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Glacier Bancorp, Inc. Announces Results for the Quarter Ended December 31, 2018

4th Quarter 2018 Highlights:

  • Net income of $49.6 million for the current quarter, an increase of $14.9 million, or 43 percent, over the prior year fourth quarter net income of $34.7 million, excluding the impact of the revaluation of the net deferred tax asset in prior year.  In prior year fourth quarter, the Company recognized a one-time tax expense of $19.7 million from the revaluation of the net deferred tax asset as a result of the Tax Cuts and Jobs Act (“Tax Act”).  The Company believes that the financial results are more comparable excluding the impact of the revaluation of the net deferred tax asset, so we have included a Non-GAAP Financial Measures section within the earnings release that shows certain key business measures without the impact of the one-time tax adjustments.
  • Pre-tax income of $61.2 million for the current quarter, an increase of $14.9 million, or 32 percent, over the prior year fourth quarter pre-tax income of $46.3 million. 
  • Current quarter diluted earnings per share of $0.59, an increase of 2 percent from the prior quarter, and an increase of 34 percent from the prior year fourth quarter diluted earnings per share of $0.44, excluding the revaluation of the net deferred tax asset.
  • Current quarter loan growth of $164 million, or 8 percent annualized.
  • Net interest margin of 4.30 percent as a percentage of earning assets, on a tax equivalent basis, a 4 basis points increase over the prior quarter, and a 7 basis points increase over the prior year fourth quarter net interest margin of 4.23 percent.
  • Declared a special dividend of $0.30 per share.  This was the 15th special dividend the Company has declared.
  • Declared and paid a regular quarterly dividend of $0.26 per share.  The dividend was the 135th consecutive quarterly dividend declared by the Company.
  • On January 16, 2019, the Company announced the signing of a definitive agreement to acquire FNB Bancorp, the bank holding company for The First National Bank of Layton, a community bank based in Layton, Utah, with total assets of $326 million.

Year 2018 Highlights:

  • Net income of $182 million for 2018, an increase of $45.8 million, or 34 percent, over the prior year net income of $136 million excluding the revaluation of the net deferred tax asset. 
  • Pre-tax income of $222 million for the current year, an increase of $41.2 million, or 23 percent, over the prior year.
  • Diluted earnings per share of $2.17, an increase of 24 percent from the prior year diluted earnings per share of $1.75, excluding the revaluation of the net deferred tax asset.
  • Total loan growth of $1.710 billion, or 26 percent, for the current year.  Organic loan growth of $728 million, or 11 percent, for the current year.
  • Total core deposit growth of $1.905 billion, or 26 percent, for the current year.  Organic core deposit growth of $195 million, or 3 percent, for the current year.
  • Net interest margin of 4.21 percent as a percentage of earning assets, on a tax equivalent basis, a 9 basis points increase over the 4.12 percent net interest margin in the prior year.
  • Dividends declared of $1.31 per share, an increase of $0.17 per share, or 15 percent, over the prior year.
  • The Company completed the acquisition and core system conversion of Columbine Capital Corp., the holding company for Collegiate Peaks Bank, a community bank in Buena Vista, Colorado, with total assets of $551 million.
  • The Company completed the acquisition and core system conversion of Inter-Mountain Bancorp, Inc., the holding company for First Security Bank, a community bank in Bozeman, Montana, with total assets of $1.110 billion.

Non-GAAP Financial Measures - Tax Cuts and Jobs Act
In addition to the results presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), this press release contains certain non-GAAP financial measures.  The Company believes that providing these non-GAAP financial measures provides investors with information useful in understanding the Company's financial performance, performance trends, and financial position.  While the Company uses these non-GAAP measures in its analysis of the Company's performance, this information should not be considered an alternative to measurements required by GAAP.

The following table provides a reconciliation of certain GAAP financial measures to non-GAAP financial measures.  The reconciling item between the GAAP and non-GAAP financial measures was the prior year fourth quarter one-time net tax expense of $19.7 million.  The one-time net tax expense was driven by the Tax Act and the change in the federal marginal rate of 35 percent to 21 percent effective January 1, 2018, which resulted in this revaluation of its deferred tax assets and deferred tax liabilities (“net deferred tax asset”) as of December 31, 2017.  The Company believes that the financial results are more comparable excluding the impact of the revaluation of the net deferred tax asset.

