Glacier Bancorp, Inc. Announces Results for the Quarter Ended March 31, 2016

HIGHLIGHTS:

• Net income of $28.7 million for the current quarter, an increase of 4 percent over the prior year first quarter net income of $27.7 million.
• Current quarter diluted earnings per share of $0.38, an increase of 3 percent from the prior year first quarter diluted earnings per share of $0.37.
• Loan growth of $119 million, or 9 percent annualized for the current quarter.
• Net interest margin of 4.01 percent as a percentage of earning assets, on a tax equivalent basis, for the current quarter.
• Dividend declared of $0.20 per share, an increase of $0.01 per share, or 5 percent, over the prior quarter.  The dividend was the 124th consecutive quarterly dividend declared by the Company.
• The Company successfully completed the first phase of the consolidation of its bank divisions’ core database systems into our new “Gold Bank” core database system.
• The Company yesterday announced the signing of a definitive agreement to acquire Treasure State Bank, a community bank based in Missoula, Montana.  As of December, 31, 2015, Treasure State Bank had total assets of $71 million, total loans of $53 million and total deposits of $58 million.

Financial Highlights

KALISPELL, Mont., April 21, 2016 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq:GBCI) reported net income of $28.7 million for the current quarter, an increase of $1.0 million, or 4 percent, from the $27.7 million of net income for the prior year first quarter.  Diluted earnings per share for the current quarter was $0.38 per share, an increase of $0.01, or 3 percent, from the prior year first quarter diluted earnings per share of $0.37.  Included in the current quarter was $135 thousand from acquisition-related expenses and $831 thousand of expenses related to the Company’s consolidation of its bank divisions’ core database systems (Core Consolidation Project or “CCP”) including expenses related to the re-issuance of debit cards with chip technology.  The Company’s Core Consolidation Project will occur throughout the current year and is expected to be completed by year end.   “The first quarter was a nice start to the year for us,” said Mick Blodnick, President and Chief Executive Officer.  “To produce this level of results at a time when we also had significant costs and time allocated to a number of major internal projects is a testament to the great work by our staff this quarter.  Although these projects will run through the rest of the year, in the future they will streamline multiple functions and allow us to operate more efficiently,” Blodnick said.

Asset Summary

Total investment securities of $3.296 billion at March 31, 2016 decreased $16.5 million, or 50 basis points, during the current quarter and increased $182 million, or 6 percent, from March 31, 2015.  The Company continues to selectively purchase investment securities when the Company has excess liquidity.  Investment securities represented 36 percent of total assets at March 31, 2016 compared to 36 percent of total assets at December 31, 2015 and 37 percent at March 31, 2015.

The loan portfolio increased $119 million, or 9 percent annualized, during the current quarter.  The loan category with the largest dollar and percentage increase during the current quarter was other commercial loans which increased $73.4 million, or 7 percent, of which $35.6 million of the increase was from municipal and SBA loans.  Excluding the acquisition of Cañon National Bank (“Cañon”) in October 2015, the loan portfolio increased $350 million, or 7 percent, since March 31, 2015 with $152 million and $150 million of the increase coming from growth in commercial real estate and other commercial loans, respectively.  “Our loan growth in the quarter was exceptional especially considering it came in the first quarter of the year,” Blodnick said.  “A substantial portion of the growth came from municipal loans, something all of our Banks have worked extremely hard at generating.  Hopefully, we can continue to grow the loan portfolio with more of these solid credits.”

Credit Quality Summary

Non-performing assets at March 31, 2016 were $80.2 million, an increase of $144 thousand, or 18 basis points, during the current quarter.  Non-performing assets at March 31, 2016 decreased $10.5 million, or 12 percent, from a year ago.  Early stage delinquencies (accruing loans 30-89 days past due) of $24.0 million at March 31, 2016 increased $4.6 million from the prior quarter and decreased $9.5 million from the prior year first quarter.

The allowance for loan and lease losses (“allowance”) was $130 million at March 31, 2016, consistent with prior periods.  The allowance as a percent of total loans outstanding at March 31, 2016 was 2.50 percent, a slight decrease from 2.55 percent at December 31, 2015.  The allowance as a percent of total loans in the current quarter decreased 27 basis points from 2.77 percent at March 31, 2015 which was driven primarily by loan growth, stabilizing credit quality, and no allowance carried over from the Cañon acquisition as a result of the acquired loans recorded at fair value.

