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Glacier Bancorp, Inc. Announces Results for the Quarter Ended December 31, 2019

4th Quarter 2019 Highlights:

  • Net income of $57.4 million for the current quarter, an increase of $7.8 million, or 16 percent, over the prior year fourth quarter net income of $49.6 million.
  • Current quarter diluted earnings per share of $0.62, an increase of 5 percent from the prior year fourth quarter diluted earnings per share of $0.59. 
  • Net interest margin of 4.45 percent increased 3 basis points compared to 4.42 percent in the prior quarter and increased 15 basis points over the prior year fourth quarter net interest margin of 4.30 percent.
  • Interest bearing deposits increased $65 million, or 4 percent annualized, during the current quarter.
  • Non-performing assets of $37.4 million, decreased $17.7 million, or 32 percent, from the prior quarter non-performing assets of $55.1 million.
  • Declared a special dividend of $0.20 per share.  This was the 16th special dividend the Company has declared.
  • Declared and paid a regular dividend of $0.29 per share.  The Company has declared 139 consecutive quarterly dividends and has increased the dividend 45 times.

Year 2019 Highlights:

  • Net income of $211 million for 2019, an increase of $28.7 million, or 16 percent, over the prior year net income of $182 million.
  • Diluted earnings per share of $2.38, an increase of 10 percent from the prior year diluted earnings per share of $2.17.
  • Net interest margin of 4.39 percent for 2019, an increase of 18 basis points from the net interest margin of 4.21 percent in 2018.
  • Core deposits organically grew $401 million, or 4 percent, during 2019, including non-interest bearing deposit growth of $305 million, or 10 percent.
  • Organic loan growth was $364 million, or 4 percent for 2019.
  • Regular quarterly dividends declared of $1.11 per share, an increase of $0.10 per share, or 10 percent, over the prior year regular quarterly dividends of $1.01.
  • The Company announced the signing of a definitive agreement to acquire State Bank Corp., the parent company of State Bank of Arizona, a community bank based in Lake Havasu City, Arizona with total assets of $678 million at December 31, 2019 which will significantly enhance its Arizona franchise.
  • The Company entered Nevada by completing the acquisition of Heritage Bancorp, the parent company of Heritage Bank of Nevada (collectively, "Heritage"), a community bank based in Reno, Nevada, with total assets of $978 million.
  • The Company completed the acquisition of FNB Bancorp, the holding company for The First National Bank of Layton (collectively, "FNB"), a community bank based in Layton, Utah, with total assets of $379 million. 

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,
2019
  Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Dec 31,
2019
  Dec 31,
2018
Operating results                          
Net income $ 57,410      51,610      52,392      49,132      49,599      210,544      181,878   
Basic earnings per share $ 0.62      0.57      0.61      0.58      0.59      2.39      2.18   
Diluted earnings per share $ 0.62      0.57      0.61      0.58      0.59      2.38      2.17   
Dividends declared per share $ 0.49      0.29      0.27      0.26      0.56      1.31      1.31   
Market value per share                          
Closing $ 45.99      40.46      40.55      40.07      39.62      45.99      39.62   
High $ 46.51      42.61      43.44      45.47      47.67      46.51      47.67   
Low $ 38.99      37.70      38.65      37.58      36.84      37.58      35.77   
Selected ratios and other data                          
Number of common stock shares outstanding 92,289,750   92,180,618   86,637,394   84,588,199   84,521,692   92,289,750   84,521,692
Average outstanding shares - basic 92,243,133   90,294,811   85,826,290   84,549,974   84,521,640   88,255,290   83,603,515
Average outstanding shares - diluted 92,365,021   90,449,195   85,858,286   84,614,248   84,610,018   88,385,775   83,677,185
Return on average assets (annualized) 1.67  %   1.55  %   1.69  %   1.67  %   1.66  %   1.64  %   1.59  %
Return on average equity (annualized) 11.61  %   10.92  %   12.82  %   13.02  %   13.08  %   12.01  %   12.56  %
Efficiency ratio 54.90  %   65.95  %   54.50  %   55.37  %   53.93  %   57.78  %   54.73  %
Dividend payout ratio 79.03  %   50.88  %   44.26  %   44.83  %   94.92  %   54.81  %   60.09  %
Loan to deposit ratio 88.92  %   88.71  %   90.27  %   87.14  %   87.64  %   88.92  %   87.64  %
Number of full time equivalent employees 2,826   2,802   2,703   2,634   2,623   2,826   2,623
Number of locations 181   182   175   169   167   181   167
Number of ATMs 248   238   228   222   216   248   216

______________________________

1 Includes a special dividend declared of $0.20 and $0.30 per share for the three months ended December 31, 2019 and December 31, 2018 and for the years ended December 31, 2019 and 2018.

