Banner Corp. (BANR) in Walla Walla, Wash., is set to buy a small troubled Idaho bank through a bankruptcy auction.

The $4.5 billion-asset company said late Thursday that it will pay $2.6 million to buy the $100 million-asset Idaho Banking in a sale under Section 363 of the U.S. Bankruptcy Code. The selling bank's holding company, Idaho Bancorp (IDBC), will file for Chapter 11 bankruptcy, the companies said in a press release.

"This transaction presents a unique opportunity for Banner to expand our presence in the Boise market, which is the third largest metropolitan market in the Pacific Northwest," Mark Grescovich, Banner's chief executive, said in the release. "The combination of our two organizations provides the opportunity to create revenue and cost synergies."

Idaho Banking was significantly undercapitalized and more than 10% of its assets were nonperforming at the end of last year, according to data from the Federal Deposit Insurance Corp.

""This combination allows us to partner with a strong community bank that is focused on providing great customer service, a deep commitment to the communities where it operates and an excellent environment for employees to perform and advance," said Jim Latta, Idaho Bancorp's chief executive, said in the release.

The deal is far from definite. As bankruptcy auctions become more common, they are also more frequently contested. Last year, Simmons First National's (SFNC) outbid private-equity firm Ford Financial Group and Arvest Bank of Fayetteville, Ark., tobuy Metropolitan National Bankin Little Rock, Ark. Simmons First paid $53.6 million, or $37.6 million more than Ford's initial bid.

A group of investors working as RKJS Bank was the initial bidder for First Mariner Bank in Baltimore. During the bidding process, however, National Penn Bancshares (NPBC) in Allentown, Pa.,entered the auction and was named the victor. RKJS filed an objection and National Penn ultimately withdrew its bid.

For Banner, the deal is its second attempt at a deal in the Boise market in the last year. In September, itagreed to buy the $1 billion-asset Home Federal Bancorp(HOME) for $197 million in cash and stock. A month later, Homesaid it would sell itself to Cascade Bancorp(CACB) in Bend, Ore., for $266 million. Banner walked away with a $3 million termination fee.

Since then, Banner has been on the hunt for additional opportunities. In February, it announced that itwould take on six branches in Oregonalong with $226 million in deposits and $95 million in loans owned by Sterling Financial. Sterling was selling the branches to comply with requirements from the Department of Justice in order to complete its sale to Umpqua Holdings (UMPQ). Banner is being paid $7 million to acquire those branches.

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