Unassociated Document

 
 
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  MARCH 31, 2009 .
 
 
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 (Section 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 (check one)
 
 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:
Common Stock, $.01 par value per share
 
As of  April 30, 2009
17,805,296 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 1 - Financial Statements.  The Consolidated Financial Statements of Banner Corporation and Subsidiaries filed as a part of the report are as follows:
Consolidated Statements of Financial Condition as of March 31, 2009 and December 31, 2008
3
   
Consolidated Statements of Operations for the Quarters Ended March 31, 2009 and 2008
4
   
Consolidated Statements of Comprehensive Income (Loss) for the Quarters Ended March 31, 2009 and 2008
5
   
Consolidated Statements of Changes in Stockholders’ Equity for the Quarters Ended March 31, 2009 and 2008
6
   
Consolidated Statements of Cash Flows for the Quarters Ended March 31, 2009 and 2008
9
   
Selected Notes to Consolidated Financial Statements
11
   
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
 
   
Special Note Regarding Forward-Looking Statements
26
   
Executive Overview
26
   
Comparison of Financial Condition at March 31, 2009 and December 31, 2008
30
   
Comparison of Results of Operations for the Quarters Ended March 31, 2009 and 2008
31
   
Asset Quality
35
   
Liquidity and Capital Resources
39
   
Capital Requirements
40
   
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
 
   
Market Risk and Asset/Liability Management
41
   
Sensitivity Analysis
41
   
Item 4 - Controls and Procedures
45
   
PART II - OTHER INFORMATION
 
   
Item 1 - Legal Proceedings
46
   
Item 1A - Risk Factors
46
   
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
46
   
Item 3 - Defaults upon Senior Securities
47
   
Item 4 - Submission of Matters to a Vote of Security Holders
47
   
Item 5 - Other Information
47
   
Item 6 - Exhibits
48
   
SIGNATURES
50

 
 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited) (In thousands, except shares)
March 31, 2009 and December 31, 2008

   
March 31 
   
December 31 
 
ASSETS
   
2009 
   
2008 
 
               
Cash and due from banks
 
$
75,510 
 
$
102,750 
 
               
Securities—trading, cost $215,057 and $245,274, respectively
   
161,963 
   
203,902 
 
Securities—available-for-sale, cost $65,468 and $52,190, respectively
   
66,963 
   
53,272 
 
Securities—held-to-maturity, fair value $67,506 and $60,530, respectively
   
67,401 
   
59,794 
 
               
Federal Home Loan Bank (FHLB) stock
   
37,371 
   
37,371 
 
Loans receivable:
             
Held for sale, fair value $11,247 and $7,540, respectively
   
11,071 
   
7,413 
 
Held for portfolio
   
3,904,476 
   
3,953,995 
 
Allowance for loan losses
   
(79,724 
)
 
(75,197 
)
     
3,835,823 
   
3,886,211 
 
               
Accrued interest receivable
   
20,821 
   
21,219 
 
Real estate owned, held for sale, net
   
38,951 
   
21,782 
 
Property and equipment, net
   
97,847 
   
97,647 
 
Goodwill and other intangibles, net
   
13,026 
   
13,716 
 
Deferred income tax asset, net
   
6,551 
   
5,528 
 
Income taxes receivable, net
   
13,450 
   
9,675 
 
Bank-owned life insurance (BOLI)
   
53,163 
   
52,680 
 
Other assets
   
21,284 
   
18,821 
 
   
$
4,510,124 
 
$
4,584,368 
 
LIABILITIES
             
Deposits:
             
Non-interest-bearing
 
$
508,593 
 
$
509,105 
 
Interest-bearing transaction and savings accounts
   
1,099,837 
   
1,137,878 
 
Interest-bearing certificates
   
2,019,074 
   
2,131,867 
 
     
3,627,504 
   
3,778,850 
 
               
Advances from FHLB at fair value
   
172,102 
   
111,415 
 
Other borrowings
   
181,194 
   
145,230 
 
Junior subordinated debentures at fair value (issued in connection with Trust Preferred Securities)
   
53,819 
   
61,776 
 
Accrued expenses and other liabilities
   
37,759 
   
40,600 
 
Deferred compensation
   
13,203 
   
13,149 
 
     
4,085,581 
   
4,151,020 
 
COMMITMENTS AND CONTINGENCIES
             
               
STOCKHOLDERS’ EQUITY
             
Preferred stock - $0.01 par value, 500,000 shares authorized, none issued
   
-- 
   
-- 
 
Preferred stock - Series A – liquidation preference $1,000 per share, 124,000 shares authorized and issued
   
116,288 
   
115,915 
 
Common stock - $0.01 par value per share, 25,000,000 shares authorized, 17,645,552 shares issued:
17,405,171 shares and 16,911,657 shares outstanding at March 31, 2009 and December 31, 2008, respectively
   
