q93010banr.htm
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

 
 
(Mark One)
 
[X] 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2010.
 
 
OR
 
[   ] 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________to  __________ :
 
 
Commission File Number 0-26584
 
BANNER CORPORATION
(Exact name of registrant as specified in its charter)
 
 
Washington
(State or other jurisdiction of incorporation or organization)
 
                                                                      91-1691604
                                                                 (I.R.S. Employer Identification Number)
 
 
10 South First Avenue, Walla Walla, Washington 99362
(Address of principal executive offices and zip code)
 
Registrant's telephone number, including area code:  (509) 527-3636
 

 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                Yes  [X]             No  [  ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).              Yes  [   ]   No   [   ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   [   ]
 
Accelerated filer   [X]
 
Non-accelerated filer   [   ]
 
Smaller reporting company
  [   ]  
 
           
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).            Yes   [   ]       No    [X]  
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
 Title of class:
 
As of October 31, 2010
 Common Stock, $.01 par value per share
 
112,060,332 shares*
 
*  Includes 240,381 shares held by the Employee Stock Ownership Plan that have not been released, committed to be released, or allocated to participant accounts.


 
 

 

BANNER CORPORATION AND SUBSIDIARIES

Table of Contents

PART I - FINANCIAL INFORMATION
 
 
   
   
   
   
   
   
 
   
   
   
   
   
   
   
   
 
   
   
   
   
 
   
   
   
   
   
Item 4 – [Removed and Reserved]
 
   
   
   

 
2 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited) (In thousands, except shares)
September 30, 2010 and December 31, 2009

   
September 30
   
December 31
 
ASSETS
   
2010
   
2009
 
               
Cash and due from banks
 
$
488,123
 
$
323,005
 
               
Securities—trading, cost $133,468 and $192,853, respectively
   
101,760
   
147,151
 
Securities—available-for-sale, cost $151,694 and $95,174, respectively
   
153,903
   
95,667
 
Securities—held-to-maturity, fair value $72,098 and $76,489, respectively
   
66,929
   
74,834
 
               
Federal Home Loan Bank (FHLB) stock
   
37,371
   
37,371
 
Loans receivable:
             
Held for sale, fair value $3,599 and $4,534, respectively
   
3,545
   
4,497
 
Held for portfolio
   
3,494,557
   
3,785,624
 
Allowance for loan losses
   
(96,435
)
 
(95,269
)
     
3,401,667
   
3,694,852
 
               
Accrued interest receivable
   
17,866
   
18,998
 
Real estate owned (REO), held for sale, net
   
107,159
   
77,743
 
Property and equipment, net
   
98,300
   
103,542
 
Other intangibles, net
   
9,210
   
11,070
 
Deferred income tax asset, net
   
--
   
14,811
 
Income taxes receivable
   
12,981
   
17,436
 
Bank-owned life insurance (BOLI)
   
56,141
   
54,596
 
Other assets
   
45,777
   
51,145
 
   
$
4,597,187
 
$
4,722,221
 
LIABILITIES
             
Deposits:
             
Non-interest-bearing
 
$
613,313
 
$
582,480
 
Interest-bearing transaction and savings accounts
   
1,459,756
   
1,341,145
 
Interest-bearing certificates
   
1,687,417
   
1,941,925
 
     
3,760,486
   
3,865,550
 
               
Advances from FHLB at fair value
   
46,833
   
189,779
 
Other borrowings
   
178,134
   
176,842
 
Junior subordinated debentures at fair value (issued in connection with Trust Preferred Securities)
   
48,394
   
47,694
 
Accrued expenses and other liabilities
   
24,624
   
24,020
 
Deferred compensation
   
13,877
   
13,208
 
     
4,072,348
   
4,317,093
 
COMMITMENTS AND CONTINGENCIES (Note 16)
             
               
STOCKHOLDERS’ EQUITY
             
Preferred stock - $0.01 par value, 500,000 shares authorized; Series A – liquidation preference
             
$1,000 per share, 124,000 shares issued and outstanding
   
118,602
   
117,407
 
Common stock and paid in capital - $0.01 par value per share, 200,000,000 shares authorized, 111,461,893 shares
issued: 111,221,512 shares and 21,299,209 shares outstanding at September 30, 2010 and December 31, 2009,
respectively
   
506,418
   
331,538
 
Retained earnings (accumulated deficit)
   
(99,575
)
 
(42,077
)
Accumulated other comprehensive income:
             
Unrealized gain on securities available-for-sale and/or transferred to held-to-maturity
   
1,381
   
249
 
Unearned shares of common stock issued to Employee Stock Ownership Plan (ESOP) trust at cost:
             
240,381 restricted shares outstanding at September 30, 2010 and December 31, 2009
   
(1,987
)
 
(1,987
)
               
Carrying value of shares held in trust for stock related compensation plans
   
(8,724
)
 
(9,045
)
Liability for common stock issued to deferred, stock related, compensation plans
   
8,724
   
9,043
 
     
--
   
(2
)
     
524,839
   
405,128
 
   
$
4,597,187
 
$
4,722,221
 

See selected notes to consolidated financial statements

 
3 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands except for per share amounts)
For the Quarters and Nine Months Ended September 30, 2010 and 2009

   
Quarters Ended
   
Nine Months Ended
 
   
September 30
   
September 30
 
   
2010 
   
2009 
   
2010 
   
2009 
 
INTEREST INCOME:
                       