KALISPELL, Mont., Jan. 23, 2020 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (GBCI) reported net income of $57.4 million for the current quarter, an increase of $7.8 million, or 16 percent, from the $49.6 million of net income for the prior year fourth quarter.  Diluted earnings per share for the current quarter was $0.62 per share, an increase of 5 percent from the prior year fourth quarter diluted earnings per share of $0.59.  Included in the current quarter was acquisition-related expenses of $4.4 million and a $1.3 million reduction in regulatory assessment and insurance expense from Small Bank Assessment credits applied by the FDIC.  “These results represent a strong close to a great year.  We are especially pleased to see the substantial improvement in credit this quarter and a business that continues to withstand market headwinds.  The Company's growth and performance for the quarter and the full year was well balanced across all of our key operating metrics,” said Randy Chesler, President and Chief Executive Officer.  “Our Company has grown stronger during 2019, both organically and with the addition of Heritage Bank in Nevada and First Community Bank in Utah.  With this foundation, we believe the Glacier team is set to have another strong year in 2020.”

Net income for 2019 was $211 million, an increase of $28.7 million, or 16 percent, from the $182 million of net income for the prior year.  Diluted earnings per share for the current year was $2.38 per share, an increase of $0.21, or 10 percent, from the diluted earnings per share of $2.17 for the same period in the prior year.

In September of 2019, the Company announced the signing of a definitive agreement to acquire State Bank Corp., the parent company of State Bank of Arizona, a community bank based in Lake Havasu City, Arizona (collectively, "SBAZ").  SBAZ provides banking services to individuals and businesses in Arizona with ten banking offices located in Bullhead City, Cottonwood, Kingman, Lake Havasu City, Phoenix, Prescott Valley and Prescott.  As of December 31, 2019, SBAZ had total assets of $678 million, gross loans of $439 million and total deposits of $587 million.  The acquisition has received regulatory approvals, is subject to other customary conditions of closing and is expected to be completed in the first quarter of 2020.  Upon closing of the transaction, SBAZ will merge into the Company's Foothills Bank division and will expand the Company's footprint in Arizona to cover all major markets in the state and be a leading community bank in Arizona.

On July 31, 2019, the Company completed the acquisition of Heritage Bancorp, the bank holding company for Heritage Bank of Nevada, a community bank based in Reno, Nevada (collectively, “Heritage”).  Upon closing of the transaction, Heritage became the Company’s sixteenth Bank division.  This acquisition also marks the Company's first entrance into the state of Nevada.

On April 30, 2019, the Company completed the acquisition of FNB Bancorp, the holding company for The First National Bank of Layton, a community bank based in Layton, Utah (“FNB”).  Upon closing of the transaction, FNB became First Community Bank Utah, the Company’s first division in Utah and the fifteenth Bank division.  In October, the Company combined its four existing Utah-based branches into First Community Bank Utah, enhancing the Company's growth prospects in one of the fastest growing markets in the United States.

The Company’s results of operations and financial condition include both acquisitions beginning on the acquisition dates and the following table discloses the preliminary fair value estimates of selected classifications of assets and liabilities acquired:

  Heritage   FNB    
(Dollars in thousands) July 31,
2019
  April 30,
2019
  Total
Total assets 977,944      $ 379,155      1,357,099   
Debt securities 103,231      47,247      150,478   
Loans receivable 615,279      245,485      860,764   
Non-interest bearing deposits 296,393      93,647      390,040   
Interest bearing deposits 425,827      180,999      606,826   
Borrowings —      7,273      7,273   

Asset Summary

              $ Change from
(Dollars in thousands) Dec 31,
2019
  Sep 30,
2019
  Dec 31,
2018
  Sep 30,
2019
  Dec 31,
2018
Cash and cash equivalents $ 330,961        406,384        203,790        (75,423 )     127,171     
Debt securities, available-for-sale 2,575,252        2,459,036        2,571,663        116,216        3,589     
Debt securities, held-to-maturity 224,611        234,992        297,915        (10,381 )     (73,304 )  
Total debt securities 2,799,863        2,694,028        2,869,578        105,835        (69,715 )  
Loans receivable                  
Residential real estate 926,388        936,877        887,742        (10,489 )     38,646     
Commercial real estate 5,579,307        5,548,174        4,657,561        31,133        921,746     
Other commercial 2,094,254        2,145,257        1,911,171        (51,003 )     183,083     
Home equity 617,201        615,781        544,688        1,420        72,513     
Other consumer 295,660        294,999        286,387        661        9,273     
Loans receivable 9,512,810        9,541,088        8,287,549        (28,278 )     1,225,261     
Allowance for loan and lease losses (124,490 )     (125,535 )     (131,239 )     1,045        6,749     
Loans receivable, net 9,388,320        9,415,553        8,156,310        (27,233 )     1,232,010     
Other assets 1,164,855        1,202,827        885,806        (37,972 )     279,049     
Total assets $ 13,683,999        13,718,792        12,115,484        (34,793 )     1,568,515     

