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Press release from GlobeNewswire (a Nasdaq OMX company)

Glacier Bancorp, Inc. Announces Results for the Quarter Ended September 30, 2013

Thursday, October 24, 2013

Glacier Bancorp, Inc. Announces Results for the Quarter Ended September 30, 2013

13:30 EDT Thursday, October 24, 2013

HIGHLIGHTS:

  • All time record net income for the current quarter of $25.6 million, an increase of 32 percent from the prior year third quarter net income of $19.4 million.
  • Current quarter diluted earnings per share of $0.35, an increase of 30 percent from the prior year third quarter diluted earnings per share of $0.27.
  • Completed the acquisition of North Cascades Bancshares, Inc., and its subsidiary, North Cascades National Bank in Chelan, Washington.
  • Excluding the acquisition, the loan portfolio increased $112 million, or 12 percent annualized.
  • Current quarter net interest margin, on a tax-equivalent basis, of 3.56 percent, an increase of 26 basis points from the prior quarter net interest margin of 3.30 percent.
  • Interest income for the current quarter of $69.5 million, an increase of 12 percent from the prior quarter interest income of $62.2 million.
  • Service charges and other fee income of $13.7 million, an increase of 16 percent from the prior quarter service charges and other fee income of $11.8 million.

Results Summary

  Three Months ended Nine Months ended
(Dollars in thousands, except per share data) September 30,
2013
June 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
Net income  $ 25,628 22,702 19,444 69,098 54,758
Diluted earnings per share  $ 0.35 0.31 0.27 0.95 0.76
Return on average assets (annualized) 1.27% 1.17% 1.03% 1.19% 0.99%
Return on average equity (annualized) 10.85% 9.78% 8.68% 9.96% 8.32%

KALISPELL, Mont., Oct. 24, 2013 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq:GBCI) reported net income of $25.6 million for the current quarter, an increase of $6.2 million, or 32 percent, from the $19.4 million of net income for the prior year third quarter. Diluted earnings per share for the current quarter was $0.35 per share, an increase of $0.08, or 30 percent, from the prior year third quarter diluted earnings per share of $0.27. "We had a good quarter in just about every aspect of the operation, topped off with the completion of our purchase of North Cascades Bancshares, Inc.," said Mick Blodnick President and Chief Executive Officer. "Loan growth for the second consecutive quarter was stronger than expected, we improved our net interest margin substantially during the quarter and credit trends and costs both moved in a positive direction. These results were all the more gratifying considering today's challenging operating environment," Blodnick said. 

Net income for the nine months ended September 30, 2013 was $69.1 million, an increase of $14.3 million, or 26 percent, from the $54.8 million of net income for the prior year first nine months. Diluted earnings per share for the first nine months of the current year was $0.95 per share, an increase of $0.19, or 25 percent, from the diluted earnings per share in the prior year first nine months. 

On July 31, 2013, the Company completed the acquisition of North Cascades Bancshares, Inc. ("NCBI"), and its subsidiary, North Cascades National Bank which has community bank offices in Brewster, Chelan, East Wenatchee, Grand Coulee, Okanogan, Omak, Twisp, Waterville, and Wenatchee, Washington. North Cascades National Bank operates as a division of Glacier Bank under the name "North Cascades Bank, division of Glacier Bank." Cash of $13.8 million and 687,876 shares of the Company's common stock were issued in the acquisition which resulted in $10.2 million of goodwill.   As a result of the NCBI acquisition and the Wheatland Bankshares, Inc. ("Wheatland") acquisition on May 31, 2013, the Company incurred $335 thousand of legal and professional expenses in connection with the acquisitions in the current quarter and $1.1 million in the nine months ended September 30, 2013. The Company's results of operations and financial condition include the acquisition of NCBI and the acquisition of Wheatland from the acquisition dates. The following table provides information on the fair value of selected classifications of assets and liabilities acquired:

  NCBI Wheatland  
(Dollars in thousands) July 31,
2013
May 31,
2013
Total
Total assets  $ 330,028  $ 300,541  $ 630,569
Investment securities, available-for-sale 48,058 75,643 123,701
Loans receivable 215,986 171,199 387,185
Non-interest bearing deposits 76,105 30,758 106,863
Interest bearing deposits 218,875 224,439 443,314
Federal Home Loan Bank advances 5,467 5,467

Asset Summary

(Dollars in thousands) September 30,
2013
December 31,
2012
September 30,
2012
$ Change from
December 31,
2012
$ Change from
September 30,
2012
Cash and cash equivalents  $ 254,684 187,040 172,399 67,644 82,285
Investment securities, available-for-sale 3,318,953 3,683,005 3,586,355 (364,052) (267,402)
Loans receivable          
Residential real estate 583,817 516,467 528,177 67,350 55,640
Commercial 2,828,287 2,278,905 2,272,959 549,382 555,328
Consumer and other 588,995 602,053 606,958 (13,058) (17,963)
Loans receivable 4,001,099 3,397,425 3,408,094 603,674 593,005
Allowance for loan and lease losses (130,765) (130,854) (136,660) 89 5,895
Loans receivable, net 3,870,334 3,266,571 3,271,434 603,763 598,900
Other assets 603,959 610,824 602,017 (6,865) 1,942
Total assets 8,047,930 7,747,440 7,632,205 300,490 415,725

Investment securities decreased $402 million, or 11 percent, during the current quarter and decreased $364 million, or 10 percent, from December 31, 2012 as the Company implemented a strategy to reduce the overall size of this portfolio. The Company continued to purchase investment securities during the current quarter, although at a much slower pace. With the growth in the loan portfolio it affords the Company the opportunity to retain higher yielding assets than what the Company could achieve with investment securities. At September 31, 2013, investment securities represented 41 percent of total assets, down from 48 percent at December 31, 2012 and 47 percent at September 30, 2012. 

