CASH AND SECURITIES

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



	December 31
	2013		2012
Cash on hand and due from banks	$	136,810	$	181,100
Cash equivalents:
Short-term cash investments	539		198
	$	137,349	$	181,298

Federal regulations require depository institutions to maintain certain minimum reserve balances. Included in cash and demand deposits were required reserves of $30.0 million and $25.4 million at December 31, 2013 and 2012, 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
	2013		2012
Interest-bearing deposits included in cash and due from banks	$	67,638	$	114,928
U.S. Government and agency obligations	61,327		98,617
Municipal bonds:
Taxable	34,216		31,480
Tax exempt	119,588		103,545
Total municipal bonds	153,804		135,025
Corporate bonds	44,154		48,519
Mortgage-backed or related securities:
1-4 residential agency guaranteed	58,117		105,770
1-4 residential other	1,051		1,299
Multifamily agency guaranteed	281,319		188,136
Multifamily other	10,234		10,659
Total mortgage-backed securities	350,721		305,864
Asset-backed securities:
Student Loan Marketing Association (SLMA)	15,681		32,474
Other asset-backed securities	9,510		10,042
Total asset-backed securities	25,191		42,516
Equity securities (excludes FHLB stock)	68		63
Total securities	635,265		630,604
FHLB stock	35,390		36,705
	$	738,293	$	782,237

Securities—Trading: The amortized cost and estimated fair value of securities—trading at December 31, 2013 and 2012 are summarized as follows (dollars in thousands):



	December 31, 2013						December 31, 2012
	Amortized Cost		Fair Value		Percent of Total		Amortized Cost		Fair Value		Percent of Total
U.S. Government and agency obligations	$	1,370	$	1,481	2.4	%	$	1,380	$	1,637	2.3	%
Municipal bonds:
Tax exempt	4,969		5,023		8.0		5,590		5,684		8.0
Total municipal bonds	4,969		5,023		8.0		5,590		5,684		8.0
Corporate bonds	49,498		35,140		56.2		57,807		35,741		50.2
Mortgage-backed or related securities:
One- to four-family residential agency guaranteed	10,483		11,230		18.0		16,574		17,911		25.1
Multifamily agency guaranteed	8,816		9,530		15.3		8,974		10,196		14.3
Total mortgage-backed or related securities	19,299		20,760		33.3		25,548		28,107		39.4
Equity securities	14		68		0.1		14		63		0.1
	$	75,150	$	62,472	100.0	%	$	90,339	$	71,232	100.0	%

There were 44 sales of securities—trading for the year ended December 31, 2013 with proceeds of $34.3 million and related gains of $1.5 million, including $1.0 million which represented recoveries on certain collateralized debt obligations that had previously been written off and a $409,000 OTTI recovery. There were eight sales of securities—trading for the year ended December 31, 2012 with proceeds of $5.1 million and related gains of $13,000. There were no sales of securities—trading for the year ended December 31, 2011. The $409,000 OTTI recovery on securities—trading related to the sale of certain equity securities issued by government-sponsored entities during the year ended December 31, 2013 which reversed a $409,000 OTTI charge during the year ended December 31, 2012 related to these same equity securities. There were no OTTI charges or recoveries for the year ended December 31, 2011. Additionally, at December 31, 2013 and 2012, there were no securities—trading in a nonaccrual status. Net unrealized holding losses of $1.5 million were recognized in 2013 compared to $6.3 million and $754,000 of net unrealized holding gains on securities—trading for the years ended December 31, 2012 and 2011, respectively.

The amortized cost and estimated fair value of securities—trading at December 31, 2013 and 2012, 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, 2013				December 31, 2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturing in one year or less	$	260	$	263	$	—	$	—
Maturing after one year through five years	7,056		7,298		4,496		4,867
Maturing after five years through ten years	12,602		13,572		14,251		15,536
Maturing after ten years through twenty years	33,335		27,472		12,055		11,346
Maturing after twenty years	21,883		13,799		59,523		39,420
	75,136		62,404		90,325		71,169
Equity securities	14		68		14		63
	$	75,150	$	62,472	$	90,339	$	71,232

Securities—Available-for-Sale: The amortized cost, gross unrealized losses and gains and estimated fair value of securities— available-for-sale at December 31, 2013 and 2012 are summarized as follows (dollars in thousands):