Loans receivable
  $ 51,162     $ 56,175     $ 156,394     $ 168,022  
Mortgage-backed securities
    972       1,422       3,143       4,792  
Other securities and cash equivalents
    2,116       1,976       6,317       6,248  
      54,250       59,573       165,854       179,062  
INTEREST EXPENSE:
                               
Deposits
    12,301       20,818       42,799       65,548  
FHLB advances
    323       630       1,004       2,025  
Other borrowings
    604       655       1,864       1,553  
Junior subordinated debentures
    1,100       1,118       3,174       3,700  
      14,328       23,221       48,841       72,826  
                                 
Net interest income before provision for loan losses
    39,922       36,352       117,013       106,236  
                                 
PROVISION FOR LOAN LOSSES
    20,000       25,000       50,000       92,000  
Net interest income
    19,922       11,352       67,013       14,236  
                                 
OTHER OPERATING INCOME:
                               
Deposit fees and other service charges
    5,702       5,705       16,494       16,049  
Mortgage banking operations
    2,519       2,065       4,284       7,640  
Loan servicing fees
    146       282       774       260  
Miscellaneous
    919       768       1,788       1,700  
      9,286       8,820       23,340       25,649  
Other-than-temporary impairment losses
    (3,000 )     (1,349 )     (4,231 )     (1,511 )
Net change in valuation of financial instruments carried at fair value
    1,366       5,982       2,453       13,940  
Total other operating income
    7,652       13,453       21,562       38,078  
                                 
OTHER OPERATING EXPENSES:
                               
Salary and employee benefits
    17,093       17,379       50,445       52,508  
Less capitalized loan origination costs
    (1,731 )     (2,060 )     (5,076 )     (7,010 )
Occupancy and equipment
    5,546       5,715       16,731       17,697  
Information/computer data services
    1,501       1,551       4,601       4,684  
Payment and card processing expenses
    2,018       1,778       5,125       4,786  
Professional services
    1,500       1,456       4,661       3,833  
Advertising and marketing
    2,025       1,899       5,717       5,938  
Deposit insurance
    2,282       2,219       6,623       7,818  
State/municipal business and use taxes
    630       558       1,643       1,630  
REO operations
    11,757       2,799       18,981       5,227  
Amortization of core deposit intangibles
    600       646       1,859       1,997  
Miscellaneous
    3,107       2,689       8,457       8,205  
Total other operating expenses
    46,328       36,629       119,767       107,313  
                                 
Income (loss) before provision for (benefit from) income taxes
    (18,754 )     (11,824 )     (31,192 )     (54,999 )
                                 
PROVISION FOR (BENEFIT FROM) INCOME TAXES
    23,988       (5,376 )     18,013       (22,777 )
                                 
NET INCOME (LOSS)
    (42,742 )     (6,448 )     (49,205 )     (32,222 )
                                 
PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION
                               
Preferred stock dividend
    1,550       1,550       4,650       4,650  
Preferred stock discount accretion
    398       373       1,195       1,119  
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
  $ (44,690 )   $ (8,371 )   $ (55,050 )   $ (37,991 )
                                 
Earnings (loss) per common share:
                               
Basic
  $ (0.40 )   $ (0.44 )   $ (1.04 )   $ (2.11 )
Diluted
  $ (0.40 )   $ (0.44 )   $ (1.04 )   $ (2.11 )
Cumulative dividends declared per common share:
  $ 0.01     $ 0.01     $ 0.03     $ 0.03  

See selected notes to consolidated financial statements

 
4 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited) (In thousands)
For the Quarters and Nine Months Ended September 30, 2010 and 2009


   
Quarters Ended
September 30
   
Nine Months Ended
September 30
 
         
   
2010 
   
2009 
   
2010 
   
2009 
 
NET INCOME (LOSS)
$
(42,742
)
$
(6,448
)
$
(49,205
)
$
(32,222
)
                         
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAXES:
                       
Unrealized holding gain (loss) during the period, net of deferred
income tax provision (benefit) of ($11), $121, $618 and $51, respectively
 
(20
)
 
627
   
1,099
   
89
 
                         
Amortization of unrealized loss on tax exempt securities transferred from available-for-sale to held-to-maturity
 
11
   
14
   
33
   
42
 
                         
Other comprehensive income (loss)
 
(9
)
 
641
   
1,132
   
131
 
                         
COMPREHENSIVE INCOME (LOSS)
$
(42,751
)
$
(5,807
)
$
(48,073
)
$
(32,091
)

See selected notes to consolidated financial statements


 
5 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited) (In thousands)
For the Nine Months Ended September 30, 2010 and 2009

 
Preferred
Stock
 
Common
Stock and
Paid in
Capital
 
Retained
Earnings
(Accumulated Deficit)
 
Accumulated Other Comprehensive
Income
 
Unearned
Restricted ESOP
Shares
 
Carrying Value, Net of Liability, Of Shares Held in Trust for Stock-Related Compensation Plans
 
Stockholders’
Equity
 
Balance, January 1, 2010
$
117,407
 
$
331,538
 
$
(42,077
)
$
249
 
$
(1,987
)
$
(2
)
$
405,128
 
                                           
     Net income (loss)
             
(49,205
)
                   
(49,205
)
                                           
Change in valuation of securities—available-for-sale, net of income tax
                   
1,099
               
1,099
 
                                           
Amortization of unrealized loss on tax exempt securities transferred from available-for-sale to held-to-maturity, net of income taxes
                   
33
               
33
 
                                           
    Accretion of preferred stock discount
 
1,195
         
(1,195
)
                   
--
 
                                           
    Accrual of dividends on preferred stock
             
(4,650
)
                   