An encouraging trend over the last three quarters has been the organic loan growth. Excluding the loans receivable from acquisitions, the loan portfolio increased $111.7 million, or 3 percent, during the current quarter and increased $205.8 million, or 6 percent, from the prior year third quarter with increases in both the commercial real estate and commercial and industrial loan categories. Excluding the acquisitions, the largest dollar increase was in commercial loans, which increased $98.8 million, or 4 percent, from the prior quarter and increased $226.5 million, or 10 percent, from the prior year third quarter. Included in the $98.8 current quarter increase in commercial loans was an increase of $63.9 million of commercial real estate loans and $34.9 million increase in commercial and industrial loans. Excluding the acquisitions, residential real estate loans increased $22.8 million, or 4 percent, from the prior quarter and increased $13.3 million, or 3 percent, from the prior year third quarter. The decreases in consumer and other loans was primarily attributable to customers paying off home equity lines of credit as they refinanced their first mortgage. 

Credit Quality Summary

(Dollars in thousands) At or for the
Nine Months
ended
September 30,
2013
At or for the
Year ended
December 31,
2012
At or for the
Nine Months
ended
September 30,
2012
Allowance for loan and lease losses      
Balance at beginning of period  $ 130,854 137,516 137,516
Provision for loan losses 5,085 21,525 19,250
Charge-offs (8,962) (34,672) (24,789)
Recoveries 3,788 6,485 4,683
Balance at end of period  $ 130,765 130,854 136,660
Other real estate owned  $ 36,531 45,115 57,650
Accruing loans 90 days or more past due 174 1,479 3,271
Non-accrual loans 88,293 96,933 115,856
Total non-performing assets 1  $ 124,998 143,527 176,777
Non-performing assets as a percentage of subsidiary assets 1.56% 1.87% 2.33%
Allowance for loan and lease losses as a percentage of non-performing loans 148% 133% 115%
Allowance for loan and lease losses as a percentage of total loans 3.27% 3.85% 4.01%
Net charge-offs as a percentage of total loans 0.13% 0.83% 0.59%
Accruing loans 30-89 days past due  $ 26,401 27,097 28,434
__________      
1 As of September 30, 2013, non-performing assets have not been reduced by U.S. government guarantees of $4.0 million.      

During the first nine months of 2013, the Company continued to diligently and methodically reduce non-performing assets. Non-performing assets at September 30, 2013 were $125 million, a decrease of $5.5 million, or 4 percent, during the current quarter and a decrease of $51.8 million, or 29 percent, from a year ago. The largest category of non-performing assets was the land, lot and other construction category which was $55.3 million, or 44 percent, of the non-performing assets at September 30, 2013. Included in this category was $25.8 million of land development loans and $15.0 million in unimproved land loans at September 30, 2013. The Company has continued to reduce the land, lot and other construction category over the prior two years. The Company's early stage delinquencies (accruing loans 30-89 days past due) of 26.4 million at September 30, 2013 increased $4.3 million, or 20 percent, from the prior quarter and decreased $2.0 million, or 7 percent, from the prior year third quarter early stage delinquencies.

"We continued to make good progress in improving our overall asset quality and that was again evident this quarter as non-performing assets declined further, delinquencies remained at low levels and net charge-offs through the third quarter were far better than our expectations and in line with our historical averages before the credit downturn," said Blodnick. 

At September 30, 2013, the allowance for loan and lease losses ("allowance") was $131 million, a decrease of $89 thousand, or less than 1 percent, from December 31, 2012 and a decrease of $5.9 million, or 4 percent, from a year ago. The allowance was 3.27 percent of total loans outstanding at September 30, 2013, a decrease of 58 basis points from 3.85 percent at December 31, 2012. Excluding the acquired banks, the allowance was 3.60 percent of total loans outstanding at September 30, 2013, a 33 basis points increase from the 3.27 allowance percentage at September 30, 2013. Such difference was primarily attributable to no allowance carried over from the acquisitions as result of the acquired loans being recorded at fair value. The allowance was 148 percent of non-performing loans at September 30, 2013, an increase from 133 percent at December 31, 2012 and an increase from 115 percent at September 30, 2012. 

Credit Quality Trends and Provision for Loan Losses

(Dollars in thousands) Provision
for Loan
Losses
Net
Charge-Offs
ALLL
as a Percent
of Loans
Accruing
Loans 30-89
Days Past Due
as a Percent of
Loans
Non-Performing
Assets to
Total Subsidiary
Assets
Third quarter 2013 $ 1,907 2,025 3.27% 0.66% 1.56%
Second quarter 2013 1,078 1,030 3.56% 0.60% 1.64%
First quarter 2013 2,100 2,119 3.84% 0.95% 1.79%
Fourth quarter 2012 2,275 8,081 3.85% 0.80% 1.87%
Third quarter 2012 2,700 3,499 4.01% 0.83% 2.33%
Second quarter 2012 7,925 7,052 3.99% 1.41% 2.69%
First quarter 2012 8,625 9,555 3.98% 1.24% 2.91%
Fourth quarter 2011 8,675 9,252 3.97% 1.42% 2.92%

Net charged-off loans of $2.0 million during the current quarter increased $995 thousand, or 97 percent, compared to the prior quarter and decreased $1.5 million, or 42 percent, from the prior year third quarter. The current quarter provision for loan losses of $1.9 million increased $829 thousand from the prior quarter and decreased $793 thousand from the prior year third quarter. Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will continue to determine the level of provision for loan loss expense. 

