News Column

Glacier Bancorp, Inc. Announces Results for the Quarter Ended June 30, 2014

July 24, 2014

HIGHLIGHTS:

• All time record net income of $28.7 million for the current quarter, an increase of 7 percent from the prior quarter net income of $26.7 million and an increase of 26 percent from the prior year second quarter net income of $22.7 million.

 • Current quarter diluted earnings per share of $0.38, an increase of 23 percent from the prior year second quarter diluted earnings per share of $0.31.

 • The loan portfolio increased $115 million, or 3 percent, during the current quarter. Excluding acquisitions, the loan portfolio increased $314 million, or 9 percent, from the prior year second quarter.

 • Non-interest bearing deposits increased $68.7 million, or 5 percent, during the current quarter. Excluding acquisitions, non-interest bearing deposits increased $153 million, or 12 percent, from the prior year second quarter.

 • Current quarter service charges and other fees of $13.5 million, increased $1.3 million, or 11 percent from prior quarter and increased $1.7 million, or 15 percent from the prior year second quarter.

 • Early stage delinquencies (accruing loans 30-89 days past due) decreased $24.3 million to $18.6 million during the current quarter and decreased $3.4 million, or 16 percent, from the prior year second quarter.

 • Dividend declared of $0.17 per share during the current quarter, an increase of $0.01 per share, or 6 percent, over the prior quarter. The dividend was the 117th consecutive quarterly dividend declared by the Company.

 • Announced the definitive agreement to acquire First National Bank of the Rockies, a community bank based in Grand Junction, Colorado, with total assets of $345 million at June 30, 2014.

Results Summary

  Three Months ended Six Months ended
(Dollars in thousands, except per share data)June 30,

2014
March 31,

2014
June 30,

2013
June 30,

2014
June 30,

2013
Net income  $ 28,677 26,730 22,702 55,407 43,470
Diluted earnings per share  $ 0.38 0.36 0.31 0.74 0.60
Return on average assets (annualized) 1.47 % 1.39 % 1.17 %  1.43 % 1.14 %
Return on average equity (annualized) 11.45 % 11.04 % 9.78 % 11.25 % 9.49 %


KALISPELL, Mont., July 24, 2014 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (Nasdaq:GBCI) reported net income of $28.7 million for the current quarter, an increase of $6.0 million, or 26 percent, from the $22.7 million of net income for the prior year second quarter. Diluted earnings per share for the current quarter was $0.38 per share, an increase of $0.07, or 23 percent, from the prior year second quarter diluted earnings per share of $0.31. Included in the current quarter non-interest expense was $834 thousand of one-time conversion expenses related to recent acquisitions.   "We achieved solid results in the second quarter as a number of earnings metrics approach levels we have not seen since before 2007, driven primarily by improved non interest income and further reduction in credit costs," said Mick Blodnick, President and Chief Executive Officer. "In addition, in the quarter we announced and are very excited and look forward to the completion in August of the acquisition of First National Bank of the Rockies which will further expand our presence in Western Colorado," Blodnick said.

Net income for the six months ended June 30, 2014 was $55.4 million, an increase of $11.9 million, from the $43.5 million of net income for the prior year first six months. Diluted earnings per share for the first six months of the current year was $0.74 per share, an increase of $0.14, or 23 percent, from the diluted earnings per share in the prior year first six months.

Asset Summary

          $ Change from
(Dollars in thousands)Jun 30,

2014
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Cash and cash equivalents  $ 202,358 161,691 155,657 132,456 40,667 46,701 69,902
Investment securities, available-for-sale 2,559,411 2,669,180 3,222,829 3,721,377 (109,769) (663,418) (1,161,966)
Investment securities, held-to-maturity 483,557 481,476 2,081 483,557 483,557
Total investment securities 3,042,968 3,150,656 3,222,829 3,721,377 (107,688) (179,861) (678,409)
Loans receivable              
Residential real estate 587,340 580,306 577,589 531,834 7,034 9,751 55,506
Commercial 3,023,915 2,928,995 2,901,283 2,544,787 94,920 122,632 479,128
Consumer and other 592,024 579,328 583,966 596,835 12,696 8,058 (4,811)
Loans receivable 4,203,279 4,088,629 4,062,838 3,673,456 114,650 140,441 529,823
Allowance for loan and lease losses (130,636) (130,729) (130,351) (130,883) 93 (285) 247
Loans receivable, net 4,072,643 3,957,900 3,932,487 3,542,573 114,743 140,156 530,070
Other assets 572,125 560,476 573,377 600,410 11,649 (1,252) (28,285)
Total assets  $ 7,890,094 7,830,723 7,884,350 7,996,816 59,371 5,744 (106,722)


Total investment securities decreased $108 million, or 3 percent, during the current quarter and decreased $678 million, or 18 percent, from June 30, 2013 as the Company continued to reduce the overall size of the investment portfolio. At June 30, 2014, investment securities represented 39 percent of total assets, down from 41 percent at December 31, 2013 and 47 percent at June 30, 2013.

