KALISPELL, Mont., Jan. 26, 2012 /PRNewswire/ --

HIGHLIGHTS:

• Net earnings for the quarter increased 50 percent to $14.3 million and diluted earnings per share increased 54 percent to $0.20 from the prior year fourth quarter.
• Excluding a goodwill impairment charge (net of tax) of $32.6 million, net operating earnings for 2011 was $50.1 million, an increase of $7.8 million, or 18 percent from the prior year.
• Non-performing assets of $213 million decreased $35.9 million, or 14 percent, from the prior quarter.
• Net charged-off loans of $9.3 million for the quarter decreased $9.6 million, or 51 percent, from the prior quarter net charged-off loans.
• Non-interest bearing deposits surpassed $1 billion for the first time.
• Dividend declared of $0.13 per share during the quarter.  
• Announced the internal restructuring of the bank subsidiaries to bank divisions.

Results Summary

Glacier Bancorp, Inc. (Nasdaq GS: GBCI) reported earnings for the current quarter of $14.3 million, an increase of $4.8 million, or 50 percent, compared to $9.6 million for the prior year fourth quarter. Diluted earnings per share for the current quarter was $0.20 per share, an increase of 54 percent from the prior year fourth quarter of $0.13 per share. "Although revenue growth is still challenging, we gained momentum in a number of fronts this past quarter." said Mick Blodnick, President and Chief Executive Officer. "Earnings continued to improve and credit costs decreased. However, those positions were partially offset by a steep increase in premium amortization which had a significant impact on our net interest income and consequently our net interest margin," Blodnick said.

Excluding the goodwill impairment charge, operating earnings for 2011 was $50.1 million versus $42.3 million for the prior year. Diluted operating earnings per share for 2011 was $0.70 per share, an increase of 15 percent from the prior year earnings per share of $0.61. Operating earnings is considered a non-GAAP financial measure and additional information regarding this measurement and reconciliation is provided herein. Including the goodwill impairment charge, net earnings was $17.5 million or $0.24 per share for the year ended December 31, 2011.

Non-GAAP Financial Measures

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 preceding results summary 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 third quarter of 2011 goodwill impairment charge (net of tax) of $32.6 million.

• The goodwill impairment charge was $40.2 million with a tax benefit of $7.6 million which resulted in a goodwill impairment charge (net of tax) of $32.6 million.  The tax benefit applied only to the $19.4 million of goodwill associated with taxable acquisitions and was determined based on the Company's marginal income tax rate of 38.9 percent.  
• The diluted earnings per share reconciling item was determined based on the goodwill impairment charge (net of tax) divided by the weighted average diluted shares of 71,915,073.  
• The goodwill impairment charge (net of tax) was included in determining earnings for both the GAAP return on average assets and GAAP return on average equity.  The average assets used in the GAAP return on average assets ratios were $7.128 billion and $6.923 billion for the three and twelve month periods, respectively.  The average assets used in the non-GAAP return on average assets ratios were $7.161 billion and $6.931 billion for the three and twelve month periods, respectively.  The average equity used in the GAAP return on average equity ratios were $850 million and $858 million for the three and twelve month periods, respectively.  The average equity used in the non-GAAP return on average equity ratios were $883 million and $866 million for the three and twelve month periods, respectively.  

Asset Summary

Total assets at December 31, 2011 were $7.188 billion, which was $145 million, or 2 percent, greater than total assets of $7.043 billion at September 30, 2011, and $429 million, or 6 percent, greater than total assets of $6.759 billion at December 31, 2010.

Investment securities, including interest bearing deposits and federal funds sold, increased $179 million, or 6 percent, during the quarter and increased $721 million, or 30 percent, from December 31, 2010. During the year, the Company purchased investment securities to primarily offset the lack of loan growth and to maintain interest income. The investment securities purchased during the current quarter were predominately U.S. Agency Collateralized Mortgage Obligations ("CMO") with short weighted-average-lives. Investment securities represent 44 percent of total assets at December 31, 2011 versus 42 percent at September 30, 2011 and 36 percent at December 31, 2010.

At December 31, 2011, the loan portfolio was $3.466 billion, a decrease of $57.4 million, or 2 percent, during the quarter. Excluding net charge-offs of $9.3 million and loans transferred to other real estate owned of $14.8 million, loans decreased $33.3 million, or 1 percent, during the current quarter. During the year, the loan portfolio decreased $283 million, or 8 percent, from total loans of $3.749 billion at December 31, 2010. Excluding net charge-offs of $64.1 million and loans transferred to other real estate owned of $79.3 million, loans decreased $140 million, or 4 percent, from December 31, 2010. During the year, the largest decrease in dollars was in commercial loans which decreased $155 million, or 6 percent, from December 31, 2010. The largest percentage decrease was in real estate loans which decreased $116 million, or 18 percent, from December 31, 2010. The Company continues to reduce its exposure to land, lot and other construction loans which totaled $381 million as of December 31, 2011 and have decreased $168 million, or 31 percent, since the prior year end. The continued downturn in the economy and resulting lack of loan demand were the primary reasons for the decrease in the loan portfolio.