  Three Months ended   Year ended
(Dollars in thousands, except per share data) Dec 31,
 2018
  Sep 30,
 2018
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
  Dec 31,
 2018
  Dec 31,
 2017
Net income (GAAP) $ 49,599     49,336     44,384     38,559     14,956     181,878     116,377  
Tax Act adjustment (GAAP)                 19,699         19,699  
Net income (non-GAAP) $ 49,599     49,336     44,384     38,559     34,655     181,878     136,076  
Basic earnings per share (GAAP) $ 0.59     0.58     0.53     0.48     0.19     2.18     1.50  
Tax Act adjustment (GAAP)                 0.25         0.25  
Basic earnings per share (non-GAAP) $ 0.59     0.58     0.53     0.48     0.44     2.18     1.75  
Diluted earnings per share (GAAP) $ 0.59     0.58     0.52     0.48     0.19     2.17     1.50  
Tax Act adjustment (GAAP)                 0.25         0.25  
Diluted earnings per share (non-GAAP) $ 0.59     0.58     0.52     0.48     0.44     2.17     1.75  
Return on average assets  (annualized) (GAAP) 1.66 %   1.66 %   1.53 %   1.50 %   0.61 %   1.59 %   1.20 %
Tax Act adjustment (GAAP) %   %   %   %   0.81 %   %   0.21 %
Return on average assets  (annualized) (non-GAAP) 1.66 %   1.66 %   1.53 %   1.50 %   1.42 %   1.59 %   1.41 %
Return on average equity  (annualized) (GAAP) 13.08 %   13.10 %   12.07 %   11.90 %   4.91 %   12.56 %   9.80 %
Tax Act adjustment (GAAP) %   %   %   %   6.47 %   %   1.66 %
Return on average equity  (annualized) (non-GAAP) 13.08 %   13.10 %   12.07 %   11.90 %   11.38 %   12.56 %   11.46 %
Dividend payout ratio   (annualized) (GAAP) 94.92 %   44.83 %   49.06 %   47.92 %   110.53 %   60.09 %   76.00 %
Tax Act adjustment (GAAP) %   %   %   %   (62.80 )%   %   (10.86 )%
Dividend payout ratio  (annualized) (non-GAAP) 94.92 %   44.83 %   49.06 %   47.92 %   47.73 %   60.09 %   65.14 %
Effective tax rate (GAAP) 19.02 %   17.96 %   17.61 %   17.88 %   67.69 %   18.15 %   35.70 %
Tax Act adjustment (GAAP) %   %   %   %   (42.57 )%   %   (10.88 )%
Effective tax rate (non-GAAP) 19.02 %   17.96 %   17.61 %   17.88 %   25.12 %   18.15 %   24.82 %

Financial Highlights

  At or for the Three Months ended     At or for the Year ended
(Dollars in thousands, except per share and market data) Dec 31,
 2018
    Sep 30,
 2018
    Jun 30,
 2018
    Mar 31,
 2018
    Dec 31,
 2017
    Dec 31,
 2018
     Dec 31,
 2017
 
Operating results                                        
Net income 1 $ 49,599     49,336     44,384     38,559     34,655     181,878     136,076  
Basic earnings per share 1 $ 0.59     0.58     0.53     0.48     0.44     2.18     1.75  
Diluted earnings per share 1 $ 0.59     0.58     0.52     0.48     0.44     2.17     1.75  
Dividends declared per share 2 $ 0.56     0.26     0.26     0.23     0.21     1.31     1.14  
Market value per share                                        
Closing $ 39.62     43.09     38.68     38.38     39.39     39.62     39.39  
High $ 47.67     46.28     41.47     41.24     40.31     47.67     40.31  
Low $ 36.84     38.37     35.77     36.72     36.01     35.77     31.50  
Selected ratios and other data                                        
Number of common stock shares outstanding 84,521,692     84,521,093     84,516,650     84,511,472     78,006,956     84,521,692     78,006,956  
Average outstanding shares - basic 84,521,640     84,518,407     84,514,257     80,808,904     78,006,956     83,603,515     77,537,664  
Average outstanding shares - diluted 84,610,018     84,593,122     84,559,268     80,887,135     78,094,494     83,677,185     77,607,605  
Return on average assets (annualized) 1 1.66 %   1.66 %   1.53 %   1.50 %   1.42 %   1.59 %    1.41 %
Return on average equity (annualized) 1 13.08 %   13.10 %   12.07 %   11.90 %   11.38 %   12.56 %    11.46 %
Efficiency ratio 53.93 %   52.26 %   55.44 %   57.80 %   54.02 %   54.73 %    53.94 %
Dividend payout ratio 1,2 94.92 %   44.83 %   49.06 %   47.92 %   47.73 %   60.09 %    65.14 %
Loan to deposit ratio 87.64 %   85.13 %   84.92 %   81.83 %   87.29 %   87.64 %    87.29 %
Number of full time equivalent employees 2,623     2,572     2,605     2,545     2,278     2,623     2,278  
Number of locations 167     164     167     166     145     167     145  
Number of ATMs 216     215     221     223     200     216     200  


1
Excludes a one time revaluation of the deferred tax assets and deferred tax liabilities as a result of the Tax Act for the three months and year ended December 31, 2017. For additional information on the revaluation, see the “Non-GAAP Financial Measures - Tax Cuts and Jobs Act” section above.

2 Includes a special dividend declared of $0.30 per share for the three months ended December 31, 2018 and for the years ended December 31, 2018 and 2017.

