Glacier Bancorp, Inc. Announces Results for Quarter Ended June 30, 2010

KALISPELL, Mont., July 22 /PRNewswire-FirstCall/ --

HIGHLIGHTS:

• Net earnings for the quarter of $13.2 million and year-to-date of $23.3 million.
• Diluted earnings per share of $0.19 for the quarter and $0.35 year-to-date.
• Non-interest bearing deposits increased $24.0 million, or 12 percent annualized, for the quarter.
• Non-performing assets as a percentage of bank assets decreased for the first time in 11 quarters.
• Early stage delinquencies (accruing 30-89 day loans) decreased during the quarter.
• Successfully completed the integration and data conversion for First National Bank & Trust.
• Declared dividend for the 101st consecutive quarter.  Dividend declared of $0.13 per share.  

Glacier Bancorp, Inc. (Nasdaq: GBCI) reported net earnings of $13.2 million for the second quarter of 2010, an increase of $2.6 million, or 24 percent, from the $10.7 million net earnings reported for the second quarter of 2009.  The diluted earnings per share of $0.19 for the quarter represented a 12 percent increase from the diluted earnings per share of $0.17 for the same quarter of 2009.  Annualized return on average assets and return on average equity for the second quarter were 0.85 percent and 6.25 percent, respectively, which compares with prior year returns for the second quarter of 0.77 percent and 6.18 percent, respectively.

Net earnings for the six months ended June 30, 2010 were $23.3 million, which is a decrease of $3.1 million or 12 percent, over the prior year.  Diluted earnings per share of $0.35 is a decrease of 19 percent over $0.43 earned in the first half of 2009.  

"Second quarter results were an improvement over recent quarters.  We still have more work to do in order to achieve the level of earnings we historically deliver and for us to be satisfied with our performance. However, we are encouraged by the progress we have made recently and hope to maintain this momentum" said Mick Blodnick, President and Chief Executive Officer.  "One reason for the improvement was a reduced provision for loan loss, reflecting improving credit quality metrics.  In addition, the quarter was straight forward and was absent much noise.  The only exception was the sale of our merchant card servicing portfolio which added almost $0.02 per share to earnings," Blodnick said.

Total assets at June 30 2010 were $6.295 billion, which is $103 million, or 2 percent, greater than total assets of $6.192 billion at December 31, 2009.  Total assets increased $656 million, or 12 percent, from June 30, 2009, of which $272 million, including $161 million in loans, related to the acquisition of First National Bank & Trust ("First National") in October 2009.  

Investment securities, including interest bearing deposits, FHLB and FRB stock, and federal funds sold, have increased $220 million, or 14 percent, from December 31, 2009 and increased $735 million, or 68 percent, from June 30, 2009.  The Company continues to purchase investment securities as loan originations slow, such purchases are predominately mortgage-backed securities issued by Freddie Mac and Fannie Mae with short weighted average lives.  The Company continues to be very selective in its purchases of tax-exempt investment securities.  Investment securities represent 29 percent of total assets at June 30, 2010 versus 19 percent of total assets at June 30, 2009.

At June 30, 2010, gross loans were $4.032 billion, a decrease of $98 million over gross loans of $4.130 billion at December 31, 2009.  Excluding net charge-offs of $39 million and loans transferred to other real estate of $46 million, loans decreased $13 million, or 1 percent annualized, from December 31, 2009.  

Credit Quality

At June 30, 2010, the allowance for loan and lease losses was $141.7 million, an increase of $44.3 million, or 45 percent, from a year ago.  The allowance was 3.51 percent of total loans outstanding at June 30, 2010, such percentage down slightly from the 3.53 percent at March 31, 2010, but substantially higher than the 2.36 percent at June 30, 2009.  The allowance was 55 percent of non-performing assets at June 30, 2010, the same percentage at the prior year end and down from 56 percent a year ago.  Non-performing assets as a percentage of total subsidiary assets at June 30, 2010 were at 4.01 percent, down from 4.13 percent as of prior year end, and up from 3.06 percent at June 30, 2009.  Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will continue to determine the level of additional provision for loan loss expense.  

Allowance for Loan and Lease Losses

The current quarter provision for loan loss expense was $17.2 million, a decrease of $3.7 million from prior quarter and a decrease of $7.9 million from the same quarter in 2009.  Net charged-off loans for the current quarter were $19.2 million compared to $20.2 million for the prior quarter and $11.5 million for the same quarter in 2009.  "Asset quality trends were encouraging although this is still a challenging credit environment," Blodnick said.  "The reduction in non-performing assets through the first half of the year was a pleasant surprise.  We have been predicting higher levels of non-performing assets through the first half of the year.  For the second straight quarter we also saw a significant reduction in early stage delinquencies.  Nonetheless, it is still far too early to determine whether this trend will continue," Blodnick said.  

During the quarter, the Company formed a wholly owned subsidiary, GBCI Other Real Estate ("GORE") to isolate bank foreclosed properties for legal protection and administrative purposes.  During the quarter, foreclosed properties were transferred to the new entity from bank subsidiaries at fair market value and such properties are currently held for sale.