Total debt securities of $2.800 billion at December 31, 2019 increased $106 million, or 4 percent, during the current quarter and decreased $69.7 million, or 2 percent, from the prior year.  Debt securities represented 20 percent of total assets at December 31, 2019 compared to 24 percent of total assets at December 31, 2018.  The level of debt securities will continue to fluctuate as necessary to supplement liquidity needs of the Company. 

The loan portfolio of $9.513 billion decreased $28.3 million, or 30 basis points, during the current quarter primarily as a result of seasonality and a few isolated loan payoffs.  Excluding the FNB and Heritage acquisitions, the loan portfolio increased $364 million, or 4 percent, since December 31, 2018, with the largest increase in commercial real estate loans, which increased $195 million, or 4 percent.

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.

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,
2019
  Sep 30,
2019
  Dec 31,
2018
Allowance for loan and lease losses          
Balance at beginning of period $ 131,239      131,239      129,568   
Provision for loan losses 57      57      9,953   
Charge-offs (15,178 )   (12,090 )   (17,807 )
Recoveries 8,372      6,329      9,525   
Balance at end of period $ 124,490      125,535      131,239   
Other real estate owned $ 5,142      7,148      7,480   
Accruing loans 90 days or more past due 1,412      7,912      2,018   
Non-accrual loans 30,883      40,017      47,252   
Total non-performing assets $ 37,437      55,077      56,750   
Non-performing assets as a percentage of subsidiary assets 0.27  %   0.40  %   0.47  %
Allowance for loan and lease losses as a percentage of non-performing loans 385  %   262  %   266  %
Allowance for loan and lease losses as a percentage of total loans 1.31  %   1.32  %   1.58  %
Net charge-offs as a percentage of total loans 0.07  %   0.06  %   0.10  %
Accruing loans 30-89 days past due $ 23,192      29,954      33,567   
Accruing troubled debt restructurings $ 34,055      32,949      25,833   
Non-accrual troubled debt restructurings $ 3,346      6,723      10,660   
U.S. government guarantees included in non-performing assets $ 1,786      3,000      4,811   

The Company experienced another successful quarter in reducing non-performing assets as the Bank divisions continued to focus on resolving outstanding credit issues.  Non-performing assets of $37.4 million at December 31, 2019 decreased $17.6 million, or 32 percent, over the prior quarter and decreased $19.3 million, or 34 percent, over the prior year end.  Non-performing assets as a percentage of subsidiary assets at December 31, 2019 was 0.27 percent, a decrease of 13 basis point from the prior quarter, and a decrease of 20 basis points from the prior year fourth quarter.  Early stage delinquencies (accruing loans 30-89 days past due) of $23.2 million at December 31, 2019 decreased $6.8 million from the prior quarter and decreased $10.4 million from the prior year end.  Early stage delinquencies as a percentage of loans at December 31, 2019 was 0.24 percent, which was a decrease of 7 basis points from prior quarter and a 17 basis points decrease from prior year end. 

The allowance for loan and lease losses (“allowance”) as a percent of total loans outstanding at December 31, 2019 was 1.31 percent, which was a 1 basis point decrease compared to the prior quarter and a decrease of 27 basis points from a year ago.  The decrease from prior year end was attributable to stabilizing credit quality and the addition of loans from the acquisitions which were added to the portfolio on a fair value basis and as a result did not require an allowance at acquisition date.

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 2019 $ —      $ 1,045      1.31  %   0.24  %   0.27  %
Third quarter 2019 —      3,519      1.32  %   0.31  %   0.40  %
Second quarter 2019 —      732      1.46  %   0.43  %   0.41  %
First quarter 2019 57      1,510      1.56  %   0.44  %   0.42  %
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  %

Net charge-offs for the current quarter were $1.0 million compared to $3.5 million for the prior quarter and $2.5 million from the same quarter last year.  There was no current or prior quarter provision for loan losses compared to $1.2 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. 