KALISPELL, Mont., Jan. 24, 2019 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (GBCI) reported net income of $49.6 million for the current quarter, an increase of $14.9 million, or 43 percent, from the $34.7 million of net income for the prior year fourth quarter, excluding the revaluation of the net deferred tax asset.  Diluted earnings per share for the current quarter was $0.59 per share, an increase of 34 percent from the prior year fourth quarter diluted earnings per share of $0.44, excluding the revaluation of the net deferred tax asset.  Included in the current quarter was $520 thousand of acquisition-related expenses and $357 thousand of loss on sale of investments.  “The Glacier team delivered very strong results in the fourth quarter and for the full year in 2018.  We are pleased to see all aspects of the business performing so well.  We thank our employees for their many contributions to the company during the year and our customers for their continued business,” said Randy Chesler, President and Chief Executive Officer.  “We are also pleased to see our on-going acquisition strategy combined with organic growth continues to provide enhanced results.”

Net income of $182 million for 2018, an increase of $45.8 million, or 34 percent, over the prior year net income of $136 million, excluding the revaluation of the net deferred tax asset.  Diluted earnings per share of $2.17, an increase of 24 percent from the prior year diluted earnings per share of $1.75, excluding the revaluation of the net deferred tax asset.

On January 16, 2019, the Company announced the signing of a definitive agreement to acquire FNB Bancorp, the holding company for The First National Bank of Layton, a community bank based in Layton, Utah (collectively, “FNB”).  FNB provides banking services to individuals and businesses throughout Utah with banking offices located in Layton, Bountiful, Clearfield, and Draper.  As of September 30, 2018, FNB had total assets of $326 million, total loans of $243 million and total deposits of $278 million. The acquisition marks the Company’s 21st acquisition since 2000 and its tenth transaction in the past six years.  The acquisition is subject to required regulatory approvals and other customary conditions of closing and is expected to be completed during the second quarter of 2019.

On February 28, 2018, the Company completed the acquisition of Inter-Mountain Bancorp, Inc., the holding company for First Security Bank, a community bank in Bozeman, Montana (collectively, “FSB”).  On January 31, 2018, the Company completed the acquisition of Columbine Capital Corp., the holding company for Collegiate Peaks Bank, a community bank in Buena Vista, Colorado (collectively, “Collegiate”).  The Company’s results of operations and financial condition include the acquisitions beginning on the acquisition dates and the following table discloses the fair value estimates of selected classifications of assets and liabilities acquired:

  FSB   Collegiate    
(Dollars in thousands) February 28,
 2018
  January 31,
 2018
  Total
Total assets $ 1,109,684     551,198     1,660,882  
Debt securities 271,865     42,177     314,042  
Loans receivable 627,767     354,252     982,019  
Non-interest bearing deposits 301,468     170,022     471,490  
Interest bearing deposits 576,118     267,149     843,267  
Borrowings 36,880     12,509     49,389  


Asset Summary

              $ Change from
(Dollars in thousands) Dec 31,
 2018
  Sep 30,
 2018
  Dec 31,
 2017
  Sep 30,
 2018
  Dec 31,
 2017
Cash and cash equivalents $ 203,790     307,104     200,004     (103,314)     3,786  
Debt securities, available-for-sale 2,571,663     2,103,619     1,778,243     468,044     793,420  
Debt securities, held-to-maturity 297,915     590,915     648,313     (293,000)     (350,398)  
Total debt securities 2,869,578     2,694,534     2,426,556     175,044     443,022  
Loans receivable                  
Residential real estate 887,742     862,830     720,728     24,912     167,014  
Commercial real estate 4,657,561     4,527,577     3,577,139     129,984     1,080,422  
Other commercial 1,911,171     1,921,955     1,579,353     (10,784)     331,818  
Home equity 544,688     528,404     457,918     16,284     86,770  
Other consumer 286,387     282,479     242,686     3,908     43,701  
Loans receivable 8,287,549     8,123,245     6,577,824     164,304     1,709,725  
Allowance for loan and lease losses (131,239)     (132,535)     (129,568)     1,296     (1,671)  
Loans receivable, net 8,156,310     7,990,710     6,448,256     165,600     1,708,054  
Other assets 885,806     916,754     631,533     (30,948)     254,273  
Total assets $ 12,115,484     11,909,102     9,706,349     206,382     2,409,135  

Total debt securities of $2.870 billion at December 31, 2018 increased $175 million, or 7 percent, during the current quarter and increased $443 million, or 18 percent, from the prior year fourth quarter. Debt securities represented 24 percent of total assets at December 31, 2018 compared to 25 percent of total assets at December 31, 2017.

The loan portfolio of $8.288 billion increased $164 million, or 8 percent annualized, during the current quarter. The loan category with the largest increase was commercial real estate loans which increased $130 million, or 3 percent. Excluding the $982 million of loans from the FSB and Collegiate acquisitions, the loan portfolio increased $728 million, or 11 percent, since December 31, 2017, with the largest increase in commercial real estate loans, which increased $463 million, or 13 percent.