318,628 
   
316,740 
 
Retained earnings (accumulated deficit)
   
(9,210 
)
 
2,150 
 
Accumulated other comprehensive income (loss):
             
Unrealized gain on securities available for sale and/or transferred to held to maturity
   
850 
   
572 
 
Unearned shares of common stock issued to Employee Stock Ownership Plan (ESOP) trust at cost:
             
240,381 restricted shares outstanding at March 31, 2009 and December 31, 2008
   
(1,987 
)
 
(1,987 
)
               
Carrying value of shares held in trust for stock related compensation plans
   
(8,846 
)
 
(8,850 
)
Liability for common stock issued to deferred, stock related, compensation plans
   
8,820 
   
8,808 
 
     
(26 
)
 
(42 
)
     
424,543 
   
433,348 
 
   
$
4,510,124 
 
$
4,584,368 
 

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 Ended March 31, 2009 and 2008

         
Quarters Ended
 
         
March 31
 
               
2009 
     
2008 
 
INTEREST INCOME:
                       
Loans receivable
           
$
56,347 
 
$
68,126 
 
Mortgage-backed securities
             
1,801 
   
1,153 
 
Securities and cash equivalents
             
2,183 
   
2,727 
 
               
60,331 
   
72,006 
 
INTEREST EXPENSE:
                       
Deposits
             
23,092 
   
30,063 
 
FHLB advances
             
720 
   
1,849 
 
Other borrowings
             
227 
   
610 
 
Junior subordinated debentures
             
1,333 
   
2,064 
 
               
25,372 
   
34,586 
 
                         
Net interest income before provision for loan losses
             
34,959 
   
37,420 
 
                         
PROVISION FOR LOAN LOSSES
             
22,000 
   
6,500 
 
Net interest income
             
12,959 
   
30,920 
 
                         
OTHER OPERATING INCOME:
                       
Deposit fees and other service charges
             
4,936 
   
5,013 
 
Mortgage banking operations
             
2,715 
   
1,615 
 
Loan servicing fees
             
(270 
)
 
349 
 
Miscellaneous
             
520 
   
331 
 
               
7,901 
   
7,308 
 
Net change in valuation of financial instruments carried at fair value
             
(3,253 
)
 
823 
 
Total other operating income
             
4,648 
   
8,131 
 
                         
OTHER OPERATING EXPENSES:
                       
Salary and employee benefits
             
17,601 
   
19,638  
 
Less capitalized loan origination costs
             
(2,116 
)
 
(2,241 
)
Occupancy and equipment
             
6,054 
   
5,868 
 
Information/computer data services
             
1,534 
   
1,989 
 
Payment and card processing expenses
             
1,453 
   
1,531 
 
Professional services
             
1,194 
   
755 
 
Advertising and marketing
             
1,832 
   
1,418 
 
Deposit insurance
             
1,497 
   
327 
 
State/municipal business and use taxes
             
540 
   
564  
 
Amortization of core deposit intangibles
             
690 
   
736 
 
Miscellaneous
             
3,514 
   
3,123 
 
Total other operating expenses
             
33,793 
   
33,708 
 
                         
Income (loss) before provision for (benefit from) income taxes
             
(16,186 
)
 
5,343 
 
                         
PROVISION FOR (BENEFIT FROM) INCOME TAXES
             
(6,923 
)
 
1,509 
 
                         
NET INCOME (LOSS)
           
$
(9,263 
)
$
3,834 
 
                         
PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION
                       
Preferred stock dividend
           
$
1,550 
 
$
-- 
 
Preferred stock discount accretion
             
373 
   
-- 
 
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
           
$
(11,186 
)
$
3,834 
 
                         
Earnings (loss) per common share (see Note 11):
                       
Basic
           
$
(0.65 
)
$
0.24 
 
Diluted
           
$
(0.65 
)
$
0.24 
 
Cumulative dividends declared per common share:
           
$
0.01 
 
$
0.20 
 
                         

See selected notes to consolidated financial statements
 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited) (In thousands)
For the Quarters Ended March 31, 2009 and 2008


         
Quarters Ended
March 31
 
         
               
2009 
   
2008 
 
NET INCOME (LOSS)
           
$
(9,263 
)
$
3,834 
 
                         
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES:
                       
Unrealized holding gain (loss) during the period, net of deferred
income tax (benefit) of $150 and $0
             
264 
   
-- 
 
                         
Amortization of unrealized loss on tax exempt securities transferred from available-for-sale to held-to-maturity
             
14 
   
14 
 
                         
Other comprehensive income
             
278 
   
14 
 
                         
COMPREHENSIVE INCOME (LOSS)
           
$
(8, 985 
)
$
3,848 
 

See selected notes to consolidated financial statements



 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited) (In thousands, except per share amounts)
For the Quarters Ended March 31, 2009 and 2008
 
Preferred
Stock
 
Common
Stock and
Paid in
Capital
 
Retained
Earnings
(Accumulated Deficit)
 