Liability Summary

              $ Change from
(Dollars in thousands) Dec 31,
2019
  Sep 30,
2019
  Dec 31,
2018
  Sep 30,
2019
  Dec 31,
2018
Deposits                  
Non-interest bearing deposits $ 3,696,627      3,772,766      3,001,178      (76,139 )     695,449     
NOW and DDA accounts 2,645,404      2,592,483      2,391,307      52,921        254,097     
Savings accounts 1,485,487      1,472,465      1,346,790      13,022        138,697     
Money market deposit accounts 1,937,141      1,940,517      1,684,284      (3,376 )     252,857     
Certificate accounts 958,501      955,765      901,484      2,736        57,017     
Core deposits, total 10,723,160      10,733,996      9,325,043      (10,836 )     1,398,117     
Wholesale deposits 53,297      134,629      168,724      (81,332 )     (115,427 )  
Deposits, total 10,776,457      10,868,625      9,493,767      (92,168 )     1,282,690     
Repurchase agreements 569,824      558,752      396,151      11,072        173,673     
Federal Home Loan Bank advances 38,611      8,707      440,175      29,904        (401,564 )  
Other borrowed funds 28,820      14,808      14,708      14,012        14,112     
Subordinated debentures 139,914      139,913      134,051            5,863     
Other liabilities 169,640      174,586      120,778      (4,946 )     48,862     
Total liabilities $ 11,723,266      11,765,391      10,599,630      (42,125 )     1,123,636     

Core deposits of $10.723 billion as of December 31, 2019 decreased $10.8 million or 10 basis points, from the prior quarter with the decrease primarily attributable to the $76 million, or 2 percent, seasonal reduction in non-interest bearing deposits.  Excluding acquisitions, core deposits increased $401 million, or 4 percent, from prior year end with non-interest bearing deposits increasing $305 million, or 10 percent.  Non-interest bearing deposits were 34 percent of total core deposits at current year end, an increase of 2 percent from 32 percent of total core deposits at the prior year end.

Wholesale deposits of $53.3 million at December 31, 2019 decreased $81.3 million from prior quarter and decreased $115 million from the prior year end.  FHLB advances of $38.6 million at December 31, 2019 increased $29.9 million from prior quarter and decreased $402 million from the prior year end.  As a result of the prior quarter's balance sheet strategy, the Company reduced its overall wholesale funding during 2019.  The balance sheet strategy included early termination of the Company's $260 million notional pay-fixed interest rate swaps and corresponding debt.  Wholesale deposits and FHLB advances will continue to fluctuate as necessary for balance sheet growth and to supplement liquidity needs of the Company.

Stockholders’ Equity Summary

              $ Change from
(Dollars in thousands, except per share data) Dec 31,
2019
  Sep 30,
2019
  Dec 31,
2018
  Sep 30,
2019
  Dec 31,
2018
Common equity $ 1,920,507      1,905,306      1,525,281      15,201      395,226   
Accumulated other comprehensive income (loss) 40,226      48,095      (9,427 )   (7,869 )   49,653   
Total stockholders’ equity 1,960,733      1,953,401      1,515,854      7,332      444,879   
Goodwill and core deposit intangible, net (519,704 )   (522,274 )   (338,828 )   2,570      (180,876 )
Tangible stockholders’ equity $ 1,441,029      1,431,127      1,177,026      9,902      264,003   
Stockholders’ equity to total assets 14.33  %   14.24  %   12.51  %        
Tangible stockholders’ equity to total tangible assets 10.95  %   10.84  %   9.99  %        
Book value per common share $ 21.25      21.19      17.93      0.06      3.32   
Tangible book value per common share $ 15.61      15.53      13.93      0.08      1.68   

Tangible stockholders’ equity of $1.441 billion at December 31, 2019 increased $9.9 million, or 70 basis points, compared to the prior quarter which was driven by earnings retention.  Tangible stockholders’ equity increased $264 million, or 22 percent, over the prior year end which was primarily the result of earnings retention, an increase in other comprehensive income, and the result of $317 million of Company stock issued for current year acquisitions.  Tangible book value per common share of $15.61 at current quarter end increased $0.08 per share from the prior quarter and increased $1.68 per share from a year ago.

Cash Dividends
On December 30, 2019, the Company’s Board of Directors declared a special cash dividend of $0.20 per share, the 16th special dividend the Company has declared.  The special dividend was payable January 16, 2020 to shareholders of record on January 7, 2020.  On November 13, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.29 per share.  The regular quarterly dividend was payable December 19, 2019 to shareholders of record on December 10, 2019. The Company has declared 139 consecutive quarterly dividends.  Regular quarterly dividends for 2019 were $1.11 per share, an increase of $0.10 per share, or 10 percent, compared to prior year quarterly dividends of $1.01 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, 2019 
Compared to September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018

