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Press release from GlobeNewswire (a Nasdaq OMX company)

Glacier Bancorp, Inc. Announces Results for the Quarter Ended December 31, 2013

Thursday, January 23, 2014

Glacier Bancorp, Inc. Announces Results for the Quarter Ended December 31, 2013

13:15 EST Thursday, January 23, 2014

HIGHLIGHTS:

  • Net Income of $26.5 million for the current quarter increased 28 percent from the prior year fourth quarter and net income of $95.6 million for the current year increased 27 percent from the prior year.
     
  • Dividend declared of $0.16 per share during the current quarter, the third increase since December 2012, totaling 23 percent.
     
  • Glacier Bancorp, Inc. stock price of $29.79 at December 31, 2013 increased 21 percent from the prior quarter and 103 percent from the prior year.
     
  • The loan portfolio increased $61.7 million, or 6 percent annualized, during the current quarter. Excluding the acquisitions, the loan portfolio increased $278 million, or 8 percent, during the current year.
     
  • Transaction deposit accounts of $3.1 billion increased $103 million, or 14 percent annualized, during the current quarter.
     
  • Current quarter net interest margin, on a tax-equivalent basis, of 3.88 percent, an increase of 32 basis points from the prior quarter net interest margin of 3.56 percent.
     
  • Interest income for the current quarter of $73.9 million, an increase of 6 percent from the prior quarter, and interest income for the current year of $264 million, an increase of 4 percent from the prior year.

Results Summary  

  Three Months ended Year ended
(Dollars in thousands, except per share data) December 31,
2013
September 30,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Net income  $ 26,546 25,628 20,758 95,644 75,516
Diluted earnings per share  $ 0.36 0.35 0.29 1.31 1.05
Return on average assets (annualized) 1.33% 1.27% 1.06% 1.23% 1.01%
Return on average equity (annualized) 10.96% 10.85% 9.17% 10.22% 8.54%

KALISPELL, Mont., Jan. 23, 2014 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq:GBCI) reported net income of $26.5 million for the current quarter, an increase of $5.8 million, or 28 percent, from the $20.8 million of net income for the prior year fourth quarter. Diluted earnings per share for the current quarter was $0.36 per share, an increase of $0.07, or 24 percent, from the prior year fourth quarter diluted earnings per share of $0.29. "The fourth quarter added to what was a very good year for Glacier Bancorp Inc., as stronger than anticipated loan growth and a much higher net interest margin allowed us to continue to deliver better results," said Mick Blodnick President and Chief Executive Officer. "In the current quarter we were again fortunate to be able to increase our dividend. This was the third time since December of last year the dividend has been raised. During that period we have increased our dividend by a total of 23 percent," Blodnick said. 

Net income for the year ended December 31, 2013 was $95.6 million, an increase of $20.1 million, or 27 percent, from the $75.5 million of net income for the prior year. Diluted earnings per share for the current year was $1.31 per share, an increase of $0.26, or 25 percent, from the diluted earnings per share in the prior year.

On July 31, 2013, the Company completed the acquisition of North Cascades Bancshares, Inc. ("NCBI"), and its subsidiary, North Cascades National Bank, and on May 31, 2013 the Company completed the acquisition of Wheatland Bankshares, Inc., and its subsidiary, First State Bank ("Wheatland"). The Company incurred $427 thousand of expense in connection with the acquisitions in the current quarter and $1.5 million for the year ended December 31, 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          
        $ Change from $ Change from
(Dollars in thousands) December 31,
2013
September 30,
2013
December 31,
2012
September 30,
2013
December 31,
2012
Cash and cash equivalents  $ 155,657 254,684 187,040 (99,027) (31,383)
Investment securities, available-for-sale 3,222,829 3,318,953 3,683,005 (96,124) (460,176)
Loans receivable          
Residential real estate 577,589 583,817 516,467 (6,228) 61,122
Commercial 2,901,283 2,828,287 2,278,905 72,996 622,378
Consumer and other 583,966 588,995 602,053 (5,029) (18,087)
Loans receivable 4,062,838 4,001,099 3,397,425 61,739 665,413
Allowance for loan and lease losses (130,351) (130,765) (130,854) 414 503
Loans receivable, net 3,932,487 3,870,334 3,266,571 62,153 665,916
Other assets 573,377 603,959 610,824 (30,582) (37,447)
Total assets  $ 7,884,350 8,047,930 7,747,440 (163,580) 136,910

Investment securities decreased $96 million, or 3 percent, during the current quarter and decreased $460 million, or 12 percent, from December 31, 2012 as the Company continued to reduce the overall size of the investment portfolio. The continued growth in the loan portfolio provides the Company the opportunity to retain higher yielding assets than what the Company could achieve with investment securities. At December 31, 2013, investment securities represented 41 percent of total assets, down from 48 percent at December 31, 2012.