Accumulated Other Comprehensive
Income (Loss)
 
Unearned
Restricted ESOP Shares
 
Carrying Value, Net of Liability, Of Shares Held in Trust 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)
             
(9,263
)
                   
(9,263
)
                                           
Change in valuation of securities—available-for-sale, net of income tax
                   
264
               
264
 
                                           
Amortization of unrealized loss on tax exempt securities transferred from available-for-sale to held-to-maturity, net of income taxes
                   
14
               
14
 
                                           
Additional registration costs for issuance of preferred stock
       
(42
)
                         
(42
)
                                           
Accretion of preferred stock discount
 
373
         
(373
)
                   
--
 
Accrual of dividends on preferred stock
             
(1,550
)
                   
(1,550)
 
Accrual of dividends on common stock ($.01/share cumulative)
             
(174
)
                   
(174
)
                                           
Proceeds from issuance of common stock for stockholder reinvestment program, net of registration expenses
       
1,897
                           
1,897
 
                                           
Amortization of compensation related to MRP
                               
16
   
16
 
                                           
Amortization of compensation related to stock options
       
33
                           
33
 
                                           
BALANCE, March 31, 2009
$
116,288
 
$
318,628
 
$
(9,210
)
$
850
 
$
(1,987
)
$
(26
)
$
424,543
 

See selected notes to consolidated financial statements

 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)
(Unaudited) (In thousands, except per share amounts)
For the Quarters Ended March 31, 2009 and 2008
 
Preferred
Stock
 
Common
Stock and
Paid in
Capital
 
Retained
Earnings
(Accumulated Deficit)
 
Accumulated Other Comprehensive
Income (Loss)
 
Unearned
Restricted ESOP Shares
 
Carrying Value, Net of Liability, Of Shares Held in Trust for Stock-Related Compensation Plans
 
Stockholders’
Equity
 
Balance, January 1, 2008
$
--
 
$
300,486
 
$
139,636
 
$
(176
)
$
(1,987
)
$
(113
)
$
437,846
 
                                           
Net income (loss)
             
3,834
                     
3,834
 
                                           
Cumulative effect of adoption of EITF 06-4 relating to liabilities under split dollar life insurance arrangements
             
(617
)
                   
(617
)
                                           
Amortization of unrealized loss on tax exempt securities transferred from available-for-sale to held-to-maturity, net of income taxes
                   
14
               
14
 
                                           
Accrual of dividends on common stock ($.20/share cumulative)
             
(3,131
)
                   
(3,131
)
                                           
Purchase and retirement of common stock
       
(14,265
)
                         
(14,265
)
                                           
Proceeds from issuance of common stock for exercise of stock options
       
551
                           
551
 
                                           
Proceeds from issuance of common stock for stockholder reinvestment program, net of registration expenses
       
5,193
                           
5,193
 
                                           
Amortization of compensation related to MRP
                               
17
   
17
 
                                           
Forfeiture of MRP stock
       
--
                           
--
 
                                           
Amortization of compensation related to stock options
       
96
                           
96
 
                                           
BALANCE, March 31, 2008
$
--
 
$
292,061
 
$
139,722
 
$
(162
)
$
(1,987
)
$
(96
)
$
429,538
 

See selected notes to consolidated financial statements

 

 


BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)
(Unaudited) (In thousands)
For the Quarters Ended March 31, 2009 and 2008

               
Quarters Ended
March 31
 
               
2009 
   
2008 
 
                         
COMMON STOCK—SHARES ISSUED AND OUTSTANDING:
                       
Common stock, shares issued, beginning of period
             
17,152 
   
16,266 
 
                         
Purchase and retirement of common stock
             
-- 
   
(614 
)
Issuance of common stock for exercised stock options and/or employee stock plans
             
-- 
   
28 
 
Issuance of common stock for stockholder reinvestment program
             
493 
   
223 
 
Number of shares issued (retired) during the period
             
493 
   
(363 
)
                         
COMMON SHARES ISSUED AND OUTSTANDING, END OF PERIOD
             
17,645 
   
15,903 
 
                         
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
             
17,405 
   
15,663 
 

See selected notes to consolidated financial statements

 

 

BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
For the Quarters Ended March 31, 2009 and 2008

               
Quarters Ended
March 31
 
               
2009 
   
2008 
 
OPERATING ACTIVITIES:
                       
Net income (loss)
           
$
(9,263 
)
$
3,834 
 
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
                       
Depreciation
             
2,538 
   
2,535 
 
Deferred income and expense, net of amortization
             
(937 
)
 
(888 
)
Amortization of core deposit intangibles
             
690 
   
736 
 
Net change in valuation of financial instruments carried at fair value
             
3,253 
   
(823 
)
Purchases of securities at fair value
             
(23,785 
)
 