Total loans receivable increased by $115 million, or 3 percent, during the current quarter with improvement in all loan categories. "We hoped that once we entered the spring our loan volumes would begin to pick up which they did," Blodnick said. "The growth this past quarter was well distributed with all of the bank divisions contributing to the success we had increasing our loan portfolio. It's also encouraging to see that this momentum appears to be carrying over into the third quarter which is important if we hope to reach our goal of 5% loan growth this year," Blodnick said. The largest dollar and percentage increase was in commercial loans which increased $94.9 million, or 3 percent, during the current quarter which was attributable to increases in loan production and seasonal draws on construction and agricultural lines. The Company was also encouraged by the current quarter increase in the consumer and other loan category since the Company has experienced several quarters of decreases in this loan category, albeit some of the current quarter increase was the result of seasonal fluctuations. Excluding the loans receivable from the acquisition of North Cascades National Bank ("NCB") at July 31, 2013, the loan portfolio increased $314 million, or 9 percent, since June 30, 2013 of which $294 million came from growth in commercial loans.

Credit Quality Summary

(Dollars in thousands) At or for the Six 

Months ended

June 30,

2014
At or for the

Three Months

ended

March 31,

2014
At or for the

Year ended

December 31,

2013
At or for the Six

Months ended

June 30,

2013
Allowance for loan and lease losses        
Balance at beginning of period  $ 130,351 130,351 130,854 130,854
Provision for loan losses 1,361 1,122 6,887 3,178
Charge-offs (3,324) (1,586) (13,643) (5,885)
Recoveries 2,248 842 6,253 2,736
Balance at end of period  $ 130,636 130,729 130,351 130,883
Other real estate owned  $ 26,338 27,332 26,860 40,713
Accruing loans 90 days or more past due 980 569 604 456
Non-accrual loans 75,147 78,905 81,956 89,355
Total non-performing assets 1  $ 102,465 106,806 109,420 130,524
Non-performing assets as a percentage of subsidiary assets 1.30 % 1.37 % 1.39 % 1.64 %
Allowance for loan and lease losses as a percentage of non-performing loans 172 % 164 % 158 % 146 %
Allowance for loan and lease losses as a percentage of total loans 3.11 % 3.20 % 3.21 % 3.56 %
Net charge-offs as a percentage of total loans 0.03 % 0.02 % 0.18 % 0.09 %
Accruing loans 30-89 days past due  $ 18,592 42,862 32,116 22,062
Accruing troubled debt restructurings  $ 73,981 77,311 81,110 80,453
Non-accrual troubled debt restructurings  $ 35,786 37,113 42,461 45,428
__________        
1 As of June 30, 2014, non-performing assets have not been reduced by U.S. government guarantees of $4.2 million.


Non-performing assets at June 30, 2014 were $102 million, a decrease of $4.3 million, or 4 percent, during the current quarter and a decrease of $28.1 million, or 21 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 $49.1 million, or 48 percent, of the non-performing assets at June 30, 2014. The Company has continued to make progress by reducing this category the past few years. The Company experienced a significant decrease in early stage delinquencies (accruing loans 30-89 days past due) during the current quarter. Early stage delinquencies of $18.6 million at June 30, 2014 decreased $24.3 million, or 57 percent, from the prior quarter and decreased $3.4 million, or 16 percent, from the prior year second quarter.

The allowance for loan and lease losses ("allowance") was $131 million at June 30, 2014 and remained stable compared to the prior quarter and a year ago. The allowance was 3.11 percent of total loans outstanding at June 30, 2014 compared to 3.20 percent at March 31, 2014 and 3.56 percent for the same quarter last year.

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
Second quarter 2014  $ 239 332 3.11 % 0.44 % 1.30 %
First quarter 2014 1,122 744 3.20 % 1.05 % 1.37 %
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 %


Another positive trend was the decrease in net-charged off loans which was 0.03 percent of total loans for the first half of 2014 compared to 0.09 percent of total loans for the same period last year. Net charged-off loans for the current quarter totaled $332 thousand, a decrease of $412 thousand, or 55 percent, from the prior quarter and a decrease of $698 thousand, or 68 percent, from the prior year second quarter, respectively. The current quarter provision for loan losses of $239 thousand decreased $883 thousand from the prior quarter and decreased $839 thousand from the prior year second 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

          $ Change from
(Dollars in thousands)Jun 30,

2014
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Non-interest bearing deposits  $ 1,464,938 1,396,272 1,374,419 1,236,104 68,666 90,519 228,834
Interest bearing deposits 4,280,898 4,228,193 4,205,548 4,122,093 52,705 75,350 158,805
Repurchase agreements 315,240 327,322 313,394 300,024 (12,082) 1,846 15,216
FHLB advances 607,305 686,744 840,182 1,217,445 (79,439) (232,877) (610,140)
Other borrowed funds 7,367 8,069 8,387 8,489 (702) (1,020) (1,122)
Subordinated debentures 125,633 125,597 125,562 125,490 36 71 143
Other liabilities 78,698 73,566 53,608 58,169 5,132 25,090 20,529
Total liabilities  $ 6,880,079 6,845,763 6,921,100 7,067,814 34,316 (41,021) (187,735)


Non-interest bearing deposits of $1.465 billion at June 30, 2014 increased $68.7 million, or 5 percent, during the current quarter. Excluding the NCB acquisition, non-interest bearing deposits at June 30, 2014 increased $153 million, or 12 percent, since June 30, 2013. Interest bearing deposits of $4.281 billion at June 30, 2014 included $215 million of wholesale deposits (i.e., brokered deposits classified as NOW, money market deposits and certificate accounts). Excluding an increase of $37.0 million in wholesale deposits during the current quarter, interest bearing deposits at June 30, 2014 increased $15.7 million, or 39 basis points. Excluding the NCB acquisition and a $157 million decrease in wholesale deposits, interest bearing deposits at June 30, 2014 increased $96.7 million, or 3 percent, from June 30, 2013.   In addition to the increase in deposit balances, the Company has benefited from a higher than expected increase in the number of checking accounts during the current year. Federal Home Loan Bank ("FHLB") advances of $607 million at June 30, 2014 decreased $79 million, or 12 percent, during the current quarter and decreased $610 million, or 50 percent, from June 30, 2013 as the need for borrowings continued to decrease concurrent with the increase in deposits.

