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Cash And Securities

12 Months Ended

Dec. 31, 2011

Note 4: CASH AND SECURITIES

Cash, due from bank and cash equivalents consisted of the following (in thousands):

	December 31
		2011		2010

Cash on hand and due from banks	$	132,189	$	361,391
Cash equivalents:
Short-term cash investments		247		261

	$	132,436	$	361,652

For the purpose of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, overnight investments and short-term deposits with original maturities of less than 90 days. Federal regulations require depository institutions to maintain certain minimum reserve balances. Included in cash and demand deposits were required reserves of $20.4 million and $19.1 million at December 31, 2011 and 2010, respectively.

The following table sets forth a summary of Banner’s interest-bearing deposits and securities at the dates indicated (includes securities—trading, available-for-sale and held-to-maturity, all at carrying value) (in thousands):

	December 31
	2011		2010

Interest-bearing deposits included in cash and due from banks	$	69,758	$	321,896

U.S. Government and agency obligations		341,606		139,807

Municipal bonds:
Taxable		18,497		7,123
Tax exempt		88,963		75,509
Total municipal bonds		107,460		82,632

Corporate bonds		42,565		58,495

Mortgage-backed or related securities:
GNMA		19,572		23,732
FHLMC		42,001		26,952
FNMA		66,519		32,341
Private issuer		1,835		3,544
Total mortgage-backed securities		129,927		86,569

Equity securities (excludes FHLB stock)		402		190

Total securities		621,960		367,693

FHLB stock		37,371		37,371

	$	729,089	$	726,960

Securities—Trading: The amortized cost and estimated fair value of securities—trading at December 31, 2011 and 2010 are summarized as follows (dollars in thousands):

	December 31, 2011							December 31, 2010
	Amortized Cost		Fair Value		Percent of Total			Amortized Cost		Fair Value		Percent of Total

U.S. Government and agency obligations	$	2,401	$	2,635		3.3	%	$	4,167	$	4,379		4.6	%

Municipal bonds:
Taxable		391		420		0.5			682		693		0.7
Tax exempt		5,431		5,542		6.9			5,422		5,705		6.0
Total municipal bonds		5,822		5,962		7.4			6,104		6,398		6.7

Corporate bonds		63,502		35,055		43.4			63,581		34,724		36.4

Mortgage-backed and related securities:
FHLMC		10,535		11,246		13.9			16,554		17,347		18.2
FNMA		23,489		25,427		31.5			30,749		32,341		33.9
Total mortgage-backed and related securities		34,024		36,673		45.4			47,303		49,688		52.1

Equity securities		6,914		402		0.5			6,915		190		0.2

	$	112,663	$	80,727		100.0	%	$	128,070	$	95,379		100.0	%

There were no sales of securities—trading for the years ended December 31, 2011 or 2010. During 2009, Banner sold a $6.5 trading security and recognized a gain of $140,000 on the sale. The Company recognized no OTTI charges on securities—trading for the year ended December 31, 2011 compared to OTTI charges of $1.2 million and $1.5 million, respectively, for the years ended December 31, 2010 and 2009. Additionally, at December 31, 2011, there were no single-issue trust preferred securities in the Company’s trading portfolio in nonaccrual status. At December 31, 2010, there was one single-issue trust preferred security in Banner’s trading portfolio in nonaccrual status with an amortized cost of $4.3 million and an estimated fair value at December 31, 2010 of $1.4 million. This security became current and was removed from nonaccrual status during 2011. Net unrealized holding gains of $741,000 were recognized in 2011 compared to $497,000 of net unrealized holding gains on securities—trading for the year ended December 31, 2010 and $4.3 million of net unrealized holding losses on securities—trading for the year ended December 31, 2009.

The amortized cost and estimated fair value of securities—trading at December 31, 2011 and 2010, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because some securities may be called or prepaid with or without call or prepayment penalties.