A positive trend for the four consecutive quarters has been the organic loan growth. Loans receivable increased $61.7 million, or 2 percent, during the current quarter, including growth of $73.0 million in commercial loans. Excluding the loans receivable from the acquisitions, the loan portfolio increased $278 million, or 8 percent, during the current year with increases in both residential real estate and commercial loans. Excluding the acquisitions, the largest dollar increase during the current year was in commercial loans which increased $294 million, or 13 percent, of which $200 million of the increase was in commercial real estate loans. The decreases in consumer and other loans were 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
Year ended
December 31,
2013
At or for the
Nine Months
ended
September 30,
2013

At or for the
Year ended
December 31,
2012
Allowance for loan and lease losses      
Balance at beginning of period  $ 130,854 130,854 137,516
Provision for loan losses 6,887 5,085 21,525
Charge-offs (13,643) (8,962) (34,672)
Recoveries 6,253 3,788 6,485
Balance at end of period  $ 130,351 130,765 130,854
Other real estate owned  $ 26,860 36,531 45,115
Accruing loans 90 days or more past due 604 174 1,479
Non-accrual loans 81,956 88,293 96,933
Total non-performing assets 1  $ 109,420 124,998 143,527
Non-performing assets as a percentage of subsidiary assets 1.39% 1.56% 1.87%
Allowance for loan and lease losses as a percentage of non-performing loans 158% 148% 133%
Allowance for loan and lease losses as a percentage of total loans 3.21% 3.27% 3.85%
Net charge-offs as a percentage of total loans 0.18% 0.13% 0.83%
Accruing loans 30-89 days past due  $ 32,116 26,401 27,097
__________      
1 As of December 31, 2013, non-performing assets have not been reduced by U.S. government guarantees of $5.4 million.

Non-performing assets at December 31, 2013 were $109 million, a decrease of $15.6 million, or 12 percent, during the current quarter and a decrease of $34.1 million, or 24 percent, from a year ago. The largest category of non-performing assets was the land, lot and other construction category (i.e. regulatory classification) which was $51.6 million, or 47 percent, of the non-performing assets at December 31, 2013. Included in this category was $25.1 million of land development loans and $13.6 million in unimproved land loans at December 31, 2013. The Company has continued to reduce its exposure to land, lot and other construction category over each of the prior two years. The Company's early stage delinquencies (accruing loans 30-89 days past due) of $32.1 million at December 31, 2013 increased $5.7 million, or 22 percent, from the prior quarter and increased $5.0 million, or 19 percent, from the prior year fourth quarter.

"We made further strides in lowering our non-performing assets as a number of projects were sold or paid off during the current quarter," said Blodnick. "Net charge-offs have been a pleasant surprise all year as we experienced a significant decline in charge-offs while at the same time recoveries were much better than projected. For the year net charge-offs were back to historical norms after four years at elevated levels," Blodnick said.

At December 31, 2013, the allowance for loan and lease losses ("allowance") was $130 million, a decrease of $414 thousand, or less than 1 percent from September 30, 2013, and a decrease of $503 thousand, or less than 1 percent from a year ago. The allowance was 3.21 percent of total loans outstanding at December 31, 2013, a decrease of 64 basis points from 3.85 percent at December 31, 2012. Such difference was primarily attributable to no allowance carried over from the acquisitions as a result of the acquired loans recorded at fair value. Excluding the acquired banks, the allowance was 3.54 percent of total loans outstanding at December 31, 2013, a 31 basis points decrease from the 3.85 percent at December 31, 2012. The allowance was 158 percent of non-performing loans at December 31, 2013, an increase from 148 percent at September 30, 2013 and an increase from 133 percent at December 31, 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
Fourth quarter 2013  $ 1,802 2,216 3.21% 0.79% 1.39%
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%

Net charged-off loans of $2.2 million during the current quarter increased $191 thousand, or 9 percent, compared to the prior quarter and decreased $5.9 million, or 73 percent, from the prior year fourth quarter. The current quarter provision for loan losses of $1.8 million decreased $105 thousand from the prior quarter and decreased $473 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 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)
December 31,
2013

September 30,
2013

December 31,
2012
$ Change from
September 30,
2013
$ Change from
December 31,
2012
Non-interest bearing deposits  $ 1,374,419 1,397,401 1,191,933 (22,982) 182,486
Interest bearing deposits 4,205,548 4,215,479 4,172,528 (9,931) 33,020
Repurchase agreements 313,394 314,313 289,508 (919) 23,886
FHLB advances 840,182 967,382 997,013 (127,200) (156,831)
Other borrowed funds 8,387 8,466 10,032 (79) (1,645)
Subordinated debentures 125,562 125,526 125,418 36 144
Other liabilities 53,608 71,556 60,059 (17,948) (6,451)
Total liabilities  $ 6,921,100 7,100,123 6,846,491 (179,023) 74,609

