Glacier Bancorp, Inc. Announces Results for the Quarter Ended December 31, 2015

HIGHLIGHTS:

  • Net income of $29.5 million for the current quarter was basically unchanged from the prior quarter’s $29.6 million net income and was an increase of 5 percent from the prior year fourth quarter net income of $28.1 million.
  • Current quarter diluted earnings per share of $0.39 compared to the prior quarter diluted earnings per share of $0.39 and the prior year fourth quarter diluted earnings per share of $0.37, an increase of 5 percent.
  • Organic loan growth was $346 million, or 8 percent, for the current year.
  • Net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the current quarter was 4.02 percent, an increase of 6 basis points from 3.96 percent in the prior quarter.
  • Approved a special dividend of $0.30 per share. This was the twelfth special dividend the Company has declared.
  • Paid a regular quarterly dividend of $0.19 per share in December. The dividend was the 123rd consecutive quarterly dividend declared by the Company.
  • The Company completed the acquisition of Cañon National Bank, a community bank based in Cañon City, Colorado.

Results Summary

Three Months ended Year ended
Dec 31, Sep 30, Jun 30, Dec 31, Dec 31, Dec 31,
(Dollars in thousands, except per share data) 2015 2015 2015 2014 2015 2014
Net income$29,508 29,614 29,335 28,054 116,127 112,755
Diluted earnings per share$0.39 0.39 0.39 0.37 1.54 1.51
Return on average assets (annualized)1.32% 1.36% 1.39% 1.37% 1.36% 1.42%
Return on average equity (annualized)10.66% 10.93% 11.05% 10.66% 10.84% 11.11%

KALISPELL, Mont., Jan. 28, 2016 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq:GBCI) reported net income of $29.5 million for the current quarter, an increase of $1.4 million, or 5 percent, from the $28.1 million of net income for the prior year fourth quarter. Diluted earnings per share for the current quarter was $0.39 per share, an increase of $0.02, or 5 percent, from the prior year fourth quarter diluted earnings per share of $0.37. Included in the current quarter was $658 thousand of one-time acquisition related expenses. “The fourth quarter capped off another very good year for Glacier Bancorp,” said Mick Blodnick, President and Chief Executive Officer. “We produced all time record earnings led by strong loan growth, continued improvement in our credit quality and a solid and consistent net interest margin. Collectively, this helped us to once again this year post some excellent performance metrics, a feat our entire staff should be very proud of what they helped achieve,” Blodnick said.

Net income for the twelve months ended December 31, 2015 was a record $116.1 million, an increase of $3.4 million, or 3 percent, from the $112.8 million of net income for the same period in the prior year. Diluted earnings per share for the twelve months ended December 31, 2015 was $1.54 per share, an increase of $0.03, or 2 percent, from the diluted earnings per share for the prior year.

On October 31, 2015, the Company completed the acquisition of Cañon Bank Corporation and its subsidiary Cañon National Bank (collectively, “Cañon”). Goodwill of $9.8 million resulted from the acquisition which was based on the estimated fair value of the assets acquired and liabilities assumed. “With the closing of Cañon National Bank this past quarter we add another quality financial institution to our Company,” Blodnick stated. “This new addition not only gains us access to the “front range” of Colorado with some new and exciting markets, but more importantly gives us some very talented bankers which were the real key to this transaction.” On February 28, 2015, the Company completed the acquisition of Montana Community Banks, Inc. and its subsidiary, Community Bank, Inc. (collectively, “CB”) which resulted in goodwill of $1.1 million. The Company incurred $2.3 million of legal and professional expenses in connection with the CB and Cañon acquisitions and the CB data conversion and integration during the current year. The Company’s results of operations and financial condition include the acquisitions of CB and Cañon from the acquisition dates and the following table provides information on the fair value of selected classifications of assets and liabilities acquired:

Cañon CB
Oct 31, Feb 28,
(Dollars in thousands) 2015 2015 Total
Total assets$270,121 175,774 445,895
Investment securities68,486 42,350 110,836
Loans receivable159,759 84,689 244,448
Non-interest bearing deposits89,083 41,779 130,862
Interest bearing deposits148,243 105,041 253,284
Federal Home Loan Bank advances and other borrowed funds 3,292 3,292

Asset Summary

$ Change from
Dec 31, Sep 30, Dec 31, Sep 30, Dec 31,
(Dollars in thousands)2015 2015 2014 2015 2014
Cash and cash equivalents$193,253 242,835 442,409 (49,582) (249,156)
Investment securities, available-for-sale2,610,760 2,530,994 2,387,428 79,766 223,332
Investment securities, held-to-maturity702,072 651,822 520,997 50,250 181,075
Total investment securities3,312,832 3,182,816 2,908,425 130,016 404,407
Loans receivable
Residential real estate688,912 644,694 611,463 44,218 77,449
Commercial3,733,517 3,581,667 3,263,448 151,850 470,069
Consumer and other656,252 650,058 613,184 6,194 43,068
Loans receivable5,078,681 4,876,419 4,488,095 202,262 590,586
Allowance for loan and lease losses(129,697) (130,768) (129,753) 1,071 56
Loans receivable, net4,948,984 4,745,651 4,358,342 203,333 590,642
Other assets634,163 592,997 597,331 41,166 36,832
Total assets$9,089,232 8,764,299 8,306,507 324,933 782,725

Total investment securities of $3.313 billion at December 31, 2015 increased $130 million, or 4 percent, during the current quarter and increased $404 million, or 14 percent, from December 31, 2014. The increase in the investment portfolio from the prior quarter and the prior year fourth quarter was the result of continuing to selectively purchase investment securities with the Company’s excess liquidity resulting from the sustained increase in deposits. Investment securities represented 36 percent of total assets at December 31, 2015 compared to 35 percent at December 31, 2014.