	December 31, 2011
	Amortized Cost		Fair Value

Due in one year or less	$	1,000	$	1,009
Due after one year through five years		1,545		1,626
Due after five years through ten years		17,755		18,975
Due after ten years through twenty years		13,244		13,431
Due after twenty years		72,205		45,284

		105,749		80,325

Equity securities		6,914		402

	$	112,663	$	80,727

Securities—Available-for-Sale: The amortized cost, gross unrealized losses and gains and estimated fair value of securities available-for-sale at December 31, 2011 and 2010 are summarized as follows (dollars in thousands):

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Total

U.S. Government and agency obligations	$	338,165	$	862	$	(56	)	$	338,971	72.8	%

Municipal bonds:
Taxable		10,358		225		(2	)		10,581	2.3
Tax exempt		16,535		210		(16	)		16,729	3.6
Total municipal bonds		26,893		435		(18	)		27,310	5.9

Corporate bonds		6,240		20		--			6,260	1.3

Mortgage-backed or related securities:
FHLMC collateralized mortgage obligations		30,504		284		(33	)		30,755	6.6
FNMA collateralized mortgage obligations		40,897		310		(115	)		41,092	8.8
GNMA certificates		18,145		1,427		--			19,572	4.2
Other collateralized mortgage obligations		1,735		100		--			1,835	0.4
Total mortgage-backed and related securities		91,281		2,121		(148	)		93,254	20.0

	$	462,579	$	3,438	$	(222	)	$	465,795	100.0	%

	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Total

U.S. Government and agency obligations	$	135,770	$	323	$	(665	)	$	135,428	67.6	%

Municipal bonds:
Taxable		800		--		(25	)		775	0.4
Tax exempt		4,723		--		(102	)		4,621	2.3
Total municipal bonds		5,523		--		(127	)		5,396	2.7

Corporate bonds		22,536		--		(14	)		22,522	11.2

Mortgage-backed or related securities:
FHLMC collateralized mortgage obligations		9,314		291		--			9,605	4.8
GNMA certificates		22,597		1,167		(32	)		23,732	11.9
Other collateralized mortgage obligations		3,318		226		--			3,544	1.8
Total mortgage-backed and related securities		35,229		1,684		(32	)		36,881	18.5

	$	199,058	$	2,007	$	(838	)	$	200,227	100.0	%

At December 31, 2011 and 2010, an aging of unrealized losses and fair value of related securities—available-for-sale was as follows (in thousands):

	December 31, 2011
	Less Than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

U.S. Government and agency obligations	$	74,326	$	(56	)	$	--	$	--	$	74,326	$	(56	)

Municipal bonds:
Taxable		3,599		(2	)		--		--		3,599		(2	)
Tax exempt		4,075		(16	)		--		--		4,075		(16	)
Total municipal bonds		7,674		(18	)		--		--		7,674		(18	)

Corporate bonds		--		--			--		--		--		--

Mortgage-backed or related securities		33,888		(148	)		--		--		33,888		(148	)

	$	115,888	$	(222	)	$	--	$	--	$	115,888	$	(222	)


	December 31, 2010
	Less Than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

U.S. Government and agency obligations	$	70,426	$	(665	)	$	--	$	--	$	70,426	$	(665	)

Municipal bonds:
Taxable		775		(25	)		--		--		775		(25	)
Tax exempt		4,621		(102	)		--		--		4,621		(102	)
Total municipal bonds		5,396		(127	)		--		--		5,396		(127	)

Corporate bonds		17,604		(14	)		--		--		17,604		14

Mortgage-backed or related securities		2,488		(32	)		--		--		2,488		(32	)

	$	95,914	$	(838	)	$	--	$	--	$	95,914	$	(838	)

Proceeds from the sale of four available-for-sale securities were $28 million for the year ended December 31, 2011 and the Company recognized losses of $5,000 on those sales. There was a single sale of securities—available-for-sale of $2.0 million with a resulting gain of $36,000 during the year ended December 31, 2010. There were no sales of securities—available-for-sale in 2009. There were no OTTI impairment charges on securities—available-for-sale for the years ended December 31, 2011, 2010 and 2009. At December 31, 2011, there were 26 securities— available-for-sale with unrealized losses, compared to 24 at December 31, 2010 and eight at December 31, 2009. Management does not believe that any individual unrealized loss as of December 31, 2011, 2010 or 2009 represented OTTI. The decline in fair market value of these securities was generally due to changes in interest rates and changes in market-desired spreads subsequent to their purchase.

The amortized cost and estimated fair value of securities—available-for-sale at December 31, 2011 and 2010, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because some securities may be called or prepaid with or without call or prepayment penalties.

