SecProbe.io

UNITED STATES
SECURITIES  AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE

Mail Stop 4561
February 23, 2009

By U.S. Mail and facsimile to (509)526-8873

Lloyd W. Baker Executive Vice President and Chief Financial Officer Banner Corporation 10 South First Avenue Walla Walla, WA 99362
Re: Banner Corporation  File No. 0-26584  Form 10-K for the period ended December 31, 2007  Forms 10-Q for the periods ended March 31, June 30 and September
30, 2008
 Form 8-K  Filed January 28, 2009
 Dear Mr. Baker:
 We have reviewed your filings and have the following comments.  Where
indicated, we think you should revise your future  filings in response to our comment.  If
you disagree, we will consider your explanation as to why our comments are inapplicable
or a revision is unnecessary.  Please be as detailed as necessary in your explanation and provide us drafts of your propos ed revisions to your future filings in response to our
comments.  In our comments, we may as k you to provide us with supplemental
information so we may better understand your  disclosure.  After reviewing this
information, we may or may not raise additional comments.
Form 10-K

Business, page 4

Lending Activities, page 5

1. Please refer to your response to comment 1 of our December 23, 2008 letter, in which you reiterate many of the disclosure s included in your document.  We have
read your document and continue to believe that an increased level of transparency surrounding your underwriting policies and procedures is appropriate.  We re-issue our comment and request that you revise future filings
accordingly.  Also, please disclose your definition of sub-prime lending in your future revisions.

Lloyd W. Baker
Banner Corporation
February 23, 2009 Page 2   2. Please refer to your response to comment 2 of our December 23, 2008 letter.  Please revise future filings to clarify the following:

• We note your disclosure that generally AR M loans held in portfolio do not allow
for interest-only payments or negative am ortization of principal.  While we note
from your response that you do not maintain  a database that would allow you to
identify all exceptions to your underw riting practices, we assume you can
quantify the ARM loans that do allow for interest-only payments and/or negative
amortization.  Please revise to quantify these loans and to provide an expanded
discussion of your underwriting policies and procedures for them.  If you are not
able to quantify the amounts of such loans,  disclose that fact.  To the extent you
believe the amounts are immaterial, please quantify them for us in your response and provide us your related underwriting policies and procedures.

• Please revise future filings to discuss the circumstances under which you would
not require private mortgage insurance on residential loans with a loan-to-value
ratio greater then 80% and quantify the amount of these loans.  To the extent you
believe the amounts are immaterial, please include in your response a discussion
of the circumstances under which you would not require private mortgage
insurance on residential loans with a lo an-to-value ratio greater then 80% and
quantify the amount of these loans.

• Where you use the terms such as “genera lly” and “usually” in future filings,
please specifically disclose, if true, that any exceptions to your disclosed policies
and procedures are immaterial.  Also, incorporate the portion of your response that discusses your decision process fo r making exceptions to your standard
underwriting practices into your disclosures.
 3. Please refer to your response to comment 3 of our December 23, 2008 letter and revise future filings to incorporate, as set forth in your response, that all adjustable
rate loans are underwritten at fu lly indexed interest rates.
 Management’s Discussion and Analysis of Financial Condition and Results of
Operations, page 27

Non-Performing Assets, page 41

4. Please refer to your response to comment 5 of our December 23, 2008 letter.  We understand that the development of the allo wance for loan losses is not a simple
mathematical formula tied to one or two ra tios; however, we continue to believe
that asset quality ratios can identify impor tant trends in the allowance for loan
losses, non-performing assets and your loan portfolio.  We re-issue comment 5 of our December 23, 2008 letter and request that you revise future filings to include an expanded discussion of the trends depi cted by your asset qu ality ratios between

Lloyd W. Baker
Banner Corporation
February 23, 2009 Page 3
quarters, including a chronology of events th at lead to the deteriorating assets
quality ratios between periods.  Also, considering the sign ificant provision
recorded in the fourth quarter of 2008, in clude a discussion of the specific facts
and circumstances that occurred in that quarter that were not present prior to
September 30, 2008.
 Form 10-Q for the Period Ended June 30, 2008

Financial Statements beginning on page 3

5. Please refer to your response to comme nt 14 of our December 23, 2008 letter.
We agree that the expanded tables in  your MD&A are helpful in understanding
changes in your balance sheet ; however, we believe that footnote disclosure of the
items cited in our comment is appropri ate because of their significance to your
business.  Given the significant fluctuations experienced in the interim periods, updated disclosures of such activity are warranted in your  interim footnotes.  At a
minimum, please revise future filings to  include summary information of loans,
the allowance for loan losses and associated  credit disclosures in  your footnotes to
your interim financial statements.
 Non-GAAP Measurements, page 24

 6. Please refer to your response to comme nt 18 of our December 23, 2008 letter.
We have considered your response and con tinue to believe that the presentation of
non-GAAP measures for recurring items does not comply with the spirit of the
Commission’s guidance on these measures.  Accordingly, please revise your
presentations as necessary to address the following:

• Based on the guidance of Question 11 under Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures (the FAQ’s) which is available on our website, it a ppears that your earnings per share and other equity-
related measures which exclude such ite ms are prohibited and should be removed
because the items which are being excluded do in fact accrue directly to shareholders.

