Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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Filed
by the Registrant
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Filed
by a Party other than the Registrant
[
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Check
the appropriate box:
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Preliminary
Proxy Statement
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[
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to
§
240.14a-12
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BANNER
CORPORATION
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(Name
of Registrant as Specified in Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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N/A
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(2)
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Aggregate
number of securities to which transactions applies:
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N/A
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
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N/A
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(4)
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Proposed
maximum aggregate value of transaction:
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N/A
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(5)
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Total
fee paid:
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N/A
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Fee
paid previously with preliminary materials:
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N/A
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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N/A
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(2)
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Form,
Schedule or Registration Statement No.:
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N/A
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(3)
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Filing
Party:
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N/A
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(4)
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Date
Filed:
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N/A
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Dear
Shareholder:
You are cordially invited to attend the
annual meeting of shareholders of Banner Corporation. The meeting
will be held at the Marcus Whitman Hotel at 6 W. Rose Street, Walla Walla,
Washington, on Tuesday, April 27, 2010, at 10:00 a.m., local time.
The Notice of Annual Meeting of
Shareholders and Proxy Statement describe the formal business to be transacted
at the meeting. During the meeting, we will also report on our
operations. Directors and officers of Banner Corporation, as well as
a representative of Moss Adams LLP, our independent auditor, will be present to
respond to appropriate questions of shareholders.
It is important that your shares are
represented at this meeting, whether or not you attend the meeting in person and
regardless of the number of shares you own. To make sure your shares
are represented, we urge you to promptly vote. You may vote your
shares via the Internet or a toll-free telephone number, or by completing and
mailing the enclosed proxy card. If you attend the meeting, you may
vote in person even if you have previously submitted your proxy.
We look forward to seeing you at the
meeting.
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Sincerely,
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D. Michael
Jones
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President and Chief Executive
Officer
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BANNER
CORPORATION
10
S. FIRST AVENUE
WALLA
WALLA, WASHINGTON 99362
(509)
527-3636
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO
BE HELD ON APRIL 27, 2010
Notice is hereby given that the 2010
annual meeting of shareholders of Banner Corporation will be held at the Marcus
Whitman Hotel at 6 W. Rose Street, Walla Walla, Washington, on Tuesday, April
27, 2010, at 10:00 a.m., local time, for the purpose of considering and acting
upon the following:
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Proposal
1.
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To elect four
directors to each serve for a three-year term.
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Proposal
2.
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To
provide advisory approval of the compensation of our named executive
officers.
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Proposal
3.
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To
ratify the Audit Committee’s selection of Moss Adams LLP as our
independent auditor for 2010.
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Proposal
4.
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To
amend the Articles of Incorporation to increase the authorized number of
shares of common stock from 75,000,000 to 200,000,000
shares.
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We will also consider and act upon such
other matters as may properly come before the meeting or any adjournments or
postponements thereof. As of the date of this notice, we are not
aware of any other business to come before the annual meeting.
The Board of Directors has fixed the
close of business on March 1, 2010 as the record date for the annual
meeting. This means that shareholders of record at the close of
business on that date are entitled to receive notice of and to vote at the
meeting and any adjournment thereof.
To ensure that your shares are
represented at the meeting,
please take the time to vote by
submitting your vote via the Internet or telephone, or by signing, dating and
mailing the enclosed
proxy card which is solicited on behalf of the Board of
Directors. The proxy will not be used
if you attend and vote at the annual
meeting in person. Regardless of the number of shares you own, your
vote
is very
important. Please act today.
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BY
ORDER OF THE BOARD OF DIRECTORS
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ALBERT
H. MARSHALL
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SECRETARY
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Walla
Walla, Washington
March 29,
2010
IMPORTANT: Voting promptly will
save us the expense of further requests for proxies in order to ensure a
quorum. A proxy card and self-addressed envelope are enclosed for
your convenience. No postage is required if mailed in the United
States.
PROXY
STATEMENT
OF
BANNER
CORPORATION
10
S. FIRST AVENUE
WALLA
WALLA, WASHINGTON 99362
(509)
527-3636
ANNUAL MEETING OF
SHAREHOLDERS
The Board of Directors of Banner
Corporation is using this Proxy Statement to solicit proxies from our
shareholders for use at the 2010 annual meeting of shareholders. We
are first mailing this Proxy Statement and the form of proxy to our shareholders
on or about March 29, 2010.
The information provided in this Proxy
Statement relates to Banner Corporation and its wholly-owned subsidiaries,
Banner Bank and Islanders Bank. Banner Corporation may also be
referred to as "Banner" and Banner Bank and Islanders Bank may also be referred
to as the "Banks." References to "we," "us" and "our" refer to Banner
and, as the context requires, the Banks.
INFORMATION ABOUT THE ANNUAL
MEETING
Time
and Place of the Annual Meeting
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Our annual meeting
will be held as follows:
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Date:
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Tuesday, April 27,
2010
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10:00
a.m., local time
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Marcus
Whitman Hotel located at 6 W. Rose Street, Walla Walla,
Washington
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Matters
to Be Considered at the Annual Meeting
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At the meeting, you
will be asked to consider and vote upon the following
proposals:
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Proposal
1.
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To elect four
directors to each serve for a three-year term
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Proposal
2.
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To
provide advisory approval of the compensation of our named executive
officers
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Proposal
3.
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To
ratify the Audit Committee's selection of Moss Adams LLP as our
independent auditor for 2010.
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Proposal
4.
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To
amend the Articles of Incorporation to increase the authorized number of
shares of common stock from 75,000,000 to 200,000,000
shares.
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We also
will transact any other business that may properly come before the annual
meeting. As of the date of this Proxy Statement, we are not aware of
any other business to be presented for consideration at the annual meeting other
than the matters described in this Proxy Statement.
Who
is Entitled to Vote?
We have fixed the close of business on
March 1, 2010 as the record date for shareholders entitled to notice of and to
vote at our annual meeting. Only holders of record of Banner’s common
stock on that date are entitled to notice of and to vote at the annual
meeting. You are entitled to one vote for each share of Banner common
stock you own. On March 1, 2010, there were 22,509,931 shares of
Banner common stock outstanding and entitled to vote at the annual
meeting.
How
Do I Vote at the Annual Meeting?
Proxies are solicited to provide all
shareholders of record on the voting record date an opportunity to vote on
matters scheduled for the annual meeting and described in these
materials. You are a shareholder of record if your shares of Banner
common stock are held in your name. If you are a beneficial owner of
Banner common stock held by a broker, bank or other nominee (i.e., in "street
name"), please see the instructions in the following question.
Shares of Banner common stock can only
be voted if the shareholder is present in person or by proxy at the annual
meeting. To ensure your representation at the annual meeting, we
recommend you vote by proxy even if you plan to attend the annual
meeting. You can always change your vote at the meeting if you are a
shareholder of record.
This year, shareholders may vote by
proxy via the Internet or a toll-free telephone number, or by mailing a proxy
card. Instructions for voting are found on the proxy
card. Shares of Banner common stock represented by properly executed
proxies will be voted by the individuals named on the proxy card in accordance
with the shareholder’s instructions. Where properly executed proxies
are returned to us with no specific instruction as how to vote at the annual
meeting, the persons named in the proxy will vote the shares "FOR" election of
each of our director nominees, "FOR" approval of the compensation of our named
executive officers, "FOR" ratification of the selection of Moss Adams LLP as our
independent auditor and "FOR" the amendment of the Articles of
Incorporation to increase the authorized number of shares of common
stock. If any other matters are properly presented at the annual
meeting for action, the persons named in the enclosed proxy and acting
thereunder will have the discretion to vote on these matters in accordance with
their best judgment. We do not currently expect that any other
matters will be properly presented for action at the annual
meeting.
You may receive more than one proxy
card depending on how your shares are held. For example, you may hold
some of your shares individually, some jointly with your spouse and some in
trust for your children. In this case, you will receive three
separate proxy cards to vote.
What
if My Shares Are Held in Street Name?
If you are the beneficial owner of
shares held in "street name" by a broker, your broker, as the record holder of
the shares, is required to vote the shares in accordance with your
instructions. If you do not give instructions to your broker, your
broker may nevertheless vote the shares with respect to discretionary items, but
will not be permitted to vote your shares with respect to non-discretionary
items, pursuant to current industry practice. In the case of
non-discretionary items, the shares not voted will be treated as "broker
non-votes." The proposal to elect directors is considered a
non-discretionary item under the rules governing brokers that are members of the
New York Stock Exchange; therefore, you must provide instructions to your broker
in order to have your shares voted in the election of directors.
If your shares are held in street name,
you will need proof of ownership to be admitted to the annual
meeting. A recent brokerage statement or letter from the record
holder of your shares are examples of proof of ownership. If you want
to vote your shares of common stock held in street name in person at the annual
meeting, you will have to get a written proxy in your name from the broker, bank
or other nominee who holds your shares.
How
Will My Shares of Common Stock Held in the Employee Stock Ownership Plan Be
Voted?
If a shareholder is a participant in
the Banner Corporation Employee Stock Ownership Plan ("ESOP"), the proxy card
represents a voting instruction to the trustees of the ESOP as to the number of
shares in the participant’s plan account. Each participant in the
ESOP may instruct the trustees how to vote the shares of common stock allocated
to the participant’s plan account. The instructions are confidential
and will not be disclosed to Banner. If an ESOP participant properly
executes the proxy card, the ESOP trustee will vote the participant’s shares in
accordance with the participant’s instructions. Unallocated shares of
common stock held by the ESOP and allocated shares for which no voting
instructions are received or for which proper voting instructions are not
received will be voted by the trustees in the same proportion as shares for
which the trustees have received voting instructions. The trustees of
the ESOP are Directors Adams, Budke, Casper, Epstein, Klaue, Kravas, Lane,
Layman, Mitchell, Orrico, Pribilsky and Smith.
How
Many Shares Must Be Present to Hold the Meeting?
A quorum must be present at the meeting
for any business to be conducted. The presence at the meeting, in
person or by proxy, of at least a majority of the shares of Banner common stock
entitled to vote at the annual meeting as of the record date will constitute a
quorum. Proxies received but marked as abstentions or broker
non-votes will be included in the calculation of the number of shares considered
to be present at the meeting.
What
if a Quorum Is Not Present at the Meeting?
If a quorum is not present at the
scheduled time of the meeting, a majority of the shareholders present or
represented by proxy may adjourn the meeting until a quorum is
present. The time and place of the adjourned meeting will be
announced at the time the adjournment is taken, and no other notice will be
given unless the meeting is adjourned for 120 days or more. An
adjournment will have no effect on the business that may be conducted at the
meeting.
Vote
Required to Approve Proposal 1: Election of Directors
Directors are elected by a plurality of
the votes cast, in person or by proxy, at the annual meeting by holders of
Banner common stock. Accordingly, the four nominees for election as
directors who receive the highest number of votes actually cast will be
elected. Pursuant to our Articles of Incorporation, shareholders are
not permitted to cumulate their votes for the election of
directors. Votes may be cast for or withheld from each
nominee. Votes that are withheld and broker non-votes will have no
effect on the outcome of the election because the four nominees receiving the
greatest number of votes will be elected.
Our Board of Directors unanimously
recommends that you vote "FOR" the
election of each of our director
nominees.
Vote
Required to Approve Proposal 2: Advisory Approval of Executive
Compensation
The advisory vote to approve the
compensation of our named executive officers requires the affirmative vote of a
majority of the outstanding shares present in person or by proxy at the annual
meeting. Abstentions will have the same effect as a vote against the
proposal.
Our Board
of Directors unanimously recommends that you vote "FOR"
approval of the compensation of our
named executive officers.
Vote
Required to Approve Proposal 3: Ratification of the Selection of the Independent
Auditor
Ratification of the selection of Moss
Adams LLP as our independent auditor for the fiscal year ending
December 31, 2010 requires the affirmative vote of a majority of the
outstanding shares present in person or by proxy at the annual
meeting. Abstentions will have the same effect as a vote against the
proposal.
Our Board
of Directors
unanimously
recommends that you vote “FOR” the ratification of the selection of the
independent auditor.
Vote Required to Approve Proposal 4:
Proposed Amendment to the Articles of Incorporation
to Increase the
Authorized Number of Shares of Common
Stock
The approval of the proposed Amendment
to the Articles of Incorporation to increase the authorized number of shares of
common stock requires the affirmative vote of a majority of the outstanding
shares entitled to vote at the annual meeting. Abstentions will have
the same effect as a vote against the proposal.
Our Board of Directors
unanimously recommends that you vote
“FOR” the amendment to the Articles of Incorporation to increase the
authorized number of
shares of common stock.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Shareholders to Be Held on April 27, 2010
Our Proxy Statement and 2009 Annual
Report to Shareholders are available at
www.bannerbank.com/proxymaterials.
The
following materials are available for review: Proxy Statement; proxy card; and
2009 Annual Report to Shareholders. Directions to attend the annual
meeting, where you may vote in person, can be found online at
http://www.marcuswhitmanhotel.com/index.cfm?page=nav7&psub=4.
May
I Revoke My Proxy?
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You may revoke your
proxy before it is voted by:
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submitting
a new proxy with a later date;
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notifying
the Secretary of Banner in writing before the annual meeting that you have
revoked your proxy; or
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voting
in person at the annual meeting.
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If you plan to attend the annual
meeting and wish to vote in person, we will give you a ballot at the annual
meeting. However, if your shares are held in “street name,” you must
bring a validly executed proxy from the nominee indicating that you have the
right to vote your shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
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The following
table sets forth, as of March 1, 2010, the voting record date, information
regarding share ownership of:
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●
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those
persons or entities (or groups of affiliated person or entities) known by
management to beneficially own more than five percent of Banner’s common
stock other than directors and executive officers;
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each
director and director nominee of Banner;
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each
executive officer named in the Summary Compensation Table appearing under
“Executive Compensation” below (known as “named executive officers”);
and
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all
current directors and executive officers of Banner and Banner Bank as a
group.
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Persons and groups who beneficially own
in excess of five percent of Banner’s common stock are required to file with the
Securities and Exchange Commission (“SEC”), and provide a copy to us, reports
disclosing their ownership under the Securities Exchange Act of
1934. To our knowledge, no other person or entity, other than those
set forth below, beneficially owned more than five percent of the outstanding
shares of Banner’s common stock as of the close of business on the voting record
date.
Beneficial ownership is determined in
accordance with the rules and regulations of the SEC. In accordance
with Rule 13d-3 of the Securities Exchange Act, a person is deemed to be the
beneficial owner of any shares of common stock if he or she has voting and/or
investment power with respect to those shares. Therefore, the table
below includes shares owned by spouses, other immediate family members in trust,
shares held in retirement accounts or funds for the benefit of the named
individuals, and other forms of ownership, over which shares the persons named
in the table may possess voting and/or investment power. In addition,
in computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
outstanding options that are currently exercisable or exercisable within 60 days
after the voting record date are included in the number of shares beneficially
owned by the person and are deemed outstanding for the purpose of calculating
the person’s percentage ownership. These shares, however, are not
deemed outstanding for the purpose of computing the percentage ownership of any
other person.
As of the voting record date, there
were 22,509,931 shares of Banner common stock outstanding.
Name
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Number
of Shares
Beneficially
Owned (1)
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Percent
of Shares
Outstanding
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Beneficial
Owners of More Than 5%
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Banner
Corporation Employee Stock Ownership Plan Trust
10
S. First Avenue
Walla
Walla, Washington 99362
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1,291,553
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(2)
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5.74
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Dimensional
Fund Advisors LP
Palisades
West, Building One, 6300 Bee Cave Road
Austin,
Texas 78746
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1,433,488
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(3)
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6.37
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Directors
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Robert
D. Adams
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103,750
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(4)
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*
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Gordon
E. Budke
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23,887
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*
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David
B. Casper
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58,237
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(5)
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*
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Edward
L. Epstein
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21,554
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*
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Jesse
G. Foster
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60,403
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(6)
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*
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David
A. Klaue
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919,048
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(7)
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4.08
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Constance
H. Kravas
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39,040
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(8)
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*
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Robert
J. Lane
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10,000
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(9)
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*
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John
R. Layman
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145,882
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(10)
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*
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Dean
W. Mitchell
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87,957
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(11)
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*
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Brent
A. Orrico
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186,406
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(12)
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*
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Wilber
Pribilsky
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124,034
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(13)
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*
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Gary
Sirmon
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209,454
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(14)
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*
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Michael
M. Smith
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117,844
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(15)
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*
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Named
Executive Officers
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D.