	December 31, 2011
	Amortized Cost		Fair Value

Due in one year or less	$	19,520	$	19,602
Due after one year through five years		329,451		330,505
Due after five years through ten years		69,813		70,083
Due after ten years through twenty years		20,505		20,787
Due after twenty years		23,290		24,818

Total securities—available-for-sale	$	462,579	$	465,795

Securities—Held-to-Maturity: The amortized cost, gross gains and losses and estimated fair value of securities held-to-maturity at December 31, 2011 and 2010 are summarized as follows (dollars in thousands):

		December 31, 2011
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value	Percent of Total
Municipal bonds:
Taxable	$	7,496	$	390	$	--		$	7,886	9.8	%
Tax exempt		66,692		4,281		--			70,973	88.6
Total municipal bonds		74,188		4,671		--			78,859	98.4

Corporate bonds		1,250		--		(2	)		1,248	1.6

	$	75,438	$	4,671	$	(2	)	$	80,107	100.0	%

		December 31, 2010
				Gross		Gross
		Amortized		Unrealized		Unrealized			Fair	Percent
		Cost		Gains		Losses			Value	of Total
Municipal bonds:
Taxable	$	5,654	$	68	$	(71	)	$	5,651	7.6	%
Tax exempt		65,183		1,952		(106	)		67,029	90.7
Total municipal bonds		70,837		2,020		(177	)		72,680	98.3

Corporate bonds		1,250		8		(22	)		1,236	1.7

	$	72,087	$	2,028	$	(199	)	$	73,916	100.0	%

At December 31, 2011 and 2010, an age analysis of unrealized losses and fair value of related securities—held-to-maturity was as follows (in thousands):

	December 31, 2011
	Less Than 12 Months				12 Months or More					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

Corporate bonds	$	--	$	--	$	498	$	(2	)	$	498	$	(2	)

	$	--	$	--	$	498	$	(2	)	$	498	$	(2	)

	December 31, 2010
	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

Municipal bonds	$	16,744	$	(177	)	$	--	$	--		$	16,744	$	(177	)
Corporate bonds	--		--			478		(22		)	478		(22		)

	$	16,744	$	(177	)	$	478	$	(22	)	$	17,222	$	(199	)

There were no sales of securities held-to-maturity during the years ended December 31, 2011, 2010 or 2009. The Company recognized a $3 million recovery on securities held-to-maturity for the year ended December 31, 2011 compared to a $3.0 million OTTI charge for the year ended December 31, 2010 and no OTTI charges or recoveries in 2009. As of December 31, 2011, there were two held-to-maturity non-rated corporate bonds issued by a housing authority in nonaccrual status each with an amortized cost of $250,000 and estimated fair values of $249,000 each. Management expects to collect all amounts due for these securities. Additionally, these two securities have begun to repay past due amounts. There were two securities held-to-maturity with unrealized losses at December 31, 2011 compared to 13 at December 31, 2010 and 12 at December 31, 2009. Management does not believe that any individual unrealized losses as of December 31, 2011 or 2010 represented OTTI. The decline in fair market value of these securities was generally due to changes in interest rates and changes in market-desired spreads subsequent to their purchase.

The amortized cost and estimated fair value of securities—held-to-maturity at December 31, 2011 and 2010, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because some securities may be called or prepaid with or without call or prepayment penalties.

	December 31, 2011
	Amortized Cost		Fair Value

Due in one year or less	$	2,707	$	2,768
Due after one year through five years		14,420		15,150
Due after five years through ten years		9,726		10,254
Due after ten years through twenty years		46,741		49,936
Due after twenty years		1,844		1,999

Total securities—held-to-maturity	$	75,438	$	80,107

The following table presents, as of December 31, 2011, investment securities which were pledged to secure borrowings, public deposits or other obligations as permitted or required by law (in thousands):

		Amortized Cost		Fair Value
Purpose or beneficiary:
State and local governments public deposits	$	91,644	$	96,279
Interest rate swap counterparties		8,414		8,812
Retail repurchase transaction accounts		138,761		141,872
Other		4,206		4,399

Total pledged securities	$	243,025	$	251,362

The carrying value of investment securities pledged to secure borrowings as of December 31, 2011 was $243.0 million.