(4,650
)
                                           
Accrual of dividends on common stock ($.03/share cumulative)
             
(2,448
)
                   
(2,448
)
                                           
Proceeds from issuance of common stock for stockholder reinvestment program, net of registration expenses
       
13,198
                           
13,198
 
                                           
Proceeds from issuance of common stock, net of offering costs
       
161,637
                           
161,637
 
                                           
    Amortization of compensation related to MRP
                               
2
   
2
 
                                           
Amortization of compensation related to stock options
       
45
                           
45
 
                                           
BALANCE, September 30, 2010
$
118,602
 
$
506,418
 
$
(99,575
)
$
1,381
 
$
(1,987
)
$
--
 
$
524,839
 

See selected notes to consolidated financial statements









 
6 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)
(Unaudited) (In thousands)
For the Nine Months Ended September 30, 2010 and 2009

 
Preferred
Stock
 
Common
Stock and
Paid in
Capital
 
Retained
Earnings (Accumulated Deficit)
 
Accumulated Other Comprehensive
Income
 
Unearned
Restricted ESOP
Shares
 
Carrying Value, Net of
 Liability, Of Shares Held inTrust for Stock-Related Compensation Plans
 
Stockholders’
Equity
 
Balance, January 1, 2009
$
115,915
 
$
316,740
 
$
2,150
 
$
572
 
$
(1,987
)
$
(42
)
$
433,348
 
                                           
Net income (loss)
             
(32,222
)
                   
(32,222
)
                                           
Change in valuation of securities—available-for-sale, net of income tax
                   
89
               
89
 
                                           
Amortization of unrealized loss on tax exempt securities transferred from available-for-sale to held-to-maturity, net of income taxes
                   
42
               
42
 
                                           
Additional registration costs for issuance of preferred stock
       
(46
)
                         
(46
)
                                           
Accretion of preferred stock discount
 
1,119
         
(1,119
)
                   
--
 
                                           
Accrual of dividends on preferred stock
             
(4,650
)
                   
(4,650
)
                                           
Accrual of dividends on common stock ($.03/share cumulative)
             
(561
)
                   
(561
)
                                           
Proceeds from issuance of common stock for stockholder reinvestment program, net of registration expenses
       
10,592
                           
10,592
 
                                           
Amortization of compensation related to MRP
                               
32
   
32
 
                                           
Amortization of compensation related to stock options
       
99
                           
99
 
                                           
                                           
BALANCE, September 30, 2009
$
117,034
 
$
327,385
 
$
(36,402
)
$
703
 
$
(1,987
)
$
(10
)
$
406,723
 

See selected notes to consolidated financial statements


 
7 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)
(Unaudited) (In thousands)
For the Nine Months Ended September 30, 2010 and 2009

     
Nine Months Ended
September 30
 
     
2010 
   
2009 
 
               
COMMON STOCK—SHARES ISSUED AND OUTSTANDING:
             
Common stock, shares issued, beginning of period
   
21,539 
   
17,152 
 
               
Purchase and retirement of common stock
   
-- 
   
-- 
 
Issuance of common stock for exercised stock options and/or
employee stock plans
   
116 
   
-- 
 
Issuance of common stock for stockholder reinvestment program
   
4,168 
   
2,782 
 
Issuance of common stock
   
85,639 
   
-- 
 
Net number of shares issued during the period
   
89,923 
   
2,782 
 
               
COMMON SHARES ISSUED AND OUTSTANDING, END OF PERIOD
   
111,462 
   
19,934 
 
               
UNEARNED, RESTRICTED ESOP SHARES:
             
Number of shares, beginning of period
   
(240 
)
 
(240 
)
Issuance/adjustment of earned shares
   
-- 
   
-- 
 
Number of shares, end of period
   
(240 
)
 
(240 
)
               
NET COMMON STOCK—SHARES OUTSTANDING
   
111,222 
   
19,694 
 

See selected notes to consolidated financial statements

 
8 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
For the Nine Months Ended September 30, 2010 and 2009

   
Nine Months Ended
September 30
 
   
2010
   
2009
 
OPERATING ACTIVITIES:
           
Net income (loss)
  $ (49,205 )   $ (32,222 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
               
Depreciation
    6,963       7,433  
Deferred income and expense, net of amortization
    105       374  
Amortization of core deposit and other intangibles
    1,860       1,998  
Other-than-temporary impairment losses
    4,231       1,511  
Net change in valuation of financial instruments carried at fair value
    (2,453 )     (13,940 )
Deferred taxes
    14,193       (3,038 )
Equity-based compensation
    47       131  
Increase in cash surrender value of bank-owned life insurance
    (1,545 )     (1,357 )
Gain on sale of loans, excluding capitalized servicing rights
    (2,994 )     (3,210 )
Loss on disposal of real estate held for sale and property
and equipment, net
    1,382       631  
Provision for losses on loans and real estate held for sale
    59,923       93,579  
Purchases of securities—trading
    (3,266 )     (69,760 )
Principal repayments and maturities of securities—trading
    50,048       103,383  
Origination of loans held for sale
    (235,084 )     (481,246 )
Proceeds from sales of loans held for sale
    236,036       483,878  
Net change in:
               
Other assets
    10,922       (14,865 )
Other liabilities
    529       (11,038 )
Net cash provided from operating activities
    91,692       62,242  
                 
INVESTING ACTIVITIES:
               