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

Liability Summary

(Dollars in thousands) September 30,
2013
December 31,
2012
September 30,
2012
$ Change from
December 31,
2012
$ Change from
September 30,
2012
Non-interest bearing deposits  $ 1,397,401 1,191,933 1,180,066 205,468 217,335
Interest bearing deposits 4,215,479 4,172,528 4,023,031 42,951 192,448
Repurchase agreements 314,313 289,508 414,836 24,805 (100,523)
FHLB advances 967,382 997,013 917,021 (29,631) 50,361
Other borrowed funds 8,466 10,032 10,152 (1,566) (1,686)
Subordinated debentures 125,526 125,418 125,382 108 144
Other liabilities 71,556 60,059 71,560 11,497 (4)
Total liabilities  $ 7,100,123 6,846,491 6,742,048 253,632 358,075

Excluding the acquisitions, non-interest bearing deposits at September 30, 2013 increased $85.2 million, or 7 percent, during the current quarter and increased $111 million, or 9 percent, since September 30, 2012. Interest bearing deposits of $4.215 billion at September 30, 2013 included $328 million of wholesale deposits (i.e., brokered deposits classified as NOW, money market deposit and certificate accounts). Excluding the acquisitions, interest bearing deposits at September 30, 2013 decreased $125 million, or 3 percent, during the current quarter and included a decrease of $44 million in wholesale deposits. Excluding the acquisition, interest bearing deposits at September 30, 2013 decreased $252 million, or 6 percent, from September 30, 2012 primarily the result of a decrease of $417 million in wholesale deposits. 

Repurchase agreements of $314 million at September 30, 2013 decreased $100 million, or 24 percent, from the prior year third quarter and was primarily a result of a decrease of $107 million in wholesale repurchase agreements. Federal Home Loan Bank ("FHLB") advances have remained relatively stable compared to the prior year end and the prior year third quarter and will fluctuate as necessary as the need for funding changes.

Stockholders' Equity Summary

(Dollars in thousands, except per share data) September 30,
2013
December 31,
2012
September 30,
2012
$ Change from
December 31,
2012
$ Change from
September 30,
2012
Common equity  $ 937,824 852,987 842,301 84,837 95,523
Accumulated other comprehensive income 9,983 47,962 47,856 (37,979) (37,873)
Total stockholders' equity 947,807 900,949 890,157 46,858 57,650
Goodwill and core deposit intangible, net (139,934) (112,274) (112,765) (27,660) (27,169)
Tangible stockholders' equity  $ 807,873 788,675 777,392 19,198 30,481
Stockholders' equity to total assets 11.78% 11.63% 11.66%    
Tangible stockholders' equity to total tangible assets 10.22% 10.33% 10.34%    
Book value per common share  $ 12.76 12.52 12.37 0.24 0.39
Tangible book value per common share  $ 10.87 10.96 10.81 (0.09) 0.06
Market price per share at end of period  $ 24.68 14.71 15.59 9.97 9.09

Tangible stockholders' equity of $808 million increased $19.2 million, or 2 percent, from the prior year end as a result of Company stock issued in connection with the acquisitions and an increase in earnings retention which was offset by the decrease in accumulated other comprehensive income.   Tangible book value per common share of $10.87 decreased $0.09 per share from the prior year end as a result of the increased Company stock issued in the acquisitions.  

Cash Dividend

On September 26, 2013, the Company's Board of Directors declared a cash dividend of $0.15 per share, payable October 17, 2013 to shareholders of record on October 8, 2013. 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 September 30, 2013 
Compared to June 30, 2013 and September 30, 2012
         
Revenue Summary        
         
  Three Months ended  
(Dollars in thousands) September 30,
2013
June 30,
2013
September 30,
2012
 
Net interest income        
Interest income  $ 69,531 62,151 62,015  
Interest expense 7,186 7,185 8,907  
Total net interest income 62,345 54,966 53,108  
Non-interest income        
Service charges, loan fees, and other fees 15,119 12,971 13,019  
Gain on sale of loans 7,021 7,472 8,728  
(Loss) gain on sale of investments (403) 241  
Other income 2,136 2,538 2,227  
Total non-interest income 23,873 23,222 23,974  
   $ 86,218 78,188 77,082  
Net interest margin (tax-equivalent) 3.56% 3.30% 3.24%  
         
(Dollars in thousands) $ Change from
June 30,
2013
$ Change from
September 30,
2012
% Change from
June 30,
2013
% Change from
September 30,
2012
Net interest income        
Interest income  $ 7,380  $ 7,516 12% 12%
Interest expense 1 (1,721) —% (19)%
Total net interest income 7,379 9,237 13% 17%
Non-interest income        
Service charges, loan fees, and other fees 2,148 2,100 17% 16%
Gain on sale of loans (451) (1,707) (6)% (20)%
(Loss) gain on sale of investments (644) (403) (267)% n/m%
Other income (402) (91) (16)% (4)%
Total non-interest income 651 (101) 3% —%
   $ 8,030  $ 9,136 10% 12%
         
_______        
n/m - not measurable        

Net Interest Income

The current quarter interest income of $69.5 million increased $7.4 million, or 12 percent, over the prior quarter primarily as a result of the increase in interest income on commercial loans and the increase in interest income on the investment portfolio. The $4.4 million, or 15 percent, increase in commercial loan interest income from the prior quarter was driven by an increased volume of commercial loans during the current quarter. The current quarter increase in interest income on the investment portfolio was primarily a result of a decrease in premium amortization (net of discount accretion) on the investment securities ("premium amortization"). The Company experienced a decrease in premium amortization for a third consecutive quarter, compared to significant increases experienced during the preceding seven quarters. Included in the current quarter's interest income was $15.2 million of premium amortization on investment securities compared to $18.4 million in the prior quarter. The current quarter decrease in premium amortization on investment securities was $3.2 million compared to a decrease of $3.0 million in premium amortization in the prior quarter. 