As a result of the third quarter 2011 goodwill impairment charge (net of tax) of $32.6 million, other assets decreased $41.7 million from December 31, 2010.

Credit Quality Summary

At December 31, 2011, the allowance for loan and lease losses ("allowance") was $138 million and remained stable compared to the prior quarter end and the prior year end. The allowance was 3.97 percent of total loans outstanding at December 31, 2011, compared to 3.66 percent at December 31, 2010. The allowance was 102 percent of non-performing loans at December 31, 2011, an increase from 89 percent at the prior quarter end and an increase from 70 percent from the prior year end. There was a sizeable decrease in non-performing assets during the current quarter due to a decrease in other real estate owned of $15.3 million, or 16 percent, and a decrease in non-performing loans of $20.7 million, or 13 percent. The momentum of reducing non-performing assets continued from the third quarter into the fourth quarter with each bank subsidiary actively managing the disposition of non-performing assets. Throughout the year, the Company has maintained an adequate allowance for loan losses while working to reduce non-performing assets. The improvement in the credit quality ratios during the current quarter and the year are a product of this effort.

The Company's early stage delinquencies (accruing loans 30-89 days past due) of $49.1 million at December 31, 2011, increased from the prior quarter early stage delinquencies of $21.1 million and the prior year end early stage delinquencies of $45.5 million. The increase in early stage delinquencies from the prior quarter was reflective of a 31 day month with 25 percent of early stage delinquencies exactly 30 days past due.

The largest category of non-performing assets was land, lot and other construction which was $117 million, or 55 percent, of non-performing assets at December 31, 2011. Included in this category was $56.2 million of land development assets and $35.8 million in unimproved land at December 31, 2011. Although land, lot and other construction assets have historically put pressure on the Company's credit quality, the Company has diligently reduced this category of non-performing assets by $38.1 million, or 25 percent, since the prior year end. Other notable categories of non-performing assets at December 31, 2011 were commercial real estate of $28.9 million and 1-4 family of $33.6 million, both categories of which have decreased since prior year end.

Credit Quality Trends and Provision for Loan Losses

Another bright spot for the current quarter was the net charged-off loans which decreased to $9.3 million compared to $18.9 million for the prior quarter and $24.5 million for the fourth quarter of 2010. The current quarter provision for loan losses was $8.7 million, a decrease of $8.5 million from the prior quarter and a decrease of $18.7 million from the fourth quarter of 2010. 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 at each subsidiary bank. "The fourth quarter saw a continuation of some encouraging credit trends," Blodnick said. "Specifically, the progress we made reducing our non-performing assets this quarter and the reduction in credit costs were key areas of improvement. As we begin the new year, we expect to make additional headway reducing our problem assets ."

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

Liability Summary

At December 31, 2011, non-interest bearing deposits of $1.011 billion increased $14.6 million, or 1 percent, since September 30, 2011 and increased $155 million, or 18 percent, since December 31, 2010. The increase in non-interest bearing deposits during the year was driven by the continued growth in the number of personal and business customers, as well as existing customers retaining cash deposits for liquidity purposes due to the uncertainty in the current economic environment. Interest bearing deposits of $3.810 billion at December 31, 2011 included $170 million of reciprocal deposits (e.g., Certificate of Deposit Account Registry System deposits). Interest bearing deposits increased $36.1 million, or 1 percent, since September 30, 2011 and included a decrease of $38.7 million in wholesale deposits including reciprocal deposits. Interest bearing deposits increased $144 million, or 4 percent, from the prior year end and included an increase of $31.1 million in wholesale deposits, including reciprocal deposits. These deposit increases have been beneficial to the Company in funding the investment securities portfolio growth at low costs over the prior twelve months. Borrowings through repurchase agreements were $259 million at December 31, 2011, a decrease of $43.2 million, or 14 percent, from September 30, 2011 and an increase of $9.2 million, or 4 percent, from December 31, 2010.

To fund growth in the investment securities portfolio, the Company's level of borrowings has increased as needed to supplement deposit growth. Since the prior quarter end, Federal Home Loan Bank ("FHLB") advances have increased $180 million which was partially offset by the decrease in Federal funds purchased of $45.0 million. FHLB advances increased $104 million since December 31, 2010.

