Glacier Bancorp, Inc. Announces Results for the Quarter Ended June 30, 2014

HIGHLIGHTS:

• All time record net income of $28.7 million for the current quarter, an increase of 7 percent from the prior quarter net income of $26.7 million and an increase of 26 percent from the prior year second quarter net income of $22.7 million.
   
• Current quarter diluted earnings per share of $0.38, an increase of 23 percent from the prior year second quarter diluted earnings per share of $0.31.
   
• The loan portfolio increased $115 million, or 3 percent, during the current quarter. Excluding acquisitions, the loan portfolio increased $314 million, or 9 percent, from the prior year second quarter.
   
• Non-interest bearing deposits increased $68.7 million, or 5 percent, during the current quarter. Excluding acquisitions, non-interest bearing deposits increased $153 million, or 12 percent, from the prior year second quarter.
   
• Current quarter service charges and other fees of $13.5 million, increased $1.3 million, or 11 percent from prior quarter and increased $1.7 million, or 15 percent from the prior year second quarter.
   
• Early stage delinquencies (accruing loans 30-89 days past due) decreased $24.3 million to $18.6 million during the current quarter and decreased $3.4 million, or 16 percent, from the prior year second quarter.
   
• Dividend declared of $0.17 per share during the current quarter, an increase of $0.01 per share, or 6 percent, over the prior quarter. The dividend was the 117th consecutive quarterly dividend declared by the Company.
   
• Announced the definitive agreement to acquire First National Bank of the Rockies, a community bank based in Grand Junction, Colorado, with total assets of $345 million at June 30, 2014.

Results Summary

KALISPELL, Mont., July 24, 2014 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq:GBCI) reported net income of $28.7 million for the current quarter, an increase of $6.0 million, or 26 percent, from the $22.7 million of net income for the prior year second quarter. Diluted earnings per share for the current quarter was $0.38 per share, an increase of $0.07, or 23 percent, from the prior year second quarter diluted earnings per share of $0.31. Included in the current quarter non-interest expense was $834 thousand of one-time conversion expenses related to recent acquisitions.   "We achieved solid results in the second quarter as a number of earnings metrics approach levels we have not seen since before 2007, driven primarily by improved non interest income and further reduction in credit costs," said Mick Blodnick, President and Chief Executive Officer. "In addition, in the quarter we announced and are very excited and look forward to the completion in August of the acquisition of First National Bank of the Rockies which will further expand our presence in Western Colorado," Blodnick said.

Net income for the six months ended June 30, 2014 was $55.4 million, an increase of $11.9 million, from the $43.5 million of net income for the prior year first six months. Diluted earnings per share for the first six months of the current year was $0.74 per share, an increase of $0.14, or 23 percent, from the diluted earnings per share in the prior year first six months.

Asset Summary

Total investment securities decreased $108 million, or 3 percent, during the current quarter and decreased $678 million, or 18 percent, from June 30, 2013 as the Company continued to reduce the overall size of the investment portfolio. At June 30, 2014, investment securities represented 39 percent of total assets, down from 41 percent at December 31, 2013 and 47 percent at June 30, 2013.

Total loans receivable increased by $115 million, or 3 percent, during the current quarter with improvement in all loan categories. "We hoped that once we entered the spring our loan volumes would begin to pick up which they did," Blodnick said. "The growth this past quarter was well distributed with all of the bank divisions contributing to the success we had increasing our loan portfolio. It's also encouraging to see that this momentum appears to be carrying over into the third quarter which is important if we hope to reach our goal of 5% loan growth this year," Blodnick said. The largest dollar and percentage increase was in commercial loans which increased $94.9 million, or 3 percent, during the current quarter which was attributable to increases in loan production and seasonal draws on construction and agricultural lines. The Company was also encouraged by the current quarter increase in the consumer and other loan category since the Company has experienced several quarters of decreases in this loan category, albeit some of the current quarter increase was the result of seasonal fluctuations. Excluding the loans receivable from the acquisition of North Cascades National Bank ("NCB") at July 31, 2013, the loan portfolio increased $314 million, or 9 percent, since June 30, 2013 of which $294 million came from growth in commercial loans.

Credit Quality Summary

Non-performing assets at June 30, 2014 were $102 million, a decrease of $4.3 million, or 4 percent, during the current quarter and a decrease of $28.1 million, or 21 percent, from a year ago. The largest category of non-performing assets was the land, lot and other construction category (i.e., regulatory classification) which was $49.1 million, or 48 percent, of the non-performing assets at June 30, 2014. The Company has continued to make progress by reducing this category the past few years. The Company experienced a significant decrease in early stage delinquencies (accruing loans 30-89 days past due) during the current quarter. Early stage delinquencies of $18.6 million at June 30, 2014 decreased $24.3 million, or 57 percent, from the prior quarter and decreased $3.4 million, or 16 percent, from the prior year second quarter.