Credit Quality Trends and Provision for Loan Losses

Net charge-offs of loans for the current quarter were $194 thousand compared to net charge-offs of $1.5 million for the prior quarter and net charge-offs of $662 thousand from the same quarter last year.  The current quarter provision for loan losses of $568 thousand increased $157 thousand from the prior quarter and decreased $197 thousand from the prior year first 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 $1.887 billion at March 31, 2016, decreased $31 million, or 2 percent, from the prior quarter which was driven by seasonal fluctuations.  Excluding the Cañon acquisition, non-interest bearing deposits increased $122 million, or 7 percent, from March 31, 2015.  Core interest bearing deposits of $4.804 billion at March 31, 2016, increased $6.7 million, or 14 basis points, from the prior quarter.  The increase in savings and money market accounts during the current quarter offset the decrease in NOW and DDA accounts.  Excluding the Cañon acquisition, core interest bearing deposits at March 31, 2016 increased $83.5 million, or 2 percent, from March 31, 2015.  Wholesale deposits (i.e., brokered deposits classified as NOW, DDA, money market deposit and certificate accounts) of $325 million at March 31, 2016 increased $95.8 million over the prior quarter and increased $114 million over the prior year first quarter.  A portion of the increases were driven by a need to obtain wholesale deposits necessary for the interest rate swap.

Securities sold under agreements to repurchase (“repurchase agreements”) of $446 million at March 31, 2016 increased $22.5 million, or 5 percent, from the prior quarter and increased $20.3 million, or 5 percent, from the prior year first quarter.  Federal Home Loan Bank (“FHLB”) advances of $314 million at March 31, 2016 decreased $80.2 million, or 20 percent, during the current quarter due to stable deposit balances and reduced need for additional borrowings.

Stockholders’ Equity Summary

Tangible stockholders’ equity of $939 million at March 31, 2016 increased $17.8 million, or 2 percent, from the prior quarter primarily from earnings retention and an increase in accumulated other comprehensive income.  Tangible stockholders’ equity increased $28.9 million, or 3 percent, from a year ago, the result of earnings retention and $15.2 million of Company stock issued in connection with the Cañon acquisition.  These two items offset the decrease in accumulated other comprehensive income and increases in goodwill and other intangibles from the acquisition.  At March 31, 2016, the tangible book value per common share was $12.33 an increase of $0.22 per share from $12.11 the prior quarter principally due to earnings retention.  Tangible book value per common share for March 31, 2016, increased $0.28 per share from the prior year first quarter.

Cash Dividend
On March 30, 2016, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share, a $0.01 per share, or 5 percent, increase over the prior quarter dividend.  The Company has increased its quarterly dividend 40 times.  The dividend was payable April 21, 2016 to shareholders of record April 12, 2016.  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 March 31, 2016
Compared to December 31, 2015 and March 31, 2015

Income Summary

Net Interest Income
In the current quarter, interest income of $84.4 million increased $1.2 million, or 1 percent from the prior quarter and increased $6.9 million, or 9 percent, over the prior year first quarter.  The increases in interest income over the prior periods were driven primarily by increases in interest income on commercial loans which increased $1.4 million, or 3 percent, over the prior quarter and increased $5.5 million, or 14 percent, over the prior year first quarter and was the result of an increased volume of commercial loans.  Interest income of $23.9 million from investment securities increased $152 thousand, or 1 percent, over the prior quarter and increased $924 thousand, or 4 percent, over the prior year first quarter.

The current quarter interest expense of $7.7 million increased $460 thousand, or 6 percent, from the prior quarter and increased $293 thousand from the prior year first quarter.  The increases in interest expense were driven by the increase in wholesale deposits and the additional interest expense for an interest rate swap with a notional $100 million that began its accrual period in December 2015.  The total cost of funding (including non-interest bearing deposits) for the current quarter was 39 basis points compared to 37 basis points for the prior quarter and 42 basis points in the prior year first quarter.

The Company’s net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the current quarter was 4.01 percent compared to 4.02 percent in the prior quarter.  During the current quarter, the earning asset yield increased by 1 basis point and was the result of a 1 basis point increase in loan yields.  The cost of funds increased 2 basis points during the current quarter due to increased wholesale deposits and the higher interest expense from the previously mentioned interest rate swap.  The Company’s current quarter net interest margin decreased 2 basis points from the prior year first quarter net interest margin of 4.03 percent.  The decrease in the net interest margin from the prior year first quarter was the result of a 4 basis points reduction in the yield on earning assets that outpaced the 3 basis points reduction in cost of funding.  The yield on earning assets benefited from the shift in earning assets from the lower yielding investment securities to the higher yielding loans; nevertheless it was outpaced by the overall decreased yield on the loan portfolio.  “The Company was pleased to maintain a net interest margin above 4 percent for the quarter given the volatile interest rate environment.  The increase in overall loan yields and maintaining the low cost of retail deposits supported the quarterly performance of the net interest margin,” said Ron Copher, Chief Financial Officer.