(49,012 
)
Principal repayments and maturities of securities at fair value
             
53,965 
   
16,800 
 
Proceeds from sales of securities at fair value
             
-- 
   
2,598 
 
Deferred taxes
             
(1,171 
)
 
(2,557 
)
Equity-based compensation
             
49 
   
113 
 
Increase in cash surrender value of bank-owned life insurance
             
(483 
)
 
(242 
)
Gain on sale of loans, excluding capitalized servicing rights
             
(1,205 
)
 
(1,218 
)
Loss (gain) on disposal of real estate held for sale and property
and equipment
             
(70 
)
 
58 
 
Provision for losses on loans and real estate held for sale
             
22,050 
   
6,500 
 
Origination of loans held for sale
             
(152,985 
)
 
(111,088 
)
Proceeds from sales of loans held for sale
             
149,327 
   
109,566 
 
Net change in:
                       
Other assets
             
(5,216 
)
 
2,826 
 
Other liabilities
             
(2,051 
)
 
(6,759 
)
Net cash provided (used) by operating activities
             
34,706 
   
(27,021 
)
                         
INVESTING ACTIVITIES:
                       
Purchases of securities available for sale
             
(18,672 
)
 
-- 
 
Principle repayments and maturities of securities available for sale
             
5,389 
   
-- 
 
Purchases of securities held to maturity
             
(7,649 
)
 
(2,176 
)
Principal repayments and maturities of securities held to maturity
             
25 
   
27 
 
Origination of loans, net of principal repayments
             
14,401 
   
(30,602 
)
Purchases of loans and participating interest in loans
             
-- 
   
(4,229 
)
Purchases of property and equipment, net
             
(2,735 
)
 
(3,286 
)
Proceeds from sale of real estate held for sale, net
             
2,056 
   
400 
 
Other
             
(139 
)
 
(414 
)
Net cash used by investing activities
             
(7,324 
)
 
(40,280 
)
                         
FINANCING ACTIVITIES:
                       
Increase (decrease) in deposits
             
(151,346 
)
 
72,717 
 
Proceeds from FHLB advances
             
91,200 
   
92,800 
 
Repayment of FHLB advances
             
(30,002 
)
 
(105,835 
)
Increase (decrease) in other borrowings, net
             
35,964 
   
43,308 
 
Cash dividends paid
             
(2,293 
)
 
(3,204 
)
Repurchases of stock, net of forfeitures
             
-- 
   
(14,265 
)
Cash proceeds from issuance of stock, net of registration costs
             
1,855 
   
5,193 
 
Exercise of stock options
             
-- 
   
551 
 
Net cash provided (used) by financing activities
             
(54,622 
)
 
91,265 
 
                         
NET (DECREASE) INCREASE  IN CASH AND DUE FROM BANKS
             
(27,240 
)
 
23,964 
 
                         
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD
             
102,750 
   
98,430 
 
CASH AND DUE FROM BANKS, END OF PERIOD
           
$
75,510 
 
$
122,394 
 

(Continued on next page)
 
 
9

 
BANNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited) (In thousands)
For the Quarters Ended March 31, 2009 and 2008

               
Quarters Ended
March 31
 
               
2009 
   
2008 
 
                         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
                       
Interest paid in cash
           
$
25,600 
 
$
35,362 
 
Taxes paid in cash
             
173 
   
544 
 
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
             
19,262 
   
6,112 
 
Net decrease in accrued dividends payable
             
(569 
)
 
(73 
)
Change in other assets/liabilities
             
179 
   
141 
 
Adoption of EITF 06-4
Accrual of liability for split-dollar life insurance
             
-- 
   
617 
 

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 March 31, 2009, its 83 branch offices and nine 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 and the Federal Deposit Insurance Corporation (FDIC).

In the opinion of management, the accompanying consolidated statements of financial condition and related interim 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 Generally Accepted Accounting Principles (GAAP).  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements.  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, because of the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of our financial statements.  Those 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, (iv) the valuation of intangibles, such as goodwill and core deposit intangibles and mortgage servicing rights and (v) the valuation of real estate held for sale.  These policies and the judgments, estimates and assumptions are described in greater detail below in Management’s Discussion and Analysis of Financial Condition and Results of Operations (Critical Accounting Policies) and in Note 1 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008 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, given 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 our financial condition and operating results in future periods.  There have been no significant changes in our application of accounting policies since December 31, 2008 (for additional information, see Note 3 of the Selected Notes to 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 2008 Consolidated Financial Statements and/or schedules to conform to the 2009 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, 2008 filed with the Securities and Exchange Commission (“SEC”).  Interim results are not necessarily indicative of results for a full year.