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

As of June 30, 2010, non-interest bearing deposits increased $42 million, or 10 percent annualized, since December 31, 2009 and increased $97 million, or 13 percent, since June 30, 2009.  Interest bearing deposits of $3.658 billion at June 30, 2010 includes $414 million issued through the Certificate of Deposit Account Registry System.  Interest bearing deposits increased $368 million, or 22 percent annualized, from December 31, 2009 and $1.026 billion, or 39 percent from June 30, 2009.  The increase in interest bearing deposits from December 31, 2009 and June 30, 2009 includes $308 million and $507 million, respectively, from wholesale deposits.  The increase in non-interest bearing deposits and interest bearing deposits from June 30, 2009 includes $39 million and $197 million, respectively, from the First National acquisition.  

As a result of the deposit growth, borrowings overall have been reduced.  Federal Home Loan Bank ("FHLB") advances decreased $260 million, or 33 percent, from December 31, 2009 and decreased $83 million, or 14 percent, from June 30, 2009.  There were no Federal Reserve Bank borrowings through the Term Auction Facility program ("TAF") at June 30, 2010 due to cessation of the TAF program by the Federal Reserve.  TAF borrowings totaled $225 million at December 31, 2009 and $587 million at June 30, 2009.  Repurchase agreements and other borrowed funds were $234 million at June 30, 2010, an increase of $8 million from December 31, 2009 and an increase of $36 million from June 30, 2009.

Total stockholders' equity and book value per share increased $156 million and $0.55 per share, respectively, from June 30, 2009, such increases largely the result of the $146 million in net proceeds from the Company's March equity offering of 10.291 million shares.  Tangible stockholders' equity has increased $155 million, or 29 percent, since June 30, 2009, with tangible stockholders' equity to tangible assets at 11.20 percent and 9.71 percent as of June 30, 2010 and June 30, 2009, respectively.  Accumulated other comprehensive income (loss), representing net unrealized gains or losses (net of tax) on investment securities, increased $9.1 million since December 31, 2009 and $11.2 million from June 30, 2009.  

Cash Dividend

On June 30, 2010, the board of directors declared a cash dividend of $0.13 per share, payable July 22, 2010 to shareholders of record on July 13, 2010.  Future cash dividends will depend on a variety of factors, including net income, capital, asset quality and general economic conditions.

Net Interest Income

Net interest income for the current quarter increased $555 thousand and decreased $412 thousand over prior year's quarter.  The current quarter net interest margin as a percentage of earning assets, on a tax-equivalent basis, was 4.35 percent which is 8 basis points lower than the 4.43 percent for the prior quarter and included a 4 basis points reduction from the reversal of interest on non-accrual loans.  The net interest margin for the current quarter is 52 basis points lower than the 4.87 percent result for the second quarter of 2009.  "Though funding costs continue to remain stable, investment of proceeds from loan paydowns and the March equity offering into low yielding investment securities continues to compress the net interest margin," said Ron Copher, Chief Financial Officer.

Non-interest Income

Non-interest income for the quarter totaled $21.4 million, an increase of $5.2 million over the prior quarter and $100 thousand over the same quarter as last year.  Fee income of $11.9 million increased $1.3 million, or 12 percent, during the quarter primarily from an increase in debit card income.  This compares to an increase of $523 thousand, or 5 percent, over the same period last year.  Gain on sale of loans increased $2.2 million, or 58 percent, over the prior quarter as a reduction in mortgage interest rates during the second quarter led to an increase in loan origination volume.  Gain on sale of loans decreased $2.9 million, or 32 percent, over the same period last year, primarily the result of a significant reduction in re-finance activity and a slowing of residential loans originated and sold in the secondary market.  Net gain on sale of investments was $242 thousand for the current quarter 2010 compared to $314 thousand for the previous quarter.  Other income of $3.1 million for the current quarter is an increase of $1.8 million and $2.3 million from prior quarter and prior year second quarter, respectively, of which $1.8 million relates to the current quarter sale of Mountain West Bank's merchant card servicing portfolio.  

Non-interest Expense

Non-interest expense of $48.2 million for the quarter increased by $6.3 million, or 15 percent, from the prior quarter and increased $5.3 million, or 12 percent, from the prior year second quarter.  Compensation and employee benefits of $21.7 million increased only $296 thousand, or 1 percent, from the previous quarter and $942 thousand, or 5 percent, from the prior year second quarter which is due to the addition of First National employees.  The number of full-time equivalent employees increased from 1,651 to 1,654 during the quarter, and increased from 1,597 since the end of the 2009 second quarter.  