The current quarter interest income of $69.5 million increased $7.5 million, or 12 percent, over the prior year third quarter and was also driven by the increase in interest income on the commercial loans and the increase in interest income on the investment portfolio. The current quarter interest income on commercial loans of $34.3 million increased $4.0 million, or 13 percent, over the prior year third quarter as a result of increased volume of commercial loans. The current quarter interest income on investment securities of $19.5 million increased $4.3 million, or 28 percent, over the prior year third quarter of which $4.3 million was attributable to the decrease in premium amortization.

The current quarter interest expense of $7.2 million was unchanged from the prior quarter and decreased $1.7 million, or 19 percent, from the prior year third quarter. The decrease in interest expense from the prior year third quarter was a result of decreases in borrowing and deposit interest rates. The cost of total funding (including non-interest bearing deposits) for the current quarter was 41 basis points compared to 43 basis points for the prior quarter and 54 basis points for the prior year third quarter. 

The current quarter net interest margin as a percentage of earning assets, on a tax-equivalent basis, was 3.56 percent, an increase of 26 basis points from the prior quarter net interest margin of 3.30 percent. The increase in the net interest margin was driven by an increased yield on the investment securities and a shift in the earning assets from investment securities to the higher yielding loan portfolio. The current quarter increase in the investment securities yield was primarily attributable to a decrease in the premium amortization which was consistent with the prior quarter. Of the 33 basis points increase in yield on the investment securities during the current quarter, 28 basis points was due to the decrease in premium amortization. The premium amortization in the current quarter accounted for a 82 basis points reduction in the net interest margin compared to a 103 basis points reduction in the prior quarter and 111 basis points reduction in the net interest margin in the prior year third quarter. "The Bank's continued focus on quality loan growth was significant to the improvement in net interest income and the net interest margin," said Ron Copher, Chief Financial Officer.  "The reduction in premium amortization combined with the changing mix of the earning assets should trend well for the remainder of 2013."

Non-interest Income

Non-interest income for the current quarter totaled $23.9 million, an increase of $651 thousand over the prior quarter and a decrease of $101 thousand over the same quarter last year. Service charge fee income increased $2.1 million, or 17 percent, from the prior quarter and increased $2.1 million, or 16 percent, from the prior year third quarter which was driven by increases in deposit accounts and changes in internal deposit processing. Gain of $7.0 million on the sale of loans for the current quarter decreased $451 thousand, or 6 percent, from the prior quarter and decreased $1.7 million, or 20 percent, from the prior year third quarter. As expected, the Company experienced a slowdown in refinance activity as mortgage rates moved up significantly in the third quarter. The decrease in gain on sale of loans was more than offset by the decrease in premium amortization on investment securities, both of which were attributable to the continuing slowdown of refinance activity. Other income of $2.1 million for the current quarter decreased $402 thousand, or 16 percent, from the prior quarter primarily as a result of a decrease in income related to other real estate owned ("OREO"). Included in other income was operating revenue of $92 thousand from OREO and gain of $341 thousand on the sales of OREO, which totaled $433 thousand for the current quarter compared to $715 thousand for the prior quarter and $531 thousand for the prior year third quarter.

Non-interest Expense Summary

  Three Months ended    
(Dollars in thousands) September 30,
2013
June 30,
2013
September 30,
2012
 
Compensation and employee benefits  $ 27,469 24,917 24,046  
Occupancy and equipment 6,421 5,906 6,001  
Advertising and promotions 1,897 1,621 1,820  
Outsourced data processing 1,232 813 801  
Other real estate owned 1,049 2,968 6,373  
Federal Deposit Insurance Corporation premiums 1,331 1,154 1,767  
Core deposit intangibles amortization 693 505 532  
Other expense 10,276 10,597 8,838  
Total non-interest expense  $ 50,368 48,481 50,178  
         
(Dollars in thousands) $ Change from
June 30,
2013
$ Change from
September 30,
2012
% Change from
June 30,
2013
% Change from
September 30,
2012
Compensation and employee benefits  $ 2,552  $ 3,423 10% 14%
Occupancy and equipment 515 420 9% 7%
Advertising and promotions 276 77 17% 4%
Outsourced data processing 419 431 52% 54%
Other real estate owned (1,919) (5,324) (65)% (84)%
Federal Deposit Insurance Corporation premiums 177 (436) 15% (25)%
Core deposit intangibles amortization 188 161 37% 30%
Other expense (321) 1,438 (3)% 16%
Total non-interest expense  $ 1,887  $ 190 4% —%

Non-interest expense of $50.4 million for the current quarter increased by $1.9 million, or 4 percent, from the prior quarter and increased by $190 thousand, or 38 basis points, from the prior year third quarter. Compensation and employee benefits increased by $2.6 million, or 10 percent, from the prior quarter and increased $3.4 million, or 14 percent, from the prior year third quarter primarily as a result of the acquisitions. Outsourced data processing expense increased $419 thousand, or 52 percent, from the prior quarter and increased $431 thousand, or 54 percent, from the prior year third quarter again as a result of the acquired banks' outsourced data processing expense. OREO expense decreased $1.9 million, or 65 percent, from the prior quarter and decreased $5.3 million, or 84 percent, from the prior year third quarter. The current quarter OREO expense of $1.0 million included $418 thousand of operating expense, $394 thousand of fair value write-downs, and $237 thousand of loss on sale of OREO. OREO expense will fluctuate as the Company continues to work through non-performing loans and dispose of foreclosed properties.    Other expense increased by $1.4 million, or 16 percent, over the prior year third quarter primarily from legal and professional expenses associated with the acquisitions and other miscellaneous expense.

