BUSINESS COMBINATIONS BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

Acquisition of Siuslaw Financial Group, Inc.

Effective as of the close of business on March 6, 2015, the Company completed the purchase of Siuslaw Financial Group, Inc. (Siuslaw), the holding company of Siuslaw Bank, an Oregon state chartered commercial bank. The results of Siuslaw's operations will be included in the Company's operating results beginning March 7, 2015 and the combined company's banking operations will operate under the Banner Bank name and brand. As of March 6, 2015, Siuslaw had $370 million in total assets, $252 million in loans, and $318 million in deposits.

The structure of the transaction is as follows:

• Siuslaw merged with and into the Company and, immediately following, Siuslaw Bank merged with and into Banner Bank;

• Siuslaw shareholders received 0.32231 shares of the Company's common stock and $1.41622 in cash in exchange for each share of Siuslaw common stock.

Aggregate consideration for the purchase is estimated at $63.9 million and includes the following:

• Cash of $5.8 million;

• Common stock issued of $58.1 million.

The primary reason for the acquisition is to continue the Company's growth strategy, including expanding our geographic footprint in markets throughout the Northwest. The assets acquired and liabilities assumed in the purchase will be accounted for under the acquisition method of accounting and, accordingly, the assets and liabilities, both tangible and intangible will be recorded at fair value as of the acquisition date. Preliminary fair values for all assets and liabilities are not reported herein as the Company is still in the process of determining the preliminary fair values. The Company expects to disclose preliminary assets acquired and liabilities assumed, including fair value adjustments, as well as supplemental pro forma information, in the Company's March 31, 2015 Form 10-Q. Goodwill will not be deductible for income tax purposes as the acquisition is accounted for as a tax-free exchange for tax purposes.

Acquisition of Six Oregon Branches

Effective as of the close of business on June 20, 2014, Banner Bank completed the purchase of six branches from Umpqua Bank, successor to Sterling Savings Bank (the Branch Acquisition). Five of the six branches are located in Coos County, Oregon and the sixth branch is located in Douglas County, Oregon. The purchase provided $212 million in deposit accounts, $88 million in loans, and $3 million in branch properties. Banner Bank received $128 million in cash from the transaction.

The assets acquired and liabilities assumed in the purchase have been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. The application of the acquisition method of accounting resulted in recognition of a core deposit intangible asset of $2.4 million and an acquisition bargain purchase gain of $9.1 million. The bargain purchase gain represents the excess fair value of the net assets acquired over the purchase price, including fair value of liabilities assumed. The bargain purchase gain consisted primarily of a $7.0 million discount on the assets acquired in this required branch divestiture combined with a $2.4 million core deposit intangible, net of approximately $300,000 in other fair value adjustments. The acquired core deposit intangible has been determined to have a useful life of approximately eight years and will be amortized on an accelerated basis.

The following table displays the fair value as of the acquisition date for each major class of assets acquired and liabilities assumed (in thousands):

	Fair Value at Acquisition June 20, 2014
Assets:
Cash	$	127,557
Loans receivable (contractual amount of $88.3 million)	87,923
Property and equipment	3,079
Core deposit intangible	2,372
Other assets	275
Total assets	221,206
Liabilities:
Deposits	212,085
Other liabilities	42
Total liabilities	212,127
Acquisition bargain purchase gain	$	9,079

The primary reason for the acquisition was to continue the Company's growth strategy, including expanding our geographic footprint in markets throughout the Northwest. As of June 20, 2014, the transaction had no remaining contingencies. The operating results of the Company include the operating results produced by the six acquired branches from June 21, 2014 to December 31, 2014. Pro forma results of operations for the years ended December 31, 2014 and 2013 , as if the Branch Acquisition had occurred on January 1, 2013, have not been presented because historical financial information was not available.

Acquisition Related Costs

The following table presents the key components of acquisition related costs in connection with the Branch Acquisition, the acquisition of Siuslaw, and the proposed acquisition of AmericanWest for the years ended December 31, 2014, 2013 and 2012 (in thousands):

	Years Ended December 31
	2014		2013		2012
Acquisition-related costs recognized in other operating expenses:
Non-capitalized equipment and repairs	$	105	$	—	$	—
Client communications	327		—		—
Information/computer data services	334		—		—
Payment and processing expenses	185		—		—
Professional services	2,953		550		—
Miscellaneous	421		—		—
	$	4,325	$	550	$	—