Michael Jones**
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83,000
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(16)
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*
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Lloyd
W. Baker
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57,250
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(17)
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*
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Richard
B. Barton
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27,208
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*
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Cynthia
D. Purcell
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28,086
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*
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Paul
E. Folz
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30,903
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(18)
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*
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All
Executive Officers and Directors as a Group (23 persons)
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2,412,417
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10.72
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_____________
*
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Less
than 1% of shares outstanding.
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**
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Mr.
Jones is also a director of Banner.
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(1)
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Shares
held in accounts under the ESOP and shares of restricted stock granted
under the Banner Corporation Management Recognition and Development Plan,
as to which the holders have voting power but not investment power, are
included as follows: Ms. Kravas, 605 shares; Mr. Sirmon, 13,409 shares;
Mr. Jones, 4,041 shares; Mr. Baker, 11,675 shares; Mr. Barton, 3,708
shares; Ms. Purcell, 7,370 shares; Mr. Folz, 3,690 shares; and all
executive officers and directors as a group, 67,222 shares. The amounts
shown also include the following number of shares which the indicated
individuals have the right to acquire within 60 days of the voting record
date through the exercise of stock options granted pursuant to Banner’s
stock option plans: Mr. Adams, 2,000; Mr. Budke, 18,150; Mr. Casper,
2,000; Mr. Epstein, 18,150; Mr. Foster, 1,800; Ms. Kravas, 18,150; Mr.
Klaue, 7,000; Mr. Lane, 7,000; Mr. Layman, 7,000; Mr. Mitchell, 2,000; Mr.
Pribilsky, 2,000; Mr. Smith, 18,150; Mr. Baker, 16,600; Mr. Barton,
21,000; Ms. Purcell, 16,600; Mr. Folz, 21,000; and all executive officers
and directors as a group, 200,600.
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(2)
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As
of the voting record date, 1,051,172 shares have been allocated to
participants’ accounts, excluding allocations to individuals who no longer
participate in the ESOP.
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(3)
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Based
on a Schedule 13G/A dated February 10, 2010 filed by Dimensional Fund
Advisors LP (“Dimensional”), a registered investment adviser, which
reports sole voting power over 1,397,788 shares and sole dispositive power
over 1,433,488 shares. Dimensional furnishes investment advice to four
investment companies registered under the Investment Company Act of 1940,
and serves as investment manager to certain other commingled group trusts
and separate accounts (collectively, the “Funds”). In its role as
investment advisor or manager, Dimensional possesses investment and/or
voting power over the shares that are owned by the Funds, and may be
deemed to be the beneficial owner of the shares held by the Funds.
However, all shares are owned by the Funds and Dimensional disclaims
beneficial ownership of these
shares.
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(Footnotes
continue on following page)
(4)
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Includes
13,270 shares owned by a trust directed by Mr.
Adams.
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(5)
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Includes
4,475 shares held jointly with his
wife.
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(6)
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Includes
25,517 shares owned solely by his
wife.
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(7)
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Includes
600,798 shares owned by companies controlled by Mr.
Klaue.
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(8)
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Includes
1,112 shares held jointly with her
husband.
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(9)
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Includes
3,000 shares held jointly with his
wife.
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(10)
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Includes
50,000 shares which have been
pledged.
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(11)
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Includes
35,512 shares held jointly with his
wife.
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(12)
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Includes
42,964 shares owned by companies controlled by Mr. Orrico and 93,527
shares owned by trusts directed by Mr.
Orrico.
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(13)
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Includes
52,929 shares held jointly with his
wife.
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(14)
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Includes
90,302 shares owned by companies controlled by Mr.
Sirmon.
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(15)
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Includes
10,200 shares held jointly with his wife, 16,000 shares owned solely by
his wife and 50,000 shares owned by a company controlled by Mr.
Smith.
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(16)
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Includes
1,000 shares held as custodian for
minors.
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(17)
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Includes
847 shares owned solely by his
wife.
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(18)
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Includes
2,800 shares held jointly with his
wife.
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PROPOSAL 1 – ELECTION OF DIRECTORS
Our Board of Directors currently
consists of 15 members and is divided into three classes. One-third
of the directors are elected annually to serve for a three-year period or until
their respective successors are elected and qualified. However,
Wilber E. Pribilsky has reached our mandatory retirement age and will retire
effective as of the annual meeting. At that time, the Board will
reduce its size from 15 to 14 members. The table below sets forth
information regarding each director of Banner and each nominee for
director. The Corporate Governance/Nominating Committee of the Board
of Directors selects nominees for election as directors. All of our
nominees currently serve as Banner directors. Each nominee has
consented to being named in this Proxy Statement and has agreed to serve if
elected. If a nominee is unable to stand for election, the Board of
Directors may either reduce the number of directors to be elected or select a
substitute nominee. If a substitute nominee is selected, the proxy
holders will vote your shares for the substitute nominee, unless you have
withheld authority. At this time, we are not aware of any reason why
a nominee might be unable to serve if elected.
The Board of Directors recommends a
vote “FOR” the election of Robert D. Adams, Edward L. Epstein, Robert J. Lane
and Gary Sirmon.
Name
|
|
Age
as of
December
31, 2009
|
|
Year
First Elected
or
Appointed Director (1)
|
|
Term
to Expire
|
|
|
|
|
|
|
|
BOARD
NOMINEES
|
|
|
|
|
|
|
|
Robert
D. Adams
|
|
68
|
|
1984
|
|
2013
(2)
|
Edward
L. Epstein
|
|
73
|
|
2003
|
|
2013
(2)
|
Robert
J. Lane
|
|
64
|
|
2007
|
|
2013
(2)
|
Gary
Sirmon
|
|
66
|
|
1983
|
|
2013
(2)
|
|
|
|
|
DIRECTORS
CONTINUING IN OFFICE
|
|
|
|
|
|
|
|
Jesse
G. Foster
|
|
71
|
|
1996
|
|
2011
|
D.
Michael Jones
|
|
67
|
|
2002
|
|
2011
|
David
A. Klaue
|
|
56
|
|
2007
|
|
2011
|
Dean
W. Mitchell
|
|
75
|
|
1979
|
|
2011
|
Brent
A. Orrico
|
|
60
|
|
1999
|
|
2011
|
Gordon
E. Budke
|
|
68
|
|
2002
|
|
2012
|
David
B. Casper
|
|
73
|
|
1976
|
|
2012
|
Constance
H. Kravas
|
|
63
|
|
2004
|
|
2012
|
John
R. Layman
|
|
51
|
|
2007
|
|
2012
|
Michael
M. Smith
|
|
55
|
|
2003
|
|
2012
|
|
|
|
|
|
|
|
(Footnotes
appear on following page)
|
(1) Includes
prior service on the Board of Directors of Banner Bank for all directors who
have served since 1995 or earlier.
(2) Assuming
re-election.
Information Regarding Nominees for
Election.
Set forth below is the present principal occupation
and other business experience during the last five years of each nominee for
election, as well as a brief discussion of the particular experience,
qualifications, attributes and skills that led the Board to conclude that the
nominee should serve as a director of Banner.
Robert D. Adams
recently sold
his business interests as a partner in and the President and Chief Executive
Officer of Carroll Adams Tractor Co., which sold and rented farm, industrial and
consumer equipment and with which he was affiliated for 36
years. Through his career, Mr. Adams developed expertise in
management, risk assessment, and agricultural and commercial building
construction.
Edward L. Epstein
retired in
2008 as a partner in the Portland, Oregon, law firm of Stoel Rives LLP, which he
joined 1962. Mr. Epstein is a corporate lawyer who focused on mergers
and acquisitions, federal income taxation of corporations, advice to boards of
directors and corporate governance matters. He co-chaired the firm’s
mergers and acquisitions practice group for a number of years, and gave advice
to businesses of all sizes, including those in the banking and financial
services sector.
Robert J. Lane
is a retired
banking executive who spent his 29-year banking career with Seattle First
National Bank, Idaho First National Bank, West One Bancorp and U.S.
Bancorp. Mr. Lane’s banking career afforded him the opportunity to
gain expertise in management, credit-related production, corporate and
commercial banking, and commercial real estate. He is President of
Lane Farms, Inc. of La Grande, Oregon and has other real estate and investment
interests.
Gary Sirmon
is Chairman of
the Board and a director of Banner and Banner Bank. He joined Banner
Bank in 1980 as an Executive Vice President and served as its Chief Executive
Officer from 1982 until February 2002. Mr. Sirmon’s extensive career
in banking has given him expertise in management, strategic planning, risk
management, and mergers and acquisitions.
Information Regarding Incumbent
Directors.
Set forth below is the present principal occupation
and other business experience during the last five years of each director
continuing in office, as well as a brief discussion of the particular
experience, qualifications, attributes and skills that led the Board to conclude
that the director should serve on Banner’s Board of Directors.
Jesse G. Foster
is Vice
Chairman of the Board and a director of Banner and Banner Bank. Mr.
Foster retired as an officer of Banner as of the end of 2003 and now serves as a
consultant to Banner Bank. He was formerly the Chief Executive
Officer, President and a Director of Inland Empire Bank, which he joined in
1962. Mr. Foster’s banking career gave him expertise in all areas of
banking.
D. Michael Jones
is the
President and Chief Executive Officer, and a director, of Banner and Banner
Bank. He joined Banner Bank in 2002 following an extensive career in
banking, finance and accounting. Mr. Jones is a Certified Public
Accountant (Inactive) and served as President and Chief Executive Officer from
1996 to 2001 for Source Capital Corporation, a lending company in Spokane,
Washington. From 1987 to 1995, Mr. Jones served as President of West
One Bancorp, a large regional banking franchise based in Boise,
Idaho. Mr. Jones’ banking career has given him expertise in all areas
of banking.
David A. Klaue
served as
Chairman of the Board of Directors of F&M Bank until its acquisition by
Banner Bank in May 2007. He is Chairman of the Board of Empire Lumber
Co., a diversified wood products manufacturer with operations in Washington,
Idaho and Montana; Felts Field Aviation, an air transportation company; Park
Ranch Land & Cattle Co., a cow/calf, feeder and hay producer; and Empire
Investments, a real estate investment company, companies with which he has been
affiliated for over 30 years. He is a managing member in various
other real estate investment, equipment and sales companies. Mr.
Klaue’s career has afforded him expertise in business, agricultural and real
estate management.
Dean W. Mitchell
retired as
Owner and Manager of Tri-Cities Communications, Inc., which operated KONA AM and
FM radio stations, with which he was affiliated for 45 years. Mr.
Mitchell’s career gave him experience in preparing budgets and financial
statements, as well as employee compensation. He has also gained a
wealth of experience from serving as a director of Banner for 32
years.
Brent A. Orrico
is President
of FAO Corporation, an asset management company, and is a principal of B
& O Financial Management Company, with which he has been affiliated for
15 years. Mr. Orrico has 30 years’ experience in banking and
finance-related business activities, including having served as an executive
officer at a major financial institution and being a founding member of two
community banks. Mr. Orrico also serves as a director of Islanders
Bank.
Gordon E. Budke
is President
of Budke Consulting, PLLC, which specializes in general business assistance to
small and growing companies. A Certified Public Accountant with over
34 years’ experience in public accounting, Mr. Budke retired as a partner from
Coopers & Lybrand (now PricewaterhouseCoopers) in October
1997. His qualification as an audit committee financial expert was
the primary reason for his nomination to the Board. Mr. Budke also
serves on the Board of Directors of Yokes Foods, Inc.
David B. Casper
is President
of David Casper Ranch, Inc., a farming operation he has owned since
1973. Mr. Casper has expertise in the area of agricultural lending
and has gained a wealth of experience in his 34 years as a director of
Banner.
Constance H. Kravas
is the
University of Washington’s Vice President for Development and Alumni Relations
and also serves as the President of University of Washington
Foundation. Prior to joining the University of Washington in 2001,
she served as Vice Chancellor for University Advancement at the University of
California, Riverside, and as Vice President for Advancement of Washington State
University and President of the Washington State University
Foundation. Ms. Kravas has over 30 years’ experience in leadership
and management positions for not-for-profit boards.
John R. Layman
served as
co-Vice Chairman of the Board of Directors of F&M Bank until its acquisition
by Banner Bank in May 2007. He is managing partner of Layman, Layman
& Robinson, PLLP, with which he has been associated since
1983. His areas of practice include real estate development,
commercial litigation, personal injury and product liability. He also
has experience in corporate duties, securities litigation, fiduciary obligations
and reporting requirements.
Michael M. Smith
has managed
a family-owned farming and orchard operation, B.T. Loftus Ranches, Inc., in
Washington’s Yakima valley since 1974. He is also a founder, director
and former president of Yakima Chief, Inc., an international hops sales
organization. Mr. Smith’s career has afforded him experience in
managing financial and operational aspects of agricultural
companies.
MEETINGS AND COMMITTEES OF THE BOARD OF
DIRECTORS
Board
of Directors
The Board of Directors conducts its
business through Board meetings and through its committees. During
the year ended December 31, 2009, the Board of Directors held 14
meetings. No director attended fewer than 75% of the total meetings
of the Board and committees on which such person served during this
period.
Committees
and Committee Charters
The Board of Directors has standing
Executive, Audit, Compensation and Corporate Governance/Nominating
Committees. The Board has adopted written charters for the Audit,
Compensation and Corporate Governance/ Nominating Committees and although copies
of these charters are not available on our website, they must be attached to the
annual meeting proxy statement at least once every three years or when the
charter has been materially amended. The Audit and Compensation
Committee charters are attached to this Proxy Statement as
Appendix A
and
Appendix
B
, respectively, and
the Corporate Governance/Nominating Committee charter was attached to the Proxy
Statement for the 2009 annual meeting.
Executive
Committee
The Executive Committee, consisting of
Directors Orrico (Chairman), Budke, Foster, Jones, Mitchell and Sirmon, acts for
the Board of Directors when formal Board action is required between regular
meetings. The Committee has the authority to exercise all powers of
the full Board of Directors, except that it does not have the power to, among
other things, declare dividends, authorize the issuance of stock, amend the
Bylaws or approve any agreement of merger or consolidation other than mergers
with Banner subsidiaries. The Executive Committee met twice during
the year ended December 31, 2009.
Audit
Committee
The Audit Committee, consisting of
Directors Budke (Chairman), Adams, Layman and Smith, oversees management’s
fulfillment of its financial reporting responsibilities and maintenance of an
appropriate internal control system. It also has the sole authority
to appoint or replace our independent auditor and oversees the activities of our
internal audit functions. The Audit Committee believes it has
fulfilled its responsibilities under its charter. The Committee met
15 times during the year ended December 31, 2009.
Each member of the Audit Committee is
“independent,” in accordance with the requirements for companies quoted on
Nasdaq. In addition, the Board of Directors has determined that Mr.
Adams and Mr. Budke meet the definition of “audit committee financial expert,”
as defined by the SEC.
Compensation
Committee
The Compensation Committee, which
consists of Directors Mitchell (Chairman), Casper, Klaue and Lane, sets salary
policies and levels for senior management and oversees all of our salary and
incentive compensation programs. The Committee believes it has
fulfilled its responsibilities under its charter. The Compensation
Committee met six times during the year ended December 31, 2009.
Each member of the Compensation
Committee is “independent,” in accordance with the requirements for companies
quoted on Nasdaq. The Committee meets, outside of the presence of Mr.
Jones, to discuss his compensation and make its recommendation to the full
Board, which then votes on his compensation. Mr. Jones makes
recommendations to the Compensation Committee regarding the compensation of all
other executive officers. The Committee considers the recommendations
of Mr. Jones and makes its recommendation to the full Board, which then votes on
executive compensation.
Corporate
Governance/Nominating Committee
The Corporate Governance/Nominating
Committee, consisting of Directors Orrico (Chairman), Epstein, Kravas and
Pribilsky, assures that we maintain the highest standards and best practices in
all critical areas relating to the management of the business of
Banner. The Committee also selects nominees for the election of
directors and develops a list of nominees for board vacancies. The
Corporate Governance/Nominating Committee believes it has fulfilled its
responsibilities under its charter. Each member of the Committee is
“independent,” in accordance with the requirements for companies quoted on
Nasdaq. The Committee met three times during the year ended
December 31, 2009.