Excluding the Cañon acquisition, the Company continues to experience growth in the loan portfolio which increased $43.0 million, or 1 percent, during the current quarter. Excluding the acquisition, the loan category with the largest dollar increase during the current quarter was commercial real estate loans which increased $25.7 million, or 1 percent. The loan category with the largest percentage increase was residential construction (i.e., regulatory classification) which increased $12.4 million or 11 percent over the prior quarter. Excluding the CB and Cañon acquisitions, the loan portfolio increased $346 million, or 8 percent, since December 31, 2014 with $278 million of the increase coming from growth in commercial loans. “Our organic loan growth was well beyond our expectation this past year as a very strong first half of the year gave us the momentum to exceed our loan goal for 2015,” Blodnick said. “Loan volume in the fourth quarter was much better than what we historically experience even with the customary drop in agricultural lending. It was especially encouraging to again see an increase in residential construction lending. We have been working very hard this year to improve our totals in this particular loan category and it’s nice to see it continue to generate positive results.”

Credit Quality Summary

At or for the
At or for the Nine Months At or for the
Year ended ended Year ended
Dec 31, Sep 30, Dec 31,
(Dollars in thousands) 2015 2015 2014
Allowance for loan and lease losses
Balance at beginning of period$129,753 129,753 130,351
Provision for loan losses2,284 1,873 1,912
Charge-offs(7,001) (4,671) (7,603)
Recoveries4,661 3,813 5,093
Balance at end of period$129,697 130,768 129,753
Other real estate owned$26,815 26,609 27,804
Accruing loans 90 days or more past due2,131 3,784 214
Non-accrual loans51,133 54,632 61,882
Total non-performing assets 1$80,079 85,025 89,900
Non-performing assets as a percentage of subsidiary assets0.88% 0.97% 1.08%
Allowance for loan and lease losses as a percentage of non-performing loans244% 224% 209%
Allowance for loan and lease losses as a percentage of total loans2.55% 2.68% 2.89%
Net charge-offs as a percentage of total loans0.05% 0.02% 0.06%
Accruing loans 30-89 days past due$19,413 17,822 25,904
Accruing troubled debt restructurings$63,590 63,638 69,129
Non-accrual troubled debt restructurings$27,057 27,442 33,714

__________
1 As of December 31, 2015, non-performing assets have not been reduced by U.S. government guarantees of $2.3 million.

Non-performing assets at December 31, 2015 were $80.1 million, a decrease of $4.9 million, or 6 percent, during the current quarter. Non-performing assets at December 31, 2015 decreased $9.8 million, or 11 percent, from a year ago. Early stage delinquencies (accruing loans 30-89 days past due) of $19.4 million at December 31, 2015 increased $1.6 million from the prior quarter and decreased $6.5 million from the prior year fourth quarter.

The allowance for loan and lease losses (“allowance”) was $130 million at December 31, 2015 consistent with prior periods. The allowance was 2.55 percent of total loans outstanding at December 31, 2015 compared to 2.68 percent at September 30, 2015 and 2.89 percent at December 31, 2014. 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 the bank acquisitions as a result of the acquired loans recorded at fair value.

Credit Quality Trends and Provision for Loan Losses

Accruing
Loans 30-89 Non-Performing
Provision Net ALLL Days Past Due Assets to
for Loan Charge-Offs as a Percent as a Percent of Total Subsidiary
(Dollars in thousands)Losses (Recoveries) of Loans Loans Assets
Fourth quarter 2015$411 $1,482 2.55% 0.38% 0.88%
Third quarter 2015826 577 2.68% 0.37% 0.97%
Second quarter 2015282 (381) 2.71% 0.59% 0.98%
First quarter 2015765 662 2.77% 0.71% 1.07%
Fourth quarter 2014191 1,070 2.89% 0.58% 1.08%
Third quarter 2014360 364 2.93% 0.39% 1.21%
Second quarter 2014239 332 3.11% 0.44% 1.30%
First quarter 20141,122 744 3.20% 1.05% 1.37%

Net charge-offs of loans for the current quarter were $1.5 million compared to net charge-offs of $577 thousand for the prior quarter and net charge-offs of $1.1 million from the same quarter last year. The current quarter provision for loan losses of $411 thousand decreased $415 thousand from the prior quarter and increased $220 thousand 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 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

$ Change from
Dec 31, Sep 30, Dec 31, Sep 30, Dec 31,
(Dollars in thousands) 2015 2015 2014 2015 2014
Non-interest bearing deposits$1,918,310 1,893,723 1,632,403 24,587 285,907
Interest bearing deposits5,026,698 4,779,456 4,712,809 247,242 313,889
Repurchase agreements423,414 441,041 397,107 (17,627) 26,307
Federal Home Loan Bank advances394,131 329,299 296,944 64,832 97,187
Other borrowed funds6,602 6,619 7,311 (17) (709)
Subordinated debentures125,848 125,812 125,705 36 143
Other liabilities117,579 113,541 106,181 4,038 11,398
Total liabilities$8,012,582 7,689,491 7,278,460 323,091 734,122

Excluding the Cañon acquisition, non-interest bearing deposits of $1.918 billion at December 31, 2015, decreased $64 million, or 3 percent, from the prior quarter which was primarily from seasonality and timing of deposits of large deposit customers. Excluding the CB and Cañon acquisitions, non-interest bearing deposits increased $155 million, or 10 percent, from December 31, 2014. Interest bearing deposits of $5.027 billion at December 31, 2015 included $230 million of wholesale deposits (i.e., brokered deposits classified as NOW, money market deposits and certificate accounts). Excluding the increase of $39.9 million in wholesale deposits and the Cañon acquisition, interest bearing deposits at December 31, 2015 increased $59.1 million, or 1 percent, during the current quarter. Excluding the decrease of $19.5 million in wholesale deposits and the CB and Cañon acquisitions, core interest bearing deposits at December 31, 2015 increased $80 million, or 2 percent, from December 31, 2014.