	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Total
U.S. Government and agency obligations	$	59,178	$	117	$	(635	)	$	58,660	12.5	%
Municipal bonds:
Taxable	23,842		100		(278		)	23,664		5.0
Tax exempt	29,229		170		(208		)	29,191		6.2
Total municipal bonds	53,071		270		(486		)	52,855		11.2
Corporate bonds	7,001		2		(39		)	6,964		1.5
Mortgage-backed or related securities:
One- to four-family residential agency guaranteed	47,077		648		(838		)	46,887		10.0
One- to four-family residential other	988		63		—			1,051		0.2
Multifamily agency guaranteed	271,428		402		(3,392		)	268,438		57.1
Multifamily other	10,604		—		(370		)	10,234		2.2
Total mortgage-backed or related securities	330,097		1,113		(4,600		)	326,610		69.5
Asset-backed securities:
SLMA	15,553		128		—			15,681		3.3
Other asset-backed securities	10,060		—		(550		)	9,510		2.0
Total asset-backed securities	25,613		128		(550		)	25,191		5.3
	$	474,960	$	1,630	$	(6,310	)	$	470,280	100.0	%

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Total
U.S. Government and agency obligations	$	96,666	$	367	$	(53	)	$	96,980	20.5	%
Municipal bonds:
Taxable	20,987		233		(67		)	21,153		4.5
Tax exempt	23,575		221		(11		)	23,785		5.0
Total municipal bonds	44,562		454		(78		)	44,938		9.5
Corporate bonds	10,701		37		(9		)	10,729		2.3
Mortgage-backed or related securities:
One- to four-family residential agency guaranteed	87,392		1,051		(584		)	87,859		18.6
One- to four-family residential other	1,223		76		—			1,299		0.3
Multifamily agency guaranteed	176,026		2,140		(226		)	177,940		37.6
Multifamily other	10,700		4		(45		)	10,659		2.2
Total mortgage-backed or related securities	275,341		3,271		(855		)	277,757		58.7
Asset-backed securities:
SLMA	32,309		210		(45		)	32,474		6.9
Other asset-backed securities	10,071		—		(29		)	10,042		2.1
Total asset-backed securities	42,380		210		(74		)	42,516		9.0
	$	469,650	$	4,339	$	(1,069	)	$	472,920	100.0	%

At December 31, 2013 and 2012, an aging of unrealized losses and fair value of related securities—available-for-sale was as follows (in thousands):



	December 31, 2013
	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	$	39,621	$	(633	)	$	998	$	(2	)	$	40,619	$	(635	)
Municipal bonds:
Taxable	15,580		(261		)	413		(17		)	15,993		(278		)
Tax exempt	8,217		(205		)	487		(3		)	8,704		(208		)
Total municipal bonds	23,797		(466		)	900		(20		)	24,697		(486		)
Corporate bonds	4,961		(39		)	—		—			4,961		(39		)
Mortgage-backed or related securities:
One- to four-family residential agency guaranteed	14,972		(133		)	22,560		(705		)	37,532		(838		)
Multifamily agency guaranteed	199,407		(3,162		)	10,096		(230		)	209,503		(3,392		)
Multifamily other	10,234		(370		)	—		—			10,234		(370		)
Total mortgage-backed or related securities	224,613		(3,665		)	32,656		(935		)	257,269		(4,600		)
Asset-backed securities:
Other asset-backed securities	—		—			9,510		(550		)	9,510		(550		)
	$	292,992	$	(4,803	)	$	44,064	$	(1,507	)	$	337,056	$	(6,310	)



	December 31, 2012
	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	$	22,955	$	(53	)	$	—	$	—		$	22,955	$	(53	)
Municipal bonds:
Taxable	11,009		(67		)	—		—			11,009		(67		)
Tax exempt	4,619		(11		)	—		—			4,619		(11		)
Total municipal bonds	15,628		(78		)	—		—			15,628		(78		)
Mortgage-backed or related securities:
One- to four-family residential agency guaranteed	32,459		(503		)	5,746		(81		)	38,205		(584		)
Multifamily agency guaranteed	32,170		(226		)	—		—			32,170		(226		)
Multifamily other	7,279		(45		)	—		—			7,279		(45		)
Total mortgage-backed or related securities	71,908		(774		)	5,746		(81		)	77,654		(855		)
Asset-backed securities:
SLMA	9,674		(45		)	—		—			9,674		(45		)
Other asset-backed securities	10,042		(29		)	—		—			10,042		(29		)
Total asset-backed securities	19,716		(74		)	—		—			19,716		(74		)
	$	136,877	$	(988	)	$	5,746	$	(81	)	$	142,623	$	(1,069	)