Note 2:  RECENT DEVELOPMENTS AND SIGNIFICANT EVENTS

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, all non-interest-bearing transaction accounts maintained at Banner Bank and Islanders Bank are insured in full by the FDIC until December 31, 2009, regardless of the standard maximum deposit insurance amounts.  The Banks are required to pay a 10 basis point fee (annualized) on balances of each covered account in excess of $250,000 while the extra deposit insurance is in place.  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.  Subject to FDIC approval, we have remaining capacity under the TLGP to issue approximately $30 million of additional guaranteed notes.  None of the senior notes are redeemable prior to maturity.

Participation in the U.S. Treasury’s Capital Purchase Program:  On November 21, 2008, we received $124 million from the U.S. Treasury Department as part of the Treasury’s Capital Purchase Program.  We issued $124 million in senior preferred stock, with a related warrant to purchase up to $18.6 million in common stock, to the U.S. Treasury.  The warrant provides the Treasury the option to purchase up to 1,707,989 shares of Banner Corporation common stock at a price of $10.89 per share at any time during the next ten years.  The preferred stock will pay a 5% dividend for the first five years, after which the rate will increase to 9% if the preferred shares are not redeemed by the Company.  The terms and conditions of the transaction and the preferred stock conform to those provided by the U.S. Treasury.  A summary of the Capital Purchase Program can be found on the Treasury’s web site at www.financialstability.gov/roadtostability/capitalpurchaseprogram.html.  The additional
 
 
11

 
capital enhances our capacity to support the communities we serve through expanded lending activities and economic development.  This capital also creates additional flexibility in considering strategic opportunities that may be available to us as the financial services industry continues to consolidate.

Goodwill write-off:  As a result of the significant decline in our stock price and market capitalization over the course of 2008 and in conjunction with similar declines in the value of most financial institutions and the ongoing disruption in related financial markets, we determined it was appropriate to reduce the carrying value of goodwill in our Consolidated Statements of Financial Condition by recording a $50 million write-down in the second quarter of 2008 and, in response to worsening economic indicators and further price declines, an additional $71 million write-down in the fourth quarter.  The total $121 million write-off of goodwill was a non-cash charge that did not affect the Company’s or the Banks’ liquidity or operations.  The adjustment brought our book value and tangible book value more closely in line with each other and more accurately reflected current market conditions.  Also, since goodwill is excluded from regulatory capital, the impairment charge (which was not deductible for tax purposes) did not have an adverse effect on the regulatory capital ratios of the Company or either of our subsidiary banks, each of which continues to remain “well capitalized” under the regulatory requirements.  (See Note 10 of the Selected Notes to Consolidated Financial Statements for additional information with respect to our valuation of intangible assets.)

Note 3:  ACCOUNTING STANDARDS RECENTLY ADOPTED OR ISSUED

Recently Adopted Accounting Standards:  On January 12, 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20. FSP EITF 99-20-1 addresses certain practical issues in EITF No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, by making its other-than-temporary impairment assessment guidance consistent with Statement of Financial Accounting Standard (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities.  FSP EITF 99-20-1 removes the reference to the consideration of a market participant’s estimates of cash flows in EITF 99-20, and instead requires an assessment of whether it is probable, based on current information and events, that the holder of the security will be unable to collect all amounts due according to the contractual terms.  If it is probable that there has been an adverse change in estimated cash flows, an other-than-temporary impairment is deemed to exist, and a corresponding loss shall be recognized in earnings equal to the entire difference between the investment’s carrying value and its fair value at the balance sheet date of the reporting period for which the assessment is made. This FSP is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively.  We adopted FSP 99-20-1 for the quarter ended March 31, 2009 and the adoption did not have a material impact on our consolidated financial statements.

In October 2008, the FASB issued FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (FSP 157-3).  FSP 157-3 clarifies the application of FAS 157 in a market that is not active.  The FSP is intended to address the following application issues: (a) how the reporting entity’s own assumptions (that is, expected cash flows and appropriately risk-adjusted discount rates) should be considered when measuring fair value when relevant observable inputs do not exist; (b) how available observable inputs in a market that is not active should be considered when measuring fair value; and (c) how the use of market quotes (for example, broker quotes or pricing services for the same or similar financial assets) should be considered when assessing the relevance of observable and unobservable inputs available to measure fair value.  FSP 157-3 was effective on issuance, including prior periods for which financial statements had not been issued.  We adopted FSP 157-3 for the quarter ended December 31, 2008 and the effect of adoption on the consolidated financial statements was not material.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)). SFAS 141(R) requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and acquisition-related and other costs will now be expensed rather than treated as cost components of the acquisition.  SFAS No. 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009.  The adoption of SFAS 141(R) could have a material impact on the consolidated financial statements for business combinations entered into after the effective date of SFAS 141(R).  Also, any tax contingencies related to acquisitions prior to the effective date of SFAS 141(R) that are resolved after the adoption of SFAS 141(R) would be recorded through current earnings, and also could have a material impact on the consolidated financial statements.  Management has determined that the impact of SFAS 141(R) is immaterial with respect to prior acquisitions and will only apply prospectively to future business combinations that may occur.