Stockholders' Equity Summary

          $ Change from  
(Dollars in thousands, except per share data)Jun 30,

2014
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Common equity  $ 985,809 969,672 953,605 905,620 16,137 32,204 80,189
Accumulated other comprehensive income 24,206 15,288 9,645 23,382 8,918 14,561 824
Total stockholders' equity 1,010,015 984,960 963,250 929,002 25,055 46,765 81,013
Goodwill and core deposit intangible, net (137,815) (138,508) (139,218) (126,771) 693 1,403 (11,044)
Tangible stockholders' equity  $ 872,200 846,452 824,032 802,231 25,748 48,168 69,969
Stockholders' equity to total assets 12.80 % 12.58 % 12.22 % 11.62 %      
Tangible stockholders' equity to total tangible assets 11.25 % 11.00 % 10.64 % 10.19 %      
Book value per common share  $ 13.56 13.23 12.95 12.63 0.33 0.61 0.93
Tangible book value per common share  $ 11.71 11.37 11.08 10.91 0.34 0.63 0.80
Market price per share at end of period  $ 28.38 29.07 29.79 22.19 (0.69) (1.41) 6.19


Total stockholders' equity eclipsed $1 billion for the first time ever ending the quarter at $1.010 billion. Tangible stockholders' equity of $872 million at June 30, 2014 increased $25.7 million, or 3 percent, from the prior quarter which was driven by earnings retention and an increase in accumulated other comprehensive income. Tangible stockholders' equity increased $70.0 million from a year ago as the result of $16.7 million of Company stock issued in connection with the acquisition of NCB and an increase in earnings retention. Tangible book value per common share of $11.71 increased $0.34 per share from the prior quarter and increased $0.80 per share from the prior year second quarter.

Cash Dividend

On June 25, 2014, the Company's Board of Directors declared a cash dividend of $0.17 per share, an increase of $0.01 per share, or 6 percent, from the prior quarter. The dividend is payable July 17, 2014 to shareholders of record on July 8, 2014. The dividend was the 117th consecutive quarterly dividend declared by the Company and 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 June 30, 2014 
Compared to March 31, 2014 and June 30, 2013
       
Revenue Summary      
       
  Three Months ended
(Dollars in thousands)June 30,

2014
March 31,

2014
June 30,

2013
Net interest income      
Interest income  $ 73,963 74,087 62,151
Interest expense 6,528 6,640 7,185
Total net interest income 67,435 67,447 54,966
Non-interest income      
Service charges, loan fees, and other fees 14,747 13,248 12,971
Gain on sale of loans 4,778 3,595 7,472
(Loss) gain on sale of investments (48) (51) 241
Other income 3,027 2,596 2,538
Total non-interest income 22,504 19,388 23,222
   $ 89,939 86,835 78,188
Net interest margin (tax-equivalent) 3.99 % 4.02 % 3.30 %
         
(Dollars in thousands) $ Change from

March 31,

2014
$ Change from

June 30,

2013
% Change from

March 31,

2014
% Change from

June 30,

2013
Net interest income        
Interest income  $ (124)  $ 11,812 — % 19 %
Interest expense (112) (657) (2) % (9) %
Total net interest income (12) 12,469 — % 23 %
Non-interest income        
Service charges, loan fees, and other fees 1,499 1,776 11 % 14 %
Gain on sale of loans 1,183 (2,694) 33 % (36) %
(Loss) gain on sale of investments 3 (289) (6) % (120) %
Other income 431 489 17 % 19 %
Total non-interest income 3,116 (718) 16 % (3) %
   $ 3,104  $ 11,751 4 % 15 %


Net Interest Income

Net interest income declined by $12 thousand for the quarter to $67.4 million. The current quarter interest income of $74.0 million decreased $124 thousand, or less than 1 percent, from the prior quarter. This decrease was primarily driven by the reduction in the investment portfolio and offset in part by the increase in interest income on commercial loans. The premium amortization (net of discount accretion) on the investment securities ("premium amortization") included in the current quarter interest income was $7.0 million compared to $7.6 million in the prior quarter. The premium amortization appears to have stabilized following reductions over the prior six consecutive quarters.

The current quarter's interest income increased $11.8 million, or 19 percent, over the prior year second quarter and was primarily attributable to higher interest income on the investment portfolio and commercial loans. Interest income on investment securities of $23.9 million increased $6.5 million, or 38 percent, over the prior year second quarter as a result of the premium amortization decreasing $11.4 million. The current quarter interest income on commercial loans of $35.3 million increased $5.4 million, or 18 percent, over the prior year quarter as a result of an increased volume of commercial loans.

