Glacier Bancorp, Inc. Announces Results for the Quarter Ended March 31, 2012

KALISPELL, Mont., April 19, 2012 /PRNewswire/ --

HIGHLIGHTS:

• Net income for the quarter increased 59 percent to $16.3 million and diluted earnings per share increased 64 percent to $0.23 from the prior year first quarter.
• Annualized return on average equity was 7.58 percent for the current quarter compared to 4.95 percent for the prior year first quarter.
• Non-interest deposits increased $28.2 million, or 11 percent annualized, during the current quarter from the prior quarter.
• Dividend declared of $0.13 per share during the quarter. 

Results Summary

Glacier Bancorp, Inc. (Nasdaq GS: GBCI) reported net income for the current quarter of $16.3 million, an increase of $6.0 million, or 59 percent, compared to $10.3 million for the prior year first quarter.  Diluted earnings per share for the current quarter was $0.23 per share, an increase of 64 percent from the prior year first quarter earnings per share of $0.14.  "Our performance continues to move in the right direction, although loan growth remains a formidable challenge for us." said Mick Blodnick, President and Chief Executive Officer.  "The reduction in our credit costs was the main driver that led to better earnings this quarter, a trend that we expect should continue this year,"  Blodnick said.

Asset Summary

Investment securities increased $112 million, or 4 percent, during the current quarter and increased $533 million, or 20 percent, from March 31, 2011.  During the current quarter and previous twelve months, the Company purchased investment securities to primarily offset the lack of loan growth and to maintain interest income.  The increase in investment securities for the current quarter occurred primarily in corporate and municipal bonds.  Investment securities represent 45 percent of total assets at March 31, 2012 versus 44 percent at December 31, 2011 and 39 percent at March 31, 2011. 

At March 31, 2012, the loan portfolio was $3.433 billion, a decrease of $32.9 million, or 1 percent, during the current quarter.  During the past twelve months, the loan portfolio decreased $214 million, or 6 percent, from total loans of $3.647 billion at March 31, 2011.  The continued downturn in the economy and resulting lack of loan demand were the primary reasons for the decrease in the loan portfolio.  Although there was a decrease in the loan portfolio during the current quarter, the Company was encouraged by the slowing rate of decline which hasn't occurred since 2009.  The largest decrease in dollars and percentage decrease during the current quarter was in consumer and other loans which decreased $19.1 million, or 3 percent, from December 31, 2011.  The decrease in consumer and other loans was primarily driven by the Company reducing its exposure to consumer land and lot loans in combination with customers paying down their lines of credit and reducing other debt.  Excluding net charge-offs of $9.6 million and loans transferred to other real estate owned of $11.0 million, loans decreased $12.3 million, or .4 percent, during the current quarter.  The Company continues to reduce its exposure to land, lot and other construction loans which totaled $361 million as of March 31, 2012, a decrease of $139 million, or 28 percent, since the prior year first quarter. 

Credit Quality Summary

At March 31, 2012, the allowance for loan and lease losses ("allowance") was $137 million, a decrease of $930 thousand from the prior quarter and a decrease of $4.2 million from a year ago.  The allowance was 3.98 percent of total loans outstanding at March 31, 2012, compared to 3.97 percent at December 31, 2011.  The allowance was 97 percent of non-performing loans at March 31, 2012, a decrease from 102 percent at the prior quarter end and an increase from 76 percent from the prior year first quarter.  The non-performing assets of $215 million remained stable compared to the prior quarter and decreased $53.0 million, or 20 percent, from the prior year first quarter.  The Company's early stage delinquencies (accruing loans 30-89 days past due) of $42.6 million at March 31, 2012 decreased from the prior quarter early stage delinquencies of $49.1 million and early stage delinquencies of $52.4 million at March 31, 2011.  The banks continue to actively manage the disposition of non-performing assets.

The largest category of non-performing assets was the land, lot and other construction category which was $108 million, or 50 percent, of the non-performing assets at March 31, 2012.  Included in this category was $50.7 million of land development assets and $31.9 million in unimproved land assets at March 31, 2012.  Although land, lot and other construction assets have historically put pressure on the Company's credit quality, the Company has continued to reduce this category.  During the current quarter, land, lot and other construction non-performing assets were reduced by $9.4 million, or 8 percent. 

Credit Quality Trends and Provision for Loan Losses

Net charged-off loans during the current quarter of $9.6 million remained stable compared to the prior quarter and decreased $6.2 million, or 39 percent, compared to the prior year first quarter.   The current quarter provision for loan losses was $8.6 million, which was nearly the same as the prior quarter and a decrease of $10.9 million from the first quarter of 2011.  Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will continue to determine the level of additional provision for loan loss expense.  "As expected, non-performing assets stayed flat this past quarter after a substantial reduction in the prior quarter," Blodnick said.  "This past quarter our banks spent most of their time and effort working to position properties for sale and queuing them up in order to resume the disposition of OREO properties along with non-performing loans." 

