Glacier Bancorp, Inc. Announces Results for the Quarter Ended December 31, 2014

HIGHLIGHTS:

• Net income of $28.1 million for the current quarter, an increase of 6 percent from the prior year fourth quarter net income of $26.5 million.
• Net income of $112.8 million for the current year, an increase of 18 percent from the prior year net income of $95.6 million.
• Current quarter diluted earnings per share of $0.37, an increase of 3 percent from the prior year fourth quarter diluted earnings per share of $0.36.
• The loan portfolio increased $29 million, or 3 percent annualized, during the current quarter.
• Non-performing assets decreased $8.2 million, or 8 percent, during the current quarter.
• Special dividend declared of $0.30 per share during the current quarter. This was the eleventh special dividend the Company has declared.
• Regular dividend declared of $0.18 per share, an increase of $0.01 per share, or 6 percent, over the prior quarter.
• Announced the definitive agreement to acquire Community Bank, Inc., a community bank based in Ronan, Montana, with total assets of $175 million at December 31, 2014.

KALISPELL, Mont, Jan. 29, 2015 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq:GBCI) reported net income of $28.1 million for the current quarter, an increase of $1.6 million, or 6 percent, from the $26.5 million of net income for the prior year fourth quarter. Diluted earnings per share for the current quarter was $0.37 per share, an increase of $0.01, or 3 percent, from the prior year fourth quarter diluted earnings per share of $0.36. Included in the current quarter non-interest expense was $1.4 million of one-time expenses primarily due to acquisition related expenses and included in the current quarter was non-interest income of $747 thousand from insurance proceeds on a bank owned life insurance policy.   "We had another very solid quarter that helped achieve an all time record year for us," said Mick Blodnick, President and Chief Executive Officer. "As expected earnings were down from the previous two quarters as seasonal factors impacted our revenue stream, especially non interest income. In addition, interest expense was higher this quarter, the result of an interest rate swap we put in place three years ago to reduce our sensitivity to increases in interest rates in the future," Blodnick said. "The highlight for the quarter was the announcement of our plans to acquire Community Bank, Inc. with a timetable to hopefully have the transaction closed by the end of February," Blodnick said.

Net income for the year ended December 31, 2014 was $112.8 million, an increase of $17.2 million, or 18 percent, from the $95.6 million of net income for the same period the prior year. Diluted earnings per share for the current year was $1.51 per share, an increase of $0.20, or 15 percent, from the diluted earnings per share in the prior year.

On August 31, 2014, the Company completed the acquisition of FNBR Holding Corporation, and its subsidiary, First National Bank of the Rockies ("FNBR"). The Company incurred $552 thousand of legal and professional expenses in connection with the FNBR acquisition during 2014. A bargain purchase gain of $680 thousand resulted from the acquisition which was based on the estimated fair value of the assets acquired and liabilities assumed. The Company's results of operations and financial condition include the acquisition of FNBR from the acquisition date and the following table provides information on the fair value of selected classifications of assets and liabilities acquired:

Total investment securities increased $27 million, or 1 percent, during the current quarter and decreased $314 million, or 10 percent, from December 31, 2013. At December 31, 2014, investment securities represented 35 percent of total assets, compared to 41 percent at December 31, 2013.

The loan portfolio increased by $29 million, or 3 percent annualized, during the current quarter with improvement in all loan categories. Excluding the loans receivable from the FNBR acquisition, the loan portfolio increased $288 million, or 7 percent, since December 31, 2013 of which $245 million came from growth in commercial loans. "Better than expected loan growth in the fourth quarter led to overall organic loan growth in 2014 of 7 percent, which was 2 percent above our goal at the beginning of the year," Blodnick said. "If we include the acquisition of First National Bank of the Rockies, our loan portfolio grew in excess of 10 percent which is the second year in a row we have generated that level of production," Blodnick said.