Securities sold under agreements to repurchase (“repurchase agreements”) of $423 million at December 31, 2015 decreased $17.6 million, or 4 percent, from the prior quarter and was primarily the result of timing of deposits in existing repurchase agreements. Federal Home Loan Bank (“FHLB”) advances of $394 million at December 31, 2015 increased $64.8 million, or 20 percent, for the current quarter due to seasonal reduction in deposit balances and increased $97.2 million, or 33 percent, since December 31, 2014 due to deposit fluctuations and the Company taking advantage of attractive term borrowings that were available from FHLB of Seattle prior to its merger with FHLB of Des Moines during the second quarter of 2015.

Stockholders’ Equity Summary

$ Change from
Dec 31, Sep 30, Dec 31, Sep 30, Dec 31,
(Dollars in thousands, except per share data) 2015 2015 2014 2015 2014
Common equity$ 1,074,661 1,066,801 1,010,303 7,860 64,358
Accumulated other comprehensive income 1,989 8,007 17,744 (6,018) (15,755)
Total stockholders’ equity 1,076,650 1,074,808 1,028,047 1,842 48,603
Goodwill and core deposit intangible, net (155,193) (141,624) (140,606) (13,569) (14,587)
Tangible stockholders’ equity$ 921,457 933,184 887,441 (11,727) 34,016
Stockholders’ equity to total assets 11.85% 12.26% 12.38%
Tangible stockholders’ equity to total tangible assets 10.31% 10.82% 10.87%
Book value per common share$ 14.15 14.23 13.70 (0.08) 0.45
Tangible book value per common share$ 12.11 12.35 11.83 (0.24) 0.28
Market price per share at end of period$ 26.53 26.39 27.77 0.14 (1.24)

Tangible stockholders’ equity of $921 million at December 31, 2015 decreased $11.7 million, or 1 percent, from the prior quarter primarily from a decrease in accumulated other comprehensive income and an increase in goodwill and intangibles from the Cañon acquisition, both of which were partially offset by $15.2 million of Company stock issued in connection with the Cañon acquisition. Tangible stockholders’ equity increased $34.0 million, or 4 percent, from a year ago, the result of earnings retention and Company stock issued in connection with the CB and Cañon acquisitions, both of which offset the decrease in accumulated other comprehensive income and increases in goodwill and intangibles from acquisitions. At December 31, 2015, the tangible book value per common share was $12.11 a decrease of $0.24 per share from $12.35 the prior quarter. The decrease resulted from shares issued in the Cañon acquisition and the decrease in accumulated other comprehensive income. Tangible book value per common share for December 31, 2015, increased $0.28 per share from the prior year fourth quarter.

Cash Dividend
On December 30, 2015, the Company’s Board of Directors declared a special cash dividend of $0.30 per share, which was the twelfth special dividend approved by the Company. The dividend was payable January 21, 2016 to shareholders of record on January 12, 2016. On November 24, 2015, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.19 per share. The dividend was payable December 17, 2015 to shareholders of record on December 8, 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 December 31, 2015
Compared to September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014
Income Summary
Three Months ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(Dollars in thousands) 2015 2015 2015 2015 2014
Net interest income
Interest income$83,211 80,367 78,617 77,486 76,179
Interest expense7,215 7,309 7,369 7,382 7,368
Total net interest income75,996 73,058 71,248 70,104 68,811
Non-interest income
Service charges, loan fees, and other fees15,966 16,030 15,445 14,156 15,129
Gain on sale of loans6,033 7,326 7,600 5,430 5,424
Gain (loss) on sale of investments143 (31) (98) 5 (28)
Other income2,325 2,474 2,855 3,102 3,453
Total non-interest income24,467 25,799 25,802 22,693 23,978
$100,463 98,857 97,050 92,797 92,789
Net interest margin (tax-equivalent)4.02% 3.96% 3.98% 4.03% 3.92%
$ Change from
Sep 30, Jun 30, Mar 31, Dec 31,
(Dollars in thousands) 2015 2015 2015 2014
Net interest income
Interest income $2,844 4,594 5,725 7,032
Interest expense (94) (154) (167) (153)
Total net interest income 2,938 4,748 5,892 7,185
Non-interest income
Service charges, loan fees, and other fees (64) 521 1,810 837
Gain on sale of loans (1,293) (1,567) 603 609
Gain (loss) on sale of investments 174 241 138 171
Other income (149) (530) (777) (1,128)
Total non-interest income (1,332) (1,335) 1,774 489
$1,606 3,413 7,666 7,674

Net Interest Income
In the current quarter, interest income of $83.2 million increased $2.8 million, or 4 percent from the prior quarter and was driven primarily by increases in interest income on investment securities, residential real estate loans and commercial loans. Interest income during the current quarter increased $7.0 million, or 9 percent, over the prior year fourth quarter and was principally due to higher interest income on commercial loans which increased $5.2 million, or 14 percent, as a result of an increased volume and yield on commercial loans. Interest income of $23.7 million on investment securities increased $1.3 million, or 6 percent, over the prior quarter and increased $1.7 million, or 8 percent, over the prior year fourth quarter with both increases the result of higher volume and yield on the investment portfolio.