Credit Quality Summary

  At or for the Year ended   At or for the Nine Months ended   At or for the Year ended
(Dollars in thousands) Dec 31,
 2018
  Sep 30,
 2018
  Dec 31,
 2017
Allowance for loan and lease losses          
Balance at beginning of period $ 129,568     129,568     129,572  
Provision for loan losses 9,953     8,707     10,824  
Charge-offs (17,807   (11,905   (19,331 )
Recoveries 9,525     6,165     8,503  
Balance at end of period $ 131,239     132,535     129,568  
Other real estate owned $ 7,480     12,399     14,269  
Accruing loans 90 days or more past due 2,018     4,333     6,077  
Non-accrual loans 47,252     55,373     44,833  
Total non-performing assets $ 56,750     72,105     65,179  
Non-performing assets as a percentage of subsidiary assets 0.47 %   0.61 %   0.68 %
Allowance for loan and lease losses as a percentage of non-performing loans 266 %   222 %   255 %
Allowance for loan and lease losses as a percentage of total loans 1.58 %   1.63 %   1.97 %
Net charge-offs as a percentage of total loans 0.10 %   0.07 %   0.17 %
Accruing loans 30-89 days past due $ 33,567     25,181     37,687  
Accruing troubled debt restructurings $ 25,833     35,080     38,491  
Non-accrual troubled debt restructurings $ 10,660     12,911     23,709  
U.S. government guarantees included in non-performing assets $ 4,811     5,791     2,513  

The Company benefited this quarter from the Bank divisions continued focus on reducing non-performing assets and resolving specific troubled credits. Non-performing assets at December 31, 2018 were $56.8 million, a decrease of $15.4 million, or 21 percent, from the prior quarter and a decrease of $8.4 million, or 13 percent, from the prior year fourth quarter. Non-performing assets as a percentage of subsidiary assets at December 31, 2018 was 0.47 percent, a decrease of 14 basis points from the prior quarter, and a decrease of 21 basis points from the prior year fourth quarter. Early stage delinquencies (accruing loans 30-89 days past due) of $33.6 million at December 31, 2018 decreased $4.1 million from prior year end. Early stage delinquencies as a percentage of loans at December 31, 2018 was 0.41 percent which was a decrease of 16 basis points from prior year end. The allowance for loan and lease losses (“allowance”) as a percent of total loans outstanding at December 31, 2018 was 1.58 percent, which was a 5 basis points decrease compared to the prior quarter and a decrease of 39 basis points from a year ago. The decrease from the prior year end was driven by stabilizing credit quality and the addition of loans from new acquisitions, as they are added to the loan portfolio on a fair value basis with no allowance.

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 2018 $ 1,246     $ 2,542     1.58 %   0.41 %   0.47 %
Third quarter 2018 3,194     2,223     1.63 %   0.31 %   0.61 %
Second quarter 2018 4,718     762     1.66 %   0.50 %   0.71 %
First quarter 2018 795     2,755     1.66 %   0.59 %   0.64 %
Fourth quarter 2017 2,886     2,894     1.97 %   0.57 %   0.68 %
Third quarter 2017 3,327     3,628     1.99 %   0.45 %   0.67 %
Second quarter 2017 3,013     2,362     2.05 %   0.49 %   0.70 %
First quarter 2017 1,598     1,944     2.20 %   0.67 %   0.75 %

Net charge-offs for the current quarter were $2.5 million compared to $2.2 million for the prior quarter and $2.9 million from the same quarter last year.  Current quarter provision for loan losses was $1.2 million, compared to $3.2 million in the prior quarter and $2.9 million in the prior year fourth quarter.  Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will continue to determine the level of the loan loss provision.

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

Liability Summary

              $ Change from
(Dollars in thousands) Dec 31,
 2018
  Sep 30,
 2018
  Dec 31,
 2017
  Sep 30,
 2018
  Dec 31,
 2017
Deposits                  
Non-interest bearing deposits $ 3,001,178     3,103,112     2,311,902     (101,934   689,276  
NOW and DDA accounts 2,391,307     2,346,050     1,695,246     45,257     696,061  
Savings accounts 1,346,790     1,345,163     1,082,604     1,627     264,186  
Money market deposit accounts 1,684,284     1,722,975     1,512,693     (38,691   171,591  
Certificate accounts 901,484     932,461     817,259     (30,977   84,225  
Core deposits, total 9,325,043     9,449,761     7,419,704     (124,718   1,905,339  
Wholesale deposits 168,724     151,421     160,043     17,303     8,681  
Deposits, total 9,493,767     9,601,182     7,579,747     (107,415 )   1,914,020  
Repurchase agreements 396,151     408,754     362,573     (12,603   33,578  
Federal Home Loan Bank advances 440,175     155,328     353,995     284,847     86,180  
Other borrowed funds 14,708     9,944     8,224     4,764     6,484  
Subordinated debentures 134,051     134,055     126,135     (4   7,916  
Other liabilities 120,778     107,227     76,618     13,551     44,160  
Total liabilities $ 10,599,630     10,416,490     8,507,292     183,140     2,092,338  

Core deposits of $9.325 billion as of December 31, 2018 decreased $125 million, or 1 percent, from the prior quarter. The Company added back $395 million deposits during the first quarter of 2018 that were previously moved off the balance sheet as part of its strategy to say below $10 billion in total assets through December 31, 2017. Excluding the $1.315 billion of core deposits from the acquisitions and deposits moved back onto the balance sheet, core deposits increased $195 million, or 3 percent, from the prior year end.