The Corporate Governance/Nominating
Committee met on January 26, 2010 to nominate directors for election at the
annual meeting. Only those nominations made by the Committee or
properly presented by shareholders will be voted upon at the annual
meeting. In its deliberations for selecting candidates for nominees
as director, the Committee considers the candidate’s level of success and
respect in the candidate’s field, as well as the candidate’s independence,
communication skills, education, character and community
involvement. The Committee also considers the candidate’s knowledge
of the banking business and whether the candidate would provide for adequate
representation of our market area. Any nominee for director made by
the Committee must be highly qualified with regard to some or all these
attributes. The Committee does not specifically consider diversity in
identifying nominees for director; however, the Committee believes that the
judicious application of the criteria described above provide Banner with a
well-rounded and effective Board with a diverse range of experience and
perspectives.
In searching for qualified director
candidates to fill vacancies in the Board, the Committee solicits its current
Board of Directors for names of potentially qualified
candidates. Additionally, the Committee may request that members of
the Board of Directors pursue their own business contacts for the names of
potentially qualified candidates. The Committee would then consider
the potential pool of director candidates, select the candidate the Committee
believes best meets the then-current needs of the Board, and conduct a thorough
investigation of the proposed candidate’s background to ensure there is no past
history that would cause the candidate not to be qualified to serve as a Banner
director. The Committee will consider director candidates recommended
by our shareholders. If a shareholder submits a proposed nominee, the
Committee would consider the proposed nominee, along with any other proposed
nominees recommended by members of the Board of Directors, in the same manner in
which the Committee would evaluate its nominees for director. For a
description of the proper procedure for shareholder nominations, see
“Shareholder Proposals” in this Proxy Statement.
Leadership
Structure
The positions of Chairman of the Board
and of President and Chief Executive Officer are held by two
persons. This has been the case since 1995, when Banner was formed to
become the holding company for Banner Bank. The Board believes this
structure is appropriate for Banner because it provides the Board with capable
leadership and independence from management. It also allows the
President and Chief Executive Officer to focus on the day-to-day business of
managing Banner, while the Chairman leads the Board.
Board
Involvement in Risk Management Process
The Board of Directors recognizes that
effective risk management requires a high level of cooperation between the Board
and senior management. Nonetheless, the Board has established and
maintains its independence in overseeing the conduct of Banner, including the
risk management process. The Board’s leadership structure takes into
account its risk administration function by the conduct of its business through
Board meetings and through its committees, in particular the Corporate
Governance/Nominating and Audit Committees, as well as by the separation of the
positions of Chairman of the Board and of President and Chief Executive Officer
as described above.
Directors keep themselves informed of
the activities and condition of Banner and of the risk environment in which it
operates by regularly attending Board and assigned Committee meetings, and by
review of meeting materials, auditor’s findings and recommendations, and
supervisory communications. Directors stay abreast of general
industry trends and any statutory and regulatory developments pertinent to
Banner and the Banks by periodic briefings by senior management, counsel,
auditors or other consultants, and by more formal director
education. The Corporate Governance/ Nominating Committee monitors
and evaluates director training and information resources.
|
The Board oversees
the conduct of Banner’s business and administers the risk management
function by:
|
|
|
|
|
●
|
selecting,
evaluating, and retaining competent senior management;
|
|
●
|
establishing,
with senior management, Banner’s long- and short-term business objectives,
and adopting operating policies to achieve these objectives in a legal and
sound manner;
|
|
●
|
monitoring
operations to ensure that they are controlled adequately and are in
compliance with laws and policies;
|
|
●
|
overseeing
Banner’s business performance; and
|
|
●
|
ensuring
that the Banks help to meet our communities’ credit
needs.
|
These
responsibilities are governed by a complex framework of federal and state law
and regulation as well as regulatory guidelines applicable to the operation of
Banner and the Banks.
The Board ensures that all significant
risk taking activities are covered by written policies that are communicated to
appropriate employees. Specific policies cover material credit,
market, liquidity, operational, legal and reputation risks. The
policies are formulated to further Banner’s business plan in a manner consistent
with safe and sound practices. The Board ensures that all such
policies are monitored by senior management to make certain that they conform
with changes in laws and regulations, economic conditions, and Banner’s and the
Banks’ circumstances. The policies are implemented by senior
management who develop and maintain procedures, including a system of internal
controls,
designed to foster sound practices, to comply with laws and regulations, and to
protect Banner against external crimes and internal fraud and
abuse.
The Board’s policies also establish
mechanisms for providing the Board with the information needed to monitor
Banner’s operations. This includes senior management reports to the
Board. These reports present information in a form meaningful to
members of the Board, who recognize that the level of detail and frequency of
individual senior management reports will vary with the nature of the risk under
consideration and Banner’s and the Banks’ unique circumstances.
The Board has also established a
mechanism for independent third party review and testing of compliance with
policies and procedures, applicable laws and regulations, and the accuracy of
information provided by senior management. This is accomplished, for
example, by an internal auditor reporting directly to the Audit
Committee. In addition, an annual external audit is performed. The
Audit Committee reviews the auditors’ findings with senior management and
monitors senior management’s efforts to resolve any identified issues and
recommendations. The Audit Committee provides regular reports of its
activities to the Board.
The Board also reviews reports of
inspection and examination or other supervisory activity, and any other material
correspondence received from Banner’s regulators. Findings and
recommendations, if any, are carefully reviewed, and progress in addressing such
matters is routinely monitored.
Corporate
Governance
We are committed to establishing and
maintaining high standards of corporate governance. The Corporate
Governance/Nominating Committee is responsible for initiatives to comply with
the provisions contained in the Sarbanes-Oxley Act of 2002, the rules and
regulations of the SEC adopted thereunder, and Nasdaq rules governing corporate
governance. The Committee will continue to evaluate and improve our
corporate governance principles and policies as necessary and as
required.
Code of Ethics.
On
June 19, 2003, the Board of Directors adopted the Officer and Director Code of
Ethics. The Code is applicable to each of our directors and officers,
including the principal executive officer and senior financial officers, and
requires individuals to maintain the highest standards of professional
conduct. A copy of the Code of Ethics was filed as an exhibit to
Banner’s Annual Report on Form 10-K for the year ended December 31,
2004.
Communications with
Shareholders.
The Board of Directors maintains a process for
shareholders to communicate with the Board. Shareholders wishing to
communicate with the Board of Directors should send any communication to the
Secretary, Banner Corporation, 10 S. First Avenue, Walla Walla, Washington
99362. Any communication must state the number of shares beneficially
owned by the shareholder making the communication. The Secretary will
forward such communication to the full Board of Directors or to any individual
director or directors to whom the communication is directed unless the
communication is unduly hostile, threatening, illegal or similarly
inappropriate, in which case the Secretary has the authority to discard the
communication or take appropriate legal action.
Annual Meeting Attendance by
Directors.
We do not have a policy regarding Board member
attendance at annual meetings of shareholders. All directors attended
last year’s annual meeting of shareholders.
Related Party
Transactions.
We have a number of written policies governing
transactions with related parties. These policies are intended to
ensure that all transactions entered into with related parties are in the best
interests of Banner and its shareholders. As a general rule,
transactions with directors and officers, and their related interests are
prohibited. An exception applies to normal banking
relationships.
Our Code of Ethics provides that where
an officer or director finds that any financial or business relationship with
customers, consultants, or vendors may impair, or appear to impair, the
independence of business judgment on behalf of Banner, that person must (1)
disclose fully to a supervisor, the Chief Executive Officer or to the Board of
Directors the existence and nature of the conflict and (2) remove and insulate
himself/herself from all decision-making and action related to that financial or
business activity of Banner. Each year, our directors and officers
complete a conflict of interest questionnaire to ensure that no conflicts, or
potential conflicts, of interest are overlooked.
The Banks have followed a policy of
granting loans to our employees, officers and directors, which fully complies
with all applicable federal regulations. All outstanding loans to our
directors and executive officers: (1) were made in the ordinary course of
business; (2) were made on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable loans with persons
not related to the Banks; and (3) did not involve more than the normal risk of
collectibility or present other unfavorable features when made. Loans
made to executive officers and directors are granted pursuant to the normal
underwriting procedures of the Banks. Loans made to a director or
executive officer in an amount that, when aggregated with the amount of all
other loans to that person and his or her related interests, are in excess of
the greater of $25,000 or 5% of the institution’s capital and surplus (up to a
maximum of $500,000) must be approved in advance by a majority of the
disinterested members of the Board of Directors. All lines of credit
to insiders that, combined with other loans, do not exceed $500,000 for
directors and their related interests or $100,000 for executive officers and
that do not fall within the exceptions to Regulation O of the Board of Governors
of the Federal Reserve System must be approved by the Board of Directors at
least annually. All loan approval and review procedures are governed
by written policies.
In addition, each director and
executive officer completes a form annually to identify all related
interests. Deposit and loan accounts of directors, executive officers
and related interests are then coded with special markers so that developments
can be tracked. Our Regulation O officer, a compliance specialist,
monitors developments monthly and completes a quarterly report of Regulation O
compliance which is submitted to the Board of Directors.
Director
Independence.
Our common stock is listed on The Nasdaq Global
Select Market. In accordance with Nasdaq rules, at least a majority
of our directors must be independent directors. The Board has
determined that 13 of our 15 directors are “independent,” as defined by
Nasdaq. Robert D. Adams, Gordon E. Budke, David B. Casper, Edward L.
Epstein, David A. Klaue, Constance H. Kravas, Robert J. Lane, John R. Layman,
Dean W. Mitchell, Brent A. Orrico, Wilber E. Pribilsky, Gary Sirmon and
Michael M. Smith are independent.
DIRECTORS’ COMPENSATION
Director Compensation
Table
The following table shows the
compensation paid to our non-employee directors for 2009. Directors
who are employees of Banner or the Banks are not compensated for their services
as directors; accordingly, compensation information for D. Michael Jones, who is
our President and Chief Executive Officer, is included in the section entitled
“Executive Compensation.” We do not offer any non-equity incentive
plan compensation to directors and the directors did not receive any stock or
option awards in 2009; therefore, these columns have been omitted from the table
below.
Name
|
|
Fees
Earned or Paid
in
Cash ($)(1)
|
|
Change
in Pension
Value
and Non-
qualified
Deferred Compensation
Earnings
($)
|
|
All
Other
Compensation
($)(2)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
Robert
D. Adams
|
|
48,000
|
|
--
|
|
--
|
|
48,000
|
Gordon
E. Budke
|
|
70,000
|
|
--
|
|
242
|
|
70,242
|
David
B. Casper
|
|
38,000
|
|
--
|
|
--
|
|
38,000
|
Edward
L. Epstein
|
|
39,000
(3)
|
|
--
|
|
36
|
|
39,036
|
Jesse
G. Foster
|
|
3,000
(4)
|
|
(5)
|
|
196,529
(6)
|
|
199,529
|
David
A. Klaue
|
|
36,000
|
|
--
|
|
--
|
|
36,000
|
Constance
H. Kravas
|
|
36,000
|
|
--
|
|
85
|
|
36,085
|
Robert
J. Lane
|
|
38,250
|
|
--
|
|
--
|
|
38,250
|
John
R. Layman
|
|
47,000
|
|
--
|
|
--
|
|
47,000
|
Dean
W. Mitchell
|
|
41,250
|
|
--
|
|
--
|
|
41,250
|
Brent
A. Orrico
|
|
56,750
(7)
|
|
--
|
|
--
|
|
56,750
|
Wilber
E. Pribilsky
|
|
36,000
|
|
--
|
|
--
|
|
36,000
|
Gary
Sirmon
|
|
58,000
(3)
|
|
(8)
|
|
138,363
(9)
|
|
196,363
|
Michael
M. Smith
|
|
47,000
|
|
--
|
|
36
|
|
47,036
|
|
|
|
|
|
|
|
|
|
(Footnotes
appear on following page)
(1)
|
The
following directors deferred all or a portion of their fees into Banner
common stock or life insurance, pursuant to the deferred fee agreements
described below: Adams, Casper, Klaue, Kravas, Layman, Mitchell, Orrico
and Smith.
|
(2)
|
Unless
otherwise noted, consists of dividends received on restricted
stock.
|
(3)
|
Includes
$3,000 in fees for attending meetings of the Board of Directors of
Community Financial Corporation, a subsidiary of Banner
Bank.
|
(4)
|
Pursuant
to the terms of his consulting agreement (described below), Mr. Foster
does not receive an annual retainer and does not earn fees for attending
Board or committee meetings of Banner or Banner Bank. He only receives
meeting fees for attending meetings of the Board of Directors of Community
Financial Corporation.
|
(5)
|
The
present value of Mr. Foster’s supplemental retirement benefits decreased
by $44,405 in 2009.
|
(6)
|
Mr.
Foster received $120,000 pursuant to his consulting agreement and $72,000
pursuant to his supplemental retirement agreement (each as described
below), as well as an aggregate of $4,529 for a car allowance, country
club dues and life insurance premiums
paid.
|
(7)
|
Includes
$18,000 in fees for attending meetings of the Board of Directors of
Islanders Bank.
|
(8)
|
The
present value of Mr. Sirmon’s supplemental retirement benefits and salary
continuation plan decreased by $47,612 in
2009.
|
(9)
|
Mr.
Sirmon received $77,062 pursuant to his salary continuation agreement and
$57,604 pursuant to his supplemental retirement agreement (each as
described below), as well as an aggregate of $3,697 for life and health
insurance premiums.
|
During the year ended December 31,
2009, non-employee directors of Banner received an annual retainer of $33,000
and a fee of $1,000 per committee meeting attended. The Chairman of
the Board receives an additional $20,000 annual retainer, the Chairman of the
Audit Committee receives an additional $20,000 annual retainer and the Chairmen
of the Compensation Committee and the Corporate Governance/Nominating Committee
receive an additional $250 per committee meeting
attended. Non-employee directors who serve on the Board of Community
Financial Corporation, a subsidiary of Banner Bank, receive $500 for each
meeting attended. Non-employee directors who serve on the Board of Islanders
Bank receive an annual retainer of $17,400 and $300 per committee meeting
attended. Officers of Banner or its subsidiaries who are also
directors do not receive any fee or remuneration for services as members of the
Board of Directors or any Board committees. The Board of Directors typically
determines whether to adjust the annual retainer and meeting fees of directors
in April of each year and from time to time requests recommendations from the
Compensation Committee.
In order to encourage the retention of
qualified directors, we have entered into deferred fee agreements whereby
directors may defer all or a portion of their regular fees until
retirement. Each director may direct the investment of the deferred
fees toward the purchase of life insurance, Banner common stock, mutual
fund-style investments or a stable value account. We have established
grantor trusts to hold the common stock and mutual fund-style
investments. The assets of the trusts are considered part of our
general assets and the directors have the status of unsecured creditors of
Banner with respect to the trust assets. The deferred fee agreements
provide pre-retirement death and disability benefits in an amount equal to the
value of the director’s account balance upon the occurrence of either
event. At retirement, a director may elect to receive the balance of
his or her account in a lump sum or in annual installments over a period not
exceeding the life expectancy of the director and the director’s
beneficiary. In connection with its acquisitions, Banner also assumed
liability for certain deferred compensation plans for the acquired institutions’
directors. At December 31, 2009, our estimated deferred compensation
liability accrual with respect to non-employee directors under these agreements
was $3.2 million.
Banner Bank entered into a salary
continuation agreement in October 1993 with Mr. Gary Sirmon, a director and
former Chairman, President and Chief Executive Officer of Banner and Banner
Bank, to ensure his continued service through retirement. Mr. Sirmon
retired on July 16, 2005 and will receive monthly payments over a minimum of a
180-month period following retirement. The annual payment for Mr.
Sirmon under this agreement is $77,062, or approximately $6,422 per
month.
Banner Bank also is party to an
agreement with Mr. Sirmon to provide him with supplemental retirement
benefits. Banner Bank has purchased life insurance to recover these
benefits and the benefits payable under the salary continuation agreement upon
Mr. Sirmon’s death. The agreement provides that, following Mr. Sirmon’s
retirement at or after attaining age 62 (which occurred on July 16, 2005) and
for a minimum of a 180-month period thereafter, Banner Bank will pay him (or his
beneficiary) an annual benefit based on his level of pre-retirement compensation
and other retirement benefits. The annual payment for Mr. Sirmon
under this agreement is $57,604, or approximately $4,800 per month.
Banner Bank entered into a consulting
agreement with Mr. Jesse G. Foster, a director and former executive officer of
Banner, in December 2003. The agreement, which is on a month-to-month
basis and may be terminated by
either
party upon 30 days’ notice, provided for compensation of $10,000 per
month. Effective January 1, 2010, the compensation was reduced to
$8,000 per month to reflect a reduction in his consulting engagement and
effective March 1, 2010, the compensation was further reduced to $5,000 per
month. The monthly compensation includes any Board or committee fees
payable to Mr. Foster.