Efficiency Ratio

The efficiency ratio for the current quarter was 54 percent compared to 55 percent for the prior year third quarter. The decrease in the efficiency ratio was primarily driven by the increase in net interest income which exceeded the increase non-interest expense. 

Operating Results for Nine Months ended September 30, 2013
Compared to September 30, 2012 
         
Revenue Summary        
         
  Nine Months ended    
(Dollars in thousands) September 30,
2013
September 30,
2012
$ Change % Change
Net interest income        
Interest income  $ 189,637  $ 194,091  $ (4,454) (2)%
Interest expense 21,829 27,549 (5,720) (21)%
Total net interest income 167,808 166,542 1,266 1%
Non-interest income        
Service charges, loan fees, and other fees 39,765 36,861 2,904 8%
Gain on sale of loans 23,582 23,063 519 2%
Loss on sale of investments (299) (299) n/m
Other income 6,997 6,179 818 13%
Total non-interest income 70,045 66,103 3,942 6%
   $ 237,853  $ 232,645  $ 5,208 2%
Net interest margin (tax-equivalent) 3.34% 3.48%    
         
_______        
n/m - not measurable        

Net Interest Income

Net interest income for the first nine months of the current year increased $1.3 million, or 1 percent, over the same period last year. Interest income for the first nine months of the current year decreased $4.5 million, or 2 percent, from the prior year first nine months and was principally due to the increase in premium amortization on investment securities earlier this year and the reduction of yields on the loan portfolio. Interest income was reduced by $55.0 million in premium amortization on investment securities during the first nine months of the current year which was an increase of $6.3 million from the first nine months of the prior year.   Such decrease in interest income were partially offset by an increased volume in commercial loans and investment securities. 

Interest expense for the first nine months of the current year decreased $5.7 million, or 21 percent, from the prior year first nine months and was primarily attributable to the decreases in interest rates on interest bearing deposits and borrowings.  The funding cost (including non-interest bearing deposits) for the first nine months of 2013 was 43 basis points compared to 57 basis points for the first nine months of 2012. 

The net interest margin, on a tax-equivalent basis, for the first nine months of 2013 was 3.34 percent, a 14 basis points reduction from the net interest margin of 3.48 percent for the first nine months of 2012.  The reduction was a result of lower yields on loans and higher premium amortization on investment securities, both of which outpaced the reduction in funding cost. The premium amortization for the first nine months of 2013 accounted for a 103 basis points reduction in the net interest margin, which was an increase of 8 basis points compared to the 95 basis points reduction in the net interest margin for the same period last year. 

Non-interest Income

Non-interest income of $70.0 million for the first nine months of 2013 increased $3.9 million, or 6 percent, over the same period last year. Gains of $23.6 million on the sale of loans for the first nine months of 2013 increased $519 thousand, or 2 percent, from the first nine months of 2012. Other income for the first nine months of 2013 increased $818 thousand, or 13 percent, over the first nine months of 2012. Included in other income was operating revenue of $247 thousand from OREO and gains of $1.6 million on the sale of OREO, which totaled $1.9 million for the first nine months of 2013 compared to $1.5 million for the same period in the prior year.

Non-interest Expense Summary

  Nine Months ended    
(Dollars in thousands) September 30,
2013
September 30,
2012
$ Change % Change
Compensation and employee benefits  $ 76,963 71,290 5,673 8%
Occupancy and equipment 18,152 17,794 358 2%
Advertising and promotions 5,066 4,935 131 3%
Outsourced data processing 2,870 2,435 435 18%
Other real estate owned 4,901 15,394 (10,493) (68)%
Federal Deposit Insurance Corporation premiums 3,789 4,779 (990) (21)%
Core deposit intangibles amortization 1,684 1,619 65 4%
Other expense 28,858 27,167 1,691 6%
Total non-interest expense  $ 142,283 145,413 (3,130) (2)%

Compensation and employee benefits for the first nine months of 2013 increased $5.7 million, or 8 percent, from the same period last year. OREO expense of $4.9 million in the first nine months of 2013 decreased $10.5 million, or 68 percent, from the first nine months of the prior year. Outsourced data processing expense increased $435 thousand, or 18 percent, from the prior year first nine months as a result of the acquired banks outsourced data processing expense. The OREO expense for the first nine months of 2013 included $2.0 million of operating expenses, $2.4 million of fair value write-downs, and $538 thousand of loss on sale of OREO. Other expense for the first nine months of 2013 increased by $1.7 million, or 6 percent, from the first nine months of the prior year and was principally attributable to the legal and professional expenses associated with the acquisitions.

Provision for loan losses

The provision for loan losses was $5.1 million for the first nine months of 2013, a decrease of $14.2 million, or 74 percent, from the same period in the prior year. Net charged-off loans during the first nine months of 2013 was $5.2 million, a decrease of $14.9 million from the first nine months of 2012. 