Non-interest bearing deposits of $1.374 billion at December 31, 2013 decreased $23.0 million, or 2 percent, during the current quarter. Excluding the acquisitions, non-interest bearing deposits at December 31, 2013 increased $75.6 million, or 6 percent, during the current year. Interest bearing deposits of $4.206 billion at December 31, 2013 included $205 million of wholesale deposits (i.e., brokered deposits classified as NOW, money market deposit and certificate accounts). Excluding a decrease of $123 million in wholesale deposits during the current quarter, interest bearing deposits at December 31, 2013 increased $113 million, or 3 percent, during the current quarter. Excluding the acquisitions, interest bearing deposits at December 31, 2013 decreased $410 million, or 10 percent, from December 31, 2012 primarily the result of a decrease of $429 million in wholesale deposits.   Federal Home Loan Bank ("FHLB") advances of $840 million at December 31, 2013 decreased $127 million, or 13 percent, during the current quarter and decreased $157 million, or 16 percent, from prior year end and will continue to fluctuate as the need for funding changes.

Stockholders' Equity Summary          
           
(Dollars in thousands, except per share data)
December 31,
2013

September 30,
2013

December 31,
2012
$ Change from
September 30,
2013
$ Change from
December 31,
2012
Common equity  $ 953,605 937,824 852,987 15,781 100,618
Accumulated other comprehensive income 9,645 9,983 47,962 (338) (38,317)
Total stockholders' equity 963,250 947,807 900,949 15,443 62,301
Goodwill and core deposit intangible, net (139,218) (139,934) (112,274) 716 (26,944)
Tangible stockholders' equity  $ 824,032 807,873 788,675 16,159 35,357
Stockholders' equity to total assets 12.22% 11.78% 11.63%    
Tangible stockholders' equity to total tangible assets 10.64% 10.22% 10.33%    
Book value per common share  $ 12.95 12.76 12.52 0.19 0.43
Tangible book value per common share  $ 11.08 10.87 10.96 0.21 0.12
Market price per share at end of period  $ 29.79 24.68 14.71 5.11 15.08

Tangible stockholders' equity of $824 million at year end increased $16.2 million from the prior quarter and $35.4 million, or 4 percent, from the prior year end. The higher capital levels were the result of $45 million of Company stock issued in connection with the acquisitions and an increase in earnings retention of $51.4 million which were offset by the decrease in accumulated other comprehensive income of $38.3 million. Tangible book value per common share of $11.08 increased $0.12 per share from the prior year end.

Cash Dividend

On November 26, 2013, the Company's Board of Directors declared a cash dividend of $0.16 per share, payable December 19, 2013 to shareholders of record on December 10, 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 December 31, 2013   
Compared to September 30, 2013 and December 31, 2012  
         
Revenue Summary        
         
  Three Months ended  
(Dollars in thousands) December 31,
2013
September 30,
2013
December 31,
2012
 
Net interest income        
Interest income  $ 73,939 69,531 59,666  
Interest expense 6,929 7,186 8,165  
Total net interest income 67,010 62,345 51,501  
Non-interest income        
Service charges, loan fees, and other fees 14,695 15,119 12,845  
Gain on sale of loans 4,935 7,021 9,164  
Loss on sale of investments (403)  
Other income 3,372 2,136 3,384  
Total non-interest income 23,002 23,873 25,393  
   $ 90,012 86,218 76,894  
Net interest margin (tax-equivalent) 3.88% 3.56% 3.05%  
         
         
(Dollars in thousands) $ Change from
September 30,
2013
$ Change from
December 31,
2012
% Change from
September 30,
2013
% Change from
December 31,
2012
Net interest income        
Interest income  $ 4,408  $ 14,273 6% 24%
Interest expense (257) (1,236) (4)% (15)%
Total net interest income 4,665 15,509 7% 30%
Non-interest income        
Service charges, loan fees, and other fees (424) 1,850 (3)% 14%
Gain on sale of loans (2,086) (4,229) (30)% (46)%
Loss on sale of investments 403 (100)% n/m
Other income 1,236 (12) 58%
Total non-interest income (871) (2,391) (4)% (9)%
   $ 3,794  $ 13,118 4% 17%
_______        
n/m - not measurable        

Net Interest Income

The current quarter interest income of $73.9 million increased $4.4 million, or 6 percent, over the prior quarter primarily as a result of the increase in interest income from investments. The current quarter increase in interest income on the investment portfolio was driven by 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 fourth consecutive quarter, compared to significant increases experienced during the preceding seven quarters. Included in the current quarter's interest income was $9.0 million of premium amortization on investment securities compared to $15.2 million in the prior quarter. The current quarter's $6.2 million decrease in premium amortization compared to a decrease of $3.2 million in premium amortization in the prior quarter. The current quarter interest income also increased as a result of increases in interest income on residential real estate loans and commercial loans. The increase in interest income on residential real estate loans during the current quarter resulted from both volume and rate increases and the increase in commercial loan interest income was the result of volume increases.

