Mergers and Acquisitions

On October 31, 2015, the Company acquired 100 percent of the outstanding common stock of Cañon Bank Corporation and its wholly-owned subsidiary, Cañon National Bank, a community bank based in Cañon City, Colorado. Cañon provides banking services to individuals and businesses in south central Colorado, with banking offices located in Colorado Springs, Pueblo, Pueblo West, Cañon City, Colorado City, and Florence, Colorado. The acquisition expands the Company’s market into south central Colorado and further diversifies the Company’s loan, customer and deposit base. The branches of Cañon have become a part of the Bank of the San Juans bank division. The Cañon acquisition was valued at $31,308,000 and resulted in the Company issuing 554,206 shares of its common stock and $16,145,000 in cash in exchange for all of Cañon’s outstanding common stock shares. The fair value of the Company shares issued was determined on the basis of the closing market price of the Company’s common stock on the October 31, 2015 acquisition date. The excess of the fair value of consideration transferred over total identifiable net assets was recorded as goodwill. The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Cañon. None of the goodwill is deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange.

On February 28, 2015, the Company acquired 100 percent of the outstanding common stock of Montana Community Banks, Inc. and its wholly-owned subsidiary, Community Bank, Inc., a community bank based in Ronan, Montana. CB provides banking services to individuals and businesses in western Montana, with banking offices located in Missoula, Polson, Ronan and Pablo, Montana. The acquisition allowed the Company to add new markets in western Montana and complimented the Company’s presence in Missoula and Polson, Montana. The branches of CB have become a part of the Glacier Bank and First Security Bank of Missoula bank divisions. The CB acquisition was valued at $22,995,000 and resulted in the Company issuing 443,644 shares of its common stock and $12,219,000 in cash in exchange for all of CB’s outstanding common stock shares. The fair value of the Company shares issued was determined on the basis of the closing market price of the Company’s common stock on the February 28, 2015 acquisition date. The excess of the fair value of consideration transferred over total identifiable net assets was recorded as goodwill. The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and CB. None of the goodwill is deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange.

Note 22. Mergers and Acquisitions (continued)

On August 31, 2014, the Company acquired 100 percent of the outstanding common stock of FNBR, a privately-owned company, and its wholly-owned subsidiary, First National Bank of the Rockies, a community bank based in Grand Junction, Colorado. First National Bank of the Rockies provides community banking services to individuals and businesses in northwestern Colorado, with banking offices located in Grand Junction, Steamboat Springs, Meeker, Rangely, Craig, Hayden and Oak Creek. As a result of the acquisition, the Company further diversified its loan and deposit customer base with its increased presence in the state of Colorado. The branches of FNBR were merged into Glacier Bank and became a part of the Bank of the San Juans division. The consideration paid by the Company to acquire FNBR was $31,817,000, which resulted in the Company issuing 555,732 shares of its common stock and $16,690,000 in cash in exchange for all of FNBR’s outstanding common stock. The fair value of the Company’s common stock shares issued was determined on the basis of the closing market price of the Company’s common stock shares on the August 31, 2014 acquisition date. The Company recorded a $680,000 bargain purchase gain due to the fair value of FNBR’s identifiable net assets exceeding the consideration transferred. The bargain purchase gain is included in other income in the Company’s consolidated statements of operations. Before recognizing the bargain purchase gain, the Company reassessed whether it correctly identified and valued each of the assets acquired and liabilities assumed. The objective of the reassessment process was to ensure that the measurements reflected consideration of all available information as of the acquisition date. The reassessment process included reviewing FNBR’s statement of financial condition to verify that all assets and liabilities had been identified and then re-evaluating and challenging again the procedures and the reasonableness of the significant assumptions utilized in determining the fair value of the identifiable assets and liabilities with respect to the acquisition date. The Company obtained fair value estimates from independent third party specialists for the significant identifiable assets and liabilities, including loans, investment securities and deposits. Following the reassessment process, the Company concluded that the consideration transferred and all of the assets acquired and liabilities assumed had been properly identified and valued.

The assets and liabilities of Cañon, CB and FNBR were recorded on the Company’s consolidated statements of financial condition at their estimated fair values as of the October 31, 2015, February 28, 2015 and August 31, 2014 acquisition dates, respectively, and their results of operations have been included in the Company’s consolidated statements of operations since those dates. The following table discloses the calculation of the fair value of the consideration transferred, the total identifiable net assets acquired and the resulting goodwill or bargain purchase gain arising from the Cañon, CB and FNBR acquisitions:



	Cañon		CB	FNBR
(Dollars in thousands)	October 31, 2015		February 28, 2015	August 31, 2014
Fair value of consideration transferred
Fair value of Company shares issued, net of equity issuance costs	$	15,163	10,776	15,127
Cash consideration for outstanding shares	16,145		12,219	16,690
Contingent consideration	—		—	—
Total fair value of consideration transferred	31,308		22,995	31,817
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable assets acquired
Cash and cash equivalents	17,860		31,931	14,578
Investment securities	68,486		42,350	157,018
Loans receivable	159,759		84,689	137,488
Core deposit intangible	4,532		2,087	4,199
Accrued income and other assets	9,689		13,580	35,884
Total identifiable assets acquired	260,326		174,637	349,167
Liabilities assumed
Deposits	237,326		146,820	309,641
FHLB advances and repurchase agreements	—		3,292	—
Accrued expenses and other liabilities	1,487		2,667	7,029
Total liabilities assumed	238,813		152,779	316,670
Total identifiable net assets	21,513		21,858	32,497
Goodwill (bargain purchase gain) recognized	$	9,795	1,137	(680	)

Note 22. Mergers and Acquisitions (continued)

The fair value of the Cañon, CB and FNBR assets acquired includes loans with fair values of $159,759,000 and $84,689,000 and $137,488,000, respectively. The gross principal and contractual interest due under the Cañon, CB and FNBR contracts is $164,568,000, $88,817,000 and $146,019,000, respectively, all of which is expected to be collectible.

Core deposit intangible assets related to the Cañon, CB and FNBR acquisitions totaled $4,532,000, $2,087,000 and $4,199,000, respectively, all with estimated lives of 10 years.

The Company incurred $707,000 and $1,605,000, respectively, of Cañon and CB third-party acquisition-related costs during the year ended December 31, 2015. The Company incurred $552,000 of FNBR third-party acquisition-related costs during the year ended December 31, 2014. The expenses are included in other expense in the Company's consolidated statements of operations.

Total income consisting of net interest income and non-interest income of the acquired operations of Cañon was approximately $2,606,000 and net income was approximately $563,000 from October 31, 2015 to December 31, 2015. Total income consisting of net interest income and non-interest income of the acquired operations of CB was approximately $7,492,000 and net income was approximately $1,808,000 from February 28, 2015 to December 31, 2015. Total income consisting of net interest income and non-interest income of the acquired operations of FNBR was approximately $6,672,000 and net income was approximately $1,675,000 from August 31, 2014 to December 31, 2014.

The following unaudited pro forma summary presents consolidated information of the Company as if the Cañon and CB acquisitions had occurred on January 1, 2014:

The following unaudited pro forma summary presents consolidated information of the Company as if the FNBR acquisition had occurred on January 1, 2013:

Years ended

(Dollars in thousands)

December 31,
2015

December 31,
2014

Net interest income and non-interest income

Net income