Federal Home Loan Bank (“FHLB”) advances of $440 million at December 31, 2018, increased $285 million over the prior quarter and increased $86 million over the prior year fourth quarter to assist in funding asset growth.

Stockholders’ Equity Summary

              $ Change from
(Dollars in thousands, except per share data) Dec 31,
 2018
  Sep 30,
 2018
  Dec 31,
 2017
  Sep 30,
 2018
  Dec 31,
 2017
Common equity $ 1,525,281     1,522,329     1,201,036     2,952     324,245  
Accumulated other comprehensive (loss) income (9,427   (29,717   (1,979 )   20,290     (7,448 )
Total stockholders’ equity 1,515,854     1,492,612     1,199,057     23,242     316,797  
Goodwill and core deposit intangible, net (338,828   (340,508   (191,995   1,680     (146,833 )
Tangible stockholders’ equity $ 1,177,026     1,152,104     1,007,062     24,922     169,964  
                               
Stockholders’ equity to total assets   12.51 %   12.53 %   12.35 %            
Tangible stockholders’ equity to total tangible assets   9.99 %   9.96 %   10.58 %            
Book value per common share $ 17.93     17.66     15.37     0.27     2.56  
Tangible book value per common share $ 13.93     13.63     12.91     0.30     1.02  
                               


Tangible stockholders’ equity of $1.177 billion at December 31, 2018 increased $25 million compared to the prior quarter which was primarily the result of an increase in other comprehensive income. Tangible stockholders’ equity increased $170 million over the prior year fourth quarter which was the result of earnings retention and $181 million and $69.8 million of Company stock issued for the acquisitions of FSB and Collegiate, respectively. These increases more than offset the increase in goodwill and core deposit intangibles associated with the acquisitions and the decrease in accumulated other comprehensive income. Tangible book value per common share at quarter end increased $0.30 per share from the prior quarter and increased $1.02 per share from a year ago.

Cash Dividends
On December 27, 2018, the Company’s Board of Directors declared a special cash dividend of $0.30 per share, the 15th special dividend the Company has declared. The dividend was payable January 17, 2019 to shareholders of record on January 8, 2019. On November 13, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share. The dividend was payable December 20, 2018 to shareholders of record on December 11, 2018. The dividend was the 135th consecutive quarterly dividend. Regular quarterly dividends declared for 2018 were $1.01 per share, an increase of $0.17 per share, or 20 percent, compared to prior year quarterly dividends of  $0.84 per share. 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, 2018
Compared to September 30, 2018, June 30, 2018 and March 31, 2018

Income Summary

  Three Months ended
(Dollars in thousands)
     Dec 31,
 2018
  Sep 30,
 2018
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
Net interest income                  
Interest income $ 125,310     122,905     117,715     103,066     96,898  
Interest expense 9,436     9,160     9,161     7,774     7,072  
Total net interest income 115,874     113,745     108,554     95,292     89,826  
Non-interest income                  
Service charges and other fees 19,708     19,504     18,804     16,871     17,282  
Miscellaneous loan fees and charges 1,278     1,807     2,243     1,477     1,077  
Gain on sale of loans 5,639     7,256     8,142     6,097     7,408  
Loss on sale of investments (357   (367   (56   (333   (115
Other income 2,226     4,216     2,695     1,974     2,057  
Total non-interest income 28,494     32,416     31,828     26,086     27,709  
Total income $ 144,368     146,161     140,382     121,378     117,535  
Net interest margin (tax-equivalent) 4.30 %   4.26 %   4.17 %   4.10 %   4.23 %
                   
      $ Change from
(Dollars in thousands)
    Sep 30,
 2018
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
Net interest income                  
Interest income     $ 2,405     7,595     22,244     28,412  
Interest expense     276     275     1,662     2,364  
Total net interest income     2,129     7,320     20,582     26,048  
Non-interest income                  
Service charges and other fees     204     904     2,837     2,426  
Miscellaneous loan fees and charges     (529 )
  (965   (199   201  
Gain on sale of loans     (1,617   (2,503   (458   (1,769
Loss on sale of investments     10     (301   (24   (242
Other income     (1,990   (469   252     169  
Total non-interest income     (3,922   (3,334   2,408     785  
Total income     $ (1,793   3,986     22,990     26,833  

Net Interest Income
The current quarter interest income of $125 million increased $2.4 million, or 2 percent, from the prior quarter and increased $28.4 million, or 29 percent, over the prior year fourth quarter with both increases primarily attributable to the increase in interest income from commercial loans. Interest income on commercial loans increased $1.7 million, or 2 percent, from the prior quarter and increased $20.9 million, or 34 percent, from the prior year fourth quarter.

The current quarter interest expense of $9.4 million remained stable from the prior quarter and increased $2.4 million, or 33 percent, from the prior year fourth quarter. The total cost of funding (including non-interest bearing deposits) for the current quarter was 36 basis points compared to 36 basis points for the prior quarter and 33 basis points for the prior year fourth quarter.