In March 2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133.  SFAS No. 161 expands the disclosure requirements in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.  This includes enhanced disclosures regarding how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.  Provisions of this statement are to be applied prospectively, and comparative disclosures for earlier periods are encouraged.  We adopted the provisions of SFAS 161 for the year ended December 31, 2008, and the impact was not material to our consolidated financial statements.  
 
12

 
In June 2008, FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.  FSP EITF 03-6-1 concludes that nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and shall be included in the computation of EPS pursuant to the two-class method.  This statement is effective for fiscal years beginning after December 15, 2008, to be applied retrospectively.  Certain of the Company’s nonvested restricted stock awards qualify as participating securities as described under this pronouncement.  Management does not expect that the adoption of EITF 03-6-1 will have a material impact on the Company's consolidated financial statements. 
 
Recently Issued Accounting Pronouncements:  On April 9, 2009, FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.  FSP FAS 157-4 provides guidance to help an entity determine whether the market for an asset is not active and when a price for a transaction is not distressed.  In this two-step model, an entity must first determine whether there are factors present that indicate that the market for the asset is not active at the measurement date.  Second, an entity must evaluate whether a quoted price is representative of a transaction that is not orderly.  If determined that a quoted price is distressed (not orderly), and thereby not representative of fair value under SFAS 157, the entity must make adjustments to the quoted price or utilize an alternative valuation technique (e.g., income approach or multiple valuation techniques) to determine fair value.  Additionally, an entity must incorporate appropriate risk premium adjustments, reflective of an orderly transaction under current market conditions, due to uncertainty in cash flows.  This FSP is effective for interim reporting periods ending after June 15, 2009.  We are currently evaluating the impact of the adoption of FSP FAS 157-4.

On April 9, 2009, FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“OTTI”), that changes the OTTI model for debt securities.  Under previous guidance, an entity is required to assess whether it has the intent and ability to hold a security to recovery in determining whether an impairment of that security is other-than-temporary.  If the impairment was deemed other-than temporarily impaired, the investment was written-down to fair value through earnings.  Under the new guidance, OTTI is triggered if an entity has the intent to sell the security, it is more likely than not that it will be required to sell the security before recovery, or if the entity does not expect to recover the entire amortized cost basis of the security.  If the entity intends to sell the security or it is more likely than not that it will be required to sell the security before recovering its cost basis, the entire impairment loss would be recognized in earnings as an OTTI.  If the entity does not intend to sell the security and it is not likely that the entity will be required to sell the security before recovering its cost basis, only the portion of the impairment loss representing credit losses would be recognized in earnings as an OTTI.  The remaining impairment loss would be recognized as a charge to other comprehensive income (“OCI”).  The FSP also results in a new category within OCI for the portion of the OTTI that is unrelated to credit losses for securities held to maturity.  The impairment recognized in OCI would be amortized over the remaining life of the debt security prospectively based on the amount and timing of future estimated cash flows, unless there is an indication of additional credit losses.  The amortization of the OTTI amount recorded in OCI will increase the carrying value of the investment, and would not affect earnings.  Upon adoption of the FSP, the noncredit portion of previously recognized OTTI shall be reclassified to accumulated OCI by a cumulative-effect adjustment to the opening balance of retained earnings.  This FSP is effective for interim reporting periods ended after June 15, 2009.  We are currently evaluating the impact of the adoption of FSP FAS 115-2 and FAS 124-2.

On April 9, 2009, FASB issued FSP FAS 107-1 and Accounting Principles Board Opinion (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments.  This FSP requires SFAS 107, Disclosures about Fair Value of Financial Instruments, disclosures in the notes of an entity’s interim financial statements for all financial instruments, whether or not recognized in the statement of financial position.  This FSP is effective for interim reporting periods ending after June 15, 2009.  We do not expect the adoption of FSP 107-1 and APB 28-1 will have a material impact on the Company’s consolidated financial statements.

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.

Generally accepted accounting principles establish 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.  The Company has determined that its current business and operations consist of a single business segment.


 
13 

 

Note 5:  ADDITIONAL INFORMATION REGARDING INTEREST-BEARING DEPOSITS AND SECURITIES

The following table sets forth additional detail on our interest-bearing deposits and securities at the dates indicated (includes securities—trading, available-for-sale and held-to-maturity, all at carrying value) (dollars in thousands):

 
March 31
 
December 31
 
March 31
 
 
2009
 
2008
 
2008
 
             
Interest-bearing deposits included in Cash and due from banks
$
2,699
 
$
12,786
 
$
28,760
 
                   
Mortgage-backed or related securities
                 
GNMA
 
32,139
   
33,729
   
40,137
 
FHLMC
 
59,576
   
45,544
   
54,817
 
FNMA
 
44,548
   
45,491
   
--
 
Private issuer
 
8,836
   
9,537
   
--
 
Total mortgage-backed securities
 
145,099
   
134,301
   
94,954
 
                   
U.S. Agency obligations
 
44,446
   
70,389
   
42,449
 
Taxable municipal bonds
 
4,651
   
4,967
   
5,174
 
Corporate bonds
 
35,758
   
48,470
   
77,177
 
Total other taxable securities
 
84,855
   
123,826
   
124,800
 
                   
Tax-exempt municipal bonds
 
66,170
   
58,607
   
55,717
 
                   
Equity securities (excludes FHLB stock)
 