Purchases of securities available-for-sale
    (161,516 )     (48,383 )
Principal repayments and maturities of securities available-for-sale
    102,704       20,885  
Proceeds from sales of securities available-for-sale
    1,965       6,458  
Purchases of securities held-to-maturity
    (1,158 )     (17,975 )
Principal repayments and maturities of securities held-to-maturity
    6,020       1,079  
Principal repayments (originations) of loans, net
    174,900       (70,652 )
Purchases of loans and participating interest in loans
    (286 )     (1,357 )
Purchases of property and equipment, net
    (1,741 )     (14,478 )
Proceeds from sale of other repossessed assets and REO held for sale, net
    30,306       29,275  
Other
    (108 )     (345 )
Net cash provided from (used by) investing activities
    151,086       (95,493 )
                 
FINANCING ACTIVITIES:
               
Increase (decrease) in deposits, net
    (105,064 )     82,325  
Proceeds from FHLB advances
    --       231,200  
Repayment of FHLB advances
    (142,504 )     (86,203 )
Increase in other borrowings, net
    1,285       29,535  
Cash dividends paid
    (6,212 )     (5,748 )
Cash proceeds from issuance of stock for stockholder reinvestment program
    13,198       10,546  
Cash proceeds from issuance of stock in secondary offering, net of offering costs
    161,637       --  
Net cash provided from (used by) financing activities
    (77,660 )     261,655  
                 
NET INCREASE IN CASH AND DUE FROM BANKS
    165,118       228,404  
                 
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD
    323,005       102,750  
CASH AND DUE FROM BANKS, END OF PERIOD
  $ 488,123     $ 331,154  

(Continued on next page)

 
9 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited) (In thousands)
For the Nine Months Ended September 30, 2010 and 2009

   
Nine Months Ended
September 30
 
   
2010
   
2009
 
             
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
           
Interest paid in cash
  $ 52,132     $ 79,518  
Taxes paid (received) in cash
    (561 )     (6,451 )
                 
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
               
    Loans, net of discounts, specific loss allowances and unearned income,
   transferred to real estate owned and other repossessed assets
    71,102       63,141  
    Real estate owned transferred to property and equipment
    --       7,030  
Net decrease in accrued dividends payable
    (886 )     (537 )
Change in other assets/liabilities
    177       757  

See selected notes to consolidated financial statements

 
10 

 

BANNER CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1:  BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

Banner Corporation (Banner or the Company) is a bank holding company incorporated in the State of Washington.  We are primarily engaged in the business of planning, directing and coordinating the business activities of our wholly-owned subsidiaries, Banner Bank and Islanders Bank.  Banner Bank is a Washington-chartered commercial bank that conducts business from its main office in Walla Walla, Washington and, as of September 30, 2010, its 86 branch offices and seven loan production offices located in Washington, Oregon and Idaho.  Islanders Bank is also a Washington-chartered commercial bank that conducts business from three locations in San Juan County, Washington.  Banner Corporation is subject to regulation by the Board of Governors of the Federal Reserve System.  Banner Bank and Islanders Bank (the Banks) are subject to regulation by the Washington State Department of Financial Institutions, Division of Banks (Washington DFI) and the Federal Deposit Insurance Corporation (FDIC).

In the opinion of management, the accompanying consolidated statements of financial condition and related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows reflect all adjustments (which include reclassifications and normal recurring adjustments) that are necessary for a fair presentation in conformity with U.S. Generally Accepted Accounting Principles (GAAP).  The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and the disclosure of contingent assets and liabilities as of the date of the statement of financial condition in the accompanying notes.  Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments.  In particular, management has identified several accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the financial statements.  These policies relate to (i) the methodology for the recognition of interest income, (ii) determination of the provision and allowance for loan and lease losses, (iii) the valuation of financial assets and liabilities recorded at fair value, including other-than-temporary impairment (OTTI) losses, (iv) the valuation of intangibles, such as goodwill, core deposit intangibles and mortgage servicing rights, (v) the valuation of real estate held for sale and (vi) the valuation of or recognition of deferred tax assets and liabilities.  These policies and the judgments, estimates and assumptions are described in greater detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations (Critical Accounting Policies) in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission (SEC).  Management believes that the judgments, estimates and assumptions used in the preparation of our consolidated financial statements are appropriate based on the factual circumstances at the time.  However, because of the sensitivity of the financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in our results of operations or financial condition.  Further, subsequent changes in economic or market conditions could have a material impact on these estimates and the Company’s financial condition and operating results in future periods.  

The Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) became effective on July 1, 2009.  At that date, the ASC became the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities, superseding existing FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature.  Rules and interpretive releases of the SEC under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  All other accounting literature is considered non-authoritative.  The implementation of the ASC affects the way companies refer to GAAP standards in financial statements and accounting policies, but it has not had a material effect on the Company’s consolidated financial statements.

Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.  Certain reclassifications have been made to the 2009 Consolidated Financial Statements and/or schedules to conform to the 2010 presentation.  These reclassifications may have affected certain ratios for the prior periods. The effect of these reclassifications is considered immaterial.  All significant intercompany transactions and balances have been eliminated.

The information included in this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC.  Interim results are not necessarily indicative of results for a full year.