The current quarter interest income of $73.9 million also increased $14.3 million, or 24 percent, over the prior year fourth quarter and was driven by the increase in interest income on the investment portfolio and the increase in interest income on commercial loans. Interest income on investment securities of $23.5 million increased $9.6 million, or 69 percent, over the prior year fourth quarter as premium amortization decreased $14.3 million. The latest quarter's interest income on commercial loans of $34.7 million increased $5.0 million, or 17 percent, over the prior year fourth quarter as a result of increased volume of commercial loans.

In the fourth quarter, interest expense of $6.9 million decreased $257 thousand, or 4 percent, from the prior quarter and decreased $1.2 million, or 15 percent, from the prior year fourth quarter. The decrease in interest expense from the prior quarter and the prior year quarter was the result of decreases in deposit interest rates and a decrease in the volume of borrowings. The cost of total funding (including non-interest bearing deposits) for the current quarter was 40 basis points compared to 41 basis points for the prior quarter and 48 basis points for the prior year fourth quarter.

This quarter's net interest margin as a percentage of earning assets, on a tax-equivalent basis, was 3.88 percent, an increase of 32 basis points from the prior quarter net interest margin of 3.56 percent. The increase in the net interest margin was driven by the increasing 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 69 basis points increase in yield on the investment securities during the current quarter, 61 basis points was due to the decrease in premium amortization. The premium amortization in the current quarter accounted for a 51 basis points reduction in the net interest margin compared to a 82 basis points reduction in the prior quarter and 128 basis points reduction in the net interest margin in the prior year fourth quarter. "Growth in the Bank's loan portfolio throughout the year was significant to the improvement in the net interest income and net interest margin for the current quarter and 2013," said Ron Copher, Chief Financial Officer.  "The reduction in premium amortization from investment securities over the course of 2013 was also a significant factor."

Non-interest Income

Non-interest income for the current quarter totaled $23.0 million, a decrease of $871 thousand over the prior quarter and a decrease of $2.4 million over the same quarter last year. Service charge fee income decreased $424 thousand, or 3 percent, from the prior quarter due to seasonal activity. Service charge fee income increased $1.9 million, or 14 percent, from the prior year fourth quarter which was driven by increases in deposit accounts and changes in internal deposit processing. A gain of $4.9 million on the sale of loans in the current quarter was a reduction of $2.1 million, or 30 percent, from the prior quarter and a decrease of $4.2 million, or 46 percent, from the prior year fourth quarter. The Company continued to experience a slowdown in refinance activity as mortgage rates moved up, although, 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 $3.4 million for the current quarter increased $1.2 million, or 58 percent, from the prior quarter primarily as a result of an increase in income related to other real estate owned ("OREO"). Included in other income was operating revenue of $153 thousand from OREO and a gain of $1.4 million on the sales of OREO, the combined total of $1.6 million for the most recent quarter compared to $433 thousand for the prior quarter and $910 thousand for the prior year fourth quarter.

Non-interest Expense Summary        
  Three Months ended  
(Dollars in thousands) December 31,
2013
September 30,
2013
December 31,
2012
 
Compensation and employee benefits  $ 27,258 27,469 24,083  
Occupancy and equipment 6,723 6,421 6,043  
Advertising and promotions 1,847 1,897 1,478  
Outsourced data processing 1,623 1,232 889  
Other real estate owned 2,295 1,049 3,570  
Regulatory assessments and insurance 1,519 1,677 1,637  
Core deposit intangibles amortization 717 693 491  
Other expense 11,052 9,930 9,817  
Total non-interest expense  $ 53,034 50,368 48,008  
         
(Dollars in thousands) $ Change from
September 30,
2013
$ Change from
December 31,
2012
% Change from
September 30,
2013
% Change from
December 31,
2012
Compensation and employee benefits  $ (211)  $ 3,175 (1)% 13%
Occupancy and equipment 302 680 5% 11%
Advertising and promotions (50) 369 (3)% 25%
Outsourced data processing 391 734 32% 83%
Other real estate owned 1,246 (1,275) 119% (36)%
Regulatory assessments and insurance (158) (118) (9)% (7)%
Core deposit intangibles amortization 24 226 3% 46%
Other expense 1,122 1,235 11% 13%
Total non-interest expense  $ 2,666  $ 5,026 5% 10%

Non-interest expense of $53.0 million for the current quarter increased by $2.7 million, or 5 percent, from the prior quarter and increased by $5.0 million, or 10 percent, from the prior year fourth quarter. Compensation and employee benefits increased by $3.2 million, or 13 percent, from the prior year fourth quarter primarily as a result of the acquisitions. Occupancy and equipment expense increased $302 thousand, or 5 percent, from the prior quarter and increased $680 thousand, or 11 percent, from the prior year fourth quarter as a result of the acquisitions. Outsourced data processing expense increased $391 thousand, or 32 percent, from the prior quarter and increased $734 thousand, or 83 percent, from the prior year fourth quarter again as a result of the acquired banks' outsourced data processing expense. OREO expense increased $1.2 million, or 119 percent, from the prior quarter and decreased $1.3 million, or 36 percent, from the prior year fourth quarter. The current quarter OREO expense of $2.3 million included $679 thousand of operating expense, $1.3 million of fair value write-downs, and $341 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 $1.1 million, or 11 percent, over the prior quarter primarily as a result of increases in loan repurchase losses and debit card fraud losses which were partially offset by decreases in professional and outside services expenses. Other expense increased $1.2 million, or 13 percent, from the prior year fourth quarter primarily from debit card fraud losses and other deposit account related losses.