The current quarter interest expense of $6.5 million decreased $112 thousand, or 2 percent, from the prior quarter and decreased $657 thousand, or 9 percent, from the prior year second quarter. The decrease in interest expense from the prior quarter and the prior year second quarter was the result of decreases in deposit interest rates and in the volume of borrowings. The cost of total funding (including non-interest bearing deposits) for the current quarter was 39 basis points compared to 40 basis points in the prior quarter and 43 basis points for the prior year second quarter.

The Company's current quarter net interest margin as a percentage of earning assets, on a tax-equivalent basis, was 3.99 percent, a decrease of 3 basis points from the prior quarter net interest margin of 4.02 percent. Similar to the prior quarter, the current quarter yield on the investment portfolio increased and there was a continuing shift in earning assets from investment securities to the higher yielding loan portfolio. The yield on the loans declined slightly causing the lower net interest margin.

The Company's current quarter net interest margin increased 69 basis points from the prior year second quarter net interest margin of 3.30 percent, such increase was primarily driven by the increased yield on the investment portfolio coupled with the significant shift in earning assets to the higher yielding loan portfolio. "We continue to work hard to change the mix of our asset base by reducing the size of our investment portfolio and replacing it with greater loan totals," said Ron Copher, Chief Financial Officer.  "If we can maintain the present pace of loan volume through the second half of the year, the net interest margin should stabilize at or near its current level," Copher said.

Non-interest Income

Non-interest income for the current quarter totaled $22.5 million, an increase of $3.1 million over the prior quarter and a decrease of $718 thousand over the same quarter last year.   The Company has benefited from the increased volume and the increased number of deposit accounts which was reflected in the $1.5 million, or 11 percent, increase in service charge fee income from the prior quarter and the $1.8 million, or 14 percent, increase from the prior year second quarter, respectively. The gain of $4.8 million on the sale of residential loans in the current quarter was an increase of $1.2 million, or 33 percent, from the prior quarter and was attributable to seasonal increases. The gain on the sale of the residential loans in the current quarter decreased $2.7 million, or 36 percent, from the prior year second quarter when the Company experienced a slowdown in refinance activity which continued through the second half of 2013 and the first half of 2014. Included in other income was operating revenue of $34 thousand from other real estate owned ("OREO") and gain of $581 thousand from the sales of OREO, a combined total of $615 thousand for the most recent quarter compared to $811 thousand for the prior quarter and $715 thousand for the prior year second quarter.

Non-interest Expense Summary

  Three Months ended  
(Dollars in thousands)June 30,

2014
March 31,

2014
June 30,

2013
 
Compensation and employee benefits  $ 28,988 28,634 24,917  
Occupancy and equipment 6,733 6,613 5,906  
Advertising and promotions 1,948 1,777 1,621  
Outsourced data processing 2,032 1,288 813  
Other real estate owned 566 507 2,968  
Regulatory assessments and insurance 1,028 1,592 1,525  
Core deposit intangibles amortization 693 710 505  
Other expense 10,685 8,949 10,226  
Total non-interest expense  $ 52,673 50,070 48,481  
         
(Dollars in thousands) $ Change from

March 31,

2014
$ Change from

June 30,

2013
% Change from

March 31,

2014
% Change from

June 30,

2013
Compensation and employee benefits  $ 354  $ 4,071 1 % 16 %
Occupancy and equipment 120 827 2 % 14 %
Advertising and promotions 171 327 10 % 20 %
Outsourced data processing 744 1,219 58 % 150 %
Other real estate owned 59 (2,402) 12 % (81)%
Regulatory assessments and insurance (564) (497) (35)% (33)%
Core deposit intangibles amortization (17) 188 (2)% 37 %
Other expense 1,736 459 19 % 4 %
Total non-interest expense  $ 2,603  $ 4,192 5 % 9 %


Compensation and employee benefits increased by $4.1 million, or 16 percent, from the prior year second quarter due to the increased number of employees from the NCB acquisition and First State Bank ("FSB") acquisition at May 31, 2013 along with additional benefit costs. Occupancy and equipment expense increased $827 thousand, or 14 percent, from the prior year second quarter as a result of the acquisitions and increases in equipment expense related to the Company's expansion of information and technology infrastructure. Advertising and promotion expense increased $327 thousand, or 20 percent, compared to the prior year second quarter primarily from recent marketing promotions at a number of the Bank divisions. Outsourced data processing expense increased $744 thousand, or 58 percent, from the prior quarter and increased $1.2 million, or 150 percent, from the prior year second quarter because of the acquired banks' outsourced data processing expense and conversion related expenses. The current quarter OREO expense of $566 thousand included $429 thousand of operating expense, $98 thousand of fair value write-downs, and $39 thousand of loss on sale of OREO. OREO expense may fluctuate as the Company continues to work through non-performing assets and dispose of foreclosed properties. Other expense increased $1.7 million, or 19 percent, from the prior quarter primarily from expenses connected with New Market Tax Credit investments.

Efficiency Ratio

The efficiency ratio for the current quarter was 55 percent compared to 56 percent for the prior year second quarter. The improvement in the efficiency ratio was principally due to the increase in net interest income which exceeded the increase in non-interest expense.