203
   
234
   
7,086
 
                   
Total securities
 
296,327
   
316,968
   
282,557
 
                   
FHLB stock
 
37,371
   
37,371
   
37,371
 
                   
 
$
336,397
 
$
367,125
 
$
348,688
 

The following table provides additional detail on income from deposits and securities for the periods indicated (dollars in thousands):

     
Quarters Ended
March 31
 
     
               
2009
   
2008
 
Mortgage-backed securities interest
           
$
1,801
 
$
1,153
 
                         
Other taxable interest income
             
1,475
   
1,916
 
Tax-exempt interest income
             
709
   
583
 
Equity securities—dividend income
             
(1
)
 
135
 
FHLB stock dividends
             
--
   
93
 
               
2,183
   
2,727
 
                         
             
$
3,984
 
$
3,880
 

Note 6:  LOANS RECEIVABLE

We originate residential mortgage loans for both portfolio investment and sale in the secondary market.  At the time of origination, mortgage loans are designated as held for sale or held for investment.  Loans held for sale are stated at lower of cost or estimated fair value determined on an aggregate basis.  Net unrealized losses on loans held for sale are recognized through a valuation allowance by charges to income.  We also originate construction and land, commercial and multifamily real estate, commercial business, agricultural and consumer loans for portfolio investment.  Loans receivable not designated as held for sale are recorded at the principal amount outstanding, net of allowance for loan losses, deferred fees, discounts and premiums.  Premiums, discounts and deferred loan fees are amortized to maturity using the level-yield methodology.

Interest is accrued as earned unless management doubts the collectability of the loan or the unpaid interest.  Interest accruals are generally discontinued when loans become 90 days past due for scheduled interest payments.  All previously accrued but uncollected interest is deducted from interest income upon transfer to nonaccrual status.  Future collection of interest is included in interest income based upon an assessment of the likelihood that the loans will be repaid or recovered.  A loan may be put on nonaccrual status sooner than this policy would dictate if, in management’s judgment, the loan may be uncollectible.  Such interest is then recognized as income only if it is ultimately collected.


 
14 

 

Our loans receivable, including loans held for sale, at March 31, 2009 and 2008 and December 31, 2008 are summarized as follows (dollars in thousands):

 
March 31
2009
 
December 31
2008
 
March 31
2008
 
 
 
Amount
 
Percent
of Total
 
 
Amount
 
Percent
of Total
 
 
Amount
 
Percent
of Total
 
                                     
Loans (including loans held for sale):
                                   
Commercial real estate
$
1,036,285
   
26.5
%
$
1,013,709
   
25.6
%
$
899,333
   
23.4
%
Multifamily real estate
 
149,442
   
3.8
   
151,274
   
3.8
   
163,110
   
4.2
 
Commercial construction
 
103,643
   
2.6
   
104,495
   
2.6
   
75,849
   
2.0
 
Multifamily construction
 
46,568
   
1.2
   
33,661
   
0.8
   
38,434
   
1.0
 
One- to four-family construction
 
365,421
   
9.3
   
420,673
   
10.6
   
571,720
   
14.9
 
Land and land development
 
446,128
   
11.4
   
486,130
   
12.3
   
502,077
   
13.1
 
Commercial business
 
650,123
   
16.6
   
679,867
   
17.2
   
735,802
   
19.2
 
Agricultural business, including
secured by farmland
 
197,972
   
5.1
   
204,142
   
5.2
   
181,403
   
4.7
 
One-to four-family real estate
 
643,705
   
16.4
   
599,169
   
15.1
   
456,199
   
11.9
 
                                     
Consumer
 
90,834
   
2.4
   
92,642
   
2.4
   
95,714
   
2.5
 
Consumer secured by one-to four-family real estate
 
185,426
   
4.7
   
175,646
   
4.4
   
120,352
   
3.1
 
Total consumer
 
276,260
   
7.1
   
268,288
   
6.8
   
216,066
   
5.6
 
Total loans outstanding
 
3,915,547
   
100.0
%
 
3,961,408
   
100.0
%
 
3,839,993
   
100.0
%
                                     
Less allowance for loan losses
 
(79,724
)
       
(75,197
)
       
(50,446
)
     
                                     
Total net loans outstanding at end of period
 
$
3,835,823
       
 
$
3,886,211
       
 
$
3,789,547
       

Loans are net of unearned, unamortized loan fees of $6,692,000, $7,105,000, and $7,083,000, respectively, at March 31, 2009, December 31, 2008 and March 31, 2008.