The Company’s net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the current quarter was 4.30 percent compared to 4.26 percent in the prior quarter. The 4 basis points increase in the net interest margin was primarily the result of increased yields on the loan portfolio. The current quarter net interest margin increased 7 basis points over the prior year fourth quarter net interest margin of 4.23 percent. Included in the current quarter margin was a 14 basis points decrease due to the reduction in the federal corporate income tax rate in 2018 by the Tax Cut and Jobs Act (“Tax Act”). The increase in the margin from the prior year fourth quarter resulted from the remix of earning assets to higher yielding loans, increased yields on the loan portfolio, and relatively stable funding costs. “During the quarter and throughout the year, the Bank divisions maintained good discipline in their deposit and loan pricing,” said Ron Copher, Chief Financial Officer. “The net interest margin expansion during each quarter reflected the increased yields on earnings assets combined with stable funding costs each quarter.”

Non-interest Income
Non-interest income for the current quarter totaled $28.5 million, a decrease of $3.9 million, or 12 percent, from the prior quarter and an increase of $785 thousand, or 3 percent, over the same quarter last year. Service charges and other fees of $19.7 million for the current quarter increased $2.4 million, or 14 percent, from the prior year fourth quarter with such increases primarily due to the increased number of accounts from organic growth and acquisitions. Gain on sale of loans decreased $1.6 million, or 22 percent, from the prior quarter as a result of seasonal activity and decreased $1.8 million, or 24 percent from the prior year fourth quarter as result of the decrease in purchase and refinance activity. Other income decreased $2.0 million, or 47 percent, from the prior quarter and was primarily due to the prior quarter $2.3 million gain on sale of a former branch building.

Non-interest Expense Summary

  Three Months ended
(Dollars in thousands)
  Dec 31,
 2018
  Sep 30,
 2018
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
Compensation and employee benefits $ 50,385     49,927     49,023     45,721     40,465  
Occupancy and equipment 7,884     7,914     7,662     7,274     6,925  
Advertising and promotions 2,434     2,432     2,530     2,170     2,024  
Data processing 3,951     3,752     4,241     3,967     3,970  
Other real estate owned 264     2,674     211     72     377  
Regulatory assessments and insurance 1,263     1,277     1,329     1,206     1,069  
Core deposit intangibles amortization 1,731     1,735     1,748     1,056     614  
Other expenses 13,964     13,118     15,051     12,161     12,922  
Total non-interest expense $ 81,876     82,829     81,795     73,627     68,366  
                   
      $ Change from
(Dollars in thousands)
    Sep 30,
 2018
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
Compensation and employee benefits     $ 458     1,362     4,664     9,920  
Occupancy and equipment     (30   222     610     959  
Advertising and promotions     2     (96   264     410  
Data processing     199     (290   (16   (19
Other real estate owned     (2,410   53     192     (113 )
Regulatory assessments and insurance     (14   (66 )   57     194  
Core deposit intangibles amortization     (4   (17   675     1,117  
Other expense     846     (1,087 )   1,803     1,042  
Total non-interest expense     $ (953   81     8,249     13,510  

Total non-interest expense of $81.9 million for the current quarter decreased $1.0 million, or 1 percent, over the prior quarter and increased $13.5 million, or 20 percent, over the prior year fourth quarter. Compensation and employee benefits increased by $458 thousand, or 1 percent, from the prior quarter. Compensation and employee benefits increased by $9.9 million, or 25 percent, from the prior year fourth quarter principally due to the increased number of employees from acquisitions. Occupancy and equipment expense increased $959 thousand, or 14 percent, over the prior year fourth quarter and was attributable to increased costs from acquisitions. OREO expenses decreased $2.4 million from the prior quarter, due to a write down of $2.2 million on a single property during the third quarter of 2018. Acquisition-related expenses were $520 thousand during the current quarter compared to $1.3 million in the prior quarter and $936 thousand in the prior year fourth quarter.

Federal and State Income Tax Expense
Tax expense during the fourth quarter of 2018 was $11.6 million, which is a decrease of $19.7 million, from the prior year fourth quarter and was primarily attributable to the revaluation of the net deferred tax asset in the prior year which was partially offset by the decrease in the federal income tax rate driven by the Tax Act. The effective tax rate in the fourth quarter of 2018 was 19 percent compared to 25 percent in the prior year fourth quarter, excluding the revaluation of the net deferred tax asset.

Efficiency Ratio
The current quarter efficiency ratio was 53.93 percent, a 167 basis points increase from the prior quarter efficiency ratio of 52.26 percent. Excluding the prior quarter gain from the sale of the former branch building, the prior quarter efficiency ratio would have been 53.06 percent. The current quarter efficiency ratio was also higher than the prior quarter efficiency ratio due to the $1.6 million seasonal decrease in the gain on sale of loans during the current quarter.


