Glacier Bancorp, Inc. Announces Results for the Quarter Ended June 30, 2015

HIGHLIGHTS:

• Net income of $29.3 million for the current quarter, an increase of 6 percent from the prior quarter $27.7 million net income and an increase of 2 percent from the prior year second quarter net income of $28.7 million.
   
• Current quarter diluted earnings per share of $0.39, an increase of 5 percent from the prior quarter $0.37 diluted earnings per share and an increase of 3 percent from the prior year second quarter diluted earnings per share of $0.38.
   
• The loan portfolio increased $120 million, or 10 percent annualized, during the current quarter.
   
• Non-interest bearing deposits of $1.731 billion, increased $55.6 million, or 13 percent annualized, during the current quarter.
   
• Gain of $7.6 million on the sale of residential real estate loans in the current quarter increased $2.2 million, or 40 percent, over the prior quarter and $2.8 million, or 59 percent, over the prior year second quarter.
   
• Dividend declared of $0.19 per share, an increase of $0.01 per share, or 6 percent, over the prior quarter. The dividend was the 121st consecutive quarterly dividend declared by the Company.
   
• Announced Randall ("Randy") M. Chesler to become president of Glacier Bank and to succeed Mick Blodnick as Chief Executive Officer of Glacier Bancorp, Inc. in 2017.
   
• The Company successfully converted Community Bank, Inc.'s core system over to the Company's core system during the current quarter.

Results Summary

KALISPELL, Mont., July 23, 2015 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq:GBCI) reported net income of $29.3 million for the current quarter, an increase of $658 thousand, or 2 percent, from the $28.7 million of net income for the prior year second quarter. Diluted earnings per share for the current quarter was $0.39 per share, an increase of $0.01, or 3 percent, from the prior year second quarter diluted earnings per share of $0.38. Included in the current quarter non-interest expense was $1.4 million of one-time expenses including conversion related expenses. "It was another very strong quarter for earnings especially in the area of non-interest income as we exceeded our projections in most categories," said Mick Blodnick, President and Chief Executive Officer. "We generated excellent organic loan growth, once again allowing us to reduce the investment portfolio and still increase net interest income. Hopefully, the pace of loan growth we achieved in the first half of the year can be carried through the last half," Blodnick said.

Net income for the six months ended June 30, 2015 was $57.0 million, an increase of $1.6 million, or 3 percent, from the $55.4 million of net income for the same period in the prior year. Diluted earnings per share for the six months ended June 30, 2015 was $0.76 per share, an increase of $0.02, or 3 percent, from the diluted earnings per share for the same period in the prior year.

On February 28, 2015, the Company completed the acquisition of Montana Community Banks, Inc. and its subsidiary, Community Bank, Inc. (collectively, "CB"). The Company successfully converted CB's core system over to the Company's core system during the current quarter. The Company incurred $833 thousand of legal and professional expenses in connection with the CB acquisition and conversion during the current year. Goodwill of $1.1 million 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 CB from the acquisition date and the following table provides information on the fair value of selected classifications of assets and liabilities acquired:

Asset Summary

Total investment securities decreased $159 million, or 5 percent, during the current quarter and decreased $88 million, or 3 percent, from June 30, 2014. The decrease in the investment portfolio during the current quarter was the result of the Company redeploying security payments into the loan portfolio, although the Company continues to selectively purchase investment securities in the volatile market with its excess liquidity. Investment securities represented 34 percent of total assets at June 30, 2015 compared to 35 percent at December 31, 2014 and 39 percent at June 30, 2014.

The loan portfolio increased $120 million, or 3 percent, during the current quarter. The loan category with the largest dollar and percent increase during the current quarter was commercial loans which increased $103 million, or 3 percent. Excluding the CB acquisition and the First National Bank of the Rockies ("FNBR") acquisition in August 2014, the loan portfolio increased $382 million, or 9 percent, since June 30, 2014 with $322 million of the increase coming from growth in commercial loans.

During the current quarter, the merger of the Federal Home Loan Bank ("FHLB") of Seattle and the FHLB of Des Moines was completed with minimal disruption to the Company. As a result of the merger, FHLB of Seattle stock of $29.4 million was redeemed by FHLB of Des Moines. 