Note 2:  RECENT DEVELOPMENTS AND SIGNIFICANT EVENTS

Regulatory Actions: On March 23, 2010, Banner Bank entered into a Memorandum of Understanding (MOU) with the FDIC and Washington DFI.  The Company also entered into a similar MOU with the Federal Reserve Bank of San Francisco on March 29, 2010.  Under its MOU, Banner Bank is required, among other things, to develop and implement plans to reduce commercial real estate concentrations; to improve asset quality and reduce classified assets; to improve profitability; and to increase Tier 1 leverage capital to equal or exceed 10% of average assets.  In addition, Banner Bank will not be able to pay cash dividends to Banner Corporation without prior approval from the FDIC and Washington DFI and the Company and Banner Bank must obtain prior regulatory approval before adding any new director or senior executive officer or changing the responsibilities of any current senior executive officer.  Further, the Company may not pay any dividends on common or preferred stock, pay interest or principal on the balance of its junior subordinated debentures or repurchase our common stock without the prior written non-objection of the Federal Reserve Bank.  See Item 1A, Risk Factors—“We are required to comply with the terms of memoranda of understanding issued by the FDIC and DFI and the Federal Reserve and lack of compliance could result in additional regulatory actions” in our Form 10-Q for the quarter ended June 30, 2010.

Secondary Offering of Common Stock:  On June 30, 2010, the Company announced the initial closing of its offering of 75,000,000 shares of its common stock and the sale of an additional 3,500,000 shares pursuant to the partial exercise of the underwriters’ over-allotment option, at a price to the public of $2.00 per share.  On July 2, 2010, the Company further announced the completion of this offering as the underwriters
 
 
11

 
exercised their over-allotment option for an additional 7,139,000 shares, at a price to the public of $2.00 per share.  Together with the 78,500,000 shares the Company issued on June 30, 2010 (including 3,500,000 shares issued pursuant to the underwriters’ initial exercise of their over-allotment option), the Company issued a total of 85,639,000 shares in the offering, resulting in net proceeds, after deducting underwriting discounts and commissions and offering expenses, of approximately $161.6 million.  Of that amount, $13.6 million (related to the 7,139,000 shares) was recorded in the Consolidated Statements of Changes in Stockholders’ Equity during the quarter ended September 30, 2010, as that portion of the transaction settled after June 30, 2010.

Banner intends to use a significant portion of the net proceeds from the offering to strengthen Banner Bank’s regulatory capital ratios in accordance with the MOU and to support managed growth.  To that end, at September 30, 2010, the Company had invested a cumulative $110 million as additional paid-in common equity in Banner Bank.  As a result, the Tier 1 leverage capital of Banner Bank was 10.77% of average assets on September 30, 2010, unchanged from June 30, 2010, and up from the 9.74% at December 31, 2009.  The Company expects to use the remaining net proceeds for general working capital purposes, including additional capital investments in its subsidiary banks if appropriate.

FDIC Prepayment:  On November 12, 2009, the FDIC adopted a final rule that required insured depository institutions to prepay an estimate of their expected quarterly deposit insurance premiums for the fourth quarter of 2009 and for the three years ended December 31, 2010, 2011 and 2012.  Insured institutions were required to deposit funds with the FDIC in the amount of the prepaid assessment on December 30, 2009.  The insured institutions will not receive interest on the deposited funds.  For purposes of calculating an institution’s prepaid assessment amount, for the fourth quarter of 2009 and all of 2010, that institution’s assessment rate was its total base assessment rate in effect on September 30, 2009.  That rate was then increased by three basis points for all of 2011 and 2012.  For purposes of calculating the prepaid amount, an institution’s third quarter 2009 assessment base was also assumed to increase quarterly by an estimated five percent annual growth rate through the end of 2012.  Each institution was directed to record the entire amount of its prepaid assessment as a prepaid expense (asset) as of December 30, 2009.  Thereafter, each institution will record an expense (charge to earnings) for its regular quarterly assessment for the quarter and an offsetting credit to the prepaid assessment until the asset is exhausted.  Once the asset is exhausted, the institution will record an expense and an accrued expense payable each quarter for its regular assessment, which would be paid in arrears to the FDIC at the end of the following quarter.  If the prepaid assessment is not exhausted by June 30, 2013, any remaining amount will be returned to the institution.  For Banner Corporation, the consolidated balance of the prepaid assessment was $23.4 million at September 30, 2010 and is recorded among “other assets” in the Consolidated Statement of Financial Condition.

FDIC Special Assessment:  On May 22, 2009, the FDIC adopted a final rule imposing a five basis point special assessment on each insured depository institution’s total assets minus Tier 1 capital as of June 30, 2009, with the maximum amount of the special assessment for any institution not to exceed ten basis points times the institution’s assessment base for the second quarter 2009 risk-based assessment.  The special assessment was collected on September 30, 2009 at the same time the regular quarterly risk based assessment for the second quarter of 2009 was collected.  For Banner Corporation, this assessment was $2.1 million, which was recognized in other operating expenses during the quarter ended June 30, 2009.  The FDIC Board may vote to impose additional special assessments if the FDIC estimates that the Deposit Insurance Fund reserve ratio will fall to a level that the FDIC Board believes would adversely affect public confidence or to a level that will be close to or below zero.

FDIC Temporary Liquidity Guarantee Program:  Banner Corporation, Banner Bank and Islanders Bank have chosen to participate in the FDIC’s Temporary Liquidity Guarantee Program (the TLGP), which applies to all U.S. depository institutions insured by the FDIC and all United States bank holding companies, unless they have opted out.  Under the TLGP, the FDIC guarantees certain senior unsecured debt of insured institutions and their holding companies, as well as non-interest-bearing transaction account deposits.  Under the transaction account guarantee component of the TLGP, known as TAGP, all non-interest-bearing and certain interest-bearing transaction accounts maintained at Banner Bank and Islanders Bank are insured in full by the FDIC until December 31, 2010, regardless of the standard maximum deposit insurance amounts.  The Banks are required to pay a fee (annualized) on balances of each covered account in excess of $250,000 while the extra deposit insurance is in place.  The annualized fee for the transaction account guarantee program was 10 basis points through December 31, 2009 and will be within a range from 15 to 25 basis points from January 1 through December 31, 2010.