Non-performing assets at December 31, 2014 were $89.9 million, a decrease of $8.2 million, or 8 percent, during the current quarter and a decrease of $19.5 million, or 18 percent, from a year ago. Land, lot and other construction loans (i.e., regulatory classification) continues to be the largest category and was $47.7 million, or 53 percent, of the non-performing assets at December 31, 2014. The Company has continued to make progress by reducing this category the past few years and the category decreased $3.7 million, or 7 percent, from the prior quarter. "2014 was another really good year of reducing problem assets, topped off by a strong final quarter," Blodnick said. "Every credit quality metric improved during the current year and as we enter 2015, there is hope that we can make additional strides further lowering our level of troubled assets," Blodnick said. Early stage delinquencies (accruing loans 30-89 days past due) of $25.9 million at December 31, 2014 increased $8.3 million from the prior quarter as a result of seasonal increases which are common in the fourth quarter. Early stage delinquencies for the current quarter decreased $6.2 million, or 19 percent, from the prior year fourth quarter.

The allowance for loan and lease losses ("allowance") was $130 million at December 31, 2014 and remained stable compared to the prior quarter and year ago periods. The allowance was 2.89 percent of total loans outstanding at December 31, 2014 compared to 2.93 percent at September 30, 2014 and 3.21 percent for the same quarter last year.

Net charged-off loans for the current quarter were $1.1 million, an increase of $706 thousand from the prior quarter and a decrease of $1.1 million from the prior year fourth quarter. The current quarter provision for loan losses of $191 thousand decreased $169 thousand from the prior quarter and decreased $1.6 million from the prior year fourth 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.

Non-interest bearing deposits at December 31, 2014 increased $36.4 million, or 2 percent, during the current quarter. Excluding the FNBR acquisition, non-interest bearing deposits increased $178 million, or 13 percent, from December 31, 2013. Interest bearing deposits of $4.713 billion at December 31, 2014 included $249 million of wholesale deposits (i.e., brokered deposits classified as NOW, money market deposits and certificate accounts). Excluding an increase of $53.1 million in wholesale deposits, interest bearing deposits at December 31, 2014 increased $149 million, or 3 percent, during the current quarter. Excluding the acquisition and an increase of $44.1 million in wholesale deposits, interest bearing deposits at December 31, 2014 increased $234 million, or 6 percent, from a year ago. 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 $297 million at December 31, 2014 decreased $70 million, or 19 percent, during the current quarter and decreased $543 million, or 65 percent, from December 31, 2013 as the need for borrowings continued to decrease.

Tangible stockholders' equity of $887 million at December 31, 2014 decreased $11.7 million, or 1 percent, from the prior quarter which was primarily the result of the $0.30 per share special dividend declared. Tangible stockholders' equity increased $63.4 million from a year ago as the result of earnings retention, stock issued in connection with the FNBR acquisition, and an increase in accumulated other comprehensive income. Tangible book value per common share of $11.83 decreased $0.15 per share from the prior quarter and increased $0.75 per share from the prior year fourth quarter.

Cash Dividend

On December 30, 2014, the Company's Board of Directors declared a special cash dividend of $0.30 per share, which was the eleventh special dividend the Company has declared. The dividend is payable on January 22, 2015 to shareholders of record on January 13, 2015. On November 25, 2014, the Company's Board of Directors declared a regular cash dividend of $0.18 per share during the current quarter, an increase of $0.01 per share, or 6 percent, from the prior quarter. The dividend was payable December 18, 2014 to shareholders of record on December 9, 2014. 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

The current quarter interest income of $76.2 million increased $489 thousand, or 1 percent, from the prior quarter. The current quarter increase in interest income was primarily driven by increases in interest income on residential real estate loans and commercial loans which more than offset the reduction in interest income from the investment securities portfolio. The current quarter's interest income increased $2.2 million, or 3 percent, over the prior year fourth quarter and was primarily attributable to higher interest income on commercial loans. The current quarter interest income of $37.9 million on commercial loans increased $3.2 million, or 9 percent, over the prior year fourth quarter as a result of an increased volume of commercial loans. Current quarter interest income of $22.1 million on investment securities decreased $1.4 million, or 6 percent, over the prior year fourth quarter as a result of a decrease volume in investment securities.