An interest rate swap with a notional amount of $100 million and a three and a half year deferred start began its accrual period in December of 2015 with a fixed interest rate of 2.498 percent. The interest rate swap expense will be offset by the maturity of a $75 million term FHLB borrowing in December with a 3.48 percent rate and was replaced with lower cost funding. The Company’s total accruing notional amount of interest rate swaps at year end was $260 million. The current quarter interest expense of $7.2 million decreased $94 thousand, or 1 percent, from the prior quarter. The current quarter interest expense decreased $153 thousand from the prior year fourth quarter. The total cost of funding (including non-interest bearing deposits) for the current quarter was 37 basis points compared to 39 basis points for the prior quarter and 42 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 4.02 percent compared to 3.96 percent in the prior quarter. The 6 basis points increase in the current quarter net interest margin was primarily driven by a 4 basis points increase in the yield on the investment portfolio. Included in the current quarter net interest margin was 2 basis points related to the recovery of interest on loans previously placed on non-accrual compared to 4 basis points in the prior quarter. The Company’s current quarter net interest margin increased 10 basis points from the prior year fourth quarter net interest margin of 3.92 percent. The increase in the net interest margin from the prior year fourth quarter was the result of a 5 basis points reduction in cost of funding, increased yield on investments securities, and increased volume of higher yielding commercial loans. “Maintaining the stable net interest margin during the challenging interest rate environment of the current quarter and year reflects the Bank divisions’ commitment to pricing loans at higher yields where possible and growing a lower cost deposit base, especially non-interest bearing deposits,” said Ron Copher, Chief Financial Officer. “The Bank’s non-interest bearing deposit base will serve the Bank well across higher interest rate environments.”

Non-interest Income
Non-interest income for the current quarter totaled $24.5 million, a decrease of $1.3 million, or 5 percent, from the prior quarter and an increase of $489 thousand, or 2 percent, over the same quarter last year. Service fee income of $16.0 million, increased $837 thousand, or 6 percent, from the prior year fourth quarter driven by the increased number of deposit accounts. The Company generated $6.0 million on the sale of residential loans in the current quarter a decrease of $1.3 million, or 18 percent, from the prior quarter as a result of seasonal fluctuations. Gain on sale of residential loans for the current quarter increased $609 thousand, or 11 percent, from the prior year fourth quarter as a result of an increase in mortgage purchase activity. Other non-interest income for the current quarter decreased $1.1 million, or 33 percent, over the prior year fourth quarter primarily due to insurance proceeds recognized in the prior year fourth quarter from a bank owned life insurance policy. Included in other income was operating revenue of $28 thousand from OREO and a gain of $211 thousand from the sale of OREO, a combined total of $239 thousand for the current quarter compared to $129 thousand for the prior quarter and $442 thousand for the prior year fourth quarter.

Non-interest Expense Summary

Three Months ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(Dollars in thousands)2015 2015 2015 2015 2014
Compensation and employee benefits$35,902 33,534 32,729 32,244 30,807
Occupancy and equipment8,090 7,887 7,810 7,362 7,191
Advertising and promotions2,035 2,459 2,240 1,927 2,046
Data processing1,733 1,258 1,593 1,249 1,815
Other real estate owned511 1,047 1,377 758 893
Regulatory assessments and insurance1,494 1,478 1,006 1,305 1,009
Core deposit intangibles amortization758 720 755 731 716
Other expenses11,680 10,729 12,435 9,921 11,221
Total non-interest expense$62,203 59,112 59,945 55,497 55,698
$ Change from
Sep 30, Jun 30, Mar 31, Dec 31,
(Dollars in thousands) 2015 2015 2015 2014
Compensation and employee benefits $2,368 3,173 3,658 5,095
Occupancy and equipment 203 280 728 899
Advertising and promotions (424) (205) 108 (11)
Data processing 475 140 484 (82)
Other real estate owned (536) (866) (247) (382)
Regulatory assessments and insurance 16 488 189 485
Core deposit intangibles amortization 38 3 27 42
Other expense 951 (755) 1,759 459
Total non-interest expense $3,091 2,258 6,706 6,505

Compensation and employee benefits for the current quarter increased by $2.4 million, or 7 percent, from the prior quarter as a result of an increased number of employees from the Cañon acquisition and benefit accruals from higher performance. Compensation and employee benefits for the current quarter increased by $5.1 million, or 17 percent, from the prior year fourth quarter due to the increased number of employees from the CB and Cañon acquisitions, annual salary increases, and an increase in the number of employees. Current quarter occupancy and equipment expense increased $899 thousand, or 13 percent, from the prior year fourth quarter as a result of added costs associated with the CB and Cañon acquisitions and equipment expense related to additional information technology infrastructure. The current quarter advertising expense decreased $424 thousand, or 17 percent, from the prior quarter as a result of timing of advertising expense. The current quarter data processing expense increased $475 thousand, or 38 percent, from the prior quarter primarily from outsourced data processing expense from the Cañon acquisition. The current quarter OREO expense of $511 thousand was a decrease of $536 thousand from the prior quarter and included $358 thousand of operating expense, $54 thousand of fair value write-downs, and $99 thousand of loss from the sales of OREO. Current quarter other expenses of $11.7 million increased by $951 thousand, or 9 percent, from the prior quarter primarily from professional expenses associated with the Cañon acquisition and expenses connected with equity investments in New Market Tax Credits (“NMTC”) projects. The NMTC expenses were more than offset by the tax benefits included in federal income tax expense. Federal and state income tax expense of $8.3 million in the current quarter decreased $964 thousand from the prior quarter and was primarily the result of the increase in NMTC credits recognized during the current quarter.