Notably, on September 27, 2010, the FDIC announced that it will not continue the TAGP beyond December 31, 2010.  However, under the FDIC’s proposed rule making of September 27, 2010, separate temporary coverage for non-interest bearing transaction accounts would become effective on December 30, 2010, and terminate on December 31, 2012.  Under the proposed rule all funds held in non-interest bearing transaction accounts would be fully insured, without limit.  Further, unlike the TAGP, all U.S. depository institutions insured by the FDIC must participate; there is no opt out provision.  The FDIC does not plan to charge a separate assessment for the temporary insurance.  As proposed, the FDIC will take into account the cost for this additional coverage in determining the amount of the general assessment the FDIC charges insured U.S. depository institutions under its risk-based assessment system

On March 31, 2009, Banner Bank completed an offering of $50 million of qualifying senior bank notes covered by the TLGP at a fixed rate of 2.625% which mature on March 31, 2012.  Under the debt guarantee component of the TLGP, the FDIC will pay the unpaid principal and interest on an FDIC-guaranteed debt instrument upon the uncured failure of the participating entity to make a timely payment of principal or interest.  Under the terms of the TLGP, the Bank is not permitted to use the proceeds from the sale of securities guaranteed under the TLGP to prepay any of its other debt that is not guaranteed by the FDIC.  Banner Bank is required to pay a 1.00% fee (annualized) on this debt, which will result in a total fee of $1.5 million over three years.  None of the senior notes are redeemable prior to maturity.

Note 3:  ACCOUNTING STANDARDS RECENTLY ADOPTED OR ISSUED

In January 2010, the Board of Governors of the Federal Reserve System issued final risk-based capital rules related to the adoption of FASB ASC Topic 860-10 and FASB ASC Topic 810-10.  Banking organizations affected by these recent pronouncements generally will be subject to
 
 
12

 
higher regulatory capital requirements intended to better align risk-based capital levels with the actual risks of certain exposures.  The adoption of the new risk-based capital rules in relation to these new pronouncements did not have a material impact on the Company’s consolidated financial statements.

In January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements.  ASU No. 2010-06 requires:

·  
fair value disclosures by each class of assets and liabilities (generally a subset within a line item as presented in the statement of financial position) rather than major category,
·  
for items measured at fair value on a recurring basis, the amounts of significant transfers between Levels 1 and 2, and transfers into and out of Level 3, and the reasons for those transfers, including separate discussion related to the transfers into each level apart from transfers out of each level, and
·  
gross presentation of the amounts of purchases, sales, issuances, and settlements in the Level 3 recurring measurement reconciliation.

Additionally, the ASU clarifies that a description of the valuation techniques(s) and inputs used to measure fair values is required for both recurring and nonrecurring fair value measurements.  Also, if a valuation technique has changed, entities should disclose that change and the reason for the change.  Disclosures other than the gross presentation changes in the Level 3 reconciliation are effective for the first reporting period beginning after December 15, 2009.  The requirement to present the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis will be effective for fiscal years beginning after December 15, 2010.  The sections of this ASU already adopted did not have a material impact on the Company’s consolidated financial statements.  The further adoption of the requirement to present the Level 3 reconciliation differently is not expected to have a material effect on the Company’s consolidated financial statements.

In February 2010, FASB issued ASU No. 2010-09, Subsequent Events (Topic 855)—Amendments to Certain Recognition and Disclosure Requirements.  ASU No. 2010-09 establishes separate subsequent event recognition criteria and disclosure requirements for SEC filers.  SEC filers are defined in this update as entities that are required to file or to furnish their financial statements with either the SEC or another appropriate agency (such as the FDIC or Office of Thrift Supervision) under Section 12(i) of the Securities and Exchange Act of 1934, as amended.  Effective with the release date, the financial statements of SEC filers will no longer disclose either the date through which subsequent events were reviewed or that subsequent events were evaluated through the date the financial statements were issued.  The requirement to evaluate subsequent events through the date of issuance is still in place; only the disclosure is affected.  This ASU also removes the requirement to make those disclosures in financial statements revised for either a correction of an error or a retrospective application of an accounting change.  The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In April 2010, FASB issued ASU No. 2010-13, Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades – a consensus of the FASB Emerging Issues Task Force.  ASU No. 2010-13 addresses whether an employee stock option should be classified as a liability or as an equity instrument if the exercise price is denominated in the currency in which a substantial portion of the entity’s equity securities trades.  That currency may differ from the entity’s functional currency and from the payroll currency of the employee receiving the option.  This guidance amends ASC 718, Compensation – Stock Compensation, to clarify that an employee share-based payment award that has an exercise price denominated in the currency of the market in which a substantial portion of the entity’s equity shares trades should not be considered to contain a condition that is not a market, performance, or service condition.  The guidance in the ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning on or after December 15, 2010, and did not have a material impact on the Company’s consolidated financial statements.