Income Summary

  Three Months ended
(Dollars in thousands) Dec 31,
2019
  Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
Net interest income                  
Interest income $ 145,281      142,395      132,385      126,116      125,310   
Interest expense 8,833      10,947      12,089      10,904      9,436   
Total net interest income 136,448      131,448      120,296      115,212      115,874   
Non-interest income                  
Service charges and other fees 14,756      15,138      20,025      18,015      19,708   
Miscellaneous loan fees and charges 1,379      1,775      1,192      967      1,278   
Gain on sale of loans 10,135      10,369      7,762      5,798      5,639   
Gain (loss) on sale of investments 257      13,811      134      213      (357 )
Other income 1,890      1,956      1,721      3,481      2,226   
Total non-interest income 28,417      43,049      30,834      28,474      28,494   
Total income $ 164,865      174,497      151,130      143,686      144,368   
Net interest margin (tax-equivalent) 4.45  %   4.42  %   4.33  %   4.34  %   4.30  %
                   
      $ Change from
(Dollars in thousands)     Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
Net interest income                  
Interest income     $ 2,886      12,896      19,165      19,971   
Interest expense     (2,114 )   (3,256 )   (2,071 )   (603 )
Total net interest income     5,000      16,152      21,236      20,574   
Non-interest income                  
Service charges and other fees     (382 )   (5,269 )   (3,259 )   (4,952 )
Miscellaneous loan fees and charges     (396 )   187      412      101   
Gain on sale of loans     (234 )   2,373      4,337      4,496   
Gain (loss) on sale of investments     (13,554 )   123      44      614   
Other income     (66 )   169      (1,591 )   (336 )
Total non-interest income     (14,632 )   (2,417 )   (57 )   (77 )
Total income     $ (9,632 )   13,735      21,179      20,497   

Net Interest Income
The current quarter net interest income of $136 million increased $5.0 million, or 4 percent, over the prior quarter and increased $20.6 million, or 18 percent, from the prior year fourth quarter.  The current quarter interest income  of $145 million increased $2.9 million, or 2 percent, over the prior quarter and increased $20.0 million, or 16 percent, over prior year fourth quarter and was primarily driven by an increase in interest income on commercial loans.  Interest income on commercial loans increased $3.1 million, or 3 percent, from the prior quarter and increased $18.1 million, or 22 percent, from the prior year fourth quarter.

The current quarter interest expense of $8.8 million decreased $2.1 million, or 19 percent, over the prior quarter and decreased $603 thousand, or 6 percent, over prior year fourth quarter which was driven by the decrease in higher cost FHLB advances and wholesale deposits.  During the current quarter, the total cost of funding (including non-interest bearing deposits) declined 9 basis points to 30 basis points compared to 39 basis points for the prior quarter and 36 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 4.45 percent compared to 4.42 percent in the prior quarter.  The core net interest margin, excluding  $2.1 million, or 6 basis points, of discount accretion and $2.0 million, or 6 basis points, of non-accrual interest recoveries, was 4.33 percent compared to 4.35 in the prior quarter and 4.25 percent in the prior year fourth quarter.  The Company experienced a 2 basis points decrease in the core net interest margin during the current quarter from decreased yields on loans and investments that more than offset the decrease in the cost of funding from the reduction of FHLB borrowings.  The core net interest margin increased 8 basis points from the prior year fourth quarter primarily the result of increased yields on the loan portfolio and a decrease in funding cost.  “The stable net margin reflects the full quarter benefits of September's balance sheet strategy to improve net interest income by reducing high cost funding and low yield securities,” said Ron Copher, Chief Financial Officer. “In addition, the average balance of non-interest bearing deposits increased in the current quarter and over the entire year.”              

Non-interest Income
Non-interest income for the current quarter totaled $28.4 million which was a decrease of $14.6 million, or 34 percent, over the prior quarter and a decrease of $77 thousand, or 27 basis points, over the same quarter last year.  In the prior quarter as part of the balance sheet strategy, the Company sold $308 million of securities and recognized gain of $13.8 million.  Service charges and other fees of $14.8 million for the current quarter decreased $5.0 million, or 25 percent, from the prior year fourth quarter due to the Company's decrease in interchange fees as a result of the Durbin Amendment.  As of July 1, 2019, the Company became subject to the Durbin Amendment which established limits on the amount of interchange fees that can be charged to merchants for debit card processing. Gain on the sale of loans of $10.1 million for the current quarter increased $4.5 million, or 80 percent, compared to the prior year fourth quarter as a result of increased purchase and refinance activity.