Non-interest Income
Non-interest income for the current quarter totaled $24.3 million, a decrease of $215 thousand, or 1 percent, from the prior quarter and an increase of $1.6 million, or 7 percent, over the same quarter last year.  Service fee income of $14.3 million, increased $1.3 million, or 10 percent, from the prior year first quarter driven by the increased number of deposit accounts.  Gain on sale of residential loans for the current quarter increased $562 thousand, or 10 percent, from the prior year first quarter.  In the prior year first quarter, the Company experienced a strong quarter for sales of residential loans as a result of the refinance activity and the Company’s resource commitment to this line of business has benefited the Company with an even stronger current year first quarter.  Other non-interest income of $2.8 million for the current quarter increased $475 thousand, or 20 percent, over the prior quarter primarily due to annual vendor incentives received and a gain on the sale of a bank building.  Other non-interest income for the current quarter decreased $302 thousand from the prior year first quarter due to insurance proceeds received in the prior year first quarter from a bank owned life insurance policy.  Included in other income was operating revenue of $11 thousand from OREO and a gain of $203 thousand from the sale of OREO, a combined total of $214 thousand for the current quarter compared to $239 thousand for the prior quarter and $417 thousand for the prior year first quarter.

Non-interest Expense Summary

Compensation and employee benefits for the current quarter increased by $1.0 million, or 3 percent, from the prior quarter as a result of an increased number of employees from the Cañon acquisition and annual salary increases.  Compensation and employee benefits for the current quarter increased by $4.7 million, or 15 percent, from the prior year first quarter due to the increased number of employees from the Community Bank, Inc. (“CB”) acquisition in February of 2015 and the Cañon acquisition, annual salary increases, and an increase in the number of employees.  Current quarter occupancy and equipment expense increased $616 thousand, or 10 percent, from the prior year first quarter as a result of added costs associated with the acquisitions.  The current quarter data processing expense increased $822 thousand, or 32 percent, from the prior year first quarter primarily from expenses associated with CCP and expenses from the Cañon acquisition.  The current quarter OREO expense of $390 thousand was a decrease of $368 thousand from the prior year first quarter and included $136 thousand of operating expense, $55 thousand of fair value write-downs, and $199 thousand of loss from the sales of OREO.  Current quarter other expenses of $10.6 million decreased by $1.1 million, or 10 percent, from the prior quarter.  The prior quarter included professional expenses associated with the Cañon acquisition and expenses connected with equity investments in New Markets Tax Credit (“NMTC”) projects.  Federal and state income tax expense of $9.4 million in the current quarter increased $1.0 million from the prior quarter and was primarily the result of the NMTC credits recognized in the prior quarter.  Current quarter other expenses increased $625 thousand, or 6 percent, over the prior year first quarter with increases related to CCP and increased expenses from recent acquisitions, albeit several areas experienced decreases including outside services, which decreased as a result of acquisition-related expenses in the prior year first quarter.

Efficiency Ratio
Although there were increased expenses in the current quarter related to CCP, the efficiency ratio for the current quarter of 56.53 percent remained stable compared to 56.52 percent in the prior quarter with minimal changes in the income and expense items related to the efficiency ratio.  The current quarter efficiency ratio of 56.53 percent compares to 54.80 percent in the prior year first quarter.  The 1.73 percent increase in the efficiency ratio resulted primarily from increased compensation expense from recent acquisitions and increased salaries along with increased expenses related to CCP, which outpaced the increases in net interest income and non-interest income for the same period.

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 trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System or the Federal Reserve Board, which could adversely affect the Company’s net interest income and profitability;
• legislative or regulatory changes, including increased banking and consumer protection regulation 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 continued 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 Bank divisions;
• potential interruption or breach in security of the Company’s systems and technological changes which could expose us to new risks, fraud or system failures; 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.

Conference Call Information
A conference call for investors is scheduled for 11:00 a.m. Eastern Time on Friday, April 22, 2016.  The conference call will be accessible by telephone and through the Internet.  Interested individuals are invited to listen to the call by telephone at 877-561-2748 and the conference ID is 77408162.  To participate on the webcast, log on to: http://edge.media-server.com/m/p/8dya659f.  If you are unable to participate during the live webcast, the call will be archived on our Web site, www.glacierbancorp.com, or by calling 855-859-2056 with the ID 77408162 until May 5, 2016.

About Glacier Bancorp, Inc.
Glacier Bancorp, Inc. is a regional bank holding company providing commercial banking services in 88 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. 

Visit our website at www.glacierbancorp.com