The geographic concentration of our loans at March 31, 2009 was as follows (dollars in thousands):

   
Washington
 
Oregon
 
Idaho
 
Other
 
Total
                                 
Commercial real estate
 
$
777,568
 
$
163,994
 
$
81,911
 
$
12,812
 
$
1,036,285
 
Multifamily real estate
   
124,786
   
12,478
   
8,804
   
3,374
   
149,442
 
Commercial construction
   
59,181
   
33,431
   
10,081
   
950
   
103,643
 
Multifamily construction
   
28,428
   
18,140
   
--
   
--
   
46,568
 
One- to four-family construction
   
177,349
   
171,780
   
16,292
   
--
   
365,421
 
Land and land development
   
223,752
   
163,179
   
59,197
   
--
   
446,128
 
Commercial business
   
483,004
   
74,744
   
76,819
   
15,556
   
650,123
 
Agricultural business, including secured by farmland
   
89,053
   
45,080
   
63,839
   
--
   
197,972
 
One- to four-family real estate
   
492,774
   
106,383
   
39,504
   
5,044
   
643,705
 
                                 
Consumer
   
63,946
   
22,579
   
4,309
   
--
   
90,834
 
Consumer secured by one- to four-family real estate
   
135,738
   
35,313
   
13,874
   
501
   
185,426
 
                                 
Total loans outstanding
 
$
2,655,579
 
$
847,101
 
$
374,630
 
$
38,237
 
$
3,915,547
 
                                 
Percent of total loans
   
67.8
%
 
21.6
%
 
9.6
%
 
1.0
%
 
100.0
%



 
15 

 

The geographic concentration of our land and land development loans at March 31, 2009 was as follows (dollars in thousands):

   
Washington
 
Oregon
 
Idaho
 
Other
 
Total
                                 
Residential
                               
Acquisition and development
 
$
113,083
 
$
118,945
 
$
23,291
 
$
--
 
$
255,319
 
Improved lots
   
53,563
   
30,321
   
5,467
   
--
   
89,351
 
Unimproved land
   
25,109
   
12,010
   
25,159
   
--
   
62,278
 
Commercial and industrial
                               
Acquisition and development
   
3,904
   
--
   
194
   
--
   
4,098
 
Improved land
   
17,207
   
699
   
402
   
--
   
18,308
 
Unimproved land
   
10,886
   
1,204
   
4,684
   
--
   
16,774
 
Total land & land development loans outstanding
 
$
223,752
 
$
163,179
 
$
59,197
 
$
--
 
$
446,128
 
         Percent of total land and land development loans
   
50.1
%
 
36.6
%
 
13.3
%
 
0.0
%
 
100.0
%

As noted in the tables above, substantially all of our loans are to borrowers in the states of Washington, Oregon and Idaho.  Accordingly, their ultimate collectibility is particularly susceptible to, among other things, changes in market and economic conditions within these states.

The amount of impaired loans, net of any charge-offs recorded as a result of specific impairment analysis, and the related allocated reserve for loan losses were as follows (dollars in thousands):

 
March 31, 2009
 
December 31, 2008
 
 
Loan
amount
 
Allocated
reserves
 
Loan
amount
 
Allocated
reserves
 
         
Impaired loans:
                       
Non-accrual
$
223,793
 
$
17,821
 
$
186,978
 
$
13,053
 
Accrual
 
27,854
   
654
   
23,635
   
1,195
 
 
$
251,647
 
$
18,475
 
$
210,613
 
$
14,248
 

The Company originates both adjustable- and fixed-rate loans.  The maturity and repricing composition of those loans, less undisbursed amounts and deferred fees, were as follows (dollars in thousands):

 
March 31
2009
 
December 31
2008
 
March 31
2008
 
       
Fixed-rate (term to maturity):
     
Due in one year or less
$
201,049
 
$
130,958
 
$
121,255
 
Due after one year through three years
 
200,264
   
206,455
   
201,046
 
Due after three years through five years
 
214,076
   
246,897
   
200,367
 
Due after five years through ten years
 
122,625
   
157,621
   
156,911
 
Due after ten years
 
445,292
   
425,213
   
355,811
 
 
$
1,183,306
 
$
1,167,144
 
$
1,035,390
 
Adjustable-rate (term to rate adjustment):
                 
Due in one year or less
$
2,488,166
 
$
1,912,755
 
$
1,963,415
 
Due after one year through three years
 
84,071
   
402,482
   
413,712
 
Due after three years through five years
 
37,477
   
440,555
   
388,231
 
Due after five years through ten years
 
122,527
   
38,472
   
39,245
 
   
2,732,241
   
2,794,264
   
2,804,603
 
 
$
3,915,547
 
$
3,961,408
 
$
3,839,993
 

The adjustable-rate loans may have interest rate adjust