Proceeds from the sale of 35 available-for-sale securities were $103 million for the year ended December 31, 2013 and the Company recognized a loss of $116,000 on those sales. There were three sales of securities—available-for-sale during the year ended December 31, 2012 with proceeds of $13 million and a resulting gain of $38,000. There were four sales of securities—available-for-sale with proceeds of $28 million and resulting losses of $5,000 during the year ended December 31, 2011. There were no OTTI impairment charges on securities—available-for-sale for the years ended December 31, 2013, 2012 and 2011. At December 31, 2013, there were 114 securities— available-for-sale with unrealized losses, compared to 52 at December 31, 2012 and 26 at December 31, 2011. Management does not believe that any individual unrealized loss as of December 31, 2013, 2012 or 2011 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, 2013 and 2012, 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, 2013				December 31, 2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturing in one year or less	$	25,136	$	25,256	$	16,369	$	16,393
Maturing after one year through five years	322,493		319,489		205,913		207,147
Maturing after five years through ten years	58,468		57,782		132,372		133,407
Maturing after ten years through twenty years	15,535		15,135		43,386		43,414
Maturing after twenty years	53,328		52,618		71,610		72,559
	$	474,960	$	470,280	$	469,650	$	472,920

Securities—Held-to-Maturity: The amortized cost, gross gains and losses and estimated fair value of securities—held-to-maturity at December 31, 2013 and 2012 are summarized as follows (dollars in thousands):



	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Total
U.S. Government and agency obligations	$	1,186	$	—	$	(80	)	$	1,106	1.1	%
Municipal bonds:
Taxable	10,552		193		(204		)	10,541		10.3
Tax exempt	85,374		2,545		(1,299		)	86,620		83.3
Total municipal bonds	95,926		2,738		(1,503		)	97,161		93.6
Corporate bonds	2,050		—		—			2,050		2.0
Mortgage-backed or related securities:
Multifamily agency guaranteed	3,351		—		(58		)	3,293		3.3
	$	102,513	$	2,738	$	(1,641	)	$	103,610	100.0	%

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Total
Municipal bonds:
Taxable	$	10,326	$	436	$	(157	)	$	10,605	11.9	%
Tax exempt	74,076		5,757		(30		)	79,803		85.7
Total municipal bonds	84,402		6,193		(187		)	90,408		97.6
Corporate bonds	2,050		—		—			2,050		2.4
	$	86,452	$	6,193	$	(187	)	$	92,458	100.0	%

At December 31, 2013 and 2012, an age analysis of unrealized losses and fair value of related securities—held-to-maturity was as follows (in thousands):



	December 31, 2013
	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	$	1,106	$	(80	)	$	—	$	—		$	1,106	$	(80	)
Municipal bonds:
Taxable	3,344		(110		)	2,964		(94		)	6,308		(204		)
Tax exempt	31,234		(1,282		)	303		(17		)	31,537		(1,299		)
Total municipal bonds	34,578		(1,392		)	3,267		(111		)	37,845		(1,503		)
Mortgage-backed or related securities:
Multifamily agency guaranteed	3,293		(58		)	—		—			3,293		(58		)
	$	38,977	$	(1,530	)	$	3,267	$	(111	)	$	42,244	$	(1,641	)



	December 31, 2012
	Less Than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Municipal bonds:
Taxable	$	4,137	$	(157	)	$	—	$	—	$	4,137	$	(157	)
Tax exempt	910		(30		)	—		—		910		(30		)
Total municipal bonds	5,047		(187		)	—		—		5,047		(187		)
	$	5,047	$	(187	)	$	—	$	—	$	5,047	$	(187	)

There were no sales of securities—held-to-maturity during the years ended December 31, 2013, 2012 or 2011. The Company recognized no OTTI charges on securities—held-to-maturity for the years ended December 31, 2013 and 2012 and a $3 million OTTI recovery for the year ended December 31, 2011. As of December 31, 2013 and 2012, there were no securities—held-to-maturity in a nonaccrual status. There were 36 securities—held-to-maturity with unrealized losses at December 31, 2013 compared to five at December 31, 2012 and two at December 31, 2011. Management does not believe that any individual unrealized losses as of December 31, 2013 or 2012 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, 2013 and 2012, 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, 2013				December 31, 2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturing in one year or less	$	1,270	$	1,281	$	3,323	$	3,410
Maturing after one year through five years	10,834		11,206		13,641		14,335
Maturing after five years through ten years	17,948		17,908		13,295		13,452
Maturing after ten years through twenty years	59,643		60,791		53,031		57,868
Maturing after twenty years	12,818		12,424		3,162		3,393
	$	102,513	$	103,610	$	86,452	$	92,458

Pledged Securities: The following table presents, as of December 31, 2013, investment securities which were pledged to secure borrowings, public deposits or other obligations as permitted or required by law (in thousands):



	Carrying Value		Amortized Cost		Fair Value
Purpose or beneficiary:
State and local governments public deposits	$	123,299	$	123,406	$	124,843
Interest rate swap counterparties	8,864		8,582		8,864
Retail repurchase transaction accounts	100,000		100,086		100,000
Other	3,315		3,282		3,315
Total pledged securities	$	235,478	$	235,356	$	237,022