Heat oven to 350°F Grease and flour 2 (9-inch) round cake pans. Set aside.
Combine cake mix, 1 cup water, banana and eggs in large bowl. Beat as directed on package. Stir in 3/4 cup coconut.
Pour batter evenly into prepared pans. Bake for 30 to 35 minutes or until toothpick inserted in center comes out clean. Cool 10 minutes; remove from pans. (Run knife around side of pans before removing.) Cool completely.
Meanwhile, combine 2 cups powdered sugar, butter, milk and extract in large bowl. Beat at medium speed, scraping bowl often, until creamy. Gradually add remaining powdered sugar, mixing until well blended.
Place 1 cake layer onto serving plate; spread with 1/2 cup frosting. Cover with second cake layer; spread top and sides of cake with remaining frosting. Sprinkle with toasted coconut.
VARIATION: Cake can be baked in a greased and floured 13x9-inch baking pan. Bake at 350°F for 30 to 40 minutes.
To toast coconut, spread coconut into single layer on ungreased baking sheet. Bake at 350°F, stirring occasionally, for 5 to 7 minutes or until lightly browned.