Cascade Bancorp. On November 17, 2016, the Company entered into an agreement and plan of merger (the "Agreement") to acquire all of the outstanding stock of Cascade Bancorp, parent company of Bank of the Cascades, an Oregon-based community bank with 50 banking offices across Oregon, Idaho and Washington. Under the terms of the Agreement, each outstanding share of Cascade Bancorp will convert into the right to receive 0.14864 shares of the Company's Class A common stock and $1.91 in cash. Based on the closing price of the Company's Class A common stock on December 31, 2016, the merger consideration represents an aggregate purchase price of approximately $627,991. As of December 31, 2016, Cascade had total assets of $3,079,058, deposits of $2,661,812 and net loans of $2,077,358. Upon completion of the merger, which is expected to close during third quarter 2017 subject to regulatory and shareholder approvals, the Company will become a regional community bank with over $12 billion in total assets and a geographic footprint that will span Montana, Wyoming, South Dakota, Idaho, Oregon and Washington.

Flathead Bank of Bigfork. On April 6, 2016, the Company's bank subsidiary entered into a stock purchase agreement to acquire all of the outstanding stock of Flathead Bank of Bigfork ("Flathead"), a Montana-based bank wholly owned by Flathead Holding Company. The acquisition was completed as of August 12, 2016 for cash consideration of $34,100. The acquisition allowed the Company to gain market share in several of its current market areas and expand its market presence in Montana.

The assets and liabilities of Flathead were recorded in the Company's consolidated financial statements at their estimated fair values as of the acquisition date. The excess value of the consideration paid over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of Flathead and the Company.

The following table summarizes the consideration paid, fair values of the Flathead assets acquired and liabilities assumed and the resulting goodwill. All amounts are final.



	As Recorded			Fair Value				As Recorded
As of August 12, 2016	by Flathead			Adjustments				by the Company

Assets acquired:
Cash and cash equivalents	$	52,653		$	—			$	52,653
Investment securities	99,801			1,315			(1)	101,116
Loans	87,181			(3,833		)	(2)	83,348
Allowance for loan losses	(1,567		)	1,567			(3)	—
Premises and equipment	4,529			891			(4)	5,420
Core deposit intangible assets	—			2,486			(5)	2,486
Company-owned life insurance	6,386			—				6,386
Other assets	5,200			(2,373		)	(6)	2,827
Total assets acquired	254,183			53				254,236
Liabilities assumed:
Deposits	209,673			(86		)	(7)	209,587
Repurchase agreements	18,050			—				18,050
Other liabilities	838			—				838
Total liabilities assumed	228,561			(86		)		228,475
Net assets acquired	$	25,622		$	139			25,761
Cash consideration paid								34,100
Goodwill								$	8,339



Explanation of fair value adjustments:
(1)	Write up of the book value of investments to their estimated fair values on the date of acquisition based upon quotes obtained from an independent third party pricing service.
(2)	Write down of the book value of loans to their estimated fair values. The fair value of loans was estimated using cash flow projections based on the remaining maturity and repricing terms, adjusted for estimated future credit losses and prepayments and discounted to present value using a risk-adjusted market rate for similar loans. The fair value of collateral dependent loans acquired with deteriorated credit quality was estimated based on the Company's analysis of the fair value of each loan's underlying collateral, discounted using market-derived rates of return with consideration given to the period of time and costs associated with foreclosure and disposition of the collateral.
(3)	Adjustment to remove the Flathead allowance for loan losses at acquisition date as the credit risk is accounted for in the fair value adjustment for loans receivable described in (2) above.
(4)	Write up of the book value of premises and equipment to their estimated fair values on the date of acquisition based upon appraisals obtained from an independent third party appraiser or pending buy/sell agreements.
(5)	Adjustment represents the value of the core deposit base assumed in the acquisition based upon an internal valuation using industry averages obtained from an investment banking firm.
(6)	Adjustment consists of the write-off of pre-existing goodwill and prepaid assets.
(7)	Decrease in book value of time deposits to their estimated fair values based upon interest rates of similar time deposits with similar terms on the date of acquisition.

Core deposit intangible assets related to the Flathead acquisition of $2,486 are being amortized using an accelerated method over the estimated useful lives of the related deposits of nine years.