The current quarter interest expense of $7.4 million increased $938 thousand from the prior quarter, primarily the result of interest expense associated with an interest rate swap undertaken to reduce the Company's sensitivity to rising interest rates. The interest rate swap with a notional amount of $160 million had a three year deferred start with the interest expense accrual period beginning in October 2014 and scheduled to end in October 2021. The current quarter interest expense increased $439 thousand from the prior year fourth quarter, such increase attributed to the interest expense associated with the interest rate swap which was partially offset by the decrease in deposit interest expense. The total cost of funding (including non-interest bearing deposits) for the current quarter was 42 basis points compared to 37 basis points in the prior quarter and 40 basis points in the prior year fourth quarter.

The Company's net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the current quarter was 3.92 percent compared to 3.99 in the prior quarter. The 7 basis points decrease in the current quarter net interest margin was primarily driven by the 5 basis point increase in the total funding cost due to the increase in the interest expense associated with the interest rate swap. The yield in earning assets decreased 2 basis points and resulted from a decrease in yields on the loan and investment securities portfolios. The Company's current quarter net interest margin increased 4 basis points from the prior year fourth quarter net interest margin of 3.88 percent, such increase primarily driven by the increased yield on the investment securities combined with a significant shift in earning assets to the higher yielding loan portfolio. The total cost of funding increased 2 basis points over the prior year fourth quarter, such increase from the interest rate swap which was partially offset by a reduction in deposit interest rates.

Non-interest Income

Non-interest income for the current quarter totaled $24.0 million, a decrease of $454 thousand over the prior quarter and an increase of $976 thousand over the same quarter last year.   Service fee income of $15.1 million, decreased $532 thousand, or 3 percent, from the prior quarter as a result of seasonal activity and increased $434 thousand, or 3 percent, from the prior year fourth quarter as a result of the increased number of deposit accounts. Gain of $5.4 million on the sale of residential loans in the current quarter was a decrease of $576 thousand, or 10 percent, from the prior quarter again because of seasonal activity. Gain on the sale of the residential loans in the current quarter increased $489 thousand, or 10 percent, from the prior year fourth quarter as a result of an increase in mortgage lending activity during the last half of 2014 as interest rates decreased. Other non-interest income for the current quarter of $3.5 million, increased $621 thousand, or 22 percent, over the prior quarter and was due to $747 thousand of insurance proceeds recognized in the current quarter from a bank owned life insurance policy. Included in other income was operating revenue of $67 thousand from other real estate owned ("OREO") and gain of $374 thousand from the sale of OREO, a combined total of $441 thousand for the current quarter compared to $406 thousand for the prior quarter and $1.6 million for the prior year fourth quarter.

Compensation and employee benefits for the current quarter increased by $665 thousand, or 2 percent, from the prior quarter due to the increased number of employees from the FNBR acquisition. Compensation and employee benefits increased by $3.5 million from the prior year fourth quarter also due to the increased number of employees from the FNBR acquisition, along with additional benefit costs and salary increases. Current quarter occupancy and equipment expense increased $230 thousand, or 3 percent, from the prior quarter and increased $468 thousand, or 7 percent, from the prior year fourth quarter as a result of added costs associated with the FNBR acquisition. Advertising and promotion expense in the current quarter increased $199 thousand, or 11 percent, compared to the prior year fourth quarter primarily from the FNBR acquisition and recent marketing promotions at a number of the Bank divisions. The current quarter data processing expense increased $343 thousand, or 23 percent, from the prior quarter and increased $192 thousand, or 12 percent, as a result of conversion related expenses in the fourth quarter of 2014. The current quarter OREO expense of $893 thousand included $360 thousand of operating expense, $474 thousand of fair value write-downs, and $59 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.

Efficiency Ratio

The efficiency ratio for the current quarter was 55 percent and the prior year fourth quarter was 54 percent. The 1 percent increase in efficiency ratio resulted from increases in non-interest expense primarily the result of increased operational expense associated with recent acquisitions, which exceeded the increases in net interest income from higher yielding earning assets and increases in non-interest income from greater mortgage activity and higher number of deposit accounts.