Non-interest Expense Summary

  Three Months ended
(Dollars in thousands) Dec 31,
2019
  Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
Compensation and employee benefits $ 55,543      62,509      51,973      52,728      50,385   
Occupancy and equipment 9,149      8,731      8,180      8,437      7,884   
Advertising and promotions 2,747      2,719      2,767      2,388      2,434   
Data processing 4,972      4,466      4,062      3,892      3,951   
Other real estate owned 609      166      191      139      264   
Regulatory assessments and insurance 45      593      1,848      1,285      1,263   
Loss on termination of hedging activities —      13,528      —      —      —   
Core deposit intangibles amortization 2,566      2,360      1,865      1,694      1,731   
Other expenses 19,621      15,603      15,284      12,267      13,964   
Total non-interest expense $ 95,252      110,675      86,170      82,830      81,876   
                   
      $ Change from
(Dollars in thousands)     Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
Compensation and employee benefits     $ (6,966 )   3,570      2,815      5,158   
Occupancy and equipment     418      969      712      1,265   
Advertising and promotions     28      (20 )   359      313   
Data processing     506      910      1,080      1,021   
Other real estate owned     443      418      470      345   
Regulatory assessments and insurance     (548 )   (1,803 )   (1,240 )   (1,218 )
Loss on termination of hedging activities     (13,528 )   —      —      —   
Core deposit intangibles amortization     206      701      872      835   
Other expenses     4,018      4,337      7,354      5,657   
Total non-interest expense     $ (15,423 )   9,082      12,422      13,376   

Total non-interest expense of $95.3 million for the current quarter decreased $15.4 million, or 14 percent, over the prior quarter and increased $13.4 million, or 16 percent, over the prior year fourth quarter.  Compensation and employee benefits decreased by $7.0 million, or 11 percent, from the prior quarter primarily due to the $5.4 million of stock compensation expense related to the accelerated vesting of stock options from the Heritage acquisition in the prior quarter.  Compensation and employee benefits increased $5.2 million, or 10 percent, from the prior year fourth quarter due to an increased number of employees driven by acquisition and organic growth.  Occupancy and equipment expense increased $418 thousand, or 5 percent, over the prior quarter and increased $1.3 million, or 16 percent, over the prior year fourth quarter as a result of the current year acquisitions and general cost increases.  Data processing expense increased $506 thousand, or 11 percent, over the prior quarter and increased $1.0 million, or 26 percent, over the prior year fourth quarter primarily as a result of the current year acquisitions.  Regulatory assessment and insurance decreased $1.2 million, or 96 percent, from the prior year fourth quarter primarily as a result of $1.3 million of Small Bank Assessment credits applied by the FDIC during the current quarter.  The prior quarter loss on termination of hedging activities included a $3.5 million write-off of the remaining unamortized deferred prepayment penalties on FHLB advances and a $10.0 million loss on the termination of pay-fixed interest rate swaps with notional amounts totaling $260 million.  Other expenses of $19.6 million, increased $4.0 million, or 26 percent, from the prior quarter and was primarily driven by an increase in acquisition-related expenses.  Other expenses included acquisition-related expenses of $4.4 million in the current quarter compared to $2.1 million in the prior quarter and $520 thousand in the prior year fourth quarter.

Federal and State Income Tax Expense
Tax expense during the fourth quarter of 2019 was $12.2 million, which was stable compared to the prior quarter and an increase of $556 thousand, or 5 percent, from the prior year fourth quarter.  The effective tax rate in the current quarter was 18 percent which compares to 19 percent in the prior quarter and prior year fourth quarter.

Efficiency Ratio
The current quarter efficiency ratio was 54.90 percent, a 97 basis points increase from the prior year fourth quarter efficiency ratio of 53.93 as a result of increased operating expenses from acquisitions and the Durbin amendment which outpaced the increase in net interest income.

Operating Results for Year Ended December 31, 2019
Compared to December 31, 2018

Income Summary

  Year ended        
(Dollars in thousands) Dec 31,
2019
  Dec 31,
2018
  $ Change   % Change
Net interest income              
Interest income $ 546,177      $ 468,996      $ 77,181        16  %
Interest expense 42,773      35,531      7,242        20  %
Total net interest income 503,404      433,465      69,939        16  %
Non-interest income              
Service charges and other fees 67,934      74,887      (6,953 )     (9 )%
Miscellaneous loan fees and charges 5,313      6,805      (1,492 )     (22 )%
Gain on sale of loans 34,064      27,134      6,930        26  %
Gain (loss) on sale of investments 14,415      (1,113 )   15,528        (1,395 )%
Other income 9,048      11,111      (2,063 )     (19 )%
Total non-interest income 130,774      118,824      11,950        10  %
Total Income $ 634,178      $ 552,289      $ 81,889        15  %
Net interest margin (tax-equivalent) 4.39  %   4.21  %        

Net Interest Income
Net interest income of $503 million for 2019 increased $69.9 million, or 16 percent, from prior year and was primarily attributable to a $64.9 million increase in interest income from commercial loans.  Interest expense of $42.8 million for 2019 increased $7.2 million, or 20 percent over the prior year as a result of an increase in the amount of deposits and interest rate increases on deposits.  The total funding cost (including non-interest bearing deposits) for 2019 was 39 basis points compared to 36 basis points for 2018.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for 2019 was 4.39 percent, an 18 basis points increase from the net interest margin of 4.21 percent for 2018.  The increase in the margin was principally due to a shift in earning assets to higher yielding loans along with an increase in yields on the loan portfolio and an increase in non-accrual interest recoveries combined with relatively stable cost of funds and an increase low cost deposits.  The current year included $4.4 million in non-accrual interest recoveries compared to $187 thousand in the prior year.