In April 2010, FASB issued ASU No. 2010-18, Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset—a consensus of the FASB Emerging Issues Task Force.  ASU No. 2010-18 clarifies that a creditor should not apply specific guidance in ASC 310, Receivables, 40, Troubled Debt Restructurings by Creditors, to acquired loans accounted for as a pooled asset under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality.  However, that guidance in ASC 310-30 continues to apply to acquired loans within the scope of ASC 310-30 that a creditor accounts for individually.  This amended guidance is effective for a modification of a loan(s) accounted for within a pool under ASC 310-30 occurring in the first interim or annual period ending on or after July 15, 2010.  The amended guidance must be applied prospectively, and early application is permitted.  Upon initial application of the amended guidance, an entity may make a one-time election to terminate accounting for loans as a pool under ASC 310-30.  An entity may make the election on a pool-by-pool basis.  The election does not preclude an entity from applying pool accounting to future acquisitions of loans with credit deterioration.  The implementation of this ASU did not have a material impact on the Company’s consolidated financial statements.

In July 2010, FASB issued ASU No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  ASU No. 2010-20 provides enhanced disclosures related to the credit quality of financing receivables and the allowance for credit losses, and provides that new and existing disclosures should be disaggregated based on how an entity develops its allowance for credit losses and how it manages credit exposures.  Under the provisions of this ASU, additional disclosures required for financing receivables include information regarding the aging of past due receivables, credit quality indicators, and modifications of financing receivables.  The provisions of ASU No. 2010-20 are effective for periods ending after December 15, 2010, with the exception of the amendments to the rollforward of the allowance for credit losses and the disclosures about modifications which are effective for periods beginning after December 15, 2010.  Comparative disclosures are required only for periods ending subsequent to initial adoption.  We are currently assessing the effects of adopting the provisions of ASU No. 2010-20 and will provide the required disclosure in our 2010 Annual Report filed on Form 10-K.


 
13 

 

Note 4:  BUSINESS SEGMENTS

The Company is managed by legal entity and not by lines of business.  Each of the Banks is a community oriented commercial bank chartered in the State of Washington.  The Banks’ primary business is that of a traditional banking institution, gathering deposits and originating loans for its portfolio in its respective primary market areas.  The Banks offer a wide variety of deposit products to its consumer and commercial customers.  Lending activities include the origination of real estate, commercial/agriculture business and consumer loans.  Banner Bank is also an active participant in the secondary market, originating residential loans for sale on both a servicing released and servicing retained basis.  In addition to interest income on loans and investment securities, the Banks receive other income from deposit service charges, loan servicing fees and from the sale of loans and investments.  The performance of the Banks is reviewed by the Company’s executive management and Board of Directors on a monthly basis.  All of the executive officers of the Company are members of Banner Bank’s management team.

GAAP establishes standards to report information about operating segments in annual financial statements and require reporting of selected information about operating segments in interim reports to stockholders.  We have determined that the Company’s current business and operations consist of a single business segment and have presented our consolidated financial statements accordingly.

Note 5:  INTEREST-BEARING DEPOSITS AND SECURITIES

The following table sets forth additional detail regarding our 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):

 
September 30
 
December 31
 
September 30
 
 
2010
 
2009
 
2009
 
             
Interest-bearing deposits included in cash and due from banks
$
441,977
 
$
244,641
 
$
270,623
 
Mortgage-backed or related securities
                 
GNMA
 
16,105
   
18,458
   
20,130
 
FHLMC
 
32,160
   
43,469
   
47,596
 
FNMA
 
35,509
   
37,549
   
40,144
 
Private issuer
 
3,994
   
6,465
   
7,073
 
Total mortgage-backed securities
 
87,768
   
105,941
   
114,943
 
                   
U.S. agency obligations
 
116,188
   
94,367
   
79,675
 
Taxable municipal bonds
 
2,953
   
3,717
   
4,512
 
Corporate bonds
 
46,035
   
43,267
   
44,515
 
Total other taxable securities
 
165,176
   
141,351
   
128,702
 
                   
Tax-exempt municipal bonds
 
69,504
   
70,018
   
74,963
 
                   
Equity securities (excludes FHLB stock)
 
144
   
342
   
493
 
                   
Total securities
 
322,592
   
317,652
   
319,101
 
                   
FHLB stock
 
37,371
   
37,371
   
37,371
 
 
$
801,940
 
$
599,664
 
$
627,095
 


 
14 

 

Securities—Trading:  The amortized cost and estimated fair value of securities—trading at September 30, 2010 and December 31, 2009 are summarized as follows (dollars in thousands):

 
September 30, 2010
   
December 31, 2009
 
Amortized
Cost
 
Fair Value
 
Percent of
Total
   
Amortized Cost
 
Fair Value
 
Percent of Total
                                       
U.S. Government and agency obligations
$
4,168
 
$
4,480
   
4.4
%
 
$
41,178
 
$
41,255
   
28.0
%
Municipal bond:
                                     
Taxable
 
682
   
716
   
0.7
     
1,004
   
1,034
   
0.7
 
Tax exempt
 
5,755
   
6,062
   
6.0
     
6,065
   
6,117
   
4.2
 
Corporate bonds
 
63,836
   
35,095
   
34.5
     
76,411
   
35,017
   
23.8
 
Mortgage-backed securities:
                                     
FHLMC
 
18,792
   
19,754
   
19.4
     
25,030
   
25,837
   
17.6
 
FNMA
 
33,320
   
35,509
   
34.9
     
36,250
   
37,549
   
25.5
 
Equity securities
 
6,915
   
144
   
0.1
     
6,915
   
342
   
0.2
 
 
$
133,468
 
$
101,760
   
100.0
%
 
$
192,853
 
$
147,151
 
 
100.0
%

The amortized cost and estimated fair value of securities—trading at September 30, 2010 and December 31, 2009, 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.