Net Interest Income

Interest income for 2014 increased $36.3 million, or 14 percent, from the prior year and was principally due to the decrease in premium amortization on investment securities and increased income from commercial loans. Interest income on investment securities benefited from a reduction of $36.6 million in premium amortization (net of discount accretion) on the investment portfolio ("premium amortization") during the current year compared to the prior year. Current year interest income on commercial loans increased $18.2 million, or 14 percent, from the prior year and was primarily the result of an increase in volume of commercial loans.

Interest expense for the current year decreased $1.8 million, or 6 percent, from the prior year and was primarily attributable to the decreases in interest rates on certificate of deposits and lower volume of borrowings, such benefit was partially offset by the increased costs associated with the interest rate swap in the final quarter of the year. The total funding cost (including non-interest bearing deposits) for the current year was 39 basis points compared to 42 basis points for the prior year.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for 2014 was 3.98 percent, a 50 basis points increase from the net interest margin of 3.48 percent for 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 2014 accounted for a 40 basis points reduction in the net interest margin, compared to an 89 basis points reduction in the net interest margin for the same period last year.  "The Bank divisions were very much focused on growing their loan portfolios throughout the year," said Ron Copher, Chief Financial Officer.  "Funding this loan growth with cash flow from the lower yielding investment securities portfolio combined with increased deposit balances at reduced rates enabled the net interest margin to improve by 50 basis points over the net interest margin for the prior year."

Non-interest Income

Non-interest income of $90.3 million for 2014 decreased $2.7 million, or 3 percent, over last year. Service charges and other fees of $58.8 million for the current year increased $4.3 million, or 8 percent, from the prior year and was primarily the result of an increase in the number of deposit accounts.   Gain of $19.8 million on the sale of residential loans for 2014 decreased $8.7 million, or 31 percent, from 2013 as a consequence of the slowdown in refinance activity. Current year other income of $11.9 million, increased $1.5 million, or 15 percent, from the prior year as a result of a current year bargain purchase gain, proceeds from bank owned life insurance policy, and other income which was partially offset by the decreases in OREO income.    Included in other income was operating revenue of $204 thousand from OREO and gain of $2.1 million from the sale of OREO, which combined totaled $2.3 million for the current year compared to $3.5 million for the same period in the prior year.

Compensation and employee benefits for 2014 increased $14.4 million, or 14 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 for 2014 increased $2.6 million, or 11 percent, over the prior year as a result of recent bank acquisitions and increases in equipment expense related to additional information and technology infrastructure. Current year advertising and promotions increased $999 thousand from the prior year primarily from the FNBR acquisition and recent marketing promotions at a number of the Bank divisions. Data processing expense for 2014 increased $2.1 million, or 47 percent, from the prior year as a result of the acquired banks outsourced data processing expense, conversion related expenses and general increases in data processing expense. OREO expense of $2.6 million in 2014 decreased $4.6 million, or 64 percent, from the same period last year. OREO expense for the 2014 included $1.4 million of operating expenses, $691 thousand of fair value write-downs, and $442 thousand of loss on sale of OREO. Other expense for the current year increased by $2.8 million, or 7 percent, from the prior year primarily from increases in employee expenses from acquired banks and increase in consulting and advisory services.

Provision for loan losses

The provision for loan losses was $1.9 million for 2014, a decrease of $5.0 million, or 72 percent, from the same period in the prior year. Net charged-off loans during 2014 was $2.5 million, a decrease of $4.9 million from 2013.

Efficiency Ratio

The efficiency ratio was 54 percent for 2014 and 55 percent for 2013.   The improvement in the efficiency ratio was the result of the increase in net interest income from the shift in earning assets from investment securities to the higher yielding loans and decreases in premium amortization on the investment security portfolio. Such increases in net interest income outpaced the increase in non-interest expense from compensation expense and the decrease in non-interest income driven by decrease in refinance activity.

About Glacier Bancorp, Inc.

Glacier Bancorp, Inc. is a regional bank holding company providing commercial banking services in 80 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;
• increased loan delinquency rates;
• the risks presented by the lingering 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 or grow the Company through acquisitions;
• consolidation in the financial services industry in the Company's markets resulting in the creation of larger financial institutions who 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