Efficiency Ratio

The efficiency ratio was 55 percent for the first nine months of 2013 and 53 percent for the first nine months of 2012. Although there was an increase in non-interest income and net interest income during the first nine months of the current year over the prior year, it was not enough to offset the increase in non-interest expense, excluding OREO expense, resulting in the increased efficiency ratio.

About Glacier Bancorp, Inc.

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

Forward Looking Statements

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

  • the risks associated with lending and potential adverse changes of the credit quality of loans in the Company's portfolio, including as a result of a slow recovery in the housing and real estate markets in its geographic areas;
  • increased loan delinquency rates;
  • the risks presented by a slow economic recovery, which could adversely affect credit quality, loan collateral values, other real estate owned values, investment values, liquidity and capital levels, dividends and loan originations;
  • changes in market interest rates, which could adversely affect the Company's net interest income and profitability;
  • legislative or regulatory changes that adversely affect the Company's business, ability to complete pending or prospective future acquisitions, limit certain sources of revenue, or increase cost of operations;
  • costs or difficulties related to the completion and integration of acquisitions;
  • the goodwill the Company has recorded in connection with acquisitions could become additionally impaired, which may have an adverse impact on earnings and capital;
  • reduced demand for banking products and services;
  • the risks presented by public stock market volatility, which could adversely affect the market price of the Company's common stock and the ability to raise additional capital in the future;
  • competition from other financial services companies in the Company's markets;
  • loss of services from the CEO and senior management team;
  • 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
         
(Dollars in thousands, except per share data) September 30,
2013
June 30,
2013
December 31,
2012
September 30,
2012
Assets        
Cash on hand and in banks  $ 130,285 105,272 123,270 98,772
Interest bearing cash deposits and federal funds sold 124,399 27,184 63,770 73,627
Cash and cash equivalents 254,684 132,456 187,040 172,399
Investment securities, available-for-sale 3,318,953 3,721,377 3,683,005 3,586,355
Loans held for sale 61,505 95,495 145,501 118,986
Loans receivable 4,001,099 3,673,456 3,397,425 3,408,094
Allowance for loan and lease losses (130,765) (130,883) (130,854) (136,660)
Loans receivable, net 3,870,334 3,542,573 3,266,571 3,271,434
Premises and equipment, net 168,633 161,918 158,989 159,386
Other real estate owned 36,531 40,713 45,115 57,650
Accrued interest receivable 44,261 43,593 37,770 39,359
Deferred tax asset 47,957 35,115 20,394 20,462
Core deposit intangible, net 10,228 7,262 6,174 6,665
Goodwill 129,706 119,509 106,100 106,100
Non-marketable equity securities 52,192 49,752 48,812 50,363
Other assets 52,946 47,053 41,969 43,046
Total assets  $ 8,047,930 7,996,816 7,747,440 7,632,205
Liabilities        
Non-interest bearing deposits $ 1,397,401 1,236,104 1,191,933 1,180,066
Interest bearing deposits 4,215,479 4,122,093 4,172,528 4,023,031
Securities sold under agreements to repurchase 314,313 300,024 289,508 414,836
Federal Home Loan Bank advances 967,382 1,217,445 997,013 917,021
Other borrowed funds 8,466 8,489 10,032 10,152
Subordinated debentures 125,526 125,490 125,418 125,382
Accrued interest payable 3,568 3,824 4,675 4,654
Other liabilities 67,988 54,345 55,384 66,906
Total liabilities 7,100,123 7,067,814 6,846,491 6,742,048
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 authorized 743 736 719 719
Paid-in capital 689,751 672,035 641,737 641,737
Retained earnings - substantially restricted 247,330 232,849 210,531 199,845
Accumulated other comprehensive income 9,983 23,382 47,962 47,856
Total stockholders' equity 947,807 929,002 900,949 890,157
Total liabilities and stockholders' equity  $ 8,047,930 7,996,816 7,747,440 7,632,205
Number of common stock shares issued and outstanding 74,307,951 73,564,900 71,937,222 71,937,222
 
Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Operations
           
  Three Months ended Nine Months ended
(Dollars in thousands, except per share data) September 30,
2013
June 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
Interest Income          
Residential real estate loans  $ 7,320 7,026 7,740 21,606 23,019
Commercial loans 34,291 29,865 30,293 92,788 91,764
Consumer and other loans 8,447 7,909 8,826 24,220 26,809
Investment securities 19,473 17,351 15,156 51,023 52,499
Total interest income 69,531 62,151 62,015 189,637 194,091
Interest Expense          
Deposits 3,398 3,474 4,485 10,584 14,048
Securities sold under agreements to repurchase 209 210 395 646 997
Federal Home Loan Bank advances 2,730 2,648 3,116 8,029 9,715
Federal funds purchased and other borrowed funds 54 54 53 160 176
Subordinated debentures 795 799 858 2,410 2,613
Total interest expense 7,186 7,185 8,907 21,829 27,549
Net Interest Income 62,345 54,966 53,108 167,808 166,542
Provision for loan losses 1,907 1,078 2,700 5,085 19,250
Net interest income after provision for loan losses 60,438 53,888 50,408 162,723 147,292
Non-Interest Income          
Service charges and other fees 13,711 11,818 11,939 36,115 33,722
Miscellaneous loan fees and charges 1,408 1,153 1,080 3,650 3,139
Gain on sale of loans 7,021 7,472 8,728 23,582 23,063
(Loss) gain on sale of investments (403) 241 (299)
Other income 2,136 2,538 2,227 6,997 6,179
Total non-interest income 23,873 23,222 23,974 70,045 66,103
Non-Interest Expense          
Compensation and employee benefits 27,469 24,917 24,046 76,963 71,290
Occupancy and equipment 6,421 5,906 6,001 18,152 17,794
Advertising and promotions 1,897 1,621 1,820 5,066 4,935
Outsourced data processing 1,232 813 801 2,870 2,435
Other real estate owned 1,049 2,968 6,373 4,901 15,394
Federal Deposit Insurance Corporation premiums 1,331 1,154 1,767 3,789 4,779
Core deposit intangibles amortization 693 505 532 1,684 1,619
Other expense 10,276 10,597 8,838 28,858 27,167
Total non-interest expense 50,368 48,481 50,178 142,283 145,413
Income Before Income Taxes 33,943 28,629 24,204 90,485 67,982
Federal and state income tax expense 8,315 5,927 4,760 21,387 13,224
Net Income  $ 25,628 22,702 19,444 69,098 54,758
Basic earnings per share  $ 0.35 0.31 0.27 0.95 0.76
Diluted earnings per share  $ 0.35 0.31 0.27 0.95 0.76
Dividends declared per share  $ 0.15 0.15 0.13 0.44 0.39
Average outstanding shares - basic 73,945,523 72,480,019 71,933,141 72,804,321 71,925,664
Average outstanding shares - diluted 74,021,871 72,548,172 71,973,985 72,869,475 71,925,761
 