Efficiency Ratio
The efficiency ratio for the current quarter was 56.52 percent compared to 54.32 percent in the prior quarter. The 2.20 percent increase in efficiency ratio was from increased compensation expense from the Cañon acquisition and increased benefit accruals combined with seasonal decreases in gain on sale of residential loans, both of which were higher than the increased interest income the Company experienced during the current quarter. The current quarter efficiency ratio of 56.52 percent compares to 55.11 percent in the prior year fourth quarter. The 1.41 percent increase in efficiency ratio resulted primarily from increased compensation expense from recent acquisitions and increased salary and benefits which outpaced the increases to net interest income and non-interest income for the same period.

Operating Results for Year ended December 31, 2015
Compared to December 31, 2014
Income Summary
Year ended $ Change % Change
(Dollars in thousands)Dec 31,
2015
Dec 31,
2014
Net interest income
Interest income$319,681 $299,919 $19,762 7%
Interest expense29,275 26,966 2,309 9%
Total net interest income290,406 272,953 17,453 6%
Non-interest income
Service charges, loan fees, and other fees61,597 58,785 2,812 5%
Gain on sale of loans26,389 19,797 6,592 33%
Gain (loss) on sale of investments19 (188) 207 (110)%
Other income10,756 11,908 (1,152) (10)%
Total non-interest income98,761 90,302 8,459 9%
$389,167 $363,255 $25,912 7%
Net interest margin (tax-equivalent)4.00% 3.98%

Net Interest Income
Interest income for 2015 increased $19.8 million, or 7 percent, from the prior year and was principally due to an increase in income from commercial loans. Current year interest income of $165 million on commercial loans increased $19.3 million, or 13 percent, from the prior year and was primarily the result of an increased volume of commercial loans. Current year interest income of $91.1 million on investment securities decreased $2.0 million, or 2 percent, over the same period last year, due to a decreased yield on investment securities. On a tax-equivalent basis, the current year interest income of $118.8 million on investment securities increased $2.8 million, or 2 percent, over the prior year.

Interest expense for 2015 increased $2.3 million, or 9 percent, from the prior year and was primarily due to the interest expense associated with the interest rate swaps. Excluding the impact of the interest rate swaps, interest expense for 2015 decreased by $1.7 million, or 7 percent, from the prior year. The total funding cost (including non-interest bearing deposits) for the current year was 40 basis points compared to 39 basis points for the prior year.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the current year was 4.00 percent, an increase of 2 basis point from the prior year net interest margin of 3.98 percent. The 2 basis points increase was attributable to a combination of items including a shift in earning assets to the higher yielding loan portfolio and an increased yield on the investment securities portfolio. In addition, the continued decreased yield on core deposits offset the increased interest expense from the interest rate swaps. Excluding the effects of the interest rate swaps, the current year cost of funds was 33 basis points compared to 38 basis points in the prior year.

Non-interest Income
Non-interest income of $98.8 million for the current year increased $8.5 million, or 9 percent, over the same period last year. Service charges and other fees of $61.6 million for the current year increased $2.8 million, or 5 percent, from last year and was driven by the increased number of deposit accounts and higher usage of deposit services from legacy customers. The gain of $26.4 million on the sale of residential loans for the current year increased $6.6 million, or 33 percent, from the prior year which was attributable to an increase in mortgage refinancing and purchase activity. Other income of $10.8 million for the current year decreased $1.2 million, or 10 percent, over the prior year due to a decrease in gain on sale of OREO and insurance proceeds recognized in the prior year fourth quarter from a bank owned life insurance policy. Included in other income was operating revenue of $123 thousand from OREO and gains of $986 thousand from the sales of OREO, which totaled $1.1 million for 2015 compared to $2.3 million for the same period in the prior year.

Non-interest Expense Summary

Year ended $ Change % Change
(Dollars in thousands)Dec 31,
2015
Dec 31,
2014
Compensation and employee benefits$134,409 $118,571 $15,838 13%
Occupancy and equipment31,149 27,498 3,651 13%
Advertising and promotions8,661 7,912 749 9%
Data processing5,833 6,607 (774) (12)%
Other real estate owned3,693 2,568 1,125 44%
Regulatory assessments and insurance5,283 5,064 219 4%
Core deposit intangible amortization2,964 2,811 153 5%
Other expenses44,765 41,648 3,117 7%
Total non-interest expense$236,757 $212,679 $24,078 11%

Compensation and employee benefits for the current year increased $15.8 million, or 13 percent, from last year due to the increased number of employees primarily from the acquired banks, additional benefit costs and annual salary increases. Occupancy and equipment expense increased $3.7 million, or 13 percent, as a result of increased costs associated with acquisitions and equipment expense related to additional information technology infrastructure. Outsourced data processing expense decreased $774 thousand, or 12 percent, from the prior year as a result of a decrease in conversion related expenses and outsourced data processing expense from an acquired bank. OREO expense of $3.7 million in the current year increased $1.1 million, or 44 percent, from the prior year. OREO expenses continue to fluctuate based on the level of activity in various quarters. OREO expense for 2015 included $1.8 million of operating expenses, $1.6 million of fair value write-downs, and $349 thousand of loss from the sales of OREO. OREO expense for 2014 included $1.4 million of operating expenses, $691 thousand of fair value write-downs, and $442 thousand of loss from the sales of OREO. Other expense of $44.8 million for the current year increased by $3.1 million, or 7 percent, from the prior year primarily due to increases in conversion and acquisition related expenses.