For additional information regarding credit quality and identification of the loan portfolio by regulatory classification, see the exhibits at the end of this press release.

Liability Summary

At March 31, 2012, non-interest bearing deposits of $1.039 billion increased $28.2 million, or 3 percent, since December 31, 2011 and increased $151 million, or 17 percent, since March  31, 2011.  Interest bearing deposits of $3.889 billion at March 31, 2012 included  $649 million of wholesale deposits of which $117 million were reciprocal deposits (e.g., Certificate of Deposit Account Registry System deposits).  In addition to reciprocal deposits, wholesale deposits include brokered deposits classified as NOW, money market deposit and certificate accounts.  Interest bearing deposits increased $78.4 million, or 2 percent, since December 31, 2011 and included an increase of $41.2 million in wholesale deposits.  Interest bearing deposits increased $225 million, or 6 percent, from March 31, 2011 and included an increase of $75.7 million in wholesale deposits.  The increase in deposits during the current quarter and throughout 2011 has been driven by the banks' success in generating new personal and business customer relationships, as well as existing customers retaining cash deposits for liquidity purposes due to the continued uncertainty in the current economic environment.  These deposit increases have been beneficial to the Company in funding the investment securities portfolio growth at low costs over the prior twelve months. 

The Company's level of borrowings has fluctuated as needed to supplement deposit growth and to fund the growth in investment securities.  Since the prior quarter end, Federal Home Loan Bank ("FHLB") advances decreased $74.0 million and have increased $34.9 million since March 31, 2011.  Included in the other liabilities at March 31, 2011 was a $129 million obligation for securities purchased on March 31, 2011 which were settled in April of 2011.

Stockholders' Equity Summary

Tangible stockholders' equity and book value per share increased $14.3 million and $0.20 per share from the prior year end, resulting in tangible stockholders' equity to tangible assets of 10.52 percent and tangible book value per share of $10.43 as of March 31, 2012.    The increases came from earnings retention and an increase in accumulated other comprehensive income.  Tangible stockholders' equity increased $66.6 million, or $0.92 per share since March 31, 2011, primarily a result of an increase in accumulated other comprehensive income.  The $15.1 million decrease in common equity from March 31, 2011 included a third quarter 2011 goodwill impairment charge (net of tax) of $32.6 million.

Cash Dividend

On March 28, 2012, the Company's Board of Directors declared a cash dividend of $0.13 per share, payable April 19, 2012 to shareholders of record on April 10, 2012.  Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations.

Operating Results for Three Months Ended March 31, 2012 Compared to December 31, 2011 and March 31, 2011

Revenue Summary

Net Interest Income

The current quarter net interest income of $58.3 million decreased $258 thousand, or .4 percent, over the prior quarter and increased $1.6 million, or 3 percent, over the prior year first quarter.   In spite of the significant collateralized mortgage obligation ("CMO") premium amortization (net of discount accretion) in the current quarter, interest income has remained relatively stable with only small decreases compared to the prior quarter and the prior year first quarter.  The current quarter CMO premium amortization was $12.8 million, an increase of $1.3 million over the prior quarter and an increase of $3.2 million over the prior year first quarter.  The decrease in interest expense of $599 thousand, or 6 percent, from the prior quarter and the decrease of $2.1 million, or 18 percent, in interest expense from the prior year first quarter was primarily driven by the decrease in interest rates on deposits as a result of the bank subsidiaries' continued focus on reducing funding costs.  The funding cost for the current quarter was 72 basis points compared to 77 basis points for the prior quarter and 96 basis points for the prior year first quarter. 

The current quarter net interest margin as a percentage of earning assets, on a tax-equivalent basis, was 3.73 percent, a decrease of 1 basis point from the prior quarter net interest margin of 3.74 percent and a decrease of 18 basis points from the prior year first quarter net interest margin of 3.91 percent.  Such decreases were a result of the reduction in yields on earning assets, the majority of which was from lower yielding investment securities and the increase in CMO premium amortization during the current quarter.  The CMO premium amortization in the current quarter accounted for a 76 basis point reduction in the net interest margin compared to a 69 basis point reduction in the prior quarter and 63 basis point reduction in the net interest margin in the prior year first quarter.  As a result of fewer loans moving to non-accrual status and the greater dispositions of existing non-accrual loans, the reversal of interest income on non-accrual loans accounted for only a 1 basis point reduction in the net interest margin during the current quarter.  "Once again, the banks continue to do a great job of lowering their funding cost, but it was not enough to offset the contraction in asset yields and the CMO premium amortization," said Ron J. Copher, Chief Financial Officer. 