• Similarly, your other performance m easures, including the “Other operating
income (Loss) EXCLUDING change in valu ation of financial instruments carried
at fair value and goodwill write-off/Aver age assets”, “Other operating expense
EXCLUDING goodwill write-off/Average asse ts”, “Efficiency ratio (other
operating expense/revenue) EXCLUDING change in valuation of financial
instruments carried at fair value a nd goodwill write-off”, and “Return (Loss) on
average assets EXCLUDING change in valu ation of financial instruments carried
at fair value and goodwill write-off”, app ear to be prohibited as your disclosures
and response do not provide the disclosure s required by Questi on 8 of the FAQ’s
to substantiate its usefulness.  Further,  the usefulness of these measures is not
apparent because the items being exclude d are directly attributable to the

Lloyd W. Baker
Banner Corporation
February 23, 2009 Page 4
measures being adjusted.  For instance, goodwill impairments and valuation adjustments would be expected to affect an entity’s return on average assets and
therefore should not be exclude d from such measures.

• Similarly, your disclosures and response do not provide sufficient support to
substantiate the usefulness of “
NET INCOME (LOSS)  FROM RECURRING
OPERATIONS ” as prescribed in the guidance of Question 8 of the FAQ’s.  Absent
such disclosures, this measure is prohibited.

• Further, if you are able to s upport this measure, its title “ NET INCOME (LOSS)
FROM RECURRING OPERATIONS ” does not appear to adequately convey the
amounts reflected in that you are ex cluding certain recurring operating
adjustments.

• Your current presentation gi ves undue emphasis to such measures.  For example,
see page 26 of your Form 10-Q for th e periods ended September 30, 2008 where
you state that you “believe that they provide more useful and comparative
information to assess trends in the Co mpany’s core operations reflected in the
current and comparative financial statement”.

• Therefore, please revise your future filings to eliminate such Non-GAAP
measures which exclude recurring items such as the change s in valuation of
financial instruments.  In light of the additional goodwill impairments charges
recorded in the fourth quarter of 2008, it appears such charges may be considered
recurring charges as well.

• We understand the needs of investors and an alysts and that they may choose to
adjust reported information for any numb er of items.  We also understand the
volatility that can be associ ated with the items you have indentified; however, we
note significant volatility in numerous line items in your financial statements.  We
believe that the effects of recu rring items are best discussed narratively  in the
context of MD&A and that an alysts and investors can best select what items to
adjust reported GAAP information based  on their needs.  Accordingly, we would
not object to a narrative  discussion of the effects of the change in valuation of
financial instruments carried at fair value.

Item 11. Executive Compensation

Compensation Discussion and Anal ysis, page 12 of DEF 14A

7. Please refer to comment 8 in our letter  dated December 23, 2008.  Please tell the
staff, and disclose in future filings, what  factors the committee considered that led
to the equity awards granted for 2007.  We note that the committee does not use a formalized system for weighting the factors considered.

Lloyd W. Baker
Banner Corporation
February 23, 2009 Page 5  8. Please refer to comments 11 and 12 in our letter dated D ecember 23, 2008.  We
note your response that the committee’s de cisions regarding certain forms of
compensation were subjective in natu re, taking into account individual and
corporate performance.  We also note th at performance targets were not used.
Please tell the staff, and in future filings disclose, how corporate and individual performance influenced the board’s co mpensation decisions, and describe the
extent to which the board exercised its discretion in awarding compensation.

Form 8-K filed January 28, 2009

9. We note that you recognized a $71.1 million im pairment to goodwill in the fourth
quarter of 2008.  Please tell the staff the approximate date on which it was determined that a charge for impairment to goodwill would be recognized.
   *  *  *  *  *
Please respond to our comments within 10 business days or tell us when you will
provide us with a response.  Please furnish a cover letter that keys your response to our
comments and provide us drafts of your proposed revisions to future filings and any requested supplemental information.  Please file your response on EDGAR.  Please
understand that we may have additional comm ents after reviewing your response to our
comment.   We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing review ed by the staff to be certain that they have provided all
information investors require for an info rmed decision.  Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
  In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
‚ the company is responsible for the adequacy  and accuracy of the disclosure in the
filing;
 ‚ staff comments or changes to disclosure  in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
 ‚ the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any person under the federal secu rities laws of the
United States.

In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.

Lloyd W. Baker
Banner Corporation February 23, 2009 Page 6
You may contact Paul Cline, Staff A ccountant, at (202) 551-6851 if you have
questions regarding comments on the financial statements and related matters.  Please
contact Matt McNair, Staff Attorney, at (202) 551-3583 or me at (202) 551-3698 with any other questions.

Sincerely,    Mark Webb Legal Branch Chief