   
September 30, 2010
   
December 31, 2009
 
   
Amortized Cost
   
Fair Value
   
Amortized Cost
   
Fair Value
 
                         
Due in one year or less
  $ 1,097     $ 1,127     $ 550     $ 565  
Due after one year through five years
    2,360       2,489       40,232       40,277  
Due after five years through ten years
    22,436       23,750       21,230       21,641  
Due after ten years through twenty years
    17,580       18,475       20,931       21,186  
Due after twenty years
    83,080       55,775       102,995       63,140  
      126,553       101,616       185,938       146,809  
Equity securities
    6,915       144       6,915       342  
    $ 133,468     $ 101,760     $ 192,853     $ 147,151  

Securities—Available-for-Sale:  The amortized cost and estimated fair value of securities available-for-sale at September 30, 2010 and December 31, 2009 are summarized as follows (dollars in thousands):

 
September 30, 2010
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
   
Percent of
Total
 
 
 
U.S. Government and agency obligations
  $ 111,259     $ 498     $ (49 )   $ 111,708       72.6 %
Corporate bonds
    9,697       --       (6 )     9,691       6.3  
Mortgage-backed or related securities:
                                       
FHLMC collateralized mortgage obligations
    12,082       323       --       12,405       8.0  
GNMA certificates
    14,911       1,194       --       16,105       10.5  
Other collateralized mortgage obligations
    3,745       249       --       3,994       2.6  
    $ 151,694     $ 2,264     $ (55 )   $ 153,903       100.0 %


 
December 31, 2009
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
   
Percent of
Total
 
 
 
U.S. Government and agency obligations
  $ 53,732     $ 22     $ (642 )   $ 53,112       55.5 %
Mortgage-backed or related securities:
                                       
FHLMC collateralized mortgage obligations
    17,410       223       --       17,633       18.4  
GNMA certificates
    17,741       716       --       18,457       19.3  
Other collateralized mortgage obligations
    6,291       174       --       6,465       6.8  
    $ 95,174     $ 1,135     $ (642 )   $ 95,667       100.0 %


 
15 

 

At September 30, 2010 and December 31, 2009, an aging of unrealized losses and fair value of related securities—available-for-sale was as follows (in thousands):

 
September 30, 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
$
26,404
 
$
(49
)
$
--
 
$
--
 
$
26,404
 
$
(49
)
Corporate bonds
 
9,691
   
(6
)
 
--
   
--
   
9,691
   
(6
)
 
$
36,095
 
$
(55
)
$
--
 
$
--
 
$
36,095
 
$
(55
)

 
December 31, 2009
 
 
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
$
48,713
 
$
(642
)
$
--
 
$
--
 
$
48,713
 
$
(642
)
 
$
48,713
 
$
(642
)
$
--
 
$
--
 
$
48,713
 
$
(642
)

Management does not believe that any individual unrealized loss as of September 30, 2010 or December 31, 2009 represents other-than-temporary impairment (OTTI).  The decline in fair market value of these securities is generally due to changes in interest rates and changes in market-desired spreads subsequent to their purchase.  At September 30, 2010, there were nine securities—available-for-sale with unrealized losses, compared to eight at December 31, 2009.

The amortized cost and estimated fair value of securities—available-for-sale at September 30, 2010 and December 31, 2009, 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.

 
September 30, 2010
 
December 31, 2009
 
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
                         
Due in one year or less
$
25,334
 
$
25,352
 
$
--
 
$
--
 
Due after one year through five years
 
75,628
   
75,997
   
48,748
   
48,257
 
Due after five years through ten years
 
19,994
   
20,049
   
4,983
   
4,854
 
Due after ten years through twenty years
 
3,745
   
3,994
   
5,133
   
5,196
 
Due after twenty years
 
26,993
   
28,511
   
36,310
   
37,360
 
 
$
151,694
 
$
153,903
 
$
95,174
 
$
95,667
 

Securities—Held-to-Maturity:  The amortized cost and estimated fair value of securities held-to-maturity at September 30, 2010 and December 31, 2009 are summarized as follows (dollars in thousands):

   
September 30, 2010
 
         
Gross
   
Gross
             
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
   
Percent
 
   
Cost
   
Gains
   
Losses
   
Value
   
of Total
 
Municipal bonds:
                             
Taxable
$
2,237
 
$
100
 
$
--
 
$
2,337
   
3.2
%
Tax exempt
 
63,442
   
5,092
   
(13
)
 
68,521
   
95.1
 
Corporate bonds
 
1,250
   
12
   
(22
)
 
1,240
   
1.7
 
 
$
66,929
 
$
5,204
 
$
(35
)
$
72,098
   
100.0
%

   
December 31, 2009
 
         
Gross
   
Gross
             
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
   
Percent
 
   
Cost
   
Gains
   
Losses
   
Value
   
of Total
 
Municipal bonds:
                             
Taxable
$
2,683
 
$
66
 
$
(30
)
$
2,719
   
3.6
%
Tax exempt
 
63,901
   
2,731
   
(72
)
 
66,560
   
87.0
 
Corporate bonds
 
8,250
   
--
   
(1,040
)
 
7,210
   
9.4
 
 
$
74,834
 
$
2,797
 
$
(1,142
)
$
76,489
   
100.0
%


 
16 

 

At September 30, 2010 and December 31, 2009, an aging of unrealized losses and fair value of related securities—held-to-maturity was as follows (in thousands):

 
September 30, 2010
 
 
Less Than 12 Months
 
12 Months or More
 
Total
 
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Municipal bonds
$
--