Efficiency Ratio

The efficiency ratio for the current quarter was 54 percent compared to 56 percent for the prior year fourth 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 Year ended December 31, 2013
Compared to December 31, 2012 
         
Revenue Summary        
  Year ended    
(Dollars in thousands) December 31,
2013
December 31,
2012

$ Change

% Change
Net interest income        
Interest income  $ 263,576  $ 253,757  $ 9,819 4%
Interest expense 28,758 35,714 (6,956) (19)%
Total net interest income 234,818 218,043 16,775 8%
         
Non-interest income        
Service charges, loan fees, and other fees 54,460 49,706 4,754 10%
Gain on sale of loans 28,517 32,227 (3,710) (12)%
Loss on sale of investments (299) (299) n/m
Other income 10,369 9,563 806 8%
Total non-interest income 93,047 91,496 1,551 2%
   $ 327,865  $ 309,539  $ 18,326 6%
Net interest margin (tax-equivalent) 3.48% 3.37%    
________        
n/m - not measurable        

Net Interest Income

Net interest income for 2013 increased $16.8 million, or 8 percent, over last year. Interest income for the current year increased $9.8 million, or 4 percent, from the prior year and was principally due to the increased volume of commercial loans in addition to the decrease in premium amortization on investment securities, which were partially reduced by the decrease in yields on the loan portfolio. Interest income was reduced by $64.1 million in premium amortization on investment securities during the current year which was a decrease of $7.9 million from the prior year.

Interest expense for 2013 decreased $7.0 million, or 19 percent, from the prior year 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 current year was 42 basis points compared to 55 basis points for the prior year.

The net interest margin, on a tax-equivalent basis, for 2013 was 3.48 percent, an 11 basis points increase from the net interest margin of 3.37 percent for 2012. The increase in the net interest margin was driven by the decreased interest rates on deposits and borrowings. The net interest margin was further supported by the continued shift in earning assets from investment securities to the higher yielding loan portfolio and the increased yield on the investment securities. The increased yield on investment securities was driven by lower premium amortization on investment securities. The premium amortization for 2013 accounted for a 90 basis points reduction in the net interest margin, which was a decrease of 14 basis points compared to the 104 basis points reduction in the net interest margin for last year.

Non-interest Income

Non-interest income of $93.0 million for 2013 increased $1.6 million, or 2 percent, over last year. Service charge fee income increased $4.8 million, or 10 percent, from the prior year which was driven by increases in the number of deposit accounts and changes in internal deposit processing. Gains of $28.5 million on the sale of loans for the current year decreased $3.7 million, or 12 percent, from the prior year as a result of the slowdown in refinance activity. Other income for the current year increased $806 thousand, or 8 percent, over the prior year. Included in other income was operating revenue of $400 thousand from OREO and gains of $3.1 million on the sale of OREO, which combined totaled $3.5 million for the current year compared to $2.4 million for the prior year.

Non-interest Expense Summary        
         
  Year ended    
(Dollars in thousands) December 31,
2013
December 31,
2012

$ Change

% Change
Compensation and employee benefits  $ 104,221 95,373 8,848 9%
Occupancy and equipment 24,875 23,837 1,038 4%
Advertising and promotions 6,913 6,413 500 8%
Outsourced data processing 4,493 3,324 1,169 35%
Other real estate owned 7,196 18,964 (11,768) (62)%
Regulatory assessments and insurance 6,362 7,313 (951) (13)%
Core deposit intangibles amortization 2,401 2,110 291 14%
Other expense 38,856 36,087 2,769 8%
Total non-interest expense  $ 195,317 193,421 1,896 1%

Compensation and employee benefits for 2013 increased $8.8 million, or 9 percent, from the same period last year. Outsourced data processing expense increased $1.2 million, or 35 percent, from the prior year primarily from the acquired banks' outsourced data processing expense. OREO expense of $7.2 million in the current year decreased $11.8 million, or 62 percent, from the prior year. The OREO expense for the current year included $2.7 million of operating expenses, $3.6 million of fair value write-downs, and $880 thousand of loss on sale of OREO. Other expense for the current year increased by $2.8 million, or 8 percent, from the prior year and was attributable to the legal and professional expenses associated with the acquisitions, debit card fraud losses and deposit account losses.

Provision for loan losses

The provision for loan losses was $6.9 million for 2013, a decrease of $14.6 million, or 68 percent, from the same period in the prior year. Net charged-off loans during the current year were $7.4 million, a decrease of $20.8 million from the prior year.