Banner Bank also is party to an
agreement with Mr. Foster to provide him with supplemental retirement
benefits. Banner Bank has purchased life insurance to recover the
benefits payable under this agreement upon Mr. Foster’s death. The
agreement provides that, following Mr. Foster’s retirement at or after attaining
age 62 and for a 12-year period thereafter, Banner Bank will pay him (or his
beneficiary) an annual benefit equal to 40% of his average annual salary during
the three years preceding his retirement. The agreement also
restricts Mr. Foster’s ability to compete with Banner Bank within a 50-mile
radius of the former Banner Bank of Oregon’s main and branch office locations
for a one-year period following his termination of employment. Mr.
Foster retired as an executive officer effective as of December 31, 2003
and is receiving payments of $6,000 per month under this agreement.
Compensation
Discussion and Analysis
The Compensation Committee of the
Banner Board of Directors is responsible for setting the policies and
compensation levels for Banner directors, officers and employees, while the
Compensation Committee of the Banner Bank Board of Directors is responsible for
setting the policies and compensation levels for Banner Bank directors, officers
and employees. Banner Bank is the primary subsidiary of
Banner. Each Committee is responsible for evaluating the performance
of its Chief Executive Officer while the Chief Executive Officer evaluates the
performance of other senior officers and makes recommendations to the
appropriate Committee regarding compensation levels.
The Compensation Committee continually
reviews executive compensation. The recent economic downturn has
impacted and will continue to impact our compensation for the foreseeable
future. In particular, we did not pay any bonuses to the named
executive officers for 2008 and 2009 and do not anticipate paying any bonuses to
the named executive officers for 2010. On November 21, 2008, Banner
received $124 million from the U.S. Department of the Treasury as part of the
Capital Purchase Program. The additional capital is intended to
enhance our capacity to support the communities we serve through expanded
lending activities and economic development. Participation in this
program will affect executive compensation, as described below.
Impact of American Recovery and
Reinvestment Act of 2009 on Executive Compensation.
Effective
November 21, 2008, Banner completed the sale to the U.S. Department of the
Treasury of 124,000 shares of its Fixed Rate Cumulative Perpetual Preferred
Stock, Series A (the “Series A Preferred Stock”), with a related warrant to
purchase 1,707,989 shares of Banner’s common stock (the “Treasury
Warrant”). The issuance was the result of the Treasury’s approval of
Banner’s application to participate in the Treasury’s Capital Purchase Program,
which was established by Treasury pursuant to the authority granted by the
Emergency Economic Stabilization Act of 2008 (the “EESA”). Banner was
required to make certain changes to its executive compensation arrangements as
necessary to comply with the provisions of the EESA. Effective
February 17, 2009, President Obama signed into law the American Recovery and
Reinvestment Act of 2009 (“ARRA”). The ARRA amends the provisions of
the EESA that are applicable to Troubled Asset Relief Program (“TARP”)
recipients, such as Banner. Accordingly, Banner is now subject to
additional limitations on executive compensation, including a provision for
recovery of bonus, retention awards, or incentive compensation paid based on
earnings, revenue, gains or other criteria later found to be materially
inaccurate, a prohibition on making golden parachute payments, a prohibition on
paying or accruing any bonus, retention award or incentive compensation (except
for certain grants of long-term restricted stock), and providing tax
gross-ups. These restrictions and prohibitions apply to various
Banner officers, as discussed in greater detail herein.
Objectives and Overview of the
Compensation Program.
Our executive compensation policies are
designed to establish an appropriate relationship between executive pay and the
annual and long-term performance of Banner and Banner Bank, to reflect the
attainment of short- and long-term financial performance goals, to enhance our
ability to attract and retain qualified executive officers, and to align to the
greatest extent possible the interests of management and
shareholders. The principles underlying the executive compensation
policies include the following:
|
●
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to
attract and retain key executives who are vital to our long-term success
and are of the highest caliber;
|
|
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●
|
to
provide levels of compensation competitive with those offered throughout
the financial industry and consistent with our level of
performance;
|
|
|
|
|
●
|
to
motivate executives to enhance long-term shareholder value by granting
awards tied to the value of our common stock; and
|
|
|
|
|
●
|
to
integrate the compensation program with our annual and long-term strategic
planning and performance measurement
processes.
|
The Committees consider a variety of
subjective and objective factors in determining the compensation package for
individual executives including: (1) the performance of Banner and Banner
Bank
as a whole
with emphasis on annual performance factors and long-term objectives; (2) the
responsibilities assigned to each executive; and (3) the performance of each
executive of assigned responsibilities as measured by the progress of Banner and
Banner Bank during the year.
Compensation
Consultant.
In late 2008, the Banner Compensation Committee
engaged Swanson Watts LLC to assist the Committee with its periodic review of
Banner’s executive pay practices by performing a total compensation benchmarking
analysis. In particular, Swanson Watts reviewed and analyzed the
current executive compensation and benefit practices for the named executive
officers, comparing these practices to those of Banner’s peer
group. The peer group consists of 16 financial institutions ranging
in total assets from $1 billion to $12 billion and headquartered in Washington,
Oregon, Montana and California. Swanson Watts presented data in two
groupings: (1) the subset of nine Northwest financial institutions Banner has
historically monitored, and (2) all 16 financial institutions, including seven
California institutions that are similar in asset size to
Banner. Banner has historically monitored the following nine
financial institutions:
|
AmericanWest
Bancorporation
|
Glacier
Bancorp, Inc.
|
|
Cascade
Bancorp
|
Sterling
Financial Corp.
|
|
Columbia
Bancorp
|
Umpqua
Holdings Corporation
|
|
Columbia
Banking System
|
West
Coast Bancorp
|
|
Frontier
Financial Corporation
|
|
Banner
monitored this peer group because management believes these institutions
represent Banner’s most direct competitors in the markets it serves, in terms of
services offered as well as competition for employees. Swanson Watts
added the following California financial institutions to its
analysis:
|
CVB
Financial Corp
|
PFF
Bancorp, Inc.
|
|
First
Community Bancorp
|
SVB
Financial Group
|
|
Hanmi
Financial Corp
|
Westamerica
Bancorporation
|
|
Imperial
Capital Bancorp, Inc.
|
|
These
institutions were added to provide better comparative data for financial
institutions similar to Banner in terms of asset size. Swanson Watts
presented the results of its benchmarking analysis to the Compensation Committee
in February 2009. The Committee considered the results of the
analysis in determining whether any changes to executive compensation were
necessary; however, as a result of restrictions on executive compensation as a
result of Banner’s participation in the Treasury’s Capital Purchase Program, the
Committee made no changes based on the analysis presented by Swanson
Watts.
Compensation Program
Elements.
The Compensation Committees focus primarily on the
following five components in forming the total compensation package for our
named executive officers:
|
●
|
base
salary;
|
|
|
|
|
●
|
incentive
compensation;
|
|
|
|
|
●
|
deferred
compensation;
|
|
●
|
long-term incentive
compensation; and
|
|
|
|
|
●
|
participation in a
supplemental executive retirement
program.
|
The
current compensation plans involve a combination of salary, deferred
compensation, phantom stock awards to reward long-term performance and a
supplemental executive retirement program to ensure the continued service of
executive officers. During the year ended December 31, 2009, there
were no at-risk incentives to reward short-term performance and none are
contemplated for 2010 as a result of Banner’s participation
in the Treasury’s
Capital Purchase Program.
Base
Salary.
The salary levels of executive officers are designed
to be competitive within the banking and financial services
industries. In addition to the benchmarking analysis described above,
the Compensation Committees evaluate current salary levels by surveying similar
institutions in Washington, Oregon, the Northwest and the United
States. The Committees’ peer group analyses focus on asset size,
nature of ownership, type of operation and other common
factors. Specifically, the Committees annually review the Northwest
Financial Industry Salary Survey prepared by Milliman (actuaries and
consultants) in association with the Washington Bankers Association, the
Washington Financial League and the Oregon Bankers Association, covering 98
Northwest financial organizations in Washington, Oregon and Idaho, the American
Bankers Association 2009 Compensation and Benefits Survey, which covers 407
responding financial institutions, the Moss Adams 2009 Bankers’ Compensation
Survey, covering 65 respondents, and the Compensation Data 2009
Banking and Finance West survey published by Compdata Surveys, covering 85
banking and finance companies in the western United States.
The Compensation Committees take a
number of factors into account when setting the base salaries of the named
executive officers. These factors include peer data provided by
compensation consultants and the Committees’ review of compensation surveys, the
officer’s level of experience, the responsibilities assigned to the officer and
the officer’s performance during the previous year.
Incentive
Compensation Program.
Historically, a short-term incentive plan had been
in effect for the officers of Banner Bank which was designed to compensate for
performance. The plan was designed to provide for incentive
compensation with established targets of 35% of salary for the Chief Executive
Officer, 30% of salary for executive vice presidents and 18% to 25% of salary
for certain other officers. In certain circumstances, incentive
compensation was payable at higher levels based on exceptional
performance. In making awards under this plan, the Compensation
Committee, the President and Chief Executive Officer or executive officers, as
appropriate, reviewed quantifiable data related to specific shared corporate
goals and individual performance goals. Individual performance goals
varied significantly depending primarily on the assigned responsibilities of
each officer and may have included such items as business unit performance
measures, staff management, project completion, or individual loan or deposit
production totals. However, as a result of the economic environment
and Banner’s anticipated operating results, no awards were contemplated or paid
for the year ended December 31, 2009. In addition, Banner’s
participation in the Treasury’s Capital Purchase Program currently prohibits it
from paying or accruing any bonus, retention award or incentive compensation to
its five most highly compensated employees; therefore, Mr. Jones, Ms. Purcell
and three employees who are not named executive officers were not eligible to
receive incentive awards for the year ended December 31, 2009. This
prohibition will be effective for as long as the 124,000 shares of Banner’s
Series A Preferred Stock sold to the Treasury remain outstanding. Future
incentive awards for eligible executive vice presidents and certain other
officers under a short-term incentive plan, such as that described above, will
depend upon Banner’s operating results, among other factors.
Deferred
Compensation.
In 2004, we adopted deferred compensation plans
which allow executive officers of Banner to defer all or part of their cash
compensation or non-qualified stock options until retirement. Each
executive officer may direct the investment of the deferred compensation toward
the purchase of life insurance, Banner common stock, mutual fund-style
investments or a stable value account. We established grantor trusts
to hold the common stock and mutual fund-style investments. The
assets of the trusts are considered part of our general assets and the executive
officers have the status of unsecured creditors of Banner with respect to the
trust assets. The deferred compensation agreements provide
pre-retirement death and disability benefits in an amount based on the value of
the executive officer’s account balance upon the occurrence of either
event. At retirement, an executive officer may elect to receive the
balance of his account in a lump sum or in annual installments over a period not
exceeding the life expectancy of the executive
officer
and his beneficiary. At December 31, 2009, our estimated deferred
compensation liability accrual with respect to executive officers under these
agreements was $760,000.
Section 401(a)(17) of the Internal
Revenue Code limits the amount of compensation that is considered for purposes
of determining the maximum contribution to Banner Bank’s tax-qualified profit
sharing plan by eligible employees. For 2009, this limit was $245,000
and remains the same for 2010. In previous years, we have credited
executive officers whose total compensation exceeds this amount with additional
deferred compensation to restore amounts that could not be contributed to the
profit sharing plan as a result of the Section 401(a)(17)
limitation. However, for 2009 we did not provide any such credits to
our executive officers.
Long-Term
Incentive Compensation.
Our shareholders approved the 2001
Stock Option Plan, under which officers may receive grants of stock
options. Shareholders also approved the 1996 Management Recognition
and Development Plan, the 1996 Stock Option Plan and the 1998 Stock Option Plan,
under which grants of stock options and awards of restricted shares are
outstanding, but no further grants or awards may be made. We believe
that stock ownership by our officers is a significant factor in aligning the
interests of the officers with those of shareholders. Stock options
and stock awards under these plans are allocated based upon the officers’ level
of responsibility and expected contributions to Banner and Banner Bank as judged
by the Compensation Committee or the Board of Directors. The
Compensation Committee considers a number of factors in granting equity
awards. These factors differ from year to year, but generally include
a review of trends in making awards by Banner’s peer group and the Committee’s
view on what is necessary for retention, as well as the potential recipient’s
other compensation and value to Banner. The Compensation Committee
does not place any specific weight on any of the factors it
considers. As a result of the limited number of stock options
available for granting purposes, no stock options were granted in
2009.
Stock ownership is enhanced through
participation in our ESOP, under which eligible employees receive an allocation
of Banner stock based on a percentage of eligible wages. We also
provide a 401(k) profit sharing plan. The Board of Directors has
appointed an administrative committee of Banner Bank officers to administer the
ESOP and the 401(k) plan, and the named executive officers participate in both
of these plans. On an annual basis, the Board of Directors
establishes the level of employer contributions to the ESOP and the 401(k) plan,
which applies to all eligible participants including the named executive
officers. In 2008, we contributed two percent of eligible wages into
the ESOP on behalf of each eligible participant, and we matched the first four
percent of participants’ contributions into the 401(k) plan each payroll
period. In 2009, we matched the first four percent of participants’
contributions into the 401(k) plan for the month of January but did not
contribute to either the ESOP or 401(k) plan thereafter because the Board of
Directors considered it prudent to reduce employee benefit costs as an expense
saving measure duing a year of reduced profitability.
On June 13, 2006, the Board of
Directors adopted the Banner Corporation Long-Term Incentive Plan, in accordance
with the recommendations made by Banner’s Compensation Committee. The
plan is an account-based type of benefit, the value of which is directly related
to changes in the value of Banner common stock, commonly known as a “phantom
stock plan.” The primary objective of the plan is to encourage
retention and reward performance by allowing executives who remain with Banner
or Banner Bank for a five-year period of time to share in increases in the value
of Banner’s common stock. Although the plan benefits are tied to the
increase in value of Banner stock during the vesting period, the plan benefit is
paid in cash rather than Banner stock, hence the term “phantom
stock.” The plan was amended on May 5, 2008 to eliminate the 25% cap
on the amount of any annual increase in the value of an award, to clarify
certain provisions and to allow for the repricing of existing and future
awards.
Within 30 days after a grant of phantom
stock, the participant must elect how and when plan benefits will be
paid. One election relates to the timing of when the benefit will be
paid: upon separation from service; at a specific time; or upon completion of 60
months of continuous service. If no election is made, payment will be
made upon the participant’s separation from service. In the case of
certain key employees, payment may be delayed for six months in order to comply
with Section 409A of the Internal Revenue Code. The other election
relates to the form of payment, with the choices being a lump sum or monthly
installments over 120 months. If no election is made, distribution
will be in the form of a lump sum. With respect to monthly
installments, there will be no change in a monthly installment amount based on
changes in the value of Banner stock or dividends. Instead, the value
of the long-term incentive benefit will be adjusted annually to reflect Banner
Bank’s average earning assets rate for the preceding year. The
initial awards under this program were made in July 2006. Subsequent
awards are granted at the discretion of the Compensation Committee as it deems
appropriate. In 2009, only non-employee directors and non-executive
officers received awards
under the
Long-Term Incentive Plan. Banner’s participation in the Treasury’s
Capital Purchase Program currently prohibits it from paying or accruing any
bonus, retention award or incentive compensation, which includes a grant of
phantom stock, to its five most highly compensated employees; therefore, Mr.
Jones, Ms. Purcell and three employees who are not named executive officers were
not eligible to receive phantom stock awards for the year ended December 31,
2009. This prohibition will be effective for as long as the 124,000
shares of Banner’s Series A Preferred Stock sold to the Treasury remain
outstanding.
Supplemental
Executive Retirement Program.
We have adopted a supplemental
executive retirement program (“SERP”) for each of the named executive
officers. The SERP is intended to encourage retention by ensuring
that the named executive officers reach a targeted retirement income,
recognizing their value to Banner and rewarding them for their long-term service
commitments. At termination of employment at or after retirement age
and achievement of a service requirement, the executive’s annual benefit under
the SERP, which may be reduced by certain other retirement benefits, would be
computed as a percentage of the executive’s final average compensation (as
defined in the plan) and the executive’s annual years of service (called the
“supplemental benefit”). The executives are eligible for a reduced
benefit upon early retirement if they meet the years of service requirements in
their individual agreements; however, no benefit payment will begin before
retirement age. The SERP also provides for payments in the event of
an executive’s disability or death, or termination in the event of a change in
control, all as discussed in further detail below, under “Potential Payments
Upon Termination or Change in Control.” Executives’ receipt of
payments under the SERP are subject to confidentiality and non-competition
provisions. The executive officers have the status of unsecured
creditors of Banner Bank with respect to the benefits accrued under the
SERP.