Non-interest Income

Non-interest income for the current quarter totaled $20.3 million, a decrease of $1.7 million over the prior quarter and an increase of $2.9 million over the same quarter last year.  Gain on sale of loans decreased $213 thousand, or 3 percent, over the prior quarter as there was a slight reduction in origination volume.  However, gain on sale of loans increased $2.1 million, or 45 percent, over the same quarter last year, the result of an increase in refinance activity during the first quarter of 2012 compared to the first quarter of 2011.  Service charge fee income decreased $696 thousand from the linked quarter, the majority of which was from lower overdraft fees driven by the increased regulatory restrictions.  Service charge fee income increased $253 thousand from the prior year first quarter primarily due to the gain in debit card income as a result of the larger number of deposit accounts and greater volume of transactions.  Other income of $2.1 million for the current quarter was a decrease of $770 thousand from the prior quarter and an increase of $695 thousand from the prior year first quarter.  Included in other income was operating revenue of $51.2 thousand from other real estate owned and gains of $477 thousand on the sale of other real estate owned, which total $528 thousand for the current quarter compared to $822 thousand for the prior quarter and $268 thousand for the prior year first quarter.

Non-interest Expense Summary

Non-interest expense of $49.0 million for the current quarter decreased by $6.1 million, or 11 percent, from the prior quarter and increased by $6.6 million, or 15 percent, from the prior year first quarter.  The changes over the prior quarter and the prior year first quarter were driven primarily by other real estate owned expense.  Other real estate owned expense decreased $6.1 million, or 47 percent, from the prior quarter and increased $4.7 million, or 225 percent, from the prior year first quarter.  The current quarter other real estate owned expense of $6.8 million included $864 thousand of operating expense, $5.4 million of fair value write-downs, and $549 thousand of loss on sale of other real estate owned.  Other real estate owned expense will fluctuate as the Company continues to work through non-performing loans and  dispose of foreclosure properties.

Excluding other real estate owned expense, non-interest expense decreased $11 thousand, or 3 basis points, from the prior quarter and increased $1.8 million, or 5 percent, from the prior year first quarter.  Compensation and employee benefits increased by $2.2 million, or 11 percent, from the prior quarter and increased $2.0 million, or 9 percent, from the prior year first quarter.  Such increases were attributable to a revised Company incentive program and the restoration in 2012 of certain compensation cuts made in 2011.  Other expense decreased $1.8 million, or 18 percent, from the prior quarter as a result of decreases in several categories including loan expenses, outside service expense, and expenses associated with New Markets Tax Credit Investments.  The banks continue to work diligently in reducing expenses in areas where they have direct control.

Efficiency Ratio

The efficiency ratio for the current quarter was 51 percent compared to 53 percent for the prior year first quarter.  The lower efficiency ratio was the result of an increase in net interest income and non-interest income which more than offset the increase in non-interest expense.

About Glacier Bancorp, Inc.

Glacier Bancorp, Inc. is a regional multi-bank holding company providing commercial banking services in 60 communities in Montana, Idaho, Utah, Washington, Wyoming and Colorado.  Glacier Bancorp, Inc. is headquartered in Kalispell, Montana, and conducts its operations principally through eleven community bank subsidiaries. These subsidiaries include: six banks domiciled in Montana - Glacier Bank of Kalispell, First Security Bank of Missoula, Valley Bank of Helena, Big Sky Western Bank of Bozeman, Western Security Bank of Billings, and First Bank of Montana of Lewistown; two banks domiciled in Idaho - Mountain West Bank of Coeur d'Alene and Citizens Community Bank of Pocatello; two banks domiciled in Wyoming - 1st Bank of Evanston and First Bank of Wyoming; and one bank domiciled in Colorado - Bank of the San Juans of Durango.

On January 18, 2012, the Company announced it's plans to combine its eleven bank subsidiaries into a single commercial bank.  The bank subsidiaries will operate as separate divisions of Glacier Bank under the same names and management teams as before the consolidation.  As part of the consolidation, the Company has filed with the appropriate federal and state bank regulators the application to merge the bank subsidiaries.  The resulting bank Board of Directors and executive officers will be the Board of Directors and senior management team of Glacier Bancorp, Inc.  The consolidation is expected to be completed in early second quarter 2012, following regulatory approvals. 

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 declines in the housing and real estate markets in its geographic areas;
• increased loan delinquency rates;
• the risks presented by a continued economic downturn, 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 integration of acquisitions;
• the goodwill we have recorded in connection with acquisitions could become impaired, which may have an adverse impact on our 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 our common stock and our ability to raise additional capital in the future;
• competition from other financial services companies in our markets; 
• loss of services from the senior management team; and
• the Company's success in managing risks involved in the foregoing.

The Company does not undertake any obligation to publicly correct or update any forward-looking statement if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statement.

Visit our website at www.glacierbancorp.com

SOURCE Glacier Bancorp, Inc.