Credit Quality Summary

Non-performing assets at June 30, 2015 were $84.2 million, a decrease of $6.5 million, or 7 percent, during the current quarter. Non-performing assets at June 30, 2015 decreased $18.2 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 $42.8 million, or 51 percent, of the non-performing assets at June 30, 2015. The Company has continued to make progress by reducing this category the past few years and the category decreased $2.8 million, or 6 percent, from the prior quarter. Early stage delinquencies (accruing loans 30-89 days past due) of $28.5 million at June 30, 2015 decreased $5.0 million from the prior quarter and increased $9.9 million from the prior year second quarter.

The allowance for loan and lease losses ("allowance") was $131 million at June 30, 2015 and continued to remain stable compared to the prior periods. The allowance was 2.71 percent of total loans outstanding at June 30, 2015 compared to 2.89 percent at December 31, 2014 and 3.11 percent for the same quarter last year. The reduction in the allowance as a percentage of total loans was driven primarily by loan growth, stabilizing credit quality, and no allowance carried over from bank acquisitions as a result of the acquired loans recorded at fair value.

Credit Quality Trends and Provision for Loan Losses

Net recoveries of loans for the current quarter were $381 thousand compared to net charge-offs of $662 thousand for the prior quarter and $332 thousand from the same quarter last year. The current quarter provision for loan losses of $282 thousand decreased $483 thousand from the prior quarter and increased $43 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 the loan loss provision.

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 $1.731 billion at June 30, 2015, increased $55.6 million, or 3 percent, from the prior quarter. Excluding the CB and FNBR acquisitions, non-interest bearing deposits increased $144 million, or 10 percent, from June 30, 2014. Interest bearing deposits of $4.828 billion at June 30, 2015 included $197 million of wholesale deposits (i.e., brokered deposits classified as NOW, money market deposits and certificate accounts). Excluding the $14.1 million decrease in wholesale deposits, interest bearing deposits at June 30, 2015 increased $58.4 million, or 1 percent, during the current quarter. Excluding the CB and FNBR acquisitions and the decrease of $18.1 million in wholesale deposits, interest bearing deposits at June 30, 2015 increased $230 million, or 6 percent, from June 30, 2014.

FHLB advances of $329 million at June 30, 2015 increased $31.3 million, or 11 percent, during the current quarter as the Company took advantage of attractive term borrowings that were available from the FHLB of Seattle prior to the merger with FHLB of Des Moines. FHLB advances as of June 30, 2015, decreased $278 million, or 46 percent, from June 30, 2014 as growth in deposits and continued balance sheet restructuring reduced the need for additional borrowings.

Stockholders' Equity Summary

Tangible stockholders' equity of $914 million at June 30, 2015 increased $3.7 million, or less than 1 percent, from the prior quarter which was primarily the result of earnings retention which offset the decrease in accumulated other comprehensive income. Tangible stockholders' equity increased $41.9 million from a year ago as the result of earnings retention and Company stock issued in connection with the CB and FNBR acquisitions, both of which offset the decrease in accumulated other comprehensive income. Tangible book value per common share of $12.10 increased $0.05 per share from the prior quarter and increased $0.39 per share from the prior year second quarter.

Cash Dividend

On June 30, 2015, the Company's Board of Directors declared a cash dividend of $0.19 per share, an increase of $0.01 per share, or 6 percent, over the prior quarter. The dividend was payable July 16, 2015 to shareholders of record on July 10, 2015. Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations. 

Operating Results for Three Months Ended June 30, 2015

Compared to March 31, 2015 and June 30, 2014

Income Summary

 

Net Interest Income

In the current quarter, interest income of $78.6 million increased $1.1 million, or 1 percent from the prior quarter. The current quarter increase in interest income was primarily driven by increases in interest income on commercial loans. Income on commercial loans of $40.7 million increased $1.7 million, or 4 percent, from the prior quarter. In addition, interest income increased $4.7 million, or 6 percent, over the prior year second quarter and was also attributable to higher interest income on commercial loans. The current quarter interest income on commercial loans increased $5.4 million, or 15 percent, over the prior year second quarter primarily the result of an increased volume in commercial loans. Interest income on investment securities of $22.0 million decreased $1.0 million, or 4 percent, over the prior quarter and decreased $1.9 million, or 8 percent, over the prior year second quarter principally due to a decreased volume of investment securities.

