Mergers and Acquisitions

9 Months Ended

Sep. 30, 2024

On January 31, 2024, the Company acquired 100% percent of the outstanding common stock of Community Financial Group, Inc. (“CFGW”) and its wholly-owned subsidiary, Wheatland Bank (“Wheatland”), a community bank based in Spokane, Washington. Wheatland provides banking services to individuals and businesses in Washington with locations in Chelan, Wenatchee, Ellensburg, Yakima, Quincy, Moses Lake, Pasco, Odessa, Davenport, Ritzville, and Spokane. Wheatland merged into the Bank and became a new bank division headquartered in Spokane and the Bank’s existing Washington-based division, North Cascades Bank, combined with the new Wheatland division. The preliminary value of the Wheatland acquisition was $93,156,000 and as part of the transaction, the Company issued 2,389,684 shares of its common stock and paid $771,000 in cash in exchange for all of Wheatland’s outstanding shares of common stock and options to purchase 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 January 31, 2024 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 Bank and Wheatland. None of the goodwill is deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange.

On July 19, 2024, the Bank completed its acquisition of six Montana branch banking offices of Rocky Mountain Bank (“RMB”) from HTLF Bank (”HTLF”), a wholly owned subsidiary of Heartland Financial USA, Inc. The RMB branches are located in Billings, Bozeman, Plentywood, Stevensville, and Whitehall. The RMB branches have joined Glacier Bank divisions operating in Montana. The Bank paid a premium of $25,238,000 for deposit relationships with balances of $396,690,000 and loans with balances of $271,569,000, and received cash of $102,019,000 from HTLF. The excess of the fair value of consideration transferred over total identified net assets was recorded as goodwill. The goodwill arising from the acquisition consist largely of the synergies and economies of scale expected from combining the operations of the Company and the acquired branches. The goodwill is deductible for income tax purposes because the acquisition was accounted for as a purchase of assets and assumption of liabilities for tax purposes.

The assets and liabilities of Wheatland and RMB were recorded on the Company’s consolidated statements of financial condition at their preliminary estimated fair values as of the respective acquisition dates 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 Wheatland and RMB branch acquisitions. The Company is continuing to obtain information to determine the fair values of assets acquired and liabilities assumed.


(Dollars in thousands)	Wheatland January 31, 2024		RMB Branches July 19, 2024
Fair value of consideration transferred
Fair value of Company shares issued	$	92,385	$	—
Cash consideration or deposit premium paid	771		25,238

Total fair value of consideration transferred	93,156		25,238
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable assets acquired
Cash and cash equivalents	31,674		102,019
Debt securities	187,183		—
Loans receivable, net of ACL	452,737		271,569
Core deposit intangible 1	16,936		9,794
Accrued income and other assets	50,760		15,114
Total identifiable assets acquired	739,290		398,496
Liabilities assumed
Deposits	616,955		396,690
Borrowings	58,500		4,305
Accrued expenses and other liabilities	9,048		2,057
Total liabilities assumed	684,503		403,052
Total identifiable net assets (liabilities)	54,787		(4,556)
Goodwill recognized	$	38,369	$	29,794

______________________________

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

The preliminary fair values of the Wheatland and the RMB branch assets acquired include loans with preliminary fair values of $452,740,000 and $271,569,000, respectively. The gross principal and contractual interest due under the loans acquired in Wheatland and RMB transactions were $468,882,000 and $288,920,000, respectively. The Company evaluated the loans at each respective acquisition date and determined there were PCD loans of $1,655,000 with an ACL of $3,000 related to the Wheatland acquisition, and no PCD loans from the RMB branch acquisition.

The Company incurred $7,664,000 and $1,744,000 of expenses in connection with the Wheatland and RMB branch acquisitions during the nine months ended September 30, 2024, respectively. 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 Wheatland was approximately $22,111,000 and net loss was approximately $6,416,000 from January 31, 2024 to September 30, 2024. Total income consisting of net interest income and non-interest income of the acquired branches of RMB was approximately $3,072,000 and net loss was approximately $2,606,000 from July 19, 2024 to September 30, 2024. The following unaudited pro forma summary presents consolidated information of the Company as if the Wheatland and RMB branch acquisitions had occurred on January 1, 2023:


	Three Months ended			Nine Months ended
(Dollars in thousands)	September 30, 2024		September 30, 2023	September 30, 2024	September 30, 2023
Net interest income and non-interest income	$	215,420	208,217	618,039	644,285
Net income	51,512		56,755	131,407	181,103