The allowance for loan and lease losses ("allowance") was $131 million at June 30, 2014 and remained stable compared to the prior quarter and a year ago. The allowance was 3.11 percent of total loans outstanding at June 30, 2014 compared to 3.20 percent at March 31, 2014 and 3.56 percent for the same quarter last year.

Credit Quality Trends and Provision for Loan Losses

Another positive trend was the decrease in net-charged off loans which was 0.03 percent of total loans for the first half of 2014 compared to 0.09 percent of total loans for the same period last year. Net charged-off loans for the current quarter totaled $332 thousand, a decrease of $412 thousand, or 55 percent, from the prior quarter and a decrease of $698 thousand, or 68 percent, from the prior year second quarter, respectively. The current quarter provision for loan losses of $239 thousand decreased $883 thousand from the prior quarter and decreased $839 thousand from the prior year second quarter. Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will continue to determine the level of provision for loan loss expense.

Supplemental information regarding credit quality and identification of the Company's loan portfolio based on regulatory classification is provided in the exhibits at the end of this press release. The regulatory classification of loans is based primarily on collateral type while the Company's loan segments presented herein are based on the purpose of the loan.

Liability Summary

Non-interest bearing deposits of $1.465 billion at June 30, 2014 increased $68.7 million, or 5 percent, during the current quarter. Excluding the NCB acquisition, non-interest bearing deposits at June 30, 2014 increased $153 million, or 12 percent, since June 30, 2013. Interest bearing deposits of $4.281 billion at June 30, 2014 included $215 million of wholesale deposits (i.e., brokered deposits classified as NOW, money market deposits and certificate accounts). Excluding an increase of $37.0 million in wholesale deposits during the current quarter, interest bearing deposits at June 30, 2014 increased $15.7 million, or 39 basis points. Excluding the NCB acquisition and a $157 million decrease in wholesale deposits, interest bearing deposits at June 30, 2014 increased $96.7 million, or 3 percent, from June 30, 2013.   In addition to the increase in deposit balances, the Company has benefited from a higher than expected increase in the number of checking accounts during the current year. Federal Home Loan Bank ("FHLB") advances of $607 million at June 30, 2014 decreased $79 million, or 12 percent, during the current quarter and decreased $610 million, or 50 percent, from June 30, 2013 as the need for borrowings continued to decrease concurrent with the increase in deposits.

Stockholders' Equity Summary

Total stockholders' equity eclipsed $1 billion for the first time ever ending the quarter at $1.010 billion. Tangible stockholders' equity of $872 million at June 30, 2014 increased $25.7 million, or 3 percent, from the prior quarter which was driven by earnings retention and an increase in accumulated other comprehensive income. Tangible stockholders' equity increased $70.0 million from a year ago as the result of $16.7 million of Company stock issued in connection with the acquisition of NCB and an increase in earnings retention. Tangible book value per common share of $11.71 increased $0.34 per share from the prior quarter and increased $0.80 per share from the prior year second quarter.

Cash Dividend

On June 25, 2014, the Company's Board of Directors declared a cash dividend of $0.17 per share, an increase of $0.01 per share, or 6 percent, from the prior quarter. The dividend is payable July 17, 2014 to shareholders of record on July 8, 2014. The dividend was the 117th consecutive quarterly dividend declared by the Company and future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations.

Net Interest Income

Net interest income declined by $12 thousand for the quarter to $67.4 million. The current quarter interest income of $74.0 million decreased $124 thousand, or less than 1 percent, from the prior quarter. This decrease was primarily driven by the reduction in the investment portfolio and offset in part by the increase in interest income on commercial loans. The premium amortization (net of discount accretion) on the investment securities ("premium amortization") included in the current quarter interest income was $7.0 million compared to $7.6 million in the prior quarter. The premium amortization appears to have stabilized following reductions over the prior six consecutive quarters.

The current quarter's interest income increased $11.8 million, or 19 percent, over the prior year second quarter and was primarily attributable to higher interest income on the investment portfolio and commercial loans. Interest income on investment securities of $23.9 million increased $6.5 million, or 38 percent, over the prior year second quarter as a result of the premium amortization decreasing $11.4 million. The current quarter interest income on commercial loans of $35.3 million increased $5.4 million, or 18 percent, over the prior year quarter as a result of an increased volume of commercial loans.

The current quarter interest expense of $6.5 million decreased $112 thousand, or 2 percent, from the prior quarter and decreased $657 thousand, or 9 percent, from the prior year second quarter. The decrease in interest expense from the prior quarter and the prior year second quarter was the result of decreases in deposit interest rates and in the volume of borrowings. The cost of total funding (including non-interest bearing deposits) for the current quarter was 39 basis points compared to 40 basis points in the prior quarter and 43 basis points for the prior year second quarter.