Allocation of
Compensation.
We do not have any specific policies regarding
allocation of total compensation between short-term and long-term elements, or
cash and non-cash elements. For 2009, the composition of total
compensation for our named executive officers was as follows:
Type
of Compensation
|
|
Percentage
of Total Compensation
|
|
|
|
Base
salary
|
|
73%
|
Deferred
compensation and
long-term
incentive compensation
|
|
0
|
Supplemental
executive retirement program
|
|
24
|
All
other compensation
|
|
3
|
Compensation
Committee Report
The Compensation Committee of Banner’s
Board of Directors has submitted the following report for inclusion in this
Proxy Statement:
The Compensation Committee has reviewed
and approved the Compensation Discussion and Analysis contained in this proxy
statement with management. Based on the Committee’s discussion with management,
the Compensation Committee recommended that the Board of Directors approve and
include the Compensation Discussion and Analysis in this proxy
statement.
The Compensation Committee certifies
that:
(1) It has
reviewed with senior risk officers the senior executive officer (SEO)
compensation plans and has made all reasonable efforts to ensure that these
plans do not encourage SEOs to take unnecessary and excessive risks that
threaten the value of Banner;
(2) It has
reviewed with senior risk officers the employee compensation plans and has made
all reasonable efforts to limit any unnecessary risks these plans pose to
Banner; and
(3) It has
reviewed the employee compensation plans to eliminate any features of these
plans that would encourage the manipulation of reported earnings of Banner to
enhance the compensation of any employee.
In October 2009, the Banner
Compensation Committee met with the Senior Risk Management Officer to discuss,
evaluate and review our senior executive officer compensation plans and employee
compensation plans and the risks, if any, these plans pose to Banner as required
by our participation in the Treasury’s Capital Purchase Program. They
met to determine whether any features in senior executive officer compensation
plans could lead those officers to take unnecessary and excessive risks that
would threaten the value of Banner, and whether any features in employee
compensation plans unnecessarily expose Banner to risks, including any features
of senior executive officer or employee compensation plans that would encourage
behavior focused on short-term results rather than long-term value
creation. They also met to discuss, evaluate and review the terms of
employee compensation plans for the purpose of determining whether they contain
any feature that could encourage the manipulation of the reported earnings of
Banner to enhance the compensation of an employee.
The Compensation Committee and Senior
Risk Management Officer concluded that our senior executive officer compensation
plans do not encourage the senior executive officers to take unnecessary and
excessive risks that would threaten the value of Banner; that senior executive
officer or employee compensation plans do not unnecessarily expose Banner to
risks or contain any features that would encourage senior executive officer or
employee behavior focused on short-term results rather than long-term value
creation; and that employee compensation plans do not contain any feature that
could encourage the manipulation of the reported earnings of Banner to enhance
the compensation of an employee.
In reaching these conclusions, the
Compensation Committee and Senior Risk Management Officer considered elements of
Banner’s Strategic Plan, including keys to success, financial measures and other
goals; Banner’s unique and material risks, including long-term and short-term
risks, and the key features of senior executive officer and employee
compensation plans. They also considered information from the Swanson
Watts LLC total compensation benchmarking analysis noted above.
During 2009, senior executive officer
compensation predominately consisted of base salary, deferred compensation and
the SERP. The Committee and the Senior Risk Management Officer noted
that combined senior executive officer base salaries appeared reasonably
balanced as a percentage of total compensation and that the level of combined
senior executive officer base salaries appeared similar to peers and are
therefore risk neutral with only a slight bias towards risk taking to enhance
short-term earnings. Although long-term incentive compensation was
not a significant component of compensation in 2009, they noted that long-term
incentive compensation requires participants to remain in the active employment
of Banner for an extended period of time (typically five years or more of
vesting) to obtain the full benefit of the plan. In addition, the
value of long-term incentives are predominantly, if not wholly, dependent on the
value of Banner’s common stock; therefore, these incentives serve to promote
long-term value creation by each participant.
The Committee and the Senior Risk
Management Officer noted that senior executive officers may elect to participate
in deferred compensation plans as described elsewhere in this Proxy Statement
and that they may direct the investment of deferred compensation toward the
purchase of Banner common stock. Risks associated with this feature
of the plan are mitigated by several features of the plan, including: required
advance selection of the form and timing of plan distributions; waiting periods
in the event of making a change in desired distributions; and the inability of a
senior executive officer to accelerate plan payments. Further, Banner
establishes grantor trusts to hold the investments associated with senior
executive officer deferred compensation elections. This means that
senior executive officers have the status of unsecured creditors of Banner with
respect to trust assets; therefore, participation in the deferred compensation
plan creates a bias towards long-term value creation and the financial strength
of Banner.
The SERP component of senior executive
officer compensation also appears to create a bias towards long-term value
creation because each participant is an unsecured creditor of
Banner. While a SERP participant’s benefits are tied, in part, to the
value of Banner common stock because of the offset for tax-qualified benefits
which includes the ESOP, the risks associated with this feature of the plan are
mitigated by several provisions of the plan, including restrictions on changing
the form of benefit and prohibitions on accelerating benefits.
The Compensation Committee and Senior
Risk Management Officer further observed that Banner’s internal controls over
financial reporting and disclosures which provide for an audited review of
assets, liabilities, capital, revenues and expenses as well as the financial
reports released to regulators, shareholders and the public provide for an
extensive array of preventive and detective controls that individually and
collectively serve to discourage and deter any senior executive officer or
employee from contemplating or taking any action to manipulate reported
earnings. The
Compensation
Committee and Senior Risk Management Officer further concluded that senior
executive officer compensation plans reflect the need for Banner to remain a
competitive enterprise, to retain and recruit talented employees who will
contribute to Banner’s future success, and ultimately to repay TARP Capital
Purchase Program obligations.
The foregoing report is provided by the
following directors, who constitute the Committee:
|
The Compensation
Committee
|
|
|
|
Dean
W. Mitchell, Chair
|
|
David
B. Casper
|
|
David A.
Klaue
|
|
Robert J.
Lane
|
This
report shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, and shall not
otherwise be deemed filed under such acts.
Summary
Compensation Table
The following table presents
information regarding compensation for our named executive officers: (1) D.
Michael Jones, our Chief Executive Officer; (2) Lloyd W. Baker, our Chief
Financial Officer; and (3) our three other most highly compensated executive
officers, who are Richard B. Barton, Cynthia D. Purcell and Paul E.
Folz. No executive officer of Islanders Bank or Community Financial
Corporation is an executive officer of Banner. The named executive
officers did not receive any option awards or non-equity incentive plan
compensation; therefore, these columns have been omitted from the table
below.
Name and Principal
Position
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Year
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|
Salary
($)
|
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Bonus
($)
|
|
Stock
Awards
($)(1)
|
|
Change in
Pension Value
and Non-qualified Deferred
Compensation
Earnings
($)(2)
|
|
All
Other
Compen-
sation
($)(3)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.
Michael Jones
|
|
2009
|
|
425,000
|
|
--
|
|
--
|
|
2,516
(4)
|
|
9,754
|
|
437,270
|
President
and
|
|
2008
|
|
425,000
|
|
--
|
|
--
|
|
81,488
(4)
|
|
27,461
|
|
533,949
|
Chief
Executive Officer
|
|
2007
|
|
415,000
|
|
175,000
|
|
--
|
|
286,502
(4)
|
|
49,562
|
|
926,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lloyd
W. Baker
|
|
2009
|
|
250,000
|
|
--
|
|
--
|
|
180,550
(5)
|
|
10,090
|
|
440,640
|
Executive
Vice President,
|
|
2008
|
|
220,000
|
|
--
|
|
14,400
|
|
211,068
(5)
|
|
24,488
|
|
469,956
|
Chief
Financial Officer
|
|
2007
|
|
202,167
|
|
65,000
|
|
--
|
|
172,912
(5)
|
|
27,958
|
|
468,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
B. Barton
|
|
2009
|
|
254,000
|
|
--
|
|
--
|
|
103,812
(6)
|
|
20,168
|
|
377,980
|
Executive
Vice President,
|
|
2008
|
|
236,250
|
|
--
|
|
10,800
|
|
173,760
(6)
|
|
35,531
|
|
456,341
|
Senior
Credit Officer
|
|
2007
|
|
222,500
|
|
55,000
|
|
--
|
|
186
(6)
|
|
37,271
|
|
314,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia
D. Purcell
|
|
2009
|
|
270,000
|
|
--
|
|
--
|
|
101,815
(7)
|
|
6,536
|
|
378,351
|
Executive
Vice President,
|
|
2008
|
|
257,650
|
|
--
|
|
14,400
|
|
220,176
(7)
|
|
21,444
|
|
513,670
|
Chief
Operating Officer
|
|
2007
|
|
239,792
|
|
70,000
|
|
--
|
|
103,429
(7)
|
|
26,593
|
|
439,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
E. Folz
|
|
2009
|
|
260,000
|
|
--
|
|
--
|
|
101,779
(8)
|
|
8,921
|
|
370,700
|
Executive
Vice President,
|
|
2008
|
|
257,500
|
|
--
|
|
10,800
|
|
168,982
(8)
|
|
21,626
|
|
458,908
|
Community
Banking
|
|
2007
|
|
239,792
|
|
65,000
|
|
--
|
|
480
(8)
|
|
26,484
|
|
331,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________
(1)
|
Represents
the aggregate grant date fair value of awards, computed in accordance with
Financial Accounting Standards Board Accounting Standards Codification
Topic 718, "Compensation - Stock Compensation" ("FASB ASC Topic
718"). For a discussion of valuation assumptions, see Note 19 of the Notes
to Consolidated Financial Statements in Banner's Annual Report on Form
10-K for the year ended December 31, 2009.
|
(2)
|
See
Pension Benefits below for a detailed discussion of the assumptions used
to calculate the Change in Pension Value.
|
(3)
|
Includes
401(k) plan contributions, dividends on unvested restricted stock, life
insurance premiums, club dues and company car
allowance.
|
|
(Footnotes
continue on following page)
|
(4)
|
For
2009, represents above-market earnings on deferred compensation. For 2008,
consists of an increase in the value of Mr. Jones's SERP of $76,449 and
above-market earnings on deferred compensation of $5,039. For 2007,
consists of an increase in the value of Mr. Jones's SERP of $278,664 and
above-market earnings on deferred compensation of
$7,838.
|
(5)
|
Represents
an increase in the value of Mr. Baker's SERP.
|
(6)
|
Consists
of the following increases in the value of Mr. Barton's SERP: $103,753 for
2009 and $173,639 for 2008; and the following amounts of above-market
earnings on deferred compensation: $59 for 2009 and $121 for 2008. For
2007, represents above-market earnings on deferred
compensation.
|
(7)
|
Represents
an increase in the value of Ms. Purcell's SERP.
|
(8)
|
Consists
of the following increases in the value of Mr. Folz's SERP: $101,595 for
2009 and $168,667 for 2008; and the following amounts of above-market
earnings on deferred compensation: $184 for 2009 and $315 for 2008. For
2007, represents above-market earnings on deferred
compensation.
|
Employment
Agreements.
We entered into employment agreements with Mr.
Jones on February 11, 2002, Mr. Baker on July 1, 1998, Ms. Purcell on March 3,
2001 and Messrs. Barton and Folz on June 3, 2002. The agreements
provide that each executive’s base salary is subject to annual
review. The base salaries for 2010 for Mr. Jones, Mr. Baker, Mr.
Barton, Ms. Purcell and Mr. Folz are $425,000, $250,000, $254,000, $285,000 and
$260,000, respectively. In addition to base salary, the agreements
provide for the executive’s participation in the employee benefit plans and
other fringe benefits applicable to executive personnel. The initial
three-year term of each agreement may be extended annually for an additional
year at the discretion of the Board of Directors of Banner Bank. The
agreements were extended on the following dates: Messrs. Barton and Folz, June
1, 2009, Mr. Baker, July 1, 2009, Mr. Jones, February 11, 2010 and Ms.
Purcell, March 1, 2010. The agreements provide that compensation may
be paid in the event of disability, death, involuntary termination or a change
in control, as described below under “Potential Payments Upon Termination or
Change in Control.”
Outstanding
Equity Awards
The following information with respect
to outstanding stock and option awards as of December 31, 2009 is presented for
the named executive officers.
|
|
Option
Awards (1)
|
|
Stock
Awards (2)
|
|
Name
|
|
Grant
Date
(1)
|
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expira-
tion
Date
|
|
Number
of
Shares
or
Units
of Stock
That
Have
Not
Vested
(#)
|
|
Market
Value
of
Shares or
Units
of Stock
That
Have
Not
Vested
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.
Michael Jones
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lloyd
W. Baker
|
|
11/21/00
|
|
4,800
|
|
--
|
|
13.09
|
|
11/21/10
|
|
|
|
|
|
|
|
12/19/01
|
|
4,800
|
|
--
|
|
16.43
|
|
12/19/11
|
|
|
|
|
|
|
|
03/25/03
|
|
5,000
|
|
--
|
|
15.67
|
|
03/25/13
|
|
|
|
|
|
|
|
12/16/04
|
|
2,000
|
|
--
|
|
31.71
|
|
12/16/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,250
(3)
|
|
8,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
B. Barton
|
|
06/03/02
|
|
14,000
|
|
--
|
|
22.05
|
|
06/03/12
|
|
|
|
|
|
|
|
03/25/03
|
|
5,000
|
|
--
|
|
15.67
|
|
03/25/13
|
|
|
|
|
|
|
|
12/16/04
|
|
2,000
|
|
--
|
|
31.71
|
|
12/16/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,250
(4)
|
|
8,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia
D. Purcell
|
|
11/21/00
|
|
4,800
|
|
--
|
|
13.09
|
|
11/21/10
|
|
|
|
|
|
|
|
12/19/01
|
|
4,800
|
|
--
|
|
16.43
|
|
12/19/11
|
|
|
|
|
|
|
|
03/25/03
|
|
5,000
|
|
--
|
|
15.67
|
|
03/25/13
|
|
|
|
|
|
|
|
12/16/04
|
|
2,000
|
|
--
|
|
31.71
|
|
12/16/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,250
(3)
|
|
8,500
|
|
Paul
E. Folz
|
|
06/03/02
|
|
14,000
|
|
--
|
|
22.05
|
|
06/03/12
|
|
|
|
|
|
|
|
03/25/03
|
|
5,000
|
|
--
|
|
15.67
|
|
03/25/13
|
|
|
|
|
|
|
|
12/16/04
|
|
2,000
|
|
--
|
|
31.71
|
|
12/16/14
|
|
7,250
(4)
|
|
8,160
|
|
_____________
(1)
|
Option
grants vest pro rata over a five-year period from the grant date, with the
first 20% vesting one year after the grant
date.
|
(2)
|
Represents
phantom stock awards. Phantom stock awards vest after five years of
service from the date of grant.
|
(3)
|
Consists
of the following awards of phantom stock: 4,250 shares on July 1,
2006 and 4,000 shares on May 5,
2008.
|
(4)
|
Consists
of the following awards of phantom stock: 4,250 shares on July 1,
2006 and 3,000 shares on May 5,
2008.
|
Option
Exercises and Stock Vested
The following table shows the value
realized upon vesting of stock awards for our named executive officers in
2009. The named executive officers did not exercise any stock options
in 2009.
|
|
Stock Awards
|
|
Name
|
|
Number
of Shares
Acquired
on
Vesting
(#)
|
|
Value
Realized on
Vesting
($)
|
|
|
|
|
|
|
|
D.
Michael Jones
|
|
--
|
|
--
|
|
Lloyd
W. Baker
|
|
100
|
|
247
|
|
Richard
B. Barton
|
|
100
|
|
247
|
|
Cynthia
D. Purcell
|
|
100
|
|
247
|
|
Paul
E. Folz
|
|
100
|
|
247
|
|
Pension
Benefits
The following information is presented
with respect to the nature and value of pension benefits for the named executive
officers at December 31, 2009.
Name
|
|
Plan Name
|
|
Number
of
Years
Credited
Service
(#)
|
|
Present
Value
of
Accumulated
Benefit
($)(1)
|
|
Payments
During
Last
Fiscal
Year
($)
|
|
|
|
|
|
|
|
|
|
D.