Efficiency Ratio

The efficiency ratio was 55 percent for 2013 and 54 percent for 2012. Although there was an increase net interest income during 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) December 31,
2013
September 30,
2013
December 31,
2012
Assets      
Cash on hand and in banks  $ 109,995 130,285 123,270
Federal funds sold 10,527 23,135
Interest bearing cash deposits 35,135 101,264 63,770
Cash and cash equivalents 155,657 254,684 187,040
Investment securities, available-for-sale 3,222,829 3,318,953 3,683,005
Loans held for sale 46,738 61,505 145,501
Loans receivable 4,062,838 4,001,099 3,397,425
Allowance for loan and lease losses (130,351) (130,765) (130,854)
Loans receivable, net 3,932,487 3,870,334 3,266,571
Premises and equipment, net 167,671 168,633 158,989
Other real estate owned 26,860 36,531 45,115
Accrued interest receivable 41,898 44,261 37,770
Deferred tax asset 43,549 47,957 20,394
Core deposit intangible, net 9,512 10,228 6,174
Goodwill 129,706 129,706 106,100
Non-marketable equity securities 52,192 52,192 48,812
Other assets 55,251 52,946 41,969
Total assets  $ 7,884,350 8,047,930 7,747,440
       
Liabilities      
Non-interest bearing deposits  $ 1,374,419 1,397,401 1,191,933
Interest bearing deposits 4,205,548 4,215,479 4,172,528
Securities sold under agreements to repurchase 313,394 314,313 289,508
Federal Home Loan Bank advances 840,182 967,382 997,013
Other borrowed funds 8,387 8,466 10,032
Subordinated debentures 125,562 125,526 125,418
Accrued interest payable 3,505 3,568 4,675
Other liabilities 50,103 67,988 55,384
Total liabilities 6,921,100 7,100,123 6,846,491
       
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 744 743 719
Paid-in capital 690,918 689,751 641,737
Retained earnings - substantially restricted 261,943 247,330 210,531
Accumulated other comprehensive income 9,645 9,983 47,962
Total stockholders' equity 963,250 947,807 900,949
Total liabilities and stockholders' equity  $ 7,884,350 8,047,930 7,747,440
Number of common stock shares issued and outstanding 74,373,296 74,307,951 71,937,222
           
Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Operations
           
           
  Three Months ended Year ended
(Dollars in thousands, except per share data) December 31,
2013
September 30,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Interest Income          
Residential real estate loans  $ 7,919 7,320 7,831 29,525 30,850
Commercial loans 34,662 34,291 29,661 127,450 121,425
Consumer and other loans 7,869 8,447 8,287 32,089 35,096
Investment securities 23,489 19,473 13,887 74,512 66,386
Total interest income 73,939 69,531 59,666 263,576 253,757
Interest Expense          
Deposits 3,286 3,398 4,135 13,870 18,183
Securities sold under agreements to repurchase 221 209 311 867 1,308
Federal Home Loan Bank advances 2,581 2,730 2,851 10,610 12,566
Federal funds purchased and other borrowed funds 46 54 53 206 229
Subordinated debentures 795 795 815 3,205 3,428
Total interest expense 6,929 7,186 8,165 28,758 35,714
Net Interest Income 67,010 62,345 51,501 234,818 218,043
Provision for loan losses 1,802 1,907 2,275 6,887 21,525
Net interest income after provision for loan losses 65,208 60,438 49,226 227,931 196,518
Non-Interest Income          
Service charges and other fees 13,363 13,711 11,621 49,478 45,343
Miscellaneous loan fees and charges 1,332 1,408 1,224 4,982 4,363
Gain on sale of loans 4,935 7,021 9,164 28,517 32,227
Loss on sale of investments (403) (299)
Other income 3,372 2,136 3,384 10,369 9,563
Total non-interest income 23,002 23,873 25,393 93,047 91,496
Non-Interest Expense          
Compensation and employee benefits 27,258 27,469 24,083 104,221 95,373
Occupancy and equipment 6,723 6,421 6,043 24,875 23,837
Advertising and promotions 1,847 1,897 1,478 6,913 6,413
Outsourced data processing 1,623 1,232 889 4,493 3,324
Other real estate owned 2,295 1,049 3,570 7,196 18,964
Regulatory assessments and insurance 1,519 1,677 1,637 6,362 7,313
Core deposit intangibles amortization 717 693 491 2,401 2,110
Other expense 11,052 9,930 9,817 38,856 36,087
Total non-interest expense 53,034 50,368 48,008 195,317 193,421
Income Before Income Taxes 35,176 33,943 26,611 125,661 94,593
Federal and state income tax expense 8,630 8,315 5,853 30,017 19,077
Net Income  $ 26,546 25,628 20,758 95,644 75,516
Basic earnings per share  $ 0.36 0.35 0.29 1.31 1.05
Diluted earnings per share  $ 0.36 0.35 0.29 1.31 1.05
Dividends declared per share  $ 0.16 0.15 0.14 0.60 0.53
Average outstanding shares - basic 74,341,256 73,945,523 71,937,222 73,191,713 71,928,570
Average outstanding shares - diluted 74,417,361 74,021,871 71,937,286 73,260,278 71,928,656
             