The Company's current quarter net interest margin as a percentage of earning assets, on a tax-equivalent basis, was 3.99 percent, a decrease of 3 basis points from the prior quarter net interest margin of 4.02 percent. Similar to the prior quarter, the current quarter yield on the investment portfolio increased and there was a continuing shift in earning assets from investment securities to the higher yielding loan portfolio. The yield on the loans declined slightly causing the lower net interest margin.

The Company's current quarter net interest margin increased 69 basis points from the prior year second quarter net interest margin of 3.30 percent, such increase was primarily driven by the increased yield on the investment portfolio coupled with the significant shift in earning assets to the higher yielding loan portfolio. "We continue to work hard to change the mix of our asset base by reducing the size of our investment portfolio and replacing it with greater loan totals," said Ron Copher, Chief Financial Officer.  "If we can maintain the present pace of loan volume through the second half of the year, the net interest margin should stabilize at or near its current level," Copher said.

Non-interest Income

Non-interest income for the current quarter totaled $22.5 million, an increase of $3.1 million over the prior quarter and a decrease of $718 thousand over the same quarter last year.   The Company has benefited from the increased volume and the increased number of deposit accounts which was reflected in the $1.5 million, or 11 percent, increase in service charge fee income from the prior quarter and the $1.8 million, or 14 percent, increase from the prior year second quarter, respectively. The gain of $4.8 million on the sale of residential loans in the current quarter was an increase of $1.2 million, or 33 percent, from the prior quarter and was attributable to seasonal increases. The gain on the sale of the residential loans in the current quarter decreased $2.7 million, or 36 percent, from the prior year second quarter when the Company experienced a slowdown in refinance activity which continued through the second half of 2013 and the first half of 2014. Included in other income was operating revenue of $34 thousand from other real estate owned ("OREO") and gain of $581 thousand from the sales of OREO, a combined total of $615 thousand for the most recent quarter compared to $811 thousand for the prior quarter and $715 thousand for the prior year second quarter.

Non-interest Expense Summary

Compensation and employee benefits increased by $4.1 million, or 16 percent, from the prior year second quarter due to the increased number of employees from the NCB acquisition and First State Bank ("FSB") acquisition at May 31, 2013 along with additional benefit costs. Occupancy and equipment expense increased $827 thousand, or 14 percent, from the prior year second quarter as a result of the acquisitions and increases in equipment expense related to the Company's expansion of information and technology infrastructure. Advertising and promotion expense increased $327 thousand, or 20 percent, compared to the prior year second quarter primarily from recent marketing promotions at a number of the Bank divisions. Outsourced data processing expense increased $744 thousand, or 58 percent, from the prior quarter and increased $1.2 million, or 150 percent, from the prior year second quarter because of the acquired banks' outsourced data processing expense and conversion related expenses. The current quarter OREO expense of $566 thousand included $429 thousand of operating expense, $98 thousand of fair value write-downs, and $39 thousand of loss on sale of OREO. OREO expense may fluctuate as the Company continues to work through non-performing assets and dispose of foreclosed properties. Other expense increased $1.7 million, or 19 percent, from the prior quarter primarily from expenses connected with New Market Tax Credit investments.

Efficiency Ratio

The efficiency ratio for the current quarter was 55 percent compared to 56 percent for the prior year second quarter. The improvement in the efficiency ratio was principally due to the increase in net interest income which exceeded the increase in non-interest expense.

Net Interest Income

Net interest income for the first six months of the current year was $135 million, an increase of $29.4 million, or 28 percent, over the same period last year. Interest income for the first six months of the current year increased $27.9 million, or 23 percent, from the prior year first six months and was principally due to the decrease in premium amortization on investment securities and an increase income from commercial loans. Interest income was reduced by $14.6 million in premium amortization on investment securities during the first half of the current year compared to $39.8 million for the same period last year. Current year interest income on commercial loans increased $11.8 million, or 20 percent, from the first half of last year and was primarily the result of an increased volume of commercial loans.

Interest expense for the first six months of the current year decreased $1.5 million, or 10 percent, from the prior year first six months and was primarily attributable to the decreases in certificate of deposit interest rates and decreases in the volume of borrowings and wholesale deposits. The funding cost (including non-interest bearing deposits) for the first six months of 2014 was 39 basis points compared to 44 basis points for the first six months of 2013.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the first six months of 2014 was 4.01 percent, a 78 basis points increase from the net interest margin of 3.23 percent for the first six months of 2013. The increase in the net interest margin was due to the increased yield on the investment portfolio combined with the shift in earning assets to the higher yielding loan portfolio. The premium amortization for the first six months of 2014 accounted for a 43 basis points reduction in the net interest margin, which was a decrease of 68 basis points compared to the 111 basis points reduction in the net interest margin for the same period last year.