Operating Results for Six Months ended June 30, 2014 
Compared to June 30, 2013 
         
Revenue Summary        
         
  Six Months ended    
(Dollars in thousands)June 30,

2014
June 30,

2013
$ Change % Change
Net interest income        
Interest income  $ 148,050  $ 120,106  $ 27,944 23 %
Interest expense 13,168 14,643 (1,475) (10)%
Total net interest income 134,882 105,463 29,419 28 %
Non-interest income        
Service charges, loan fees, and other fees 27,995 24,646 3,349 14 %
Gain on sale of loans 8,373 16,561 (8,188) (49)%
(Loss) gain on sale of investments (99) 104 (203) (195)%
Other income 5,623 4,861 762 16 %
Total non-interest income 41,892 46,172 (4,280) (9)%
 $ 176,774$ 151,635$ 25,139 17 %
Net interest margin (tax-equivalent) 4.01 % 3.23 %    


Net Interest Income

Net interest income for the first six months of the current year was $135 million, an increase of $29.4 million, or 28 percent, over the same period last year. Interest income for the first six months of the current year increased $27.9 million, or 23 percent, from the prior year first six months and was principally due to the decrease in premium amortization on investment securities and an increase income from commercial loans. Interest income was reduced by $14.6 million in premium amortization on investment securities during the first half of the current year compared to $39.8 million for the same period last year. Current year interest income on commercial loans increased $11.8 million, or 20 percent, from the first half of last year and was primarily the result of an increased volume of commercial loans.

Interest expense for the first six months of the current year decreased $1.5 million, or 10 percent, from the prior year first six months and was primarily attributable to the decreases in certificate of deposit interest rates and decreases in the volume of borrowings and wholesale deposits. The funding cost (including non-interest bearing deposits) for the first six months of 2014 was 39 basis points compared to 44 basis points for the first six months of 2013.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the first six months of 2014 was 4.01 percent, a 78 basis points increase from the net interest margin of 3.23 percent for the first six months of 2013. The increase in the net interest margin was due to the increased yield on the investment portfolio combined with the shift in earning assets to the higher yielding loan portfolio. The premium amortization for the first six months of 2014 accounted for a 43 basis points reduction in the net interest margin, which was a decrease of 68 basis points compared to the 111 basis points reduction in the net interest margin for the same period last year.

Non-interest Income

Non-interest income of $41.9 million for the first half of 2014 decreased $4.3 million, or 9 percent, over the same period last year. The gains of $8.4 million on the sale of residential loans for the first half of 2014 decreased $8.2 million, or 49 percent, from the first half of 2013 as a consequence of the slowdown in refinance activity. Service charges and other fees of $28.0 million for the first six months of 2014 increased $3.3 million, or 14 percent, from the same period last year.   Included in other income was operating revenue of $98 thousand from OREO and gains of $1.3 million from the sales of OREO, which totaled $1.4 million for the first half of 2014 compared to $1.4 million for the same period in the prior year.

Non-interest Expense Summary

  Six Months ended    
(Dollars in thousands)June 30,

2014
June 30,

2013
$ Change % Change
Compensation and employee benefits  $ 57,622 49,494 8,128 16 %
Occupancy and equipment 13,346 11,731 1,615 14 %
Advertising and promotions 3,725 3,169 556 18 %
Outsourced data processing 3,320 1,638 1,682 103 %
Other real estate owned 1,073 3,852 (2,779) (72)%
Regulatory assessments and insurance 2,620 3,166 (546) (17)%
Core deposit intangibles amortization 1,403 991 412 42 %
Other expense 19,634 17,874 1,760 10 %
Total non-interest expense  $ 102,743 91,915 10,828 12 %


Compensation and employee benefits for the first six months of 2014 increased $8.1 million, or 16 percent, from the same period last year due to the increased number of employees from the acquired banks, additional benefit costs and annual salary increases. Occupancy and equipment expense increased $1.6 million, or 14 percent, as a result of the acquisitions and increases in equipment expense related to additional information and technology infrastructure. Outsourced data processing expense increased $1.7 million, or 103 percent, from the prior year first six months as a result of the acquired banks outsourced data processing expense and general increases in data processing expense. OREO expense of $1.1 million in the first six months of 2014 decreased $2.8 million, or 72 percent, from the first six months of the prior year. OREO expense for the first six months of 2014 included $714 thousand of operating expenses, $151 thousand of fair value write-downs, and $208 thousand of loss on sale of OREO. Other expense for the first half of 2014 increased by $1.8 million, or 10 percent, from the first half of the prior year primarily from debit card expenses and other deposit account related charges.

Provision for loan losses

The provision for loan losses was $1.4 million for the first six months of 2014, a decrease of $1.8 million, or 57 percent, from the same period in the prior year. Net charged-off loans during the first six months of 2014 was $1.1 million, a decrease of $2.1 million from the first six months of 2013.

Efficiency Ratio

The efficiency ratio was 54 percent for the first six months of 2014 and 55 percent for the first six months of 2013.   The improvement in the efficiency ratio resulted from net interest income outpacing the increase in non-interest expense and the decrease in non-interest income.

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,   each operating in Wyoming; North Cascades Bank, Chelan, operating in Washington; and Bank of the San Juans, Durango, operating in Colorado.

Forward Looking Statements

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

• the risks associated with lending and potential adverse changes of the credit quality of loans in the Company's portfolio, 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, OREO 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;• consolidation in the financial services industry in the Company's markets resulting in the creation of larger financial institutions which may have greater resources could change the competitive landscape;• dependence on the CEO, the senior management team and the Presidents of the Bank divisions;• potential interruption or breach in security of the Company's systems; and• the Company's success in managing risks involved in the foregoing.