Non-interest Income
Non-interest income of $131 million for 2019 increased $12.0 million, or 10 percent, over the last year which was driven by the sale of debt securities from the balance sheet strategy implemented during the current year.  Service charges and other fees of $67.9 million for 2019 decreased $7.0 million, or 9 percent, from the prior year.  Excluding the impact from the Durbin Amendment, there was an increase in fees during the current year from the increased number of deposit accounts from organic growth and acquisitions.  Gain on the sale of loans of $34.1 million for 2019, increased $6.9 million, or 26 percent, compared to the prior year as a result of increased purchase and refinance activity.  Other income decreased $2.1 million from the prior year and was the result of a gain of $2.3 million on the sale of a former branch building in the prior year third quarter.

Non-interest Expense Summary

  Year ended        
(Dollars in thousands) Dec 31,
2019
  Dec 31,
2018
  $ Change   % Change
Compensation and employee benefits $ 222,753      $ 195,056      $ 27,697        14  %
Occupancy and equipment 34,497      30,734      3,763        12  %
Advertising and promotions 10,621      9,566      1,055        11  %
Data processing 17,392      15,911      1,481        %
Other real estate owned 1,105      3,221      (2,116 )     (66 )%
Regulatory assessments and insurance 3,771      5,075      (1,304 )     (26 )%
Loss on termination of hedging activities 13,528      —      13,528        n/m  
Core deposit intangibles amortization 8,485      6,270      2,215        35  %
Other expenses 62,775      54,294      8,481        16  %
Total non-interest expense $ 374,927      $ 320,127      $ 54,800        17  %

______________________________

n/m - not measurable

Total non-interest expense of $375 million for 2019 increased $54.8 million, or 17 percent, over the prior year.  Compensation and employee benefits for 2019 increased $27.7 million, or 14 percent, from the prior year due to the increased number of employees from acquisitions and organic growth, a $5.4 million of stock compensation expense related to the Heritage acquisition and annual salary increases.  Occupancy and equipment expense for 2019 increased $3.8 million, or 12 percent from the prior year as a result of increased cost from acquisitions and general cost increases.  Data processing expense increased $1.5 million or 9 percent, over the prior year primarily as a result of increased costs from acquisitions.  Regulatory assessment and insurance decreased $1.3 million, or 26 percent, from the prior year and included $2.5 million of Small Bank Assessment credits applied by the FDIC during the current year.  Other expenses of $62.8 million in the current year, increased $8.5 million, or 16 percent, from the prior year and was primarily driven an increase in acquisition-related expenses, increased costs from acquisitions and general cost increases.  Other expenses included acquisition-related expenses of $8.5 million in 2019 compared to $6.6 million in the prior year.

Provision for Loan Losses
The provision for loan losses was $57 thousand for 2019, a decrease of $9.9 million from prior year.  Net charge-offs during the 2019 were $6.8 million compared to $8.3 million during 2018.

Federal and State Income Tax Expense
Tax expense of $48.7 million in 2019 increased $8.3 million, or 21 percent, over the prior year.  The effective tax rate in 2019 was 19 percent compared to 18 percent in the prior year.

Efficiency Ratio
The efficiency ratio for the year ended December 31, 2019 was 57.78 percent.  Excluding the $10.0 million loss recognized on the termination of the interest rate swaps, the $3.5 million write-off of the remaining unamortized deferred prepayment penalties on FHLB advances, and the $5.4 million of accelerated stock compensation expense, the efficiency ratio would have been 54.79 percent, which was an increase of 6 basis points from the efficiency ratio of 54.73 percent for 2018.  The increase in the efficiency ratio was driven by the decrease in interchange fees from the Durbin Amendment that outpaced the increase in net interest income.

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;
  • 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 24, 2020. 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 9735109. To participate on the webcast, log on to: https://edge.media-server.com/mmc/p/eq5tpgz. 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 9735109 by February 7, 2020.