Michael Jones
|
|
Supplemental
Executive Retirement Program
|
|
7(2)
|
|
1,210,627
|
|
--
|
Lloyd
W. Baker
|
|
Supplemental
Executive Retirement Program
|
|
15
|
|
1,269,640
|
|
--
|
Richard
B. Barton
|
|
Supplemental
Executive Retirement Program
|
|
3
|
|
277,412
|
|
--
|
Cynthia
D. Purcell
|
|
Supplemental
Executive Retirement Program
|
|
25
|
|
920,250
|
|
--
|
Paul
E. Folz
|
|
Supplemental
Executive Retirement Program
|
|
3
|
|
270,262
|
|
--
|
______________
(1)
|
Amounts
shown assume normal retirement age as defined in individual agreements,
except for Mr. Jones who has reached retirement age and is assumed for
present value calculation purposes to retire on December 31, 2009, and an
assumed life of 82 years for the recipient and recipient’s spouse, with
the projected cash flows discounted at six and one-half percent to
calculate the resulting present value.
|
(2)
|
As of December 31,
2008, Mr. Jones agreed to limit his years of service to seven
years.
|
Supplemental Executive Retirement
Program.
We have adopted a SERP for each of the named
executive officers. Banner Bank has purchased life insurance on each
of the executives in an amount sufficient to recover the benefits payable under
the SERP, payable upon their deaths. The SERP provides for payments
in the event of retirement, early retirement, disability, involuntary
termination following a change in control and death. These payments
are discussed in further detail below, under “Potential Payments Upon
Termination or Change in Control.”
Nonqualified
Deferred Compensation
The following information is presented
with respect to plans that provide for the deferral of compensation on a basis
that is not tax-qualified in which the named executive officers participated in
2009.
Name
|
|
Executive
Contributions
in
Last FY ($)
|
|
Registrant
Contributions
in
Last FY ($)
|
|
Aggregate
Earnings
in
Last
FY ($)(1)
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate
Balance
at
FYE ($)(2)
|
|
|
|
|
|
|
|
|
|
|
|
D.
Michael Jones
|
|
--
|
|
--
|
|
(3,060)
|
|
--
|
|
646,101
|
Lloyd
W. Baker
|
|
--
|
|
--
|
|
(21,086)
|
|
--
|
|
9,457
|
Richard
B. Barton
|
|
--
|
|
--
|
|
837
|
|
--
|
|
16,331
|
Cynthia
D. Purcell
|
|
--
|
|
--
|
|
1,870
|
|
--
|
|
8,032
|
Paul
E. Folz
|
|
--
|
|
--
|
|
(6,229)
|
|
--
|
|
51,355
|
|
|
|
|
|
|
|
|
|
|
|
(Footnotes
appear on following page)
|
(1)
|
The
following amounts, constituting above-market earnings, were reported as
compensation in 2009 in the Summary Compensation Table: for Mr. Jones,
$2,516; for Mr. Barton, $59; and for Mr. Folz,
$184.
|
(2)
|
Of
these amounts, the following amounts were previously reported as
compensation to the officers in the Summary Compensation Table: for Mr.
Jones, $64,634; for Mr. Baker, $4,310; for Mr. Barton, $5,150; for Ms.
Purcell, $4,772; and for Mr. Folz,
$7,811.
|
Potential
Payments Upon Termination or Change in Control
We have entered into agreements with
the named executive officers that provide for potential payments upon
disability, termination, early retirement, normal retirement and
death. In addition, our equity plans also provide for potential
payments upon termination. The following table shows, as of December
31, 2009, the value of potential payments and benefits following a termination
of employment under a variety of scenarios. However, as a result of
Banner’s participation in the Treasury’s Capital Purchase Program, it is
currently prohibited from making a golden parachute payment to a named executive
officer or any of the next five most highly compensated
employees. For purposes of this restriction, a golden parachute
payment means any payment for the departure from a TARP recipient for any
reason, or any payment due to a change in control of the TARP recipient, except
for payments for services performed or benefits accrued. Excluded
from the restriction are payments made in the event of an employee’s death or
disability. The affected executives signed compensation modification
agreements to comply with the restriction against making golden parachute
payments. Accordingly, except for payments for services performed or
benefits accrued, our named executive officers are not currently eligible to
receive any payments upon termination without just cause or in connection with a
change in control pursuant to their employment agreements
or supplemental executive retirement program but they, or their
beneficiaries, remain eligible to receive payments upon a termination due to
death or disability. The prohibition against golden parachute
payments will be effective for as long as the 124,000 shares of Banner’s Series
A Preferred Stock sold to the Treasury remain outstanding.
|
|
Death
($)
|
|
Disability
($)
|
|
Involuntary
Termination
($)
|
|
Involuntary
Termination
Following
Change
in
Control
($)
|
|
Early
Retirement
($)
|
|
Normal
Retirement
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Michael Jones
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement
|
|
--
|
|
--
|
|
885,417
(1)
|
|
2,119,492(1)
|
|
--
|
|
--
|
SERP
|
|
67,025(2)
|
|
134,050(2)
|
|
134,050(2)
|
|
134,050(2)
|
|
134,050(2)
|
|
134,050(2)
|
Equity
Plans
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lloyd W. Baker
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement
|
|
--
|
|
166,667(2)
|
|
625,000(1)
|
|
762,707(1)
|
|
--
|
|
--
|
SERP
|
|
60,163(2)
|
|
120,325(2)
|
|
120,325(3)
|
|
120,325(3)
|
|
120,325(3)
|
|
120,325(2)
|
Equity
Plans
|
|
--
|
|
--
|
|
--
|
|
8,500(1)
|
|
--
|
|
8,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard B. Barton
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement
|
|
--
|
|
169,333(2)
|
|
613,833(1)
|
|
878,577
(1)
|
|
--
|
|
--
|
SERP
|
|
17,052(2)
|
|
34,103(2)
|
|
34,103(4)
|
|
34,103(4)
|
|
34,103(4)
|
|
34,103(2)
|
Equity
Plans
|
|
--
|
|
--
|
|
--
|
|
8,160
(1)
|
|
--
|
|
8,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cynthia D. Purcell
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement
|
|
--
|
|
190,000(2)
|
|
617,500
(1)
|
|
819,720
(1)
|
|
--
|
|
--
|
SERP
|
|
76,860(2)
|
|
153,719(2)
|
|
94,222(3)
|
|
94,222(3)
|
|
94,222(3)
|
|
153,719(2)
|
Equity
Plans
|
|
--
|
|
--
|
|
--
|
|
8,500
(1)
|
|
--
|
|
8,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul E. Folz
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement
|
|
--
|
|
173,000(2)
|
|
628,333(1)
|
|
839,560
(1)
|
|
--
|
|
--
|
SERP
|
|
17,546(2)
|
|
35,092(2)
|
|
35,092(3)
|
|
35,092(3)
|
|
35,092(3)
|
|
35,092(2)
|
Equity
Plans
|
|
--
|
|
--
|
|
--
|
|
8,160(1)
|
|
--
|
|
8,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
___________
(1)
|
Payment
is prohibited as a result of Banner’s participation in the Treasury’s
Capital Purchase Program.
|
(2)
|
Indicates
annual payments.
|
(3)
|
Indicates
annual payments (which may not begin before age
62).
|
(4)
|
Indicates
annual payments (which may not begin before age
68).
|
Employment
Agreements.
The employment agreements with Messrs. Baker,
Barton and Folz and Ms. Purcell provide for payments in the event of death,
disability or termination. The employment agreement with Mr. Jones
provides for payments in the event of death or termination. In the
event of an executive’s death during the term of his employment agreement, we
will pay to his estate the compensation due through the last day of the calendar
month in which his death occurred.
The employment agreements with Messrs.
Baker, Barton and Folz and Ms. Purcell provide that if the executive becomes
disabled or incapacitated to the extent that he or she is unable to perform the
duties of his or her position, he or she shall receive short-term disability
benefits equal to 100% of his or her monthly compensation beginning on the
15
th
day
of disability and continuing until the 180
th
day
of disability and long-term disability benefits equal to 66 2/3% of monthly
salary beginning on the 181
st
day
of disability and continuing until he or she attains age 65. These
benefits will be reduced by the amount of any benefits payable to the executive
under any other disability program of Banner Bank. The Bank currently
provides disability benefits with certain limitations to all full time
employees. In addition, during any period of disability, the
executive and his or her dependents shall, to the greatest extent possible,
continue to be covered under all executive benefits plans of Banner Bank,
including without limitation, its retirement plans, life insurance plan and
health insurance plans, as if actively employed by Banner Bank. If
the executive is disabled for a continuous period exceeding six calendar months,
Banner Bank may, at it election, terminate the employment
agreement.
The employment of the executives is
terminable at any time for just cause as defined in the
agreements. In addition, the employment of the executive may be
terminated without just cause, in which case the agreement provides that he or
she would continue to receive base salary over the remaining term. As
described previously, as a result of Banner’s participation in the Treasury’s
Capital Purchase Program, it is currently prohibited from a making a payment
upon termination without just cause to a named executive officer.
The employment agreements also provide
for benefits in the event of the executives’ termination in connection with a
change in control. If, after a change in control, we terminate an
executive’s employment or otherwise change the circumstances in which he or she
is employed, or cause a reduction in responsibilities or authority or
compensation or other benefits provided under the employment agreement without
consent, the agreements provide that we must pay to the executive and provide
him or her, or the his or her beneficiaries, dependents and estate, with the
following: (1) 2.99 times the executive’s base amount (as defined in Section
280G of the Internal Revenue Code of 1986); and (2) during the period of 36
calendar months beginning with the event of termination, continued coverage
under all Banner employee benefit plans as if the executive were still employed
during that period under the employment agreement. The employment
agreements limit these payments and do not allow payments of amounts in excess
of the limits imposed by Section 280G of the Internal Revenue
Code. As described previously, as a result of Banner’s participation
in the Treasury’s Capital Purchase Program, it is currently prohibited from
making a payment in connection with a change in control to a named executive
officer.
Supplemental Executive Retirement
Program.
We have adopted a supplemental executive retirement
program (“SERP”) for each of the named executive officers. At
termination of employment at or after attaining age 62 (age 65 for Mr. Jones and
age 68 for Mr. Barton) and having achieved a service requirement, the
executive’s annual benefit under the SERP would be computed as the product of 3%
(4% for Messrs. Barton and Folz) of the executive’s final average compensation
(defined as the three calendar years of the executive’s annual cash
compensation, including bonuses, which produce the highest average within the
executive’s final eight (five in the case of Mr. Jones) full calendar years of
employment) and the executive’s annual years of service (subsequent to January
1, 2007 for Messrs. Barton and Folz) (called the “supplemental
benefit”). However, the supplemental benefit would be limited such
that the sum of (1) amounts payable from the executive’s other retirement
benefits from Banner and Banner Bank and (2) the supplemental benefit may not
exceed 60% of final average compensation (for Messrs. Barton and Folz, the
supplemental benefit may not exceed the product of 3% times his total years of
service and his final average compensation). Payment of the
supplemental benefit begins on the first day of the month next following the
executive’s retirement date and continues monthly for the executive’s life,
unless the executive is a specified employee (as defined in Section 416(i) of
the Internal Revenue Code), in which case payment begins on the first day of the
month following the six-month anniversary of the executive’s termination of
employment. The executives are eligible for a reduced benefit upon
retirement prior to age 62 (age 68 for Mr. Barton) if they meet the years of
service requirements in their individual agreements; however, no benefit payment
will begin before age 62 (age 68 for Mr. Barton) and payments will be subject to
the delayed distribution requirements if the executive is a specified
employee.
In the event of the executive’s
termination of employment prior to his or her retirement date by reason of
disability (or in the case of Mr. Jones, for good reason), the agreements
provide that the executive or the executive’s surviving spouse shall receive the
supplemental benefit described above as if the executive’s retirement date had
occurred on the date immediately preceding termination of
employment. “Good reason” is defined as having occurred when: (1) the
executive is assigned duties which are largely inferior to his duties
immediately prior to a change of control; (2) the executive’s incentive and
benefit plans, programs or arrangements are terminated, or the executive’s
participation is reduced to such an extent as to materially reduce their
aggregate value; or (3) the executive is required to relocate his principal
business office or his principal place of residence outside of the area
consisting of a 35-mile radius from the current main office and any branch of
Banner Bank, or the executive is assigned duties that would reasonably require
such a relocation. As described previously, as a result of Banner’s
participation in the Treasury’s Capital Purchase Program, it is currently
prohibited from making a payment to Mr. Jones upon a termination for
good reason.
In the event of the executive’s death,
the executive’s surviving spouse shall receive a spouse’s supplemental
benefit. If the death occurs following the executive’s retirement
date, the surviving spouse shall be entitled to a spouse’s supplemental benefit,
payable for life, equal to 50% of the monthly amount of the supplemental benefit
payable to the executive prior to his or her death. If the death
occurs while the executive is actively employed by Banner or any of its
affiliates, the surviving spouse shall receive a spouse’s supplement benefit
equal to 50% of the amount the executive would have received as a supplemental
benefit if the executive’s retirement date had occurred on the date immediately
preceding the executive’s death.
With respect to each of the named
executive officers other than Mr. Jones, the agreement provides that in the
event of the executive’s involuntary termination of employment on or after the
effective date of a change in control, the date of termination shall be treated
as the executive’s retirement date and he or she shall be entitled to receive a
supplemental benefit. If the executive had reached his or her
retirement date, the supplemental benefit would be calculated as described above
for normal retirement and if the executive had not reached his or her retirement
date but had satisfied the years of service requirement, the supplemental
benefit would be calculated as described above for early
retirement. No benefit payment will begin before age 62 (age 68 for
Mr. Barton) and payments will be subject to the delayed distribution
requirements if the executive is a specified employee. As described
previously, as a result of Banner’s participation in the Treasury’s Capital
Purchase Program, it is currently prohibited from making a payment in connection
with a change in control to a named executive officer.
In the event of Mr. Jones’s involuntary
termination of employment or termination for good reason on or after the
effective date of a change in control, his agreement provides that the date of
termination shall be his retirement date and he shall be entitled to receive a
supplemental benefit calculated for normal retirement. Within 90 days
prior to the effective date of the change in control, the agreement provides
that Mr. Jones may elect to have the supplemental benefit payable (1) monthly
for life, beginning either on the first day of the month next following his
retirement date or if he is a specified employee, the first day of the month
following the six-month anniversary of his termination of employment, or (2)
beginning on a date specified by Mr. Jones. As described previously,
as a result of Banner’s participation in the Treasury’s Capital Purchase
Program, it is currently prohibited from making a payment in connection with a
change in control to a named executive officer.
The supplemental benefit shall cease to
be paid to the executive (and rights to the spouse’s supplemental benefit shall
terminate) if the executive (1) discloses material confidential information or
trade secrets concerning Banner Bank or any of its subsidiaries without its
consent or (2) engages in any activity that is materially damaging to the Bank
including engaging in competitive employment during the three-year period
beginning on the executive’s retirement date (or in the case of Messrs. Barton
and Folz, during the two-year period beginning on the date of his involuntary
termination of employment on or after the effective date of a change of
control.
Equity Plans.
Our
2001 Stock Option Plan and Long-Term Incentive Plan provide for accelerated
vesting of awards in the event of a change in control. If a change in
control occurs: (1) all options granted and not fully exercisable will become
exercisable in full; and (2) awards of phantom stock will vest fully and be
payable within 60 days. In addition, if a tender offer or exchange
offer for Banner’s shares commences, options granted under the 2001 Stock Option
Plan and not fully exercisable will become exercisable in full. The
Long-Term Incentive Plan also provides that a participant who (1) has attained
age 65, (2) voluntarily terminates employment with Banner and its affiliates,
(3) is not vested at the time of the termination of employment and (4) enters
into a non-competition agreement for a period equal to the greater of two years
from the participant’s separation from service or the period of time necessary
for the participant to fully vest in his
or her
benefit, shall have continuous service credited on his or her behalf
for vesting purposes for a period equal to the term of the non-competition
agreement. As described previously, as a result of Banner’s
participation in the Treasury’s Capital Purchase Program, it is currently
prohibited from making golden parachute payments to the named executive officers
and this includes accelerating equity awards.
Compensation Committee Interlocks and
Insider Participation
The members of the Compensation
Committee are Dean W. Mitchell, David B. Casper, David A. Klaue and Robert J.
Lane. No members of the Compensation Committee were officers or
employees of Banner or any of its subsidiaries during the year ended December
31, 2009, nor were they formerly Banner officers or had any relationships
otherwise requiring disclosure.