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

Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Financial Condition
         
(Dollars in thousands, except per share data)June 30,

2014
March 31,

2014
December 31,

2013
June 30,

2013
Assets        
Cash on hand and in banks  $ 130,114 116,267 109,995 105,272
Federal funds sold 2,852 14,055 10,527 6,375
Interest bearing cash deposits 69,392 31,369 35,135 20,809
Cash and cash equivalents 202,358 161,691 155,657 132,456
Investment securities, available-for-sale 2,559,411 2,669,180 3,222,829 3,721,377
Investment securities, held-to-maturity 483,557 481,476
Total investment securities 3,042,968 3,150,656 3,222,829 3,721,377
Loans held for sale 56,021 36,133 46,738 95,495
Loans receivable 4,203,279 4,088,629 4,062,838 3,673,456
Allowance for loan and lease losses (130,636) (130,729) (130,351) (130,883)
Loans receivable, net 4,072,643 3,957,900 3,932,487 3,542,573
Premises and equipment, net 167,741 166,757 167,671 161,918
Other real estate owned 26,338 27,332 26,860 40,713
Accrued interest receivable 41,765 41,274 41,898 43,593
Deferred tax asset 34,505 39,997 43,549 35,115
Core deposit intangible, net 8,109 8,802 9,512 7,262
Goodwill 129,706 129,706 129,706 119,509
Non-marketable equity securities 52,715 52,192 52,192 49,752
Other assets 55,225 58,283 55,251 47,053
Total assets  $ 7,890,094 7,830,723 7,884,350 7,996,816
Liabilities        
Non-interest bearing deposits  $ 1,464,938 1,396,272 1,374,419 1,236,104
Interest bearing deposits 4,280,898 4,228,193 4,205,548 4,122,093
Securities sold under agreements to repurchase 315,240 327,322 313,394 300,024
Federal Home Loan Bank advances 607,305 686,744 840,182 1,217,445
Other borrowed funds 7,367 8,069 8,387 8,489
Subordinated debentures 125,633 125,597 125,562 125,490
Accrued interest payable 3,163 3,173 3,505 3,824
Other liabilities 75,535 70,393 50,103 54,345
Total liabilities 6,880,079 6,845,763 6,921,100 7,067,814
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 745 745 744 736
Paid-in capital 692,343 692,196 690,918 672,035
Retained earnings - substantially restricted 292,721 276,731 261,943 232,849
Accumulated other comprehensive income 24,206 15,288 9,645 23,382
Total stockholders' equity 1,010,015 984,960 963,250 929,002
Total liabilities and stockholders' equity  $ 7,890,094 7,830,723 7,884,350 7,996,816
Number of common stock shares issued and outstanding 74,467,908 74,465,666 74,373,296 73,564,900
 
Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Operations
           
  Three Months ended Six Months ended
(Dollars in thousands, except per share data)June 30,

2014
March 31,

2014
June 30,

2013
June 30,

2014
June 30,

2013
Interest Income          
Residential real estate loans  $ 7,220 7,087 7,026 14,307 14,286
Commercial loans 35,267 35,042 29,865 70,309 58,497
Consumer and other loans 7,583 7,643 7,909 15,226 15,773
Investment securities 23,893 24,315 17,351 48,208 31,550
Total interest income 73,963 74,087 62,151 148,050 120,106
Interest Expense          
Deposits 3,061 3,089 3,474 6,150 7,186
Securities sold under agreements to repurchase 192 210 210 402 437
Federal Home Loan Bank advances 2,447 2,514 2,648 4,961 5,299
Federal funds purchased and other borrowed funds 48 53 54 101 106
Subordinated debentures 780 774 799 1,554 1,615
Total interest expense 6,528 6,640 7,185 13,168 14,643
Net Interest Income 67,435 67,447 54,966 134,882 105,463
Provision for loan losses 239 1,122 1,078 1,361 3,178
Net interest income after provision for loan losses 67,196 66,325 53,888 133,521 102,285
Non-Interest Income          
Service charges and other fees 13,547 12,219 11,818 25,766 22,404
Miscellaneous loan fees and charges 1,200 1,029 1,153 2,229 2,242
Gain on sale of loans 4,778 3,595 7,472 8,373 16,561
(Loss) gain on sale of investments (48) (51) 241 (99) 104
Other income 3,027 2,596 2,538 5,623 4,861
Total non-interest income 22,504 19,388 23,222 41,892 46,172
Non-Interest Expense          
Compensation and employee benefits 28,988 28,634 24,917 57,622 49,494
Occupancy and equipment 6,733 6,613 5,906 13,346 11,731
Advertising and promotions 1,948 1,777 1,621 3,725 3,169
Outsourced data processing 2,032 1,288 813 3,320 1,638
Other real estate owned 566 507 2,968 1,073 3,852
Regulatory assessments and insurance 1,028 1,592 1,525 2,620 3,166
Core deposit intangibles amortization 693 710 505 1,403 991
Other expense 10,685 8,949 10,226 19,634 17,874
Total non-interest expense 52,673 50,070 48,481 102,743 91,915
Income Before Income Taxes 37,027 35,643 28,629 72,670 56,542
Federal and state income tax expense 8,350 8,913 5,927 17,263 13,072
Net Income  $ 28,677 26,730 22,702 55,407 43,470
Basic earnings per share  $ 0.38 0.36 0.31 0.74 0.60
Diluted earnings per share  $ 0.38 0.36 0.31 0.74 0.60
Dividends declared per share  $ 0.17 0.16 0.15 0.33 0.29
Average outstanding shares - basic 74,467,576 74,437,393 72,480,019 74,452,568 72,224,263
Average outstanding shares - diluted 74,499,660 74,480,818 72,548,172 74,491,459 72,282,104
 