Glacier Bancorp, Inc.
Average Balance Sheet
         
  Three Months ended
September 30, 2013
Nine Months ended
September 30, 2013
(Dollars in thousands) Average
Balance
Interest &
Dividends
Average
Yield/
Rate
Average
Balance
Interest &
Dividends
Average
Yield/
Rate
Assets            
Residential real estate loans $ 635,337 7,320 4.61%  $ 615,974 21,606 4.68%
Commercial loans 2,696,655 34,291 5.04% 2,451,211 92,788 5.06%
Consumer and other loans 592,023 8,447 5.66% 589,078 24,220 5.50%
Total loans 1 3,924,015 50,058 5.06% 3,656,263 138,614 5.07%
Tax-exempt investment securities 2 1,110,211 15,978 5.76% 1,032,296 45,357 5.86%
Taxable investment securities 3 2,506,432 8,780 1.40% 2,629,107 20,726 1.05%
Total earning assets 7,540,658 74,816 3.94% 7,317,666 204,697 3.74%
Goodwill and intangibles 132,872     120,498    
Non-earning assets 320,623     339,495    
Total assets $ 7,994,153     $ 7,777,659    
Liabilities            
Non-interest bearing deposits $ 1,298,559 —% $ 1,206,170 —%
NOW accounts 1,008,108 325 0.13% 981,261 884 0.12%
Savings accounts 559,382 69 0.05% 523,298 200 0.05%
Money market deposit accounts 1,136,420 570 0.20% 1,044,797 1,581 0.20%
Certificate accounts 1,130,511 2,227 0.78% 1,111,127 6,945 0.84%
Wholesale deposits 4 318,697 207 0.26% 482,520 974 0.27%
FHLB advances 1,121,049 2,730 0.97% 1,015,597 8,029 1.06%
Repurchase agreements, federal funds purchased and other borrowed funds 430,838 1,058 0.97% 427,604 3,216 1.01%
Total funding liabilities 7,003,564 7,186 0.41% 6,792,374 21,829 0.43%
Other liabilities 53,628     57,301    
Total liabilities 7,057,192     6,849,675    
Stockholders' Equity            
Common stock 740     729    
Paid-in capital 683,618     659,337    
Retained earnings 246,085     233,303    
Accumulated other comprehensive income 6,518     34,615    
Total stockholders' equity 936,961     927,984    
Total liabilities and stockholders' equity $ 7,994,153     $ 7,777,659    
Net interest income (tax-equivalent)   $ 67,630     $ 182,868  
Net interest spread (tax-equivalent)     3.53%     3.31%
Net interest margin (tax-equivalent)     3.56%     3.34%
             
__________            
1 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.    
2 Includes tax effect of $4.9 million and $13.9 million on tax-exempt investment security income for the three and nine months ended September 30, 2013, respectively.      
3 Includes tax effect of $381 thousand and $1,141 thousand on investment security tax credits for the three and nine months ended September 30, 2013, respectively.        
4 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 % Change from
(Dollars in thousands) September 30,
2013
December 31,
2012
September 30,
2012
December 31,
2012
September 30,
2012
Custom and owner occupied construction  $ 40,187 40,327 39,937 —% 1%
Pre-sold and spec construction 38,702 34,970 46,149 11% (16)%
Total residential construction 78,889 75,297 86,086 5% (8)%
Land development 75,282 80,132 88,272 (6)% (15)%
Consumer land or lots 111,331 104,229 109,648 7% 2%
Unimproved land 51,986 53,459 54,988 (3)% (5)%
Developed lots for operative builders 15,082 16,675 19,943 (10)% (24)%
Commercial lots 15,707 19,654 21,674 (20)% (28)%
Other construction 99,868 56,109 37,981 78% 163%
Total land, lot, and other construction 369,256 330,258 332,506 12% 11%
Owner occupied 815,401 710,161 703,253 15% 16%
Non-owner occupied 541,688 452,966 450,402 20% 20%
Total commercial real estate 1,357,089 1,163,127 1,153,655 17% 18%
Commercial and industrial 528,792 420,459 401,717 26% 32%
Agriculture 283,801 145,890 157,587 95% 80%
1st lien 738,842 738,854 719,030 —% 3%
Junior lien 76,277 82,083 84,687 (7)% (10)%
Total 1-4 family 815,119 820,937 803,717 (1)% 1%
Multifamily residential 113,880 93,328 95,766 22% 19%
Home equity lines of credit 298,935 319,779 326,878 (7)% (9)%
Other consumer 128,374 109,019 108,069 18% 19%
Total consumer 427,309 428,798 434,947 —% (2)%
Other 88,469 64,832 61,099 36% 45%
Total loans receivable, including loans held for sale 4,062,604 3,542,926 3,527,080 15% 15%
Loans held for sale 1 (61,505) (145,501) (118,986) (58)% (48)%
Total  $ 4,001,099 3,397,425 3,408,094 18% 17%
           