The current quarter interest expense of $7.4 million decreased $13 thousand, or less than 1 percent, from the prior quarter. The current quarter interest expense increased $841 thousand from the prior year second quarter, such increase attributed to the interest expense associated with the interest rate swap which started interest expense accruals in the fourth quarter of 2014. The total cost of funding (including non-interest bearing deposits) for the current quarter was 40 basis points compared to 42 basis points for the prior quarter and 39 basis points in the prior year second quarter.

The Company's net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the current quarter was 3.98 percent compared to 4.03 percent in the prior quarter. The 5 basis points decrease in the current quarter net interest margin was primarily driven by an 8 basis points reduction attributable to the investment portfolio. The reduction in the investment portfolio coupled with additional liquidity caused the cash balance to build through the quarter. The Company's current quarter net interest margin decreased 1 basis point from the prior year second quarter net interest margin of 3.99 percent. "The Bank divisions continue to achieve strong growth in their non-interest bearing deposit balances as well as low-cost interest bearing deposit balances," said Ron Copher, Chief Financial Officer. "Moreover, the Bank divisions maintained discipline over the pricing of their interest bearing balances," Copher said.

Non-interest Income

Non-interest income for the current quarter totaled $25.8 million, an increase of $3.1 million, or 14 percent, over the prior quarter and an increase of $3.3 million, or 15 percent, over the same quarter last year. Service fee income of $15.4 million, increased $1.3 million, or 9 percent, from the prior quarter as a result of seasonal activity and increased $698 thousand, or 5 percent, from the prior year second quarter as a result of the increased number of deposit accounts. "Fee income has been exceptional through the first six months of the year, but especially the most recent quarter," said Blodnick. "All the hard work our banks have done the past five years to build their customer base is paying off. A larger customer base allows us more engagement with these individuals and businesses and the opportunity to provide more products and services resulting in greater revenue." Gain of $7.6 million on the sale of the residential loans in the current quarter increased $2.2 million, or 40 percent, from the prior quarter and increased $2.8 million, or 59 percent, from the prior year second quarter as a result of an increase in mortgage refinancing and purchase activity. Other non-interest income for the current quarter decreased $247 thousand, or 8 percent, over the prior quarter and decreased $172 thousand, or 6 percent, over the prior year second quarter. Included in other income was operating revenue of $5 thousand from other real estate owned ("OREO") and a gain of $318 thousand from the sale of OREO, a combined total of $323 thousand for the current quarter compared to $417 thousand for the prior quarter and $615 thousand for the prior year second quarter.

Non-interest Expense Summary

Compensation and employee benefits for the current quarter increased by $485 thousand, or 2 percent, from the prior quarter due to the increased number of employees from the CB acquisition. Compensation and employee benefits for the current quarter increased by $3.7 million from the prior year second quarter due to of the increased number of employees from the CB and FNBR acquisitions and salary increases. Current quarter occupancy and equipment expense increased $1.1 million, or 16 percent, from the prior year second quarter as a result of added costs associated with the CB and FNBR acquisitions. The current quarter advertising expense increased $313 thousand, or 16 percent, from the prior quarter and increased $292 thousand, or 15 percent, as a result of the Company actively marketing to its customer base. The current quarter data processing expense increased $344 thousand, or 28 percent, from the prior quarter as a result of conversion related expenses and general increases during the current quarter. The current quarter data processing expense decreased $439 thousand, or 22 percent, from the prior year second quarter as a result of conversion related expenses in the prior year second quarter. The current quarter OREO expense of $1.4 million included $437 thousand of operating expense, $846 thousand of fair value write-downs, and $93 thousand of loss from the sales of OREO. Current quarter other expenses of $12.4 million increased by $2.5 million, or 25 percent, from the prior quarter primarily from expenses connected with equity investments in New Market Tax Credits ("NMTC") projects and conversion related expenses. The NMTC expenses are more than offset by the tax benefits included in federal income tax expense. Current quarter other expense increased $1.8 million, or 16 percent, from the prior year second quarter due to conversion related expenses.