Operating Results for Year ended December 31, 2018
Compared to December 31, 2017

Income Summary

  Year ended        
(Dollars in thousands) Dec 31,
 2018
  Dec 31,
 2017
  $ Change   % Change
Net interest income              
Interest income $ 468,996     $ 375,022     $ 93,974     25 %
Interest expense 35,531     29,864     5,667     19 %
Total net interest income 433,465     345,158     88,307     26 %
Non-interest income              
Service charges and other fees 74,887     67,717     7,170     11 %
Miscellaneous loan fees and charges 6,805     4,360     2,445     56 %
Gain on sale of loans 27,134     30,439     (3,305   (11 )%
Loss on sale of investments (1,113   (660   (453   69 %
Other income 11,111     10,383     728     7 %
Total non-interest income 118,824     112,239     6,585     6 %
  Total income $ 552,289     $ 457,397     $ 94,892     21 %
Net interest margin (tax-equivalent) 4.21 %   4.12 %        

Net Interest Income
Interest income of $469 million for 2018 increased $94.0 million, or 25 percent, from 2017 and was principally due to a $76.8 million increase in interest income from commercial loans. Interest expense of $35.5 million for the current year increased $5.7 million over the prior year same period. The Company has maintained stable funding costs through its focus on growing non-interest bearing deposits and continued pricing discipline. The total funding cost for 2018 and 2017 was 36 basis points.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for 2018 was 4.21 percent, a 9 basis points increase from the net interest margin of 4.12 percent for 2017. Included in the current year margin was a 14 basis points decrease compared to the prior year driven by the reduction in the federal corporate income tax rate. The increase in the margin from the prior year resulted from the remix of earning assets to higher yielding loans, increased yields on the loan portfolio, and stable funding costs.

Non-interest Income
Non-interest income of $119 million for the current year increased $6.6 million, or 6 percent, over the prior year. Service charges and other fees of $74.9 million for 2018 increased $7.2 million, or 11 percent, from the prior year as a result of an increased number of deposit accounts from organic growth and acquisitions. Miscellaneous loan fees and charges for 2018 increased $2.4 million, or 56 percent from the prior year as a result of the recent acquisitions and increased loan growth. Gain on sale of loans for the current year decreased $3.3 million, or 11 percent, from the prior year due to the decrease in purchase and refinance activity. Other income of $11.1 million, increased $728 thousand, or 7 percent, from the prior year with increases of $1.9 million from the sale of bank assets and a decrease of $2.1 million from the gain on sale of OREO.

Non-interest Expense Summary

  Year ended        
(Dollars in thousands) Dec 31,
 2018
  Dec 31,
 2017
  $ Change   % Change
Compensation and employee benefits $ 195,056     $ 160,506     $ 34,550     22 %
Occupancy and equipment 30,734     26,631     4,103     15 %
Advertising and promotions 9,566     8,405     1,161     14 %
Data processing 15,911     14,150     1,761     12 %
Other real estate owned 3,221     1,909     1,312     69 %
Regulatory assessments and insurance 5,075     4,431     644     15 %
Core deposit intangibles amortization 6,270     2,494     3,776     151 %
Other expenses 54,294     47,045     7,249     15 %
Total non-interest expense $ 320,127     $ 265,571     $ 54,556     21 %

Total non-interest expense of $320 million for 2018 increased $54.6 million, or 21 percent, over the prior year. Compensation and employee benefits for 2018 increased $34.6 million, or 22 percent, from the same period last year primarily due to the increased number of employees from acquisitions. Occupancy and equipment expense for 2018 increased $4.1 million, or 15 percent from the prior year primarily as a result of increased costs from acquisitions. Data processing expense for the current year increased $1.8 million, or 12 percent, from the prior year as a result of increased costs from the acquisitions and organic growth. Current year other expenses of $54.3 million increased $7.2 million, or 15 percent, from the prior year due to an increase in acquisition-related expenses and increased costs from acquired banks and organic growth. Acquisition-related expenses were $6.6 million during 2018 compared to $2.1 million in 2017.

Provision for Loan Losses
The provision for loan losses was $10.0 million for 2018, a decrease of $871 thousand from 2017 provision for loan loss of $10.8 million. Net charge-offs during the 2018 were $8.3 million compared to $10.8 million during 2017.

Federal and State Income Tax Expense
Tax expense of $40.3 million in 2018 decreased $24.3 million, or 38 percent, over the prior year same period as a result of a the revaluation of the net deferred tax asset and the decrease in the federal corporate income tax rate by the Tax Act. The effective tax rate in 2018 was 18 percent compared to 25 percent in the prior year, excluding the revaluation of the net deferred tax asset.

Efficiency Ratio
For 2018, the efficiency ratio was 54.73, a 79 basis points increase over the prior year efficiency ratio of 53.94. Applying the same 35 percent federal corporate income tax rate as in effect during the prior year, the efficiency ratio would be 53.77 percent for 2018, or 17 basis points lower than 2017.