Glacier Bancorp, Inc.
Average Balance Sheet
             
         
  Three Months ended

June 30, 2014
Six Months ended

June 30, 2014 
       
(Dollars in thousands) Average

Balance
Interest &

Dividends
Average

Yield/

Rate
Average

Balance
Interest &

Dividends
Average

Yield/

Rate
Assets            
Residential real estate loans  $ 619,720 7,220 4.66 %  $ 614,655 14,307 4.66 %
Commercial loans 2,934,715 35,267 4.82 % 2,908,530 70,309 4.87 %
Consumer and other loans 580,128 7,583 5.24 % 578,386 15,226 5.31 %
Total loans 1 4,134,563 50,070 4.86 % 4,101,571 99,842 4.91 %
Tax-exempt investment securities 2 1,197,586 16,890 5.64 % 1,194,649 33,658 5.63 %
Taxable investment securities 3 1,998,096 12,558 2.51 % 2,049,494 25,622 2.50 %
Total earning assets 7,330,245 79,518 4.35 % 7,345,714 159,122 4.37 %
Goodwill and intangibles 138,187     138,542    
Non-earning assets 334,187     325,952    
Total assets  $ 7,802,619      $ 7,810,208    
Liabilities            
Non-interest bearing deposits  $ 1,387,554 — %  $ 1,358,805 — %
NOW accounts 1,093,724 270 0.10 % 1,095,567 604 0.11 %
Savings accounts 634,706 81 0.05 % 631,843 161 0.05 %
Money market deposit accounts 1,192,876 619 0.21 % 1,190,215 1,219 0.21 %
Certificate accounts 1,138,736 1,971 0.69 % 1,135,798 3,955 0.70 %
Wholesale deposits 4 201,848 120 0.24 % 175,280 211 0.24 %
FHLB advances 666,819 2,447 1.45 % 745,882 4,961 1.32 %
Repurchase agreements, federal funds purchased and other borrowed funds 428,308 1,020 0.96 % 433,972 2,057 0.96 %
Total funding liabilities 6,744,571 6,528 0.39 % 6,767,362 13,168 0.39 %
Other liabilities 53,166     49,497    
Total liabilities 6,797,737     6,816,859    
Stockholders' Equity            
Common stock 745     744    
Paid-in capital 692,157     691,893    
Retained earnings 289,984     282,466    
Accumulated other comprehensive income 21,996     18,246    
Total stockholders' equity 1,004,882     993,349    
Total liabilities and stockholders' equity  $ 7,802,619      $ 7,810,208    
Net interest income (tax-equivalent)    $ 72,990      $ 145,954  
Net interest spread (tax-equivalent)     3.96 %     3.98 %
Net interest margin (tax-equivalent)     3.99 %     4.01 %
             
__________            
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 $5.2 million and $10.3 million on tax-exempt investment security income for the three and six months ended June 30, 2014.          
3 Includes tax effect of $371 thousand and $743 thousand on investment security tax credits for the three and six months ended June 30, 2014.          
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
(Dollars in thousands)Jun 30,

2014
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Custom and owner occupied construction$ 51,497  $ 44,333$ 50,352$ 35,529 16 % 2 % 45 %
Pre-sold and spec construction 34,114 34,786 34,217 36,967 (2)% — % (8)%
Total residential construction85,61179,11984,56972,4968 % 1 %18 %
Land development 81,589 82,275 73,132 77,080 (1)% 12 % 6 %
Consumer land or lots 101,042 104,308 109,175 100,549 (3)% (7)% — %
Unimproved land 51,457 49,871 50,422 50,492 3 % 2 % 2 %
Developed lots for operative builders 15,123 15,984 15,951 15,105 (5)% (5)% — %
Commercial lots 17,238 15,609 12,585 16,987 10 % 37 % 1 %
Other construction 112,081 84,214 103,807 90,735 33 % 8 % 24 %
Total land, lot, and other construction378,530352,261365,072350,9487 % 4 %8 %
Owner occupied 816,859 812,727 811,479 753,692 1 % 1 % 8 %
Non-owner occupied 617,693 611,093 588,114 475,991 1 % 5 % 30 %
Total commercial real estate1,434,5521,423,8201,399,5931,229,6831 %2 %17 %
Commercial and industrial549,143523,071523,354470,1785 %5 %17 %
Agriculture288,555269,886279,959238,1367 %3 %21 %
1st lien 757,954 726,471 733,406 718,793 4 % 3 % 5 %
Junior lien 73,130 71,012 73,348 77,359 3 % — % (5)%
Total 1-4 family831,084797,483806,754796,1524 %3 %4 %
Multifamily residential152,169143,438123,154107,4376 %24 %42 %
Home equity lines of credit 309,282 298,073 298,119 304,859 4 % 4 % 1 %
Other consumer 134,414 131,030 130,758 123,947 3 % 3 % 8 %
Total consumer443,696429,103428,877428,8063 % 3 %3 %
Other95,960106,58198,24475,115(10)%(2)%28 %
Total loans receivable, including loans held for sale 4,259,300 4,124,762 4,109,576 3,768,951 3 % 4 % 13 %
Less loans held for sale 1(56,021)(36,133)(46,738)(95,495)55 %20 %(41)%
Total loans receivable$ 4,203,279$ 4,088,629$ 4,062,838$ 3,673,456 3 % 3 % 14 %
_______              
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-