Glacier Bancorp, Inc.
Average Balance Sheet
             
             
  Three Months ended Year ended
  December 31, 2013 December 31, 2013
(Dollars in thousands)
Average
Balance

Interest &
Dividends
Average
Yield/
Rate
 
Average
Balance
 
Interest &
Dividends
Average
Yield/
Rate
Assets            
Residential real estate loans  $ 645,567 7,919 4.91%  $ 623,433 29,525 4.74%
Commercial loans 2,812,421 34,662 4.89% 2,542,255 127,450 5.01%
Consumer and other loans 579,440 7,869 5.39% 586,649 32,089 5.47%
Total loans 1 4,037,428 50,450 4.96% 3,752,337 189,064 5.04%
Tax-exempt investment securities 2 1,159,889 16,567 5.71% 1,064,457 61,924 5.82%
Taxable investment securities 3 2,217,332 12,386 2.23% 2,525,317 33,112 1.31%
Total earning assets 7,414,649 79,403 4.25% 7,342,111 284,100 3.87%
Goodwill and intangibles 139,609     125,315    
Non-earning assets 336,999     338,866    
Total assets  $ 7,891,257      $ 7,806,292    
             
Liabilities            
Non-interest bearing deposits  $ 1,357,572 —%  $ 1,244,332 —%
NOW accounts 1,052,779 333 0.13% 999,288 1,217 0.12%
Savings accounts 591,528 76 0.05% 540,495 276 0.05%
Money market deposit accounts 1,167,104 588 0.20% 1,075,625 2,169 0.20%
Certificate accounts 1,122,565 2,095 0.74% 1,114,010 9,039 0.81%
Wholesale deposits 4 291,009 194 0.26% 434,249 1,169 0.27%
FHLB advances 840,860 2,581 1.22% 971,554 10,610 1.09%
Repurchase agreements, federal funds purchased and other borrowed funds 441,260 1,062 0.95% 431,046 4,278 0.99%
Total funding liabilities 6,864,677 6,929 0.40% 6,810,599 28,758 0.42%
Other liabilities 66,015     59,497    
Total liabilities 6,930,692     6,870,096    
             
Stockholders' Equity            
Common stock 743     732    
Paid-in capital 690,164     667,107    
Retained earnings 256,451     239,138    
Accumulated other comprehensive income 13,207     29,219    
Total stockholders' equity 960,565     936,196    
Total liabilities and stockholders' equity  $ 7,891,257      $ 7,806,292    
Net interest income (tax-equivalent)    $ 72,474      $ 255,342  
Net interest spread (tax-equivalent)     3.85%     3.45%
Net interest margin (tax-equivalent)     3.88%     3.48%
             
__________            
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 $5.1 million and $19.0 million on tax-exempt investment security income for the three months and year ended December 31, 2013, respectively.
3 Includes tax effect of $381 thousand and $1.5 million on investment security tax credits for the three months and year ended December 31, 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) December 31,
2013
September 30,
2013
December 31,
2012
September 30,
2013
December 31,
2012
Custom and owner occupied construction  $ 50,352 40,187 40,327 25% 25%
Pre-sold and spec construction 34,217 38,702 34,970 (12)% (2)%
Total residential construction 84,569 78,889 75,297 7% 12%
           
Land development 73,132 75,282 80,132 (3)% (9)%
Consumer land or lots 109,175 111,331 104,229 (2)% 5%
Unimproved land 50,422 51,986 53,459 (3)% (6)%
Developed lots for operative builders 15,951 15,082 16,675 6% (4)%
Commercial lots 12,585 15,707 19,654 (20)% (36)%
Other construction 103,807 99,868 56,109 4% 85%
Total land, lot, and other construction 365,072 369,256 330,258 (1)% 11%
           
Owner occupied 811,479 815,401 710,161 —% 14%
Non-owner occupied 588,114 541,688 452,966 9% 30%
Total commercial real estate 1,399,593 1,357,089 1,163,127 3% 20%
           
Commercial and industrial 523,354 528,792 420,459 (1)% 24%
           
Agriculture 279,959 283,801 145,890 (1)% 92%
           
1st lien 733,406 738,842 738,854 (1)% (1)%
Junior lien 73,348 76,277 82,083 (4)% (11)%
Total 1-4 family 806,754 815,119 820,937 (1)% (2)%
           
Multifamily residential 123,154 113,880 93,328 8% 32%
           
Home equity lines of credit 298,119 298,935 319,779 —% (7)%
Other consumer 130,758 128,374 109,019 2% 20%
Total consumer 428,877 427,309 428,798 —% —%
           