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

  • the risks associated with lending and potential adverse changes of the credit quality of loans in the Company’s portfolio;
  • changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System or the Federal Reserve Board, which could adversely affect the Company’s net interest income and profitability;
  • changes in the cost and scope of insurance from the Federal Deposit Insurance Corporation and other third parties;
  • legislative or regulatory changes, including increased banking and consumer protection regulation that adversely affect the Company’s business, both generally and as a result of the Company exceeding $10 billion in total consolidated assets;
  • ability to complete pending or prospective future acquisitions, limit certain sources of revenue, or increase cost of operations;
  • costs or difficulties related to the completion and integration of acquisitions;
  • the goodwill the Company has recorded in connection with acquisitions could become impaired, which may have an adverse impact on earnings and capital;
  • reduced demand for banking products and services;
  • the reputation of banks and the financial services industry could deteriorate, which could adversely affect the Company's ability to obtain (and maintain) customers;
  • competition among financial institutions in the Company's markets may increase significantly;
  • the risks presented by continued public stock market volatility, which could adversely affect the market price of the Company’s common stock and the ability to raise additional capital or grow the Company through acquisitions;
  • the projected business and profitability of an expansion or the opening of a new branch could be lower than expected;
  • consolidation in the financial services industry in the Company’s markets resulting in the creation of larger financial institutions who may have greater resources could change the competitive landscape;
  • dependence on the Chief Executive Officer, the senior management team and the Presidents of Glacier Bank  divisions;
  • material failure, potential interruption or breach in security of the Company’s systems and technological changes which could expose us to new risks (e.g., cybersecurity), fraud or system failures;
  • natural disasters, including fires, floods, earthquakes, and other unexpected events;
  • the Company’s success in managing risks involved in the foregoing; and
  • the effects of any reputational damage to the Company resulting from any of 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.

Conference Call Information
A conference call for investors is scheduled for 11:00 a.m. Eastern Time on Friday, January 25, 2019. The conference call will be accessible by telephone and through the internet. Interested individuals are invited to listen to the call by dialing 877-561-2748 and conference ID 3053399. To participate on the webcast, log on to: https://edge.media-server.com/m6/p/ddsz3whh. If you are unable to participate during the live webcast, the call will be archived on our website, www.glacierbancorp.com, or by calling 855-859-2056 with the ID 3053399 by February 8, 2019.

About Glacier Bancorp, Inc.
Glacier Bancorp, Inc. is the parent company for Glacier Bank, Kalispell and its bank divisions: First Security Bank of Missoula; Valley Bank of Helena; Western Security Bank, Billings; First Bank of Montana, Lewistown; and First Security Bank, Bozeman, all located in Montana; as well as Mountain West Bank, Coeur d’Alene, operating in Idaho, Utah and Washington; First Bank, Powell, operating in Wyoming and Utah; Citizens Community Bank, Pocatello, operating in Idaho; Bank of the San Juans, Durango; and Collegiate Peaks Bank, Buena Vista both operating in Colorado; First State Bank, Wheatland, operating in Wyoming; North Cascades Bank, Chelan, operating in Washington; and The Foothills Bank, Yuma, operating in Arizona.


Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Financial Condition

...
(Dollars in thousands, except per share data) December 31,
 2018
  September 30,
 2018
  December 31,
 2017
Assets          
Cash on hand and in banks $ 161,782     171,394     139,948  
Federal funds sold          
Interest bearing cash deposits 42,008     135,710     60,056  
Cash and cash equivalents 203,790     307,104     200,004  
Debt securities, available-for-sale 2,571,663     2,103,619     1,778,243  
Debt securities, held-to-maturity 297,915     590,915     648,313  
Total debt securities 2,869,578     2,694,534     2,426,556  
Loans held for sale, at fair value 33,156     50,649     38,833  
Loans receivable 8,287,549     8,123,245     6,577,824  
Allowance for loan and lease losses (131,239   (132,535   (129,568 )
Loans receivable, net 8,156,310     7,990,710     6,448,256  
Premises and equipment, net 241,528     239,006     177,348  
Other real estate owned 7,480     12,399     14,269  
Accrued interest receivable 54,408     62,248     44,462  
Deferred tax asset 23,564     37,264     38,344  
Core deposit intangible, net 49,242     50,973     14,184  
Goodwill 289,586     289,535     177,811  
Non-marketable equity securities 27,871     16,502     29,884  
Bank-owned life insurance 82,320     81,850     59,351  
Other assets 76,651     76,328     37,047  
Total assets $ 12,115,484     11,909,102     9,706,349  
Liabilities          
Non-interest bearing deposits $ 3,001,178     3,103,112     2,311,902  
Interest bearing deposits 6,492,589     6,498,070     5,267,845  
Securities sold under agreements to repurchase 396,151     408,754     362,573  
FHLB advances 440,175     155,328     353,995  
Other borrowed funds 14,708     9,944     8,224  
Subordinated debentures 134,051     134,055     126,135  
Accrued interest payable 4,252     4,065     3,450  
Other liabilities 116,526     103,162     73,168  
Total liabilities 10,599,630     10,416,490     8,507,292  
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 845     845     780  
Paid-in capital 1,051,253     1,050,463     797,997  
Retained earnings - substantially restricted 473,183     471,021     402,259  
Accumulated other comprehensive loss (9,427   (29,717   (1,979
Total stockholders’ equity 1,515,854