Accrual

Loans
Accruing

Loans 90 Days

or More Past Due
Other

Real Estate

Owned
(Dollars in thousands)Jun 30,

2014
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Jun 30,

2014
Jun 30,

2014
Jun 30,

2014
Custom and owner occupied construction  $ 1,196 1,227 1,248 1,291 1,196
Pre-sold and spec construction 609 663 828 1,319 229 380
Total residential construction1,8051,8902,0762,6101,425380
Land development 23,718 24,555 25,062 26,004 14,821 8,897
Consumer land or lots 2,804 3,169 2,588 5,475 1,992 812
Unimproved land 12,421 12,965 13,630 15,611 11,529 892
Developed lots for operative builders 2,186 2,157 2,215 2,093 1,558 628
Commercial lots 2,787 2,842 2,899 3,185 282 2,505
Other construction 5,156 5,168 5,167 5,532 167 4,989
Total land, lot and other construction49,07250,85651,56157,90030,34918,723
Owner occupied 14,595 14,625 14,270 16,503 13,192 1,403
Non-owner occupied 3,956 3,563 4,301 5,091 2,914 39 1,003
Total commercial real estate18,55118,18818,57121,59416,106392,406
Commercial and industrial5,8505,0306,4007,1035,083532235
Agriculture3,5063,4843,5296,1463,17331302
1st lien 17,240 17,457 17,630 22,543 12,655 300 4,285
Junior lien 1,146 4,947 4,767 5,819 1,132 14
Total 1-4 family18,38622,40422,39728,36213,7873144,285
Multifamily residential729156253729
Home equity lines of credit 4,289 4,434 4,544 6,107 4,242 47
Other consumer 277 364 342 449 253 17 7
Total consumer4,5664,7984,8866,5564,495647
Total  $ 102,465 106,806 109,420 130,524 75,147 980 26,338
 
Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification (continued)
               
  Accruing 30-89 Days Delinquent Loans,  by Loan Type % Change from
(Dollars in thousands)Jun 30,

2014
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Custom and owner occupied construction $ —  $ 277  $ 202 $ — (100)% (100)% n/m
Pre-sold and spec construction 144 101 43 % n/m n/m
Total residential construction144378202(62)%(29)%n/m
Consumer land or lots 267 504 1,716 338 (47)% (84)% (21)%
Unimproved land 899 420 615 341 114 % 46 % 164 %
Developed lots for operative builders 1,163 8 146 (100)% (100)% (100)%
Total land, lot and other construction1,1662,0872,339825(44)%(50)%41 %
Owner occupied 6,125 9,099 5,321 7,297 (33)% 15 % (16)%
Non-owner occupied 1,665 2,901 2,338 2,247 (43)% (29)% (26)%
Total commercial real estate7,79012,0007,6599,544(35)%2 %(18)%
Commercial and industrial2,5286,1923,5423,844(59)%(29)%(34)%
Agriculture4972,7101,366169(82)%(64)%194 %
1st lien 2,408 15,018 12,386 2,807 (84)% (81)% (14)%
Junior lien 536 503 482 980 7 % 11 % (45)%
Total 1-4 family2,94415,52112,8683,787(81)%(77)%(22)%
Multifamily Residential6891,5351,075(55)%(36)%n/m
Home equity lines of credit 1,839 1,506 1,999 3,138 22 % (8)% (41)%
Other consumer 938 933 1,066 755 1 % (12)% 24 %
Total consumer2,7772,4393,0653,89314 %(9)%(29)%
Other57n/mn/mn/m
Total  $ 18,592  $ 42,862  $ 32,116  $ 22,062 (57)% (42)% (16)%
_______              
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)Jun 30,

2014
Mar 31,

2014
Dec 31,

2013
Jun 30,

2013
Jun 30,

2014
Jun 30,

2014
Custom and owner occupied construction $ — (51) (1)
Pre-sold and spec construction (39) (16) (10) (16) 39
Total residential construction(39)(16)(61)(17)39
Land development (333) 93 (383) (76) 127 460
Consumer land or lots 97 (69) 843 290 300 203
Unimproved land (126) (5) 715 233 25 151
Developed lots for operative builders (117) (17) (81) -11 9 126
Commercial lots (3) (2) 248 251 3
Other construction (473) (128)
Total land, lot and other construction(482)869559461943
Owner occupied (7) (18) 350 (306) 47 54
Non-owner occupied (184) (185) 397 268 50 234
Total commercial real estate(191)(203)747(38)97288
Commercial and industrial1,3431,0383,0968231,655312
Agriculture5321
1st lien 298 (199) 681 287 457 159
Junior lien 91 38 106 56 275 184
Total 1-4 family389(161)787343732343
Multifamily residential11(39)(31)1211
Home equity lines of credit (120) 51 1,606 1,346 82 202
Other consumer 175 34 324 141 284 109
Total consumer55851,9301,487366311
Other8211
Total  $ 1,076 744 7,390 3,149 3,324 2,248


Visit our website atwww.glacierbancorp.com

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

Source: Glacier Bancorp, Inc.


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