PROPOSAL 2 – ADVISORY VOTE ON EXECUTIVE
COMPENSATION
On February 17, 2009, President Obama
signed the American Recovery and Reinvestment Act of 2009 (“ARRA”) into
law. For financial institutions that have received or will receive
financial assistance under the troubled asset relief program (“TARP”) or related
programs, such as Banner, the ARRA significantly rewrites the original executive
compensation and corporate governance provisions of Section 111 of the Emergency
Economic Stabilization Act of 2008. Notably, the ARRA requires that
TARP recipients permit shareholders to vote to approve executive
compensation. This proposal, commonly known as a “say on pay”
proposal gives shareholders the opportunity to endorse or not endorse the
compensation of our named executive officers. The proposal will be
presented at the annual meeting in the form of the following
resolution:
RESOLVED,
that the shareholders approve the compensation of Banner Corporation’s named
executive officers, as disclosed in the Compensation Discussion and Analysis,
the compensation tables and related material in the Proxy Statement for the 2010
annual meeting of shareholders.
As provided under the ARRA, this vote
will not be binding on our Board of Directors and may not be construed as
overruling a decision by the Board. The Compensation Committee and
the Board may, however, take into account the outcome of the vote when
considering future executive compensation arrangements.
Our executive compensation policies are
designed to establish an appropriate relationship between executive pay and the
annual and long-term performance of Banner and Banner Bank, to reflect the
attainment of short- and long-term financial performance goals, to enhance our
ability to attract and retain qualified executive officers, and to align to the
greatest extent possible the interests of management and
shareholders. Our Board of Directors believes that our compensation
policies and procedures achieve these objectives.
The Board of Directors unanimously
recommends that
you vote
“FOR” approval of the compensation of our named executive
officers.
Audit Committee
Charter.
The Audit Committee operates pursuant to a charter
approved by our Board of Directors. The Audit Committee reports to
the Board of Directors and is responsible for overseeing and monitoring our
financial accounting and reporting, system of internal controls established by
management and audit process. The charter sets out the
responsibilities, authority and specific duties of the Audit
Committee. The charter specifies, among other things, the structure
and membership requirements of the Audit Committee, as well as the relationship
of the Audit Committee to our independent auditor, the internal audit department
and management.
Report of the Audit
Committee.
The Audit Committee reports as follows with respect
to Banner’s audited financial statements for the year ended December 31,
2009:
|
●
|
The
Audit Committee has completed its review and discussion of the 2009
audited financial statements with management;
|
|
|
|
|
●
|
The
Audit Committee has discussed with the independent auditor (Moss Adams
LLP) the matters required to be discussed by Statement on Auditing
Standards No. 61,
Communication with Audit
|
|
|
|
|
|
Committees
, as amended,
as adopted by the Public Company Accounting Oversight Board in Rule
3200T;
|
|
|
|
|
●
|
The
Audit Committee has received written disclosures and the letter from the
independent auditor required by applicable requirements of the Public
Company Accounting Oversight Board regarding the independent auditor’s
communications with the Audit Committee concerning independence, and has
discussed with the independent auditor the independent auditor’s
independence; and
|
|
|
|
|
●
|
The
Audit Committee has, based on its review and discussions with management
of the 2009 audited financial statements and discussions with the
independent auditors, recommended to the Board of Directors that Banner’s
audited financial statements for the year ended December 31, 2009 be
included in its Annual Report on Form 10-K
.
|
The
foregoing report is provided by the following directors, who constitute the
Audit Committee:
|
Audit
Committee
|
|
|
|
Gordon
E. Budke, Chairman
|
|
Robert
D. Adams
|
|
John
R. Layman
|
|
Michael
M. Smith
|
This
report shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, and shall not
otherwise be deemed filed under such acts.
PROPOSAL 3 – RATIFICATION OF SELECTION OF
INDEPENDENT AUDITOR
The Audit Committee of the Board of
Directors has selected Moss Adams LLP as our independent auditor for the year
ending December 31, 2010 and that selection is being submitted to shareholders
for ratification. Although ratification is not required by our Bylaws
or otherwise, the Board is submitting the selection of Moss Adams LLP to our
shareholder for ratification as a matter of good corporate
practice. If the selection is not ratified, the Audit Committee will
consider whether it is appropriate to select another registered public
accounting firm. Even if the selection is ratified, the Audit
Committee in its discretion may select a different registered public accounting
firm at any time during the year if it determines that such a change would be in
the best interests of Banner and our shareholders. Moss Adams LLP
served as our independent auditor for the year ended December 31, 2009 and a
representative of the firm will be present at the annual meeting to respond to
shareholders’ questions and will have the opportunity to make a statement if he
or she so desires.
The Board of Directors unanimously
recommends that you vote “FOR” the ratification of the appointment of Moss Adams
LLP as our independent auditor.
The following table sets forth the
aggregate fees billed, or expected to be billed, to us by Moss Adams LLP for
professional services rendered for the fiscal years ended December 31, 2009 and
2008.
|
|
Year
Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Audit
Fees (1)
|
|
$646,499
|
|
$635,451
|
|
Audit-Related
Fees
|
|
--
|
|
--
|
|
Tax
Fees
|
|
--
|
|
11,950
|
|
All
Other Fees
|
|
--
|
|
--
|
|
|
|
|
|
|
|
__________
|
(1)
|
Fees
for 2009 include estimated amounts to be
billed.
|
The Audit
Committee will establish general guidelines for the permissible scope and nature
of any permitted non-audit services to be provided by the independent auditor in
connection with the Committee’s annual review of its
charter. Pre-approval may be granted by action of the full Audit
Committee or by delegated authority to one or more members of the Audit
Committee. If this authority is delegated, all approved non-audit
services will be presented to the Audit Committee at its next
meeting. In considering non-audit services, the Audit Committee or
its delegate will consider various factors, including but not limited to,
whether it would be beneficial to have the service provided by the independent
auditors and whether the service could compromise the independence of the
independent auditors. For the year ended December 31, 2009, the Audit
Committee approved all of the services provided by Moss Adams LLP that were
designated as audit-related fees, tax fees and all other fees as set forth in
the table above.
The Audit Committee of the Board of
Directors determined that all of the services performed by Moss Adams LLP in
fiscal year 2009 were not incompatible with Moss Adams LLP maintaining its
independence.
PROPOSAL 4 – AMENDMENT OF THE ARTICLES OF
INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
On February 23, 2010, our Board of
Directors unanimously adopted a resolution recommending that Banner’s Articles
of Incorporation be amended to increase the number of authorized shares of
common stock, having a par value of $.01 per share, from 75,000,000 shares to
200,000,000 shares (the “Common Stock Amendment”). The Board of
Directors further directed that the Common Stock Amendment be submitted for
consideration by shareholders at the annual meeting. If the Common
Stock Amendment is approved by shareholders, Banner will execute and submit to
the Washington Secretary of State for filing Articles of Amendment of the
Articles of Incorporation providing for the Common Stock
Amendment. The Common Stock Amendment will become effective at the
close of business on the date the Articles of Amendment are accepted for filing
by the Washington Secretary of State.
As of the voting record date for the
annual meeting, there were 22,509,931 shares of common stock issued and
outstanding and another 2,203,367 shares of common stock were reserved for
issuance upon exercise of options previously granted from Banner’s stock option
plans or issuable under other outstanding stock awards and the Treasury
Warrant.
The Board of Directors believes that it
is in Banner’s best interest to increase the number of authorized but unissued
shares of common stock in order to meet Banner’s possible future business and
financing needs as they arise. During 2009 we sought to raise capital and are
continuing to evaluate opportunities that may be available to increase Banner’s
capital position.
In connection with our evaluation,
we have had preliminary discussions with our
investment bankers but have not
determined the specific method or methods by which we will raise capital, the
amounts we will raise or the exact timing of an
offering.
Our Board of Directors believes that the
availability of these additional shares will provide Banner with the capability
and flexibility to increase our capital through the issuance of common stock for
a variety of purposes that the Board of Directors may deem advisable in the
future. These purposes could include, among other things, increasing
the capital position of our subsidiary banks; issuing stock for possible
acquisition transactions; repaying funds received by Banner through the
Treasury’s Capital Purchase Program should we elect to do so in the future; or
for other corporate and business purposes. The additional common shares
authorized would be identical in all respects to Banner’s currently authorized
shares of common stock. Banner’s Articles of Incorporation provide
that shareholders shall not have preemptive rights for its capital
stock. The determination by our Board of Directors and Banner’s
management that the authorized common stock should be increased took into
account the historical and anticipated issuance patterns of Banner, the
potential issuance of stock splits or dividends in the future based on market
conditions and the use of authorized shares for our Dividend Reinvestment and
Direct Stock Purchase and Sale Plan or other additional financing or expansion
may be appropriate to enhance shareholder value.
The proposed increase in the number of
authorized shares of common stock would give our Board of Directors authority to
issue additional shares of common stock from time to time without delay or
further action by the shareholders except as may be required by applicable law
or the rules of Nasdaq. Subject to its fiduciary duties to
shareholders, the Board of Directors would have the authority to issue
additional shares in transactions that might discourage, delay or prevent an
unsolicited acquisition of control of Banner or make such an unsolicited
acquisition of control of Banner more difficult or expensive; however, the Board
of Directors has no plans to utilize the authorized shares in that manner and is
not aware of any effort by any third parties to acquire control of
Banner.
The issuance of additional shares of
common stock for any of the corporate purposes listed above could have a
dilutive effect on earnings per share and the book or market value of our
outstanding common stock, depending on the circumstances, and could dilute a
shareholder’s percentage voting power in Banner. Holders of our
common stock are not entitled to preemptive rights or other protections against
dilution. Our Board of Directors intends to take these factors into
account
before authorizing any new issuance of shares. As noted above, we may
repurchase our Series A Preferred Stock and the related Treasury Warrant
issued under the Capital Purchase Program with the proceeds from any sale of
these additional shares of common stock. If we elect to repurchase
the Series A Preferred Stock and the Treasury Warrant, the Treasury Warrant
will be repurchased at fair market value. Accordingly, the repurchase
of these securities may be at an amount more than our carrying value and, as
such, may negatively impact our net income available to shareholders and our
earnings per share.
In the event shareholders approve the
Common Stock Amendment, Article IV of Banner’s Articles of Incorporation will be
amended to increase the number of shares of common stock which Banner is
authorized to issue from 75,000,000 to 200,000,000. The par value of
the common stock will remain at one cent ($.01) per share. Upon
effectiveness of the Amendment, the first sentence of Article IV of Banner’s
Articles of Incorporation will read as follows:
ARTICLE
IV.
Capital
Stock
. The total number of shares of all classes of capital
stock which the corporation has authority to issue is 200,500,000, of which
200,000,000 shall be common stock of par value of $0.01 per share, and of which
500,000 shall be serial preferred stock of par value $0.01 per
share.
The remaining text of Article VI of
Banner’s Articles of Incorporation would remain unchanged.
Approval of the Common Stock Amendment
will require the affirmative vote of a majority of the outstanding shares
entitled to vote thereon. Proxies received in response to the Board
of Directors’ solicitation will be voted “FOR” approval of the Common Stock
Amendment if no specific instructions are included thereon for this Proposal
4.
The Board of Directors recommends a
vote “FOR” the amendment of the Articles of Incorporation to
increase the number of authorized
shares of common stock.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act
requires our executive officers and directors, and persons who own more than 10%
of any registered class of Banner’s equity securities, to file reports of
ownership and changes in ownership with the SEC. Executive officers,
directors and greater than 10% shareholders are required by regulation to
furnish us with copies of all Section 16(a) forms they
file. Based solely on our review of the copies of such forms we have
received and written representations provided to us by these persons, we believe
that during the year ended December 31, 2009, all filing requirements applicable
to our reporting officers, directors and greater than 10% shareholders were
properly and timely complied with, except for Mr. Foster, who filed a late Form
5 covering two transactions.
The Board of Directors is not aware of
any business to come before the annual meeting other than those matters
described in this Proxy Statement. However, if any other matters
should properly come before the meeting, it is intended that proxies in the
accompanying form will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.
We will bear the cost of solicitation
of proxies, and will reimburse brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of Banner’s common stock. In
addition to solicitations via the Internet and by mail, our directors, officers
and regular employees may solicit proxies personally or by telecopier or
telephone without additional compensation.
Banner’s 2009 Annual Report to
Shareholders, including financial statements, has been mailed to all
shareholders of record as of the close of business on March 1,
2010. Any shareholder who has not received a copy of the Annual
Report may obtain a copy by writing to us or by accessing our proxy materials
online at www.bannerbank.com/proxymaterials. The Annual Report is not
to be treated as part of the proxy solicitation material or having been
incorporated herein by reference.
A copy of Banner’s Annual Report on
Form 10-K for the year ended December 31, 2009, as filed with the SEC, will be
furnished without charge to shareholders of record as of March 1, 2010 upon
written request to Albert H. Marshall, Secretary, Banner Corporation, 10 S.
First Avenue, Post Office Box 907, Walla Walla, Washington 99362.
Proposals of shareholders intended to
be presented at our annual meeting to be held in 2011 must be received by us no
later than November 30, 2010 to be considered for inclusion in the proxy
materials and form of proxy relating to that meeting. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Securities Exchange Act.
In addition, our Articles of
Incorporation provide that in order for business to be brought before the annual
meeting, a shareholder must deliver notice to the Secretary not less than 30 nor
more than 60 days prior to the date of the annual meeting; provided that if less
than 31 days’ notice of the annual meeting is given to shareholders, such notice
must be delivered not later than the close of the tenth day following the day on
which notice of the annual meeting was mailed to shareholders. The
notice must state the shareholder’s name, address and number of shares of Banner
common stock held, and briefly discuss the business to be brought before the
annual meeting, the reasons for conducting such business at the annual meeting
and any interest of the shareholder in the proposal.
Our Articles of Incorporation provide
that if a shareholder intends to nominate a candidate for election as a
director, the shareholder must deliver written notice of his or her intention to
our Secretary not less than 30 days nor more than 60 days prior to the date of
the annual meeting of shareholders; provided, however, that if less than 31
days’ notice of the annual meeting is given to shareholders, such written notice
must be delivered to our Secretary not later than the close of the tenth day
following the day on which notice of the annual meeting was mailed to
shareholders. The notice must set forth (1) the name, age, business
address and, if known, residence address of each nominee for election as a
director, (2) the principal occupation or employment of each nominee, (3) the
number of shares of Banner common stock which are beneficially owned by each
such nominee, (4) such other information as would be required to be included
pursuant to the Securities Exchange Act in a proxy statement soliciting proxies
for the election of the proposed nominee, including, without limitation, such
person’s written consent to being named in the proxy statement as a nominee and
to serving as a director, if elected, and (5) as to the shareholder giving such
notice (a) his or her name and address as they appear on our books and (b) the
class and number of Banner shares which are beneficially owned by such
shareholder.
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BY ORDER OF THE
BOARD OF DIRECTORS
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ALBERT
H. MARSHALL
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SECRETARY
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Walla
Walla, Washington
March 29,
2010
Appendix
A
BANNER
CORPORATION
AUDIT
COMMITTEE CHARTER
I. Purpose
The primary function of the Audit
Committee (“Audit Committee” or “Committee”) is to assist the Board of Directors
(“Board”) in fulfilling its oversight responsibilities by reviewing the quality
and integrity of financial reports and other financial information provided by
Banner Corporation (“Corporation”); the Corporation’s systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Corporation’s auditing,
accounting and financial reporting processes generally. Consistent
with the function, the Audit Committee should encourage continuous improvement
of, and should foster adherence to, the Corporation’s policies, procedures and
practices at all levels. The Audit Committee’s primary duties and
responsibilities are to:
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1.
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Serve
as an independent and objective party to monitor the Corporation’s
financial reporting process and internal control
system.
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2.
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Review
and appraise the audit efforts of the Corporation’s independent
accountants and internal auditing
department.
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3.
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Provide
an open avenue of communication among the independent accountants,
financial and senior management, the internal auditing department and the
Board of Directors.
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The Audit Committee will primarily
fulfill these responsibilities by carrying out the activities enumerated in
Section IV of this charter.