In conjunction with the Flathead acquisition, the Company acquired certain loans with evidence of deterioration in credit quality and for which was probable, at acquisition, that the Company would be unable to collect all contractual amounts owed. The excess of all cash flows expected at acquisition over the initial fair value of the acquired credit-impaired loans ("accretable yield") is amortized to interest income over the expected remaining lives of the underlying loans using the effective interest method. The accretable yield will fluctuate due to changes in (i) estimated lives of underlying credit-impaired loans, (ii) assumptions regarding future principal and interest amounts collected, and (iii) indices used to fair value variable rate loans.

Information regarding loans acquired credit-impaired as of the August 12, 2016 acquisition date is as follows:



Contractually required principal and interest payments	$	19,324
Contractual cash flows not expected to be collected ("non-accretable discount")	10,999
Cash flows expected to be collected	8,325
Interest component of cash flows expected to be collected ("accretable discount")	1,113
Fair value of acquired credit-impaired loans	$	7,212

Information regarding acquired loans not deemed credit-impaired at the acquisition date is as follows:



Contractually required principal and interest payments	$	100,616
Contractual cash flows not expected to be collected	4,702
Fair value at acquisition	76,136

The following table presents unaudited pro forma consolidated revenues and net income as if the Flathead acquisition had occurred as of January 1, 2015.



Year ended December 31, (unaudited)	2016		2015
Interest income	$	301,699	$	289,330
Non-interest income	137,793		123,282
Total revenues	$	439,492	$	412,612

Net income	$	98,674	$	88,847

The unaudited pro forma net income presented in the table above for 2016 was adjusted to exclude acquisition-related costs, including change in control expenses related to employee benefit plans and legal and professional expenses, of $1,834, net of tax. Pro forma net income presented in the table above for 2015 was adjusted to include the aforementioned acquisition-related costs. The unaudited pro forma net income presented in the table above for 2016 and 2015 includes adjustments for scheduled amortization of core deposit intangible assets acquired in the acquisition. No adjustments were made for operating costs savings and other business synergies expected as a result of the acquisition, or accretion or amortization of fair value adjustments other than core deposit intangible assets.

Absarokee Bancorporation, Inc. On July 24, 2015, the Company acquired all of the outstanding stock of Absarokee Bancorporation, Inc. ("Absarokee"), a Montana-based bank holding company operating one subsidiary bank, United Bank, with branches located in three Montana communities adjacent to the Company's existing market areas. As a result of the acquisition, the Company increased its presence in the state of Montana. The Company merged United Bank with and into FIB immediately subsequent to the acquisition. The Company paid cash consideration for the acquisition of $7,234.

The Absarokee acquisition was accounted for using the acquisition method with cash consideration funded from cash on hand. The assets and liabilities of the acquired entities were recorded in the Company's consolidated financial statements at their estimated fair values as of the acquisition dates. The excess value of the consideration paid over the fair value of assets acquired and liabilities assumed was recorded as goodwill. During 2016, the Company completed its review of Absarokee tax items and finalized the fair value of acquired deferred tax assets resulting in a $42 decrease in goodwill.

Core deposit intangible assets related to the Absarokee acquisition of $695 are being amortized using an accelerated method over the estimated useful lives of the related deposits of ten years.

Unaudited pro forma consolidated revenues and net income as if the Absarokee acquisition had occurred as of January 1, 2014, are not presented because the effect of this acquisition was not considered significant.

Goodwill arising from the Flathead and Absarokee acquisitions consists largely of the synergies and economies of scale expected from combining the operations of the acquired entities and the Company. The Absarokee acquisition was accounted for as a tax-free exchange; therefore, goodwill recorded in conjunction with the Absarokee acquisition is not deductible for income tax purposes. The Flathead acquisition was accounted for as a deemed asset purchase; therefore, goodwill recorded in conjunction with the Flathead acquisition is deductible for income tax purposes. Fair values of assets acquired and liabilities assumed as part of the Flathead and Absarokee acquisitions were estimated using relevant market information and significant other inputs and generally fall within Levels 2 and 3 of the fair value hierarchy.

The accompanying consolidated statements of income include the results of operations of the acquired entities from their acquisition dates. The operations of Flathead and Absarokee were immediately integrated with the Company's operations and the acquired banks were merged with FIB. As such, the Company has determined it is not practical to report post-acquisition date revenues and net income of the acquired entities that were included in the Company's consolidated statements of income for the years ended December 31, 2016 and 2015.

The Company recorded third party acquisition-related costs of $2,821, $795 and $4,017 in 2016, 2015 and 2014 respectively. These costs are included in acquisition expenses in the Company's consolidated statements of income.