Provision for Loan Losses
The provision for loan losses was $2.3 million for the current year, an increase of $372 thousand, or 19 percent, from the same period in the prior year. Net charged-off loans during 2015 were $2.3 million, a decrease of $170 thousand from 2014.

Efficiency Ratio
The efficiency ratio was 55.40 percent for 2015 compared to 54.31 percent for 2014. The increase in the efficiency ratio resulted primarily from compensation expense from increased acquired bank employees and salary increases outpacing the increase in net interest income primarily from commercial loans and non-interest income principally from the increase in gain on sale of loans.

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.

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 Glacier 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.

Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Financial Condition
December 31, September 30, December 31,
(Dollars in thousands, except per share data) 2015 2015 2014
Assets
Cash on hand and in banks$117,137 104,363 122,834
Federal funds sold6,080 2,210 1,025
Interest bearing cash deposits70,036 136,262 318,550
Cash and cash equivalents193,253 242,835 442,409
Investment securities, available-for-sale2,610,760 2,530,994 2,387,428
Investment securities, held-to-maturity702,072 651,822 520,997
Total investment securities3,312,832 3,182,816 2,908,425
Loans held for sale56,514 40,456 46,726
Loans receivable5,078,681 4,876,419 4,488,095
Allowance for loan and lease losses(129,697) (130,768) (129,753)
Loans receivable, net4,948,984 4,745,651 4,358,342
Premises and equipment, net194,030 185,864 179,175
Other real estate owned26,815 26,609 27,804
Accrued interest receivable44,524 46,786 40,587
Deferred tax asset58,475 55,095 41,737
Core deposit intangible, net14,555 10,781 10,900
Goodwill140,638 130,843 129,706
Non-marketable equity securities27,495 24,905 52,868
Other assets71,117 71,658 67,828
Total assets$9,089,232 8,764,299 8,306,507
Liabilities
Non-interest bearing deposits$1,918,310 1,893,723 1,632,403
Interest bearing deposits5,026,698 4,779,456 4,712,809
Securities sold under agreements to repurchase423,414 441,041 397,107
FHLB advances394,131 329,299 296,944
Other borrowed funds6,602 6,619 7,311
Subordinated debentures125,848 125,812 125,705
Accrued interest payable3,517 3,641 4,155
Other liabilities114,062 109,900 102,026
Total liabilities8,012,582 7,689,491 7,278,460
Stockholders’ Equity
Preferred shares, $0.01 par value per share, 1,000,000 shares authorized, none issued or outstanding
Common stock, $0.01 par value per share, 117,187,500 shares authorized761 755 750
Paid-in capital736,368 720,639 708,356
Retained earnings - substantially restricted337,532 345,407 301,197
Accumulated other comprehensive income1,989 8,007 17,744
Total stockholders’ equity1,076,650 1,074,808 1,028,047
Total liabilities and stockholders’ equity$9,089,232 8,764,299 8,306,507
Number of common stock shares issued and outstanding76,086,288 75,532,082 75,026,092



Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Operations
Three Months ended Year ended
December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands, except per share data) 2015 2015 2014 2015 2014
Interest Income
Investment securities$23,731 22,437 22,050 91,086 93,052
Residential real estate loans8,572 7,878 8,464 32,153 30,721
Commercial loans43,109 42,137 37,935 164,966 145,631
Consumer and other loans7,799 7,915 7,730 31,476 30,515
Total interest income83,211 80,367 76,179 319,681 299,919
Interest Expense
Deposits3,932 3,947 4,018 16,138 13,195
Securities sold under agreements to repurchase287 261 238 1,021 865
Federal Home Loan Bank advances2,156 2,273 2,253 8,841 9,570
Federal funds purchased and other borrowed funds18 21 64 81 199
Subordinated debentures822 807 795 3,194 3,137
Total interest expense7,215 7,309 7,368 29,275 26,966
Net Interest Income75,996 73,058 68,811 290,406 272,953
Provision for loan losses411 826 191 2,284 1,912
Net interest income after provision for loan losses75,585 72,232 68,620 288,122 271,041
Non-Interest Income
Service charges and other fees15,044 14,975 14,004 57,321 54,089
Miscellaneous loan fees and charges922 1,055 1,125 4,276 4,696
Gain on sale of loans6,033 7,326 5,424 26,389 19,797
Gain (loss) on sale of investments143 (31) (28) 19 (188)
Other income2,325 2,474 3,453 10,756 11,908
Total non-interest income24,467 25,799 23,978 98,761 90,302
Non-Interest Expense
Compensation and employee benefits35,902 33,534 30,807 134,409 118,571
Occupancy and equipment8,090 7,887 7,191 31,149 27,498
Advertising and promotions2,035 2,459 2,046 8,661 7,912
Data processing1,733 1,258 1,815 5,833 6,607
Other real estate owned511 1,047 893 3,693 2,568
Regulatory assessments and insurance1,494 1,478 1,009 5,283 5,064
Core deposit intangibles amortization758 720 716 2,964 2,811
Other expenses11,680 10,729 11,221 44,765 41,648
Total non-interest expense62,203 59,112 55,698 236,757 212,679
Income Before Income Taxes37,849 38,919 36,900 150,126 148,664
Federal and state income tax expense8,341 9,305 8,846 33,999 35,909
Net Income$29,508 29,614 28,054 116,127 112,755
Basic earnings per share$0.39 0.39 0.37 1.54 1.51
Diluted earnings per share$0.39 0.39 0.37 1.54 1.51
Dividends declared per share$0.49 0.19 0.48 1.05 0.98
Average outstanding shares - basic75,893,521 75,531,923 75,025,201 75,542,455 74,641,957
Average outstanding shares - diluted75,968,169 75,586,453 75,082,566 75,595,581 74,687,315