The Audit Committee shall be comprised
of three or more directors as determined by the Board, each of whom shall be
independent directors, and free from any relationships that, in the opinion of
the Board, would interfere with the exercise of his or her independent judgment,
as a member of the Committee. All members of the Committee shall have
a working familiarity with basic finance and accounting
practices. Member independence, experience and financial expertise
will be in conformance with rules established by the SEC, NASD, FDIC, and the
AICPA. The members of the Committee shall be elected by the Board at
the annual organizational meeting of the Board and shall serve until their
successors shall be duly elected and qualified. Unless a Chair is
selected by the full Board, the members of the Committee may designate a Chair
by majority vote of the full Committee membership.
III. Meetings
The Committee shall meet at least four
times annually, or more frequently as circumstances dictate. As part
of its job to foster open communication, the Committee should meet at least
annually with management, the Internal Audit Officer and the independent
accountants in separate executive session to discuss any matters that the
Committee or each of these groups believes should be discussed
privately. In addition, the Committee or at least its Chair should
meet with the independent accountants and management quarterly to review the
Corporation’s financial statements consistent with IV.4 below.
IV. Responsibilities
and Duties
To fulfill its responsibilities and
duties, the Audit Committee shall:
Documents/Reports
Review
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1.
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Review
and update this Charter periodically, at least annually, as conditions
dictate.
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2.
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Review
the Corporation’s annual financial statements and any submitted to the
public, including any certification, report, opinion, or review rendered
by the independent accountants.
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3.
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Review
the regular internal reports prepared by the internal auditing department
and management’s response.
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4.
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Review
with financial management and the independent accountants the financial
statements, including disclosures made in Management’s Discussion and
Analysis of Financial Condition and Results of Operations, in the
Corporation’s reports on Forms 10-Q and 10-K and annual reports to
shareholders prior to its filing or prior to the release of
earnings. The Committee shall recommend to the Board whether or
not the audited financial statements should be included in the
Corporation’s 10-K.
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5.
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Review
disclosures made by the Corporation’s chief executive officer and chief
financial officer regarding compliance with their certification
obligations as required under the Sarbanes-Oxley Act of 2002 and the rules
promulgated thereunder, including the Corporation’s disclosure controls
and procedures and internal controls for financial reporting
and evaluations thereof.
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Independent
Accountants
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6.
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Be
directly responsible for the appointment, compensation, retention and
oversight of the work of any registered public accounting firm engaged for
the purpose of preparing or issuing an audit report of performing other
audit, review or attest services for the Corporation, and each such
registered accounting firm shall report directly to the Audit
Committee.
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7.
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Approve
all audit engagement fees and terms and all non-audit engagements with the
independent accountants. The Committee may delegate authority
to pre-approve non-audit services to one or more members of the
Committee. If this authority is delegated, all approved
non-audit services will be presented to the Committee at its next
scheduled meeting.
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8.
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Ensure
receipt from the independent accountants of a formal written statement
delineating all relationships between the accountants and the Corporation,
consistent with Independence Standards Board Standard 1. On an
annual basis, the Committee should review and discuss with the accountants
any such relationships to determine the accountants’ independence and
objectivity. The Committee should take, or recommend to the
Board that it take appropriate action to oversee the independence of the
accountants.
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9.
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Ensure
the independent accountants’ ultimate accountability to the Board and the
Committee, as representatives of the shareholders, receiving direct
reports from the accountants.
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10.
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Periodically
consult with the independent accountants out of the presence of management
about internal controls and the completeness and accuracy of the
organization’s financial
statements.
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11.
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Discuss
with the independent auditors all matters required by Statement of
Auditing Standards No. 61 relating to the conduct of the
audit.
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12.
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Ensure
that the lead audit partner of the independent accountants and the audit
partner responsible for reviewing the audit are rotated at least every
five years, and that all other audit partners are rotated at least every
seven years.
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Financial Reporting
Processes
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13.
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In
consultation with the independent accountants and the internal auditors,
review the integrity of the organization’s financial reporting processes,
both internal and external.
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14.
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Consider
the independent accountants’ judgments about the quality and
appropriateness of the Corporation’s accounting principles as applied in
its financial reporting.
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15.
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Consider
and approve, if appropriate, major changes to the Corporation’s auditing
and accounting principles and practices as suggested by the independent
accountant’s, management, or the internal auditing
department.
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Process
Improvements
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16.
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Establish
regular and separate systems of reporting to the Audit Committee by each
of management, the independent accountants and the internal auditors
regarding any significant judgments made in management’s preparation of
the financial statements and the view of each as to appropriateness of
such judgments.
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17.
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Establish
procedures that allow employees of the Corporation or any of its
subsidiaries to submit confidential and anonymous concerns regarding
questionable accounting or auditing
matters.
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18.
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Establish
procedures for the receipt, retention and treatment of complaints received
by the Corporation regarding accounting, internal accounting controls or
auditing matters.
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19.
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Following
completion of the annual audit, review separately, as needed, with each of
management, the independent accountants and the internal auditing
department any significant difficulties encountered during the course of
the audit, including any restrictions on the scope of work or access to
required information.
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20.
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Review
(and in the case of the independent accountants, settle) any disagreement
among management and the independent accountants or the internal auditing
department in connection with the preparation of the financial
statements.
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21.
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Review
with the independent accountants, the internal auditing department and
management the adequacy and effectiveness of the accounting and financial
controls of the Corporation and elicit any recommendations for the
improvement of such internal control procedures or particular areas where
new or more detailed controls or procedures are
desirable.
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22.
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Review
with the independent accountants, the internal auditing department and
management the extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have been
implemented.
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Compliance
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23.
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Review
the Corporation’s financial statements, reports and other information
disseminated to the public. Assess compliance with legal
requirements and engage outside consultants or counsel, when
necessary.
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24.
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Review
activities, organizational structure, and qualifications of the internal
audit department.
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25.
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Review,
with the organization’s counsel, legal compliance matters including
corporate securities trading
policies.
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26.
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Review,
with the organization’s counsel, any legal matter that could have a
significant impact on the organization’s public financial
statements.
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27.
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On
an ongoing basis, review all related party transactions for potential
conflict of interest situations. Approve related party
transactions when warranted.
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28.
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Perform
any other activities consistent with this Charter, the Corporation’s
By-laws and governing law, as the Committee or Board deems necessary or
appropriate.
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Reporting
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29.
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Prepare
an audit committee report for inclusion in the Corporation’s annual proxy
statement, consulting with the Corporation’s legal counsel, if
necessary.
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Miscellaneous
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30.
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Determine
the appropriate funding for payment of (i) compensation to the independent
accountants, (ii) compensation to any advisers employed by the Committee
and (iii) ordinary administrative expenses of the Audit Committee that are
necessary or appropriate in carrying out its duties.
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31.
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Discuss
with management any second opinions sought from an accounting firm other
than the Corporation’s independent accountants, including the substance
and reasons for seeking any such opinion.
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32.
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Review
the internal audit function of the Corporation, including the
independence, competence, staffing, adequacy and authority of the internal
auditing department, the reporting relationships among the internal
auditing department, financial management and the Audit Committee, the
internal audit reporting obligations, the proposed internal audit plans
for the coming year, and the coordination of such plans with the
independent accountants.
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33.
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Review
findings from completed internal audits and progress reports on the
proposed internal audit plan, together with explanations for any
deviations from the original plan.
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34.
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Review
the appointment, reassignment or dismissal of the director of the internal
audit.
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35.
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Review
at least annually the material exceptions noted in the reports to the
Audit Committee by the internal auditors and the independent accountants,
and the progress made in responding to the
exceptions.
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36.
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Inquire
of management and the independent auditors about significant risks or
exposures, review the Corporation’s policies for risk assessment and risk
management, and assess the steps management has taken to control such risk
to the Corporation.
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37.
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Review
the Corporation’s policies and procedures for regular review of the
expense accounts of the Corporation’s executive
management.
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38.
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Review
with management and legal counsel the Corporation’s system for assessing
whether the Corporation’s financial statements, reports and other
financial information required to be disseminated to the public and filed
with governmental organizations satisfy the requirements of the SEC and
NASD.
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39.
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Discuss
with management and the independent accountants any correspondence with
regulators or governmental agencies and any employee complaints or
published reports, which raise material issues regarding the Corporation’s
financial statements or accounting
policies.
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40.
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Discuss
with the Corporation’s legal counsel any regulatory matters that may have
a material impact on the Corporation’s financial statements or its
compliance and reporting policies.
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41.
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At
its discretion, request that management, the independent accountants or
the internal auditors undertake special projects or investigations which
the Audit Committee deems necessary to fulfill its
responsibilities.
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V. Limitations
of Audit Committee’s Roles
While the Committee has the
responsibilities and powers set forth in this Audit Committee Charter, it is not
the duty of the Committee to prepare financial statements, plan or conduct
audits or to determine that the Corporation’s financial statements and
disclosures are complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and
regulations. These are the responsibilities of management and the
independent accountants.
Appendix
B
COMPENSATION
COMMITTEE CHARTER
FOR
THE
COMPENSATION COMMITTEE
OF
BANNER CORPORATION
AND
THE
COMPENSATION COMMITTEE
OF
BANNER BANK
The primary function of the
Compensation Committee of Banner Corporation (“Corporation Compensation
Committee”) and the Compensation Committee of Banner Bank (“Bank Compensation
Committee,” and together with the Corporation Compensation Committee, the
“Committees”) is to work together to coordinate the compensation paid to the
directors, officers and employees of both Banner Corporation (“Corporation”) and
Banner Bank (“Bank”). In achieving this goal, the Committees shall
operate separately but shall coordinate their efforts in order to achieve a
coordinated policy. The Corporation Compensation Committee shall set
the policies and compensation levels for directors, officers and employees of
the Corporation, while the Bank Compensation Committee shall set the policies
and compensation levels for directors, officers and employees of the
Bank. The Committees shall coordinate their efforts to ensure that
compensation policies are administered fairly and consistently.
The Committees shall each be comprised
of three or more directors as determined by the Board of Directors of the
Corporation or the Bank, as appropriate. Each member shall be an
independent director of the respective entity, who is free from any
relationships that, in the opinion of the relevant Board, would interfere with
the exercise of his or her independent judgment as a member of the
Committee. Member independence will be in conformity with rules
established by the Securities and Exchange Commission and the National
Association of Securities Dealers. The members of the Committees
shall be elected by the Board of Directors of the Corporation or the Bank, as
appropriate, at the annual organizational meeting of the relevant Board and
shall serve until their successors are duly elected and
qualified. Unless a Chair is selected by the relevant Board, the
members of each Committee may designate a Chair by majority vote of the full
Committee membership.
The Committees shall each meet at least
annually, or more frequently as circumstances dictate. As part of the
job to set executive compensation levels, each Committee should meet at least
annually with the appropriate Chief Executive Officer in order to discuss the
Chief Executive Officer’s evaluation of the senior officers and recommendations
for compensation levels. In addition to the separate meetings of the
Corporation Compensation Committee and the Bank Compensation Committee, the
Committees shall meet together at least annually, or more frequently as
circumstances dictate, to ensure that compensation policies for the Corporation
and the Bank are administered consistently.
IV.
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Responsibilities
and Duties
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To fulfill its responsibilities and
duties, each Committee shall (with the understanding that the Corporation
Compensation Committee shall take all action with respect to the Corporation and
the Bank Compensation Committee shall take all action with respect to the
Bank):
Compensation
Policies
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1.
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Develop
guidelines and policies for director compensation, coordinating actions
between the Corporation Compensation Committee and the Bank Compensation
Committee.
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2.
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Develop
guidelines and policies for executive compensation, coordinating actions
between the Corporation Compensation Committee and the Bank Compensation
Committee.
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3.
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Make
regular reports to the appropriate Board of
Directors.
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4.
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At
least annually, review the compensation policies to ensure that they are
effective in meeting goals for compensation and make new recommendations,
as needed.
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5.
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Review
and approve the list of a peer group of companies to which the Corporation
and the Bank shall compare themselves for compensation
purposes.
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6.
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If
necessary, engage independent consultants and outside counsel to provide
comparative information regarding compensation and benefits, and advice on
issues involving laws and regulations governing
compensation.
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7.
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Review
and approve other large compensation expense categories such as employee
benefit plans.
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8.
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At
least annually, review and update (if necessary) this Charter, as
conditions dictate.
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Compensation
9.
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Review
director compensation levels and recommend, as necessary, changes in the
compensation levels, with equity ownership in the Corporation
encouraged.
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10.
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Receive
and review an annual report from the Chief Executive Officer which
includes the performance assessment for all senior officers and
recommendations for compensation levels, and which also includes salary
recommendations for all employees.
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11.
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Set
compensation for all senior officers, other than the Chief Executive
Officer, based on the recommendations of the Chief Executive
Officer.
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12.
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On
an annual basis, review and approve goals and objectives relevant to
compensation of the Chief Executive Officer, evaluate the Chief Executive
Officer’s performance in light of those goals and objectives, and
determine the Chief Executive Officer’s compensation based on this
evaluation.
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13.
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For
the senior officers, annually review and approve (i) employment
agreements, severance agreements and change in control agreements or
provisions, in each case, when and if appropriate, and (ii) any special or
supplemental benefits.
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14.
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Adopt,
administer, approve and ratify awards under incentive compensation and
stock plans, including amendments to the awards made under any such plans,
and review and monitor awards under such
plans.
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Succession
Planning
15.
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In
conjunction with the Corporate Governance/Nominating Committee, recommend
to the appropriate Board of Directors a policy on succession planning for
the Chief Executive Officer.
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Reporting
16.
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Prepare
a report on executive compensation for inclusion in the Corporation’s
annual proxy statement, consulting with the Corporation’s legal counsel,
if necessary.
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REVOCABLE
PROXY
BANNER
CORPORATION
ANNUAL
MEETING OF SHAREHOLDERS
APRIL
27, 2010
The undersigned hereby appoints David
B. Casper and Wilber E. Pribilsky, and each of them, with full powers of
substitution to act as attorneys and proxies for the undersigned, to vote all
shares of common stock of Banner Corporation (“Banner”) which the undersigned is
entitled to vote at the annual meeting of shareholders, to be held at the Marcus
Whitman Hotel at 6 W. Rose Street, Walla Walla, Washington, on Tuesday,
April 27, 2010, at 10:00 a.m., local time, and at any and all adjournments
thereof, as indicated.
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FOR
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VOTE
WITHHELD
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1
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The
election as director of the nominees listed below
(except
as marked to the contrary below)
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[ ]
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[ ]
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Robert
D. Adams
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Edward
L. Epstein
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Robert
J. Lane
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Gary
Sirmon
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______________________________________________________________
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FOR
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AGAINST
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ABSTAIN
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2
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Advisory
approval of the compensation of Banner Corporation's named executive
officers.
|
[ ]
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[ ]
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[ ]
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3
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The
ratification of the Audit Committee's selection of Moss Adams LLP as the
independent auditor for the year ending December 31, 2010.
|
[ ]
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[ ]
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[ ]
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4
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The approval of the
amendment of Banner'
s Articles of
Incorporation to
increase the authorized number of shares of common
stock from 75,000,000 to 200,000,000 shares
.
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[ ]
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[ ]
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[ ]
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5
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In
their discretion, upon such other matters as may properly come before the
meeting.
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The
Board of Directors recommends a vote "FOR" the above
proposals.
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The
proxies or the trustees of the ESOP, as the case may be, will vote your shares
as directed on this card. If you do not indicate your choices on this
card, the proxies will vote your shares in accordance with the directors'
recommendations. If any other business is presented at the annual
meeting, the proxies will vote your shares in accordance with the directors'
recommendations. At the present time, the Board of Directors knows of
no other business to be presented at the annual meeting. This proxy
card also confers discretionary authority on the Board of Directors to vote with
respect to the election of any person as director where the nominees are unable
to serve or for good cause will not serve and on matters incident to the conduct
of the annual meeting.
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and
elect to vote at the annual meeting or at any adjournment thereof and after
notification to the Secretary of Banner at the annual meeting of the
shareholder’s decision to terminate this proxy, then the power of said attorneys
and proxies shall be deemed terminated and of no further force and
effect.
The undersigned acknowledges receipt
from Banner prior to the execution of this proxy of the Notice of
Annual Meeting of Shareholders, a Proxy Statement dated March 29, 2010 and the
2009 Annual Report to Shareholders.
Dated:
, 2010
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_____________________________________________
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_____________________________________________
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PRINT
NAME OF SHAREHOLDER
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PRINT
NAME OF SHAREHOLDER
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_____________________________________________
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_____________________________________________
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SIGNATURE
OF SHAREHOLDER
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SIGNATURE
OF SHAREHOLDER
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Please
sign exactly as your name appears on the enclosed card. When signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should
sign.
PLEASE
COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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