Mergers and Acquisitions

The Company has completed the following acquisitions during the last two years:


•	Inter-Mountain Bancorp., Inc. and its wholly-owned subsidiary, First Security Bank


•	Columbine Capital Corp., and its wholly-owned subsidiary, Collegiate Peaks Bank


•	TFB Bancorp, Inc. and its subsidiary, The Foothills Bank

The assets and liabilities of FSB, Collegiate and Foothills were recorded on the Company’s consolidated statements of financial condition at their estimated fair values as of their acquisition dates 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 FSB, Collegiate and Foothills acquisitions:



(Dollars in thousands)	FSB February 28, 2018		Collegiate January 31, 2018	Foothills April 30, 2017
Fair value of consideration transferred
Fair value of Company shares issued, net of equity issuance costs	$	181,043	69,764	46,673
Cash consideration for outstanding shares	—		16,265	17,342
Effective settlement of a pre-existing relationship	—		10,054	—
Total fair value of consideration transferred	181,043		96,083	64,015
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable assets acquired
Cash and cash equivalents	24,397		93,136	13,251
Debt securities	271,865		42,177	25,420
Loans receivable	627,767		354,252	292,529
Core deposit intangible ¹	31,053		10,275	4,331
Accrued income and other assets	78,274		15,911	19,699
Total identifiable assets acquired	1,033,356		515,751	355,230
Liabilities assumed
Deposits	877,586		437,171	296,760
Borrowings ²	36,880		12,509	22,800
Accrued expenses and other liabilities	14,175		5,435	2,264
Total liabilities assumed	928,641		455,115	321,824
Total identifiable net assets	104,715		60,636	33,406
Goodwill recognized	$	76,328	35,447	30,609

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

² Borrowings assumed with the FSB acquisition include Tier 2 subordinated debentures of $7,903,000.

2018 Acquisitions

On February 28, 2018, the Company acquired 100 percent of the outstanding common stock of Inter-Mountain Bancorp., Inc. and its wholly-owned subsidiary, First Security Bank, a community bank based in Bozeman, Montana. FSB provides banking services to individuals and businesses throughout Montana with locations in Bozeman, Belgrade, Big Sky, Choteau, Fairfield, Fort Benton, Three Forks, Vaughn and West Yellowstone. The acquisition expands the Company’s presence in the Bozeman and Golden Triangle markets in Montana and further diversifies the Company’s loan, customer and deposit base. FSB merged into the Bank and became a new bank division headquartered in Bozeman and the Bank’s existing Bozeman-based division, Big Sky Western Bank, combined with the new FSB division. The agriculture-focused northern branches of FSB combined with the Bank’s First Bank of Montana division. The FSB acquisition was valued at $181,043,000 and resulted in the Company issuing 4,654,091 shares of its common stock. 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, 2018 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 FSB. 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 January 31, 2018, the Company acquired 100 percent of the outstanding common stock of Columbine Capital Corp. and its wholly-owned subsidiary, Collegiate Peaks Bank, a community bank based in Buena Vista, Colorado. Collegiate provides banking services to businesses and individuals in the Mountain and Front Range communities of Colorado, with locations in Aurora, Buena Vista, Denver and Salida. The acquisition expands the Company’s presence in Colorado to the mountains and along the Front Range and further diversifies the Company’s loan, customer and deposit base. Collegiate merged into the Bank and operates as a separate Bank division under its existing name and management team. The Collegiate acquisition was valued at $96,083,000 and resulted in the Company issuing 1,778,777 shares of its common stock and paying $16,265,000 in cash in exchange for all of Collegiate’s outstanding common stock shares and $10,054,000 due to an effective settlement of pre-existing receivable from Columbine Capital Corp. 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 January 31, 2018 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 Collegiate. None of the goodwill is deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange.

The fair values of the FSB and Collegiate assets acquired include loans with fair values of $627,767,000 and $354,252,000, respectively. The gross principal and contractual interest due under the FSB and Collegiate contracts was $632,370,000 and $355,364,000, 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 $4,714,000 and $1,683,000 of expenses in connection with the FSB and Collegiate acquisitions, respectively, during the year ended December 31, 2018. Mergers and acquisition expenses are included in other expense in the Company's consolidated statements of operations and consist of third-party costs, conversion costs and employee retention and severance expenses.

Total income consisting of net interest income and non-interest income of the acquired operations of FSB was approximately $42,796,000 and net income was approximately $11,303,000 from February 28, 2018 to December 31, 2018. Total income consisting of net interest income and non-interest income of the acquired operations of Collegiate was approximately $23,921,000 and net income was approximately $4,962,000 from January 31, 2018 to December 31, 2018. The following unaudited pro forma summary presents consolidated information of the Company as if the FSB and Collegiate acquisitions had occurred on January 1, 2017:

2017 Acquisition

On April 30, 2017, the Company acquired 100 percent of the outstanding common stock of TFB Bancorp, Inc. and its wholly-owned subsidiary, The Foothills Bank, a community bank based in Yuma, Arizona. Foothills provides banking services to individuals and businesses in Arizona, with locations in Yuma, Prescott and Casa Grande, Arizona. The acquisition expands the Company’s market into the state of Arizona and further diversifies the Company’s loan, customer and deposit base. Foothills merged into the Bank and operates as a separate Bank division under its existing name and management team. The Foothills acquisition was valued at $64,015,000 and resulted in the Company issuing 1,381,661 shares of its common stock and $17,342,000 in cash in exchange for all of Foothills’ 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 April 30, 2017 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 Foothills. None of the goodwill is deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange.

The fair value of the Foothills assets acquired include loans with fair values of $292,529,000. The gross principal and contractual interest due under the Foothills contracts was $303,527,000. The Company evaluated the principal and contractual interest due at the acquisition date and determined that an insignificant amount was not expected to be collectible.

Note 22. Mergers and Acquisitions (continued)

The Company incurred $1,127,000 of expenses in connection with the Foothills acquisition during the year ended December 31, 2017. Mergers and acquisition expenses are included in other expense in the Company's consolidated statements of operations and consist of third-party costs, conversion costs and employee retention and severance expenses.

Total income consisting of net interest income and non-interest income of the acquired operations of Foothills was approximately $13,625,000 and net income was approximately $2,626,000 from April 30, 2017 to December 31, 2017. The following unaudited pro forma summary presents consolidated information of the Company as if the Foothills acquisition had occurred on January 1, 2016:

Years ended

(Dollars in thousands)

December 31,
2018

December 31,
2017

Net interest income and non-interest income

Net income