Glacier Bancorp, Inc.
Average Balance Sheet
Three Months ended Year ended
December 31, 2015 December 31, 2015
Average Average
Average Interest & Yield/ Average Interest & Yield/
(Dollars in thousands)Balance Dividends Rate Balance Dividends Rate
Assets
Residential real estate loans$728,346 $8,572 4.71% $687,013 $32,153 4.68%
Commercial loans 13,601,427 43,828 4.83% 3,459,470 167,587 4.84%
Consumer and other loans648,683 7,799 4.77% 631,512 31,476 4.98%
Total loans 24,978,456 60,199 4.80% 4,777,995 231,216 4.84%
Tax-exempt investment securities 31,361,905 20,173 5.92% 1,328,908 77,199 5.81%
Taxable investment securities 41,988,643 11,176 2.25% 1,918,283 41,648 2.17%
Total earning assets8,329,004 91,548 4.36% 8,025,186 350,063 4.36%
Goodwill and intangibles147,572 143,293
Non-earning assets400,730 389,126
Total assets$8,877,306 $8,557,605
Liabilities
Non-interest bearing deposits$1,918,399 $ % $1,756,888 $ %
NOW accounts1,441,615 284 0.08% 1,371,340 1,074 0.08%
Savings accounts811,804 97 0.05% 758,776 360 0.05%
Money market deposit accounts1,372,881 522 0.15% 1,340,967 2,066 0.15%
Certificate accounts1,081,921 1,607 0.59% 1,131,210 6,891 0.61%
Wholesale deposits 5201,695 1,422 2.80% 206,889 5,747 2.78%
FHLB advances332,910 2,156 2.53% 319,565 8,841 2.73%
Repurchase agreements and other borrowed funds523,213 1,127 0.85% 509,431 4,296 0.84%
Total funding liabilities7,684,438 7,215 0.37% 7,395,066 29,275 0.40%
Other liabilities94,505 91,360
Total liabilities7,778,943 7,486,426
Stockholders’ Equity
Common stock759 755
Paid-in capital730,927 720,827
Retained earnings358,860 336,998
Accumulated other comprehensive income7,817 12,599
Total stockholders’ equity1,098,363 1,071,179
Total liabilities and stockholders’ equity$8,877,306 $8,557,605
Net interest income (tax-equivalent) $84,333 $320,788
Net interest spread (tax-equivalent) 3.99% 3.96%
Net interest margin (tax-equivalent) 4.02% 4.00%

__________
1 Includes tax effect of $719 thousand and $2.6 million on tax-exempt municipal loan and lease income for the three months and year ended December 31, 2015.
2 Total loans are gross of the allowance for loan and lease losses, net of unearned income and include loans held for sale. Non-accrual loans were included in the average volume for the entire period.
3 Includes tax effect of $7.3 million and $26.3 million on tax-exempt investment security income for the three months and year ended December 31, 2015.
4 Includes tax effect of $362 thousand and $1.4 million on federal income tax credits for the three months and year ended December 31, 2015.
5 Wholesale deposits include brokered deposits classified as NOW, money market deposit and certificate accounts.


Glacier Bancorp, Inc.
Loan Portfolio by Regulatory Classification
Loans Receivable, by Loan Type % Change from
Dec 31, Sep 30, Dec 31, Sep 30, Dec 31,
(Dollars in thousands) 2015 2015 2014 2015 2014
Custom and owner occupied construction$75,094 $64,951 $56,689 16% 32%
Pre-sold and spec construction50,288 46,921 47,406 7% 6%
Total residential construction125,382 111,872 104,095 12% 20%
Land development62,356 83,756 82,829 (26)% (25)%
Consumer land or lots97,270 98,490 101,818 (1)% (4)%
Unimproved land73,844 74,439 86,116 (1)% (14)%
Developed lots for operative builders12,336 13,697 14,126 (10)% (13)%
Commercial lots22,035 22,937 16,205 (4)% 36%
Other construction156,784 122,347 150,075 28% 4%
Total land, lot, and other construction424,625 415,666 451,169 2% (6)%
Owner occupied938,625 885,736 849,148 6% 11%
Non-owner occupied774,192 739,057 674,381 5% 15%
Total commercial real estate1,712,817 1,624,793 1,523,529 5% 12%
Commercial and industrial649,553 619,688 547,910 5% 19%
Agriculture367,339 386,523 310,785 (5)% 18%
1st lien856,193 801,705 775,785 7% 10%
Junior lien65,383 67,351 68,358 (3)% (4)%
Total 1-4 family921,576 869,056 844,143 6% 9%
Multifamily residential201,542 189,944 160,426 6% 26%
Home equity lines of credit372,039 359,605 334,788 3% 11%
Other consumer150,469 154,095 133,773 (2)% 12%
Total consumer522,508 513,700 468,561 2% 12%
Other209,853 185,633 124,203 13% 69%
Total loans receivable, including loans held for sale5,135,195 4,916,875 4,534,821 4% 13%
Less loans held for sale 1(56,514) (40,456) (46,726) 40% 21%
Total loans receivable$5,078,681 $4,876,419 $4,488,095 4% 13%