Other 98,244 88,469 64,832 11% 52%
Total loans receivable, including loans held for sale 4,109,576 4,062,604 3,542,926 1% 16%
Less loans held for sale 1 (46,738) (61,505) (145,501) (24)% (68)%
           
Total loans receivable  $ 4,062,838 4,001,099 3,397,425 2% 20%
_______          
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) December 31,
2013
September 30,
2013
December 31,
2012
December 31,
2013
December 31,
2013
December 31,
2013
Custom and owner occupied construction  $ 1,248 1,270 1,343 1,248
Pre-sold and spec construction 828 1,157 1,603 403 425
Total residential construction 2,076 2,427 2,946 1,651 425
             
Land development 25,062 25,834 31,471 15,213 9,849
Consumer land or lots 2,588 3,500 6,459 1,759 829
Unimproved land 13,630 14,977 19,121 12,194 1,436
Developed lots for operative builders 2,215 2,284 2,393 1,504 711
Commercial lots 2,899 2,978 1,959 300 2,599
Other construction 5,167 5,776 5,105 178 4,989
Total land, lot and other construction 51,561 55,349 66,508 31,148 20,413
             
Owner occupied 14,270 19,224 15,662 12,426 1,844
Non-owner occupied 4,301 5,453 4,621 2,908 1,393
Total commercial real estate 18,571 24,677 20,283 15,334 3,237
             
Commercial and industrial 6,400 7,452 5,970 6,238 160 2
             
Agriculture 3,529 2,488 6,686 3,064 465
             
1st lien 17,630 20,959 25,739 14,983 434 2,213
Junior lien 4,767 5,648 6,660 4,767
Total 1-4 family 22,397 26,607 32,399 19,750 434 2,213
             
Multifamily residential 253
             
Home equity lines of credit 4,544 5,599 8,041 4,469 75
Other consumer 342 399 441 302 10 30
Total consumer 4,886 5,998 8,482 4,771 10 105
Total  $ 109,420 124,998 143,527 81,956 604 26,860
           
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) December 31,
2013
September 30,
2013
December 31,
2012
September 30,
2013
December 31,
2012
Custom and owner occupied construction  $ 202 5 n/m 3,940%
Pre-sold and spec construction 772 893 (100)% (100)%
Total residential construction 202 772 898 (74)% (78)%
           
Land development 917 191 (100)% (100)%
Consumer land or lots 1,716 504 762 240% 125%
Unimproved land 615 311 422 98% 46%
Developed lots for operative builders 8 9 422 (11)% (98)%
Commercial lots 68 11 (100)% (100)%
           
Total land, lot and other construction 2,339 1,809 1,808 29% 29%
           
Owner occupied 5,321 7,261 5,523 (27)% (4)%
Non-owner occupied 2,338 2,509 2,802 (7)% (17)%
Total commercial real estate 7,659 9,770 8,325 (22)% (8)%
           
Commercial and industrial 3,542 4,176 1,905 (15)% 86%
           
Agriculture 1,366 725 912 88% 50%
           
1st lien 12,386 5,142 7,352 141% 68%
Junior lien 482 881 732 (45)% (34)%
Total 1-4 family 12,868 6,023 8,084 114% 59%
           
Multifamily Residential 1,075 226 376% n/m
           
Home equity lines of credit 1,999 1,770 4,164 13% (52)%
Other consumer 1,066 1,130 1,001 (6)% 6%
Total consumer 3,065 2,900 5,165 6% (41)%
Total  $ 32,116 26,401 27,097 22% 19%
______          
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) December 31,
2013
September 30,
2013
December 31,
2012
December 31,
2013
December 31,
2013
Custom and owner occupied construction  $ (51) (1) 24 51
Pre-sold and spec construction (10) 128 2,489 187 197
Total residential construction (61) 127 2,513 187 248
           
Land development (383) (97) 3,035 664 1,047
Consumer land or lots 843 486 4,003 1,232 389
Unimproved land 715 435 636 770 55
Developed lots for operative builders (81) (36) 1,802 74 155
Commercial lots 248 250 362 254 6
Other construction (473) (130) 473
Total land, lot and other construction 869 908 9,838 2,994 2,125
           
Owner occupied 350 271 1,312 1,513 1,163
Non-owner occupied 397 375 597 516 119
Total commercial real estate 747 646 1,909 2,029 1,282
           
Commercial and industrial 3,096 1,382 2,651 4,386 1,290
           
Agriculture 53 21 125 53
           
1st lien 681 347 5,257 980 299
Junior lien 106 145 3,464 352 246
Total 1-4 family 787 492 8,721 1,332 545
           
Multifamily residential (39) (31) 43 39
           
Home equity lines of credit 1,606 1,516 2,124 1,918 312
Other consumer 324 109 262 731 407
Total consumer 1,930 1,625 2,386 2,649 719
Other 8 4 1 13 5
           
Total  $ 7,390 5,174 28,187 13,643 6,253
CONTACT: Michael J. Blodnick
(406) 751-4701
Ron J. Copher
(406) 751-7706

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