About Glacier Bancorp, Inc.
Glacier Bancorp, Inc. is the parent company for Glacier Bank and its Bank divisions: Bank of the San Juans (Durango, CO), Citizens Community Bank (Pocatello, ID), Collegiate Peaks Bank (Buena Vista, CO), First Bank of Montana (Lewistown, MT), First Bank of Wyoming (Powell, WY), First Community Bank Utah (Layton, UT), First Security Bank of Bozeman (Bozeman, MT), First Security Bank of Missoula (Missoula, MT), First State Bank (Wheatland, WY), Glacier Bank (Kalispell, MT), Heritage Bank of Nevada (Reno, NV), Mountain West Bank (Coeur d’Alene, ID), North Cascades Bank (Chelan, WA), The Foothills Bank (Yuma, AZ), Valley Bank of Helena (Helena, MT), and Western Security Bank (Billings, MT).

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

(Dollars in thousands, except per share data) Dec 31,
2019
  Sep 30,
2019
  Dec 31,
2018
Assets          
Cash on hand and in banks $ 198,639      233,623      161,782   
Interest bearing cash deposits 132,322      172,761      42,008   
Cash and cash equivalents 330,961      406,384      203,790   
Debt securities, available-for-sale 2,575,252      2,459,036      2,571,663   
Debt securities, held-to-maturity 224,611      234,992      297,915   
Total debt securities 2,799,863      2,694,028      2,869,578   
Loans held for sale, at fair value 69,194      100,441      33,156   
Loans receivable 9,512,810      9,541,088      8,287,549   
Allowance for loan and lease losses (124,490 )   (125,535 )   (131,239 )
Loans receivable, net 9,388,320      9,415,553      8,156,310   
Premises and equipment, net 310,309      307,590      241,528   
Other real estate owned 5,142      7,148      7,480   
Accrued interest receivable 56,047      63,294      54,408   
Deferred tax asset 2,037      —      23,564   
Core deposit intangible, net 63,286      65,852      49,242   
Goodwill 456,418      456,422      289,586   
Non-marketable equity securities 11,623      10,427      27,871   
Bank-owned life insurance 109,428      108,814      82,320   
Other assets 81,371      82,839      76,651   
Total assets $ 13,683,999      13,718,792      12,115,484   
Liabilities          
Non-interest bearing deposits $ 3,696,627      3,772,766      3,001,178   
Interest bearing deposits 7,079,830      7,095,859      6,492,589   
Securities sold under agreements to repurchase 569,824      558,752      396,151   
FHLB advances 38,611      8,707      440,175   
Other borrowed funds 28,820      14,808      14,708   
Subordinated debentures 139,914      139,913      134,051   
Accrued interest payable 4,686      4,435      4,252   
Other liabilities 164,954      170,151      116,526   
Total liabilities 11,723,266      11,765,391      10,599,630   
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 923      922      845   
Paid-in capital 1,378,534      1,375,785      1,051,253   
Retained earnings - substantially restricted 541,050      528,599      473,183   
Accumulated other comprehensive income (loss) 40,226      48,095      (9,427 )
Total stockholders’ equity 1,960,733      1,953,401      1,515,854   
Total liabilities and stockholders’ equity $ 13,683,999      13,718,792      12,115,484   

Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Operations

...
  Three Months ended   Year ended
(Dollars in thousands, except per share data) Dec 31,
2019
  Sep 30,
2019
  Dec 31,
2018
  Dec 31,
2019
  Dec 31,
2018
Interest Income                  
Debt securities $ 20,904      21,357      22,016      85,504      86,499   
Residential real estate loans 12,554      12,156      10,751      46,899      40,041   
Commercial loans 100,301      97,224      82,238      369,107      304,164   
Consumer and other loans 11,522      11,658      10,305      44,667      38,292   
Total interest income 145,281      142,395      125,310      546,177      468,996   
Interest Expense                  
Deposits 6,101      6,214      4,989      23,280      18,359   
Securities sold under agreements to repurchase 1,007      999      707      3,694      2,248   
Federal Home Loan Bank advances 86      2,035      2,146      9,023      8,880   
Other borrowed funds 92      47      (10 )   215      95   
Subordinated debentures 1,547      1,652      1,604      6,561      5,949   
Total interest expense 8,833      10,947      9,436      42,773      35,531   
Net Interest Income 136,448      131,448      115,874      503,404      433,465   
Provision for loan losses —      —      1,246      57      9,953   
Net interest income after provision for loan losses 136,448      131,448      114,628      503,347      423,512   
Non-Interest Income                  
Service charges and other fees 14,756      15,138      19,708      67,934      74,887   
Miscellaneous loan fees and charges 1,379      1,775      1,278      5,313      6,805   
Gain on sale of loans 10,135      10,369      5,639      34,064      27,134   
Gain (loss) on sale of debt securities 257      13,811      (357 )   14,415      (1,113 )
Other income 1,890      1,956      2,226      9,048      11,111   
Total non-interest income 28,417      43,049