_______
1 Loans held for sale are primarily 1st lien 1-4 family loans.


Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification
Accruing
Non- Loans 90 Days Other
Accrual or More Real Estate
Non-performing Assets, by Loan Type Loans Past Due Owned
Dec 31, Sep 30, Dec 31, Dec 31,Dec 31,Dec 31,
(Dollars in thousands) 2015 2015 2014 2015 2015 2015
Custom and owner occupied construction$1,016 1,048 1,132 1,016
Pre-sold and spec construction 218
Total residential construction1,016 1,048 1,350 1,016
Land development17,582 17,719 20,842 6,791 10,791
Consumer land or lots2,250 2,430 3,581 934 20 1,296
Unimproved land12,328 12,055 14,170 8,382 3,946
Developed lots for operative builders488 492 1,318 267 221
Commercial lots1,521 1,631 2,660 241 1,280
Other construction4,236 4,244 5,151 4,236
Total land, lot and other construction38,405 38,571 47,722 16,615 20 21,770
Owner occupied10,952 12,719 13,574 8,794 2,158
Non-owner occupied3,446 3,833 3,013 2,634 812
Total commercial real estate14,398 16,552 16,587 11,428 2,970
Commercial and industrial3,993 5,110 4,375 3,916 20 57
Agriculture3,281 3,114 3,074 2,666 167 448
1st lien10,691 11,953 9,580 9,264 64 1,363
Junior lien668 660 442 668
Total 1-4 family11,359 12,613 10,022 9,932 64 1,363
Multifamily residential113 440 113
Home equity lines of credit5,486 6,013 6,099 5,338 15 133
Other consumer228 204 231 109 45 74
Total consumer5,714 6,217 6,330 5,447 60 207
Other1,800 1,800 1,800
Total$80,079 85,025 89,900 51,133 2,131 26,815


Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification (continued)
Accruing 30-
89 Days Delinquent Loans, by Loan Type % Change from
(Dollars in thousands)Dec 31,
2015
Sep 30,
2015
Dec 31,
2014
Sep 30,
2015
Dec 31,
2014
Custom and owner occupied construction$462 $138 $ 235% n/m
Pre-sold and spec construction181 144 869 26% (79)%
Total residential construction643 282 869 128% (26)%
Land development447 n/m n/m
Consumer land or lots166 266 391 (38)% (58)%
Unimproved land774 304 267 155% 190%
Commercial lots 21 n/m (100)%
Other construction337 n/m n/m
Total land, lot and other construction1,724 570 679 202% 154%
Owner occupied2,760 2,497 5,971 11% (54)%
Non-owner occupied923 5,529 3,131 (83)% (71)%
Total commercial real estate3,683 8,026 9,102 (54)% (60)%
Commercial and industrial1,968 2,774 2,915 (29)% (32)%
Agriculture1,014 867 994 17% 2%
1st lien6,272 2,510 6,804 150% (8)%
Junior lien1,077 228 491 372% 119%
Total 1-4 family7,349 2,738 7,295 168% 1%
Multifamily Residential662 114 481% n/m
Home equity lines of credit1,046 1,599 1,288 (35)% (19)%
Other consumer1,227 811 928 51% 32%
Total consumer2,273 2,410 2,216 (6)% 3%
Other97 41 1,834 137% (95)%
Total$19,413 $17,822 $25,904 9% (25)%


_______
n/m - not measurable


Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification (continued)
Net Charge-Offs (Recoveries), Year-to-Date
Period Ending, By Loan Type Charge-Offs Recoveries
(Dollars in thousands)Dec 31,
2015
Sep 30,
2015
Dec 31,
2014
Dec 31,
2015
Dec 31,
2015
Pre-sold and spec construction$(53) (34) (94) 53
Land development(288) (293) (390) 957 1,245
Consumer land or lots66 (8) 375 512 446
Unimproved land(325) (152) 52 325
Developed lots for operative builders(85) (72) (140) 51 136
Commercial lots(26) (5) (6) 26
Other construction(1) (1) 1
Total land, lot and other construction(659) (531) (109) 1,520 2,179
Owner occupied247 249 669 668 421
Non-owner occupied93 105 (162) 116 23
Total commercial real estate340 354 507 784 444
Commercial and industrial1,389 1,011 1,069 2,166 777
Agriculture50 (8) 28 59 9
1st lien834 (80) 372 971 137
Junior lien(125) (106) 183 79 204
Total 1-4 family709 (186) 555 1,050 341
Multifamily residential(318) (318) 138 318
Home equity lines of credit740 531 190 897 157
Other consumer143 39 226 525 382
Total consumer883 570 416 1,422 539
Other(1) 1
Total$2,340 858 2,510 7,001 4,661

Visit our website at www.glacierbancorp.com

CONTACT: Michael J. Blodnick (406) 751-4701 Ron J. Copher (406) 751-7706

Source:Glacier Bancorp, Inc.