Stockholders' Equity Summary

Total stockholders' equity and book value per share increased $12.0 million and $0.16 per share from the prior year end. The increase came primarily from accumulated other comprehensive income representing net unrealized gains or losses (net of tax) on the investment securities portfolio which was largely offset by the third quarter 2011 goodwill impairment charge (net of tax) of $32.6 million. Tangible stockholders' equity increased $54.7 million, or $0.76 per share since December 31, 2010 resulting in tangible stockholders' equity to tangible assets of 10.40 percent and tangible book value per share of $10.23 as of December 31, 2011.

Cash Dividend

On December 28, 2011, the Company's Board of Directors declared a cash dividend of $0.13 per share, payable January 19, 2012 to shareholders of record on January 10, 2012. For 2011, cash dividends declared were $0.52 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, 2011

Compared to September 30, 2011 and December 30, 2010

Revenue Summary

Net Interest Income

The current quarter net interest income of $58.5 million decreased $1.6 million, or 3 percent, over the prior quarter and increased $1.9 million, or 3 percent, over the prior year fourth quarter. The current quarter interest income included $11.5 million of premium amortization (net of discount accretion) on CMOs, such amount an increase of $4.0 million over the prior quarter and an increase of $2.9 million over the prior year fourth quarter premium amortization. The decrease in interest expense of $1.1 million, or 10 percent, from the prior quarter and the decrease of $2.2 million, or 18 percent, in interest expense from the prior year fourth quarter was primarily driven by the decrease in interest rates on deposits as a result of the bank subsidiaries continued focus on reducing funding cost. The funding cost for the current quarter was 77 basis points compared to 87 basis points for the prior quarter and 103 basis points for the prior year fourth quarter.

The current quarter net interest margin as a percentage of earning assets, on a tax-equivalent basis, was 3.74 percent, a decrease of 18 basis points from the prior quarter net interest margin of 3.92 percent and a decrease of 17 basis points from the prior year fourth quarter net interest margin of 3.91. Such decreases were a result of the decrease in yields on earning assets, most of which was from lower yielding investment securities and the increase in premium amortization during the current quarter. The CMO premium amortization in the current quarter accounted for a 69 basis point reduction in the net interest margin compared to a 46 basis point reduction in the prior quarter and 56 basis point reduction in the net interest margin in the prior year fourth quarter. "The banks continue to do a great job of lowering their funding cost, but it was not enough to offset the contraction in asset yields and the increase in premium amortization," said Ron J. Copher, Chief Financial Officer. The current quarter net interest margin included a 2 basis points reduction from the reversal of interest on non-accrual loans.

Non-interest Income

Non-interest income for the current quarter totaled $22.0 million, an increase of $1.1 million over the prior quarter and a decrease of $3.9 million over the same quarter last year. Gain on sale of loans increased $1.9 million, or 37 percent, over the prior quarter and decreased $2.8 million, or 29 percent, over the same quarter last year. Such changes were the result of an increase in refinance activity during the fourth quarter of 2011, although at much lower levels than the refinance volume in the fourth quarter of 2010. There were no sales of investment securities during the current quarter which compared to an $813 thousand gain on sale of investment securities for the prior quarter and a $2.2 million gain in the prior year fourth quarter. Other income of $2.9 million for the current quarter was an increase of $391 thousand from the prior quarter and an increase of $1.1 million from the prior year fourth quarter. Included in other income was operating revenue from other real estate owned and gain on the sale of other real estate owned aggregating $822 thousand for the current quarter compared to $903 thousand for the prior quarter and $313 thousand for the prior year fourth quarter.

Non-interest Expense Summary

Excluding the goodwill impairment charge, non-interest expense of $55.1 million for the current quarter increased by $7.0 million, or 15 percent, from the prior quarter and increased by $9.4 million, or 21 percent, from the prior year fourth quarter. The increases over the linked quarter and the prior year quarter were driven primarily by higher other real estate owned expense. Other real estate owned expense increased $5.7 million, or 79 percent, from the prior quarter and increased $10.0 million, or 353 percent, from the prior year fourth quarter. The current quarter other real estate owned expense of $12.9 million included $1.8 million of operating expense, $9.4 million of fair value write-downs, and $1.7 million of loss on sale of other real estate owned. Other real estate owned expense will fluctuate as the Company continues to work through non-performing loans and dispose of foreclosure properties.

Excluding other real estate owned expense, non-interest expense increased $1.3 million, or 3 percent, from prior quarter and decreased $655 thousand, or 2 percent, from the prior year fourth quarter. Compensation and employee benefits decreased by $296 thousand, or 1 percent, from the prior quarter and decreased $1.