Occupancy and equipment expense increased $40 thousand, or 1 percent, from the prior quarter and increased $377 thousand, or 7 percent, from the prior year second quarter.  Advertising and promotion expense increased $52 thousand, or 3 percent, from prior quarter and decreased $78 thousand, or 5 percent, from the second quarter of 2009.  Other real estate owned expenses increased $5.1 million, or 218 percent, from prior quarter and increased $5.1 million, or 218 percent, from the prior year.  The current quarter other real estate owned expense of $7.4 million included $1.5 million of operating expenses, $2.9 million of fair value write-downs, and $3.0 million of loss on sale of other real estate owned.  The other real estate owned expenses have increased as the Company moves to aggressively dispose of problem assets and other real estate owned.  FDIC premiums decreased $1.7 million, or 44 percent, from the prior year second quarter which included a FDIC special assessment.  Other expenses increased $819 thousand, or 12 percent, from the prior quarter and increased $527 thousand, or 7 percent, from the prior year second quarter.   "Other real estate owned expenses and write-downs were at an extraordinary high level this past quarter," Blodnick said.  "We expect this expense category to remain elevated for the next couple of quarters as we work to move these properties.  All other expense categories were in line or below expectations."

Efficiency Ratio

The efficiency ratio (non-interest expense / net interest income plus non-interest income) was 59 percent for the quarter, compared to 53 percent for the 2009 second quarter.  The increase in the efficiency ratio from the prior year is the result of the increase in other expenses primarily from other real estate owned expenses, losses and write-downs.

Net Interest Income

Net interest income for the six month period decreased $1.3 million, or 1 percent, over the same period in 2009.  Total interest income decreased $2.7 million, or 2 percent, while total interest expense decreased $1.5 million, or 5 percent.  The decrease in interest income is due to a lower yield and volume of loans coupled with an increase in lower yielding investment securities.  The decrease in interest expense is primarily attributable to the rate decreases on interest bearing deposits and lower cost borrowings.  The net interest margin as a percentage of earning assets, on a tax equivalent basis, decreased 51 basis points from 4.90 percent for 2009 to 4.39 percent for 2010.

Non-interest Income

Non-interest income decreased $1.1 million over the same period in 2009.  Fee income for the first half of 2010 has increased $990 thousand, or 5 percent, compared to prior year primarily from an increase in debit card income.  Gain on sale of loans decreased $5.2 million, or 34 percent, over the first six months of last year, primarily the result of a significant reduction in re-finance activity and a slowing of residential loans originated and sold in the secondary market.  Other income increased $2.6 million over the same period in 2009, of which $1.8 million relates to the current quarter sale of Mountain West Bank's merchant card servicing portfolio.  

Non-interest Expense

Non-interest expense for the first six month of 2010 increased by $7.6 million, or 9 percent, from the same period prior year.  Compensation and employee benefits increased $354 thousand, or 1 percent, from 2009.  Occupancy and equipment expense increased $430 thousand, or 4 percent, reflecting the cost of additional locations and facility upgrades.  Advertising and promotion expense decreased by $210 thousand, or 6 percent, from 2009.   Other real estate owned expense increased $6.9 million, or 241 percent, from the prior first six months.  The other real estate owned expenses for the first six months of 2010 of $9.7 million included $2.2 million of operating expenses, $3.3 million of fair value write-downs, and $4.2 of loss on sale of other real estate owned.  FDIC premiums decreased $635 thousand, or 13 percent, from the prior year first six months which included a special assessment of $2.5 million.  Other expense increased $630 thousand, or 4 percent, from the prior year.  

Efficiency Ratio

The efficiency ratio (non-interest expense / net interest income plus non-interest income) was 57 percent for the first six months of 2010, compared to 52 percent for the same period in 2009.  The increase in the efficiency ratio from the prior year is the result of the increase in other expenses primarily from other real estate owned expenses, losses and write-downs.

Allowance for Loan and Lease Losses

The provision for loan loss expense was $38.2 million for the first six months of 2010, a decrease of $2.7 million, or 7 percent, from the same period in 2009.  Net charged-off loans during the six months ended June 30, 2010 was $39.4 million, an increase of $19.2 million from the same period in 2009.

About Glacier Bancorp, Inc.

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

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

• the risks associated with lending and potential adverse changes of the credit quality of loans in the Company's portfolio, including as a result of declines in the housing and real estate markets in its geographic areas;
• increased loan delinquency rates;
• the risks presented by a continued economic downturn, which could adversely affect credit quality, loan collateral values, other real estate owned values, investment values, liquidity and capital levels, dividends and loan originations;
• changes in market interest rates, which could adversely affect the Company's net interest income and profitability;
• legislative or regulatory changes that adversely affect the Company's business, ability to complete pending or prospective future acquisitions, limit certain sources of revenue, or increase cost of operations;
• costs or difficulties related to the integration of acquisitions;
• the goodwill recorded in connection with acquisitions could become impaired, which may have an adverse impact on the Company's earnings and capital;
• reduced demand for banking products and services;
• the risks presented by public stock market volatility, which could adversely affect the Company's stock value and the ability to raise capital in the future;
• competition from other financial services companies in our markets; and
• the Company's success in managing risks involved in the foregoing.

The Company does not undertake any obligation to publicly correct or update any forward-looking statement if we later become aware that it is not likely to be achieved.

Visit our website at www.glacierbancorp.com

SOURCE Glacier Bancorp, Inc.