_______          
1 Loans held for sale are primarily 1st lien 1-4 family loans.          
 
Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification
             
  Non-performing Assets, by Loan Type Non-
Accruing
Loans 
Accruing
Loans 90 Days
or More Past Due 
Other
Real Estate
Owned
   
(Dollars in thousands) September 30,
2013
December 31,
2012
September 30,
2012
September 30,
2013
September 30,
2013
September 30,
2013
Custom and owner occupied construction  $ 1,270 1,343 2,468 1,270
Pre-sold and spec construction 1,157 1,603 5,993 409 748
Total residential construction 2,427 2,946 8,461 1,679 748
Land development 25,834 31,471 38,295 15,029 10,805
Consumer land or lots 3,500 6,459 9,332 1,993 1,507
Unimproved land 14,977 19,121 25,369 13,150 1,827
Developed lots for operative builders 2,284 2,393 6,471 1,547 737
Commercial lots 2,978 1,959 2,002 309 2,669
Other construction 5,776 5,105 5,111 523 5,253
Total land, lot and other construction 55,349 66,508 86,580 32,551 22,798
Owner occupied 19,224 15,662 15,845 13,908 5,316
Non-owner occupied 5,453 4,621 3,929 2,883 83 2,487
Total commercial real estate 24,677 20,283 19,774 16,791 83 7,803
Commercial and industrial 7,452 5,970 7,060 7,408 35 9
Agriculture 2,488 6,686 6,894 1,785 703
1st lien 20,959 25,739 30,578 17,167 6 3,786
Junior lien 5,648 6,660 9,213 5,497 48 103
Total 1-4 family 26,607 32,399 39,791 22,664 54 3,889
Multifamily residential 253 253
Home equity lines of credit 5,599 8,041 7,502 5,151 448
Other consumer 399 441 462 264 2 133
Total consumer 5,998 8,482 7,964 5,415 2 581
Total  $ 124,998 143,527 176,777 88,293 174 36,531
 
Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification (continued)
           
  Accruing 30-89 Days Delinquent Loans, 
by Loan Type
% Change from % Change from
(Dollars in thousands) September 30,
2013
December 31,
2012
September 30,
2012
December 31,
2012
September 30,
2012
Custom and owner occupied construction $ — 5 852 (100)% (100)%
Pre-sold and spec construction 772 893 (14)% n/m
Total residential construction 772 898 852 (14)% (9)%
Land development 917 191 774 380% 18%
Consumer land or lots 504 762 850 (34)% (41)%
Unimproved land 311 422 1,126 (26)% (72)%
Developed lots for operative builders 9 422 129 (98)% (93)%
Commercial lots 68 11 518% n/m
Total land, lot and other construction 1,809 1,808 2,879 —% (37)%
Owner occupied 7,261 5,523 6,849 31% 6%
Non-owner occupied 2,509 2,802 4,927 (10)% (49)%
Total commercial real estate 9,770 8,325 11,776 17% (17)%
Commercial and industrial 4,176 1,905 2,803 119% 49%
Agriculture 725 912 345 (21)% 110%
1st lien 5,142 7,352 4,462 (30)% 15%
Junior lien 881 732 750 20% 17%
Total 1-4 family 6,023 8,084 5,212 (25)% 16%
Multifamily Residential 226 191 n/m 18%
Home equity lines of credit 1,770 4,164 3,433 (57)% (48)%
Other consumer 1,130 1,001 943 13% 20%
Total consumer 2,900 5,165 4,376 (44)% (34)%
Total $ 26,401 27,097 28,434 (3)% (7)%
           
_______          
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) September 30,
2013
December 31,
2012
September 30,
2012
September 30,
2013
September 30,
2013
Custom and owner occupied construction  $ (1) 24 24 1
Pre-sold and spec construction 128 2,489 2,516 187 59
Total residential construction 127 2,513 2,540 187 60
Land development (97) 3,035 2,654 247 344
Consumer land or lots 486 4,003 2,537 838 352
Unimproved land 435 636 543 466 31
Developed lots for operative builders (36) 1,802 1,257 74 110
Commercial lots 250 362 41 254 4
Other construction (130) 130
Total land, lot and other construction 908 9,838 7,032 1,879 971
Owner occupied 271 1,312 1,254 1,124 853
Non-owner occupied 375 597 232 471 96
Total commercial real estate 646 1,909 1,486 1,595 949
Commercial and industrial 1,382 2,651 1,790 2,319 937
Agriculture 21 125 95 21
1st lien 347 5,257 2,864 511 164
Junior lien 145 3,464 2,668 288 143
Total 1-4 family 492 8,721 5,532 799 307
Multifamily residential (31) 43 86 31
Home equity lines of credit 1,516 2,124 1,412 1,702 186
Other consumer 109 262 133 453 344
Total consumer 1,625 2,386 1,545 2,155 530
Other 4 1 7 3
Total  $ 5,174 28,187 20,106 8,962 3,788

Visit our website at www.glacierbancorp.com

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

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