Banking and Finance

Banner Bank set to buy Idaho Banking Co.

The $2.6 million sale will take months to complete.

zkyle@idahostatesman.comApril 25, 2014 

Banner Bank strengthened its position in the Treasure Valley with the agreement Thursday.

Idaho Bancorp, the parent company of troubled, Boise-based Idaho Banking Co., filed for Chapter 11 bankruptcy as part of the sale agreement. Bankruptcy could clean the bank's books of about $18 million it owes to the federal Troubled Asset Relief Program and to holders of certain securities.

With $4.6 billion in assets, Banner Bank is the fourth-largest bank in the Pacific Northwest. It held a 1.4 percent share of the Treasure Valley market as of June 30, measured by deposits.

Banner tried to buy Nampa's Home Federal Bank last year but was outbid at the last minute by Bank of the Cascades, based in Bend, Ore. Banner Chief Financial Officer Lloyd Baker said the Idaho Banking Co. acquisition would boost Banner's locations in the market from five to nine.

"This is further demonstration of our interest in this market," Baker said.

Idaho Banking Co. had just under $100 million in assets and about 11,000 customers as of Dec. 31.

Baker said Banner likely would close the Idaho Banking branch at 6010 W. Fairview Ave. near a Banner branch. But he said the other branches would give Banner locations in areas the bank wants to increase its reach. It's too early to say whether all of Idaho Banking Co.'s 31 employees will be retained, he said.

Idaho Banking Co. has been trying to recapitalize or sell since it was placed under consent orders by federal and state regulators in 2010, said Gavin Gee, director of the Idaho Department of Finance, which regulates state-chartered banks. Gee said other banks have shown interest in buying Idaho Banking Co. and might place bids in what will essentially be a public auction held by the bankruptcy court. Banner could bid again if competitors outbid its $2.6 million offer.

The bankruptcy proposal would wipe out what's owed to the federal government. Gee expects federal bank regulators to accept the loss, since it ends the risk of an expensive shutdown of a troubled bank that's unlikely to repay the TARP money anyway.

"This (sale) is very good news from our perspective," Gee said.

Idaho Bancorp also owes about $9 million to holders of trust preferred securities, which are taxed like debt but treated like equities in a company's accounting. Gee said the bankruptcy judge likely would direct the $2.6 million, or a higher winning bid, to the securities' holders. Shareholders of Idaho Banking Co. stock likely would receive nothing. Those shares now trade over the counter.

"This (sale) is very good news from our perspective," Gee said.

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