Mergers and Acquisitions

On August 31, 2016, the Company acquired 100 percent of the outstanding common stock of Treasure State Bank, a community bank based in Missoula, Montana. TSB provides banking services to individuals and businesses in the greater Missoula market. TSB has merged into Glacier Bank and has become a part of the First Security Bank of Missoula bank division. The TSB acquisition was valued at $13,940,000 and resulted in the Company issuing 349,545 shares of its common stock and $3,475,000 in cash in exchange for all of TSB’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 August 31, 2016 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 TSB. None of the goodwill is deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange.

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)

The assets and liabilities of TSB, Cañon and CB were recorded on the Company’s consolidated statements of financial condition at their estimated fair values as of the August 31, 2016, October 31, 2015 and February 28, 2015 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 arising from the TSB, Cañon and CB acquisitions:



	TSB		Cañon		CB
(Dollars in thousands)	August 31, 2016		October 31, 2015		February 28, 2015
Fair value of consideration transferred
Fair value of Company shares issued, net of equity issuance costs	$	10,465	$	15,163	10,776
Cash consideration for outstanding shares	3,475		16,145		12,219
Contingent consideration	—		—		—
Total fair value of consideration transferred	13,940		31,308		22,995
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable assets acquired
Cash and cash equivalents	10,176		17,860		31,931
Investment securities	—		68,486		42,350
Loans receivable	51,875		159,759		84,689
Core deposit intangible ¹	762		4,532		2,087
Accrued income and other assets	6,937		9,689		13,580
Total identifiable assets acquired	69,750		260,326		174,637
Liabilities assumed
Deposits	58,364		237,326		146,820
FHLB advances and repurchase agreements	3,260		—		3,292
Accrued expenses and other liabilities	601		1,487		2,667
Total liabilities assumed	62,225		238,813		152,779
Total identifiable net assets	7,525		21,513		21,858
Goodwill recognized	$	6,415	$	9,795	1,137

________

¹ The core deposit intangible for each acquisition was determined to have an estimated life of 10 years.

Note 22. Mergers and Acquisitions (continued)

The fair value of the TSB, Cañon and CB assets acquired includes loans with fair values of $51,875,000, $159,759,000 and $84,689,000, respectively. The gross principal and contractual interest due under the TSB, Cañon and CB contracts is $54,819,000, $164,568,000 and $88,817,000, respectively. The Company evaluated the principal and contractual interest due at each of the acquisition dates and determined that insignificant amounts were not expected to be collectible.

The Company incurred $456,000 of third-party acquisition-related costs in connection with the TSB acquisition during the year ended December 31, 2016. 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 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 TSB was approximately $1,800,000 and the net income was approximately $897,000 from August 31, 2016 to December 31, 2016. 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.

The following unaudited pro forma summary presents consolidated information of the Company as if the TSB acquisition had occurred on January 1, 2015:

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

Years ended

(Dollars in thousands)

December 31,
2016

December 31,
2015

Net interest income and non-interest income

Net income