Mergers and Acquisitions

3 Months Ended

Mar. 31, 2020

On February 29, 2020, the Company acquired 100 percent of the outstanding common stock of State Bank Corp. and its wholly-owned subsidiary, State Bank of Arizona, a community bank based in Lake Havasu City, Arizona. SBAZ has been merged into The Foothills Bank division of Glacier Bank. SBAZ provides banking services to individuals and businesses in Arizona with locations in Bullhead City, Cottonwood, Kingman, Lake Havasu City, Phoenix, Prescott Valley and Prescott. The preliminary value of the SBAZ acquisition was $125,854,000 and resulted in the Company issuing 3,007,044 shares of its common stock and paying $13,721,000 in cash in exchange for all of SBAZ’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 29, 2020 acquisition date. The excess of the preliminary 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 SBAZ. None of the goodwill is deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange.

The assets and liabilities of SBAZ were recorded on the Company’s consolidated statements of financial condition at their preliminary estimated fair values as of the acquisition date and the results of operations have been included in the Company’s consolidated statements of operations since that date. The following table discloses the preliminary fair value estimates of the consideration transferred, the total identifiable net assets acquired and the resulting goodwill arising from the SBAZ acquisition. The Company is continuing to obtain information to determine the fair values of assets acquired and liabilities assumed.


(Dollars in thousands)	SBAZ February 29, 2020
Fair value of consideration transferred
Fair value of Company shares issued	$	112,133
Cash consideration	13,721

Total fair value of consideration transferred	125,854
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable assets acquired
Cash and cash equivalents	57,434
Debt securities	142,174
Loans receivable, net of ACL	451,653
Core deposit intangible ¹	2,593
Accrued income and other assets	33,318
Total identifiable assets acquired	687,172
Liabilities assumed
Deposits	603,289
Borrowings	10,904
Accrued expenses and other liabilities	4,062
Total liabilities assumed	618,255
Total identifiable net assets	68,917
Goodwill recognized	$	56,937

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

The preliminary fair values of the SBAZ assets acquired include loans with preliminary fair values of $451,702,000. The gross principal and contractual interest due under the SBAZ contracts was $452,510,000. The Company evaluated the loans at the acquisition date and determined there were PCD loans of $3,401,000 with an ACL of $49,000.

The Company incurred $2,530,000 of expenses in connection with the SBAZ acquisition during the three months ended March 31, 2020. Mergers and acquisition expenses are included in other expense in the Company's consolidated statements of operations and consist of third-party costs and employee severance expenses.

Total income consisting of net interest income and non-interest income of the acquired operations of SBAZ was approximately $2,579,000 and net loss was approximately $3,474,000 from February 29, 2020 to March 31, 2020. The following unaudited pro forma summary presents consolidated information of the Company as if the SBAZ acquisition had occurred on January 1, 2019:


	Three Months ended
(Dollars in thousands)	March 31, 2020		March 31, 2019
Net interest income and non-interest income	$	172,893	151,065
Net income	42,228		50,956