Non-interest Income

Non-interest income of $41.9 million for the first half of 2014 decreased $4.3 million, or 9 percent, over the same period last year. The gains of $8.4 million on the sale of residential loans for the first half of 2014 decreased $8.2 million, or 49 percent, from the first half of 2013 as a consequence of the slowdown in refinance activity. Service charges and other fees of $28.0 million for the first six months of 2014 increased $3.3 million, or 14 percent, from the same period last year.   Included in other income was operating revenue of $98 thousand from OREO and gains of $1.3 million from the sales of OREO, which totaled $1.4 million for the first half of 2014 compared to $1.4 million for the same period in the prior year.

Non-interest Expense Summary

Compensation and employee benefits for the first six months of 2014 increased $8.1 million, or 16 percent, from the same period last year due to the increased number of employees from the acquired banks, additional benefit costs and annual salary increases. Occupancy and equipment expense increased $1.6 million, or 14 percent, as a result of the acquisitions and increases in equipment expense related to additional information and technology infrastructure. Outsourced data processing expense increased $1.7 million, or 103 percent, from the prior year first six months as a result of the acquired banks outsourced data processing expense and general increases in data processing expense. OREO expense of $1.1 million in the first six months of 2014 decreased $2.8 million, or 72 percent, from the first six months of the prior year. OREO expense for the first six months of 2014 included $714 thousand of operating expenses, $151 thousand of fair value write-downs, and $208 thousand of loss on sale of OREO. Other expense for the first half of 2014 increased by $1.8 million, or 10 percent, from the first half of the prior year primarily from debit card expenses and other deposit account related charges.

Provision for loan losses

The provision for loan losses was $1.4 million for the first six months of 2014, a decrease of $1.8 million, or 57 percent, from the same period in the prior year. Net charged-off loans during the first six months of 2014 was $1.1 million, a decrease of $2.1 million from the first six months of 2013.

Efficiency Ratio

The efficiency ratio was 54 percent for the first six months of 2014 and 55 percent for the first six months of 2013.   The improvement in the efficiency ratio resulted from net interest income outpacing the increase in non-interest expense and the decrease in non-interest income.

About Glacier Bancorp, Inc.

Glacier Bancorp, Inc. is a regional bank holding company providing commercial banking services in 72 communities in Montana, Idaho, Utah, Washington, Wyoming and Colorado. Glacier Bancorp, Inc. is headquartered in Kalispell, Montana, and  is the parent company for Glacier Bank, Kalispell and Bank divisions First Security Bank of Missoula; Valley Bank of Helena; Big Sky Western Bank, Bozeman; Western Security Bank, Billings; and First Bank of Montana, Lewistown, all operating in Montana; as well as Mountain West Bank, Coeur d'Alene operating in Idaho, Utah and Washington; Citizens Community Bank, Pocatello, operating in Idaho; 1st Bank, Evanston, operating in Wyoming and Utah;  First Bank of Wyoming, Powell and First State Bank, Wheatland,   each operating in Wyoming; North Cascades Bank, Chelan, operating in Washington; and Bank of the San Juans, Durango, operating in Colorado.

Forward Looking Statements

This news release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about management's plans, objectives, expectations and intentions that are not historical facts, and other statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "should," "projects," "seeks," "estimates" or words of similar meaning. These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations in the forward-looking statements, including those set forth in this news release:

• the risks associated with lending and potential adverse changes of the credit quality of loans in the Company's portfolio, including as a result of a slow recovery in the housing and real estate markets in its geographic areas;
• increased loan delinquency rates;
• the risks presented by a slow economic recovery which could adversely affect credit quality, loan collateral values, OREO values, investment values, liquidity and capital levels, dividends and loan originations;
• changes in market interest rates, which could adversely affect the Company's net interest income and profitability;
• legislative or regulatory changes that adversely affect the Company's business, ability to complete pending or prospective future acquisitions, limit certain sources of revenue, or increase cost of operations;
• costs or difficulties related to the completion and integration of acquisitions;
• the goodwill the Company has recorded in connection with acquisitions could become additionally impaired, which may have an adverse impact on earnings and capital;
• reduced demand for banking products and services;
• the risks presented by public stock market volatility, which could adversely affect the market price of the Company's common stock and the ability to raise additional capital in the future;
• consolidation in the financial services industry in the Company's markets resulting in the creation of larger financial institutions which may have greater resources could change the competitive landscape;
• dependence on the CEO, the senior management team and the Presidents of the Bank divisions;
• potential interruption or breach in security of the Company's systems; and
• the Company's success in managing risks involved in the foregoing.

The Company does not undertake any obligation to publicly correct or update any forward-looking statement if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statement.

Visit our website at www.glacierbancorp.com