Efficiency Ratio

The efficiency ratio for the current quarter was 55.91 percent and the prior year second quarter was 54.73 percent. The 1.18 percent increase in efficiency ratio resulted from increases in non-interest expense driven by increased compensation and other operational expenses, which exceeded the increases in net interest income from an increase in earning assets and increases in non-interest income from greater mortgage refinancing activity. The efficiency ratio was also negatively impacted by the higher efficiency ratios from the recently acquired banks; however, the Company expects synergies to be realized in the near term. 

Operating Results for Six Months ended June 30, 2015

Compared to June 30, 2014

Income Summary

Net Interest Income

Net interest income for the first six months of the current year was $141 million, an increase of $6.5 million, or 5 percent, over the same period last year. Interest income for the first six months of the current year increased $8.1 million, or 5 percent, from the prior year first six months and was principally due to an increase in income from commercial loans. Current year interest income of $79.7 million on commercial loans increased $9.4 million, or 13 percent, from the first half of last year and was primarily the result of an increased volume of commercial loans. Current year interest income of $44.9 million on investment securities decreased $3.3 million, or 7 percent, over the same period last year, as a result of a combined decreased rate on investment securities and decreased volume of investment securities.

Interest expense for the first six months of the current year increased $1.6 million, or 12 percent, from the prior year first six months and was due to the interest expense associated with the interest rate swap which started interest expense accruals in the fourth quarter of 2014. The total funding cost (including non-interest bearing deposits) for the first six months of 2015 was 41 basis points compared to 39 basis points for the first six months of 2014.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the first six months of 2015 was 4.00 percent, a 1 basis point decrease from the net interest margin of 4.01 percent for the first six months of 2014.

Non-interest Income

Non-interest income of $48.5 million for the first half of 2015 increased $6.6 million, or 16 percent, over the same period last year. Service charges and other fees of $29.6 million for the first six months of 2015 increased $1.6 million, or 6 percent, from the same period last year driven by the increased number of deposit accounts and increases from recent acquisitions. The gains of $13.0 million on the sale of residential loans for the first half of 2015 increased $4.7 million, or 56 percent, from the first half of 2014 resulting from a pickup in mortgage refinancing and purchase activity. Included in other income was operating revenue of $75 thousand from OREO and gains of $665 thousand from the sales of OREO, which totaled $740 thousand for the first half of 2015 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 2015 increased $7.4 million, or 13 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 $1.8 million, or 14 percent, as a result of increased costs associated with the CB and FNBR acquisitions. Outsourced data processing expense decreased $478 thousand, or 14 percent, from the prior year first six months as a result of a decrease in conversion related expenses. OREO expense of $2.1 million in the first six months of 2015 increased $1.1 million, or 99 percent, from the first six months of the prior year. OREO expense for the first six months of 2015 included $851 thousand of operating expenses, $1.1 million of fair value write-downs, and $214 thousand of loss from the sales of OREO. OREO expenses tend to fluctuate based on the level of activity in various quarters. Other expense of $22.4 million for the first half of 2015 increased by $2.7 million, or 14 percent, from the first half of the prior year primarily from increases in conversion related expenses.

Provision for Loan Losses

The provision for loan losses was $1.0 million for the first six months of 2015, a decrease of $314 thousand, or 23 percent, from the same period in the prior year. Net charged-off loans during the first six months of 2015 was $281 thousand, a decrease of $795 thousand from the first six months of 2014.

Efficiency Ratio

The efficiency ratio was 55.36 percent for the first six months of 2015 and 54.11 percent for the first six months of 2014. The increase in the efficiency ratio resulted from compensation expense and increased costs from acquisitions outpacing the increase in net interest income and increases in gains on sale of loans. 

About Glacier Bancorp, Inc.

Glacier Bancorp, Inc. is a regional bank holding company providing commercial banking services in 82 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;
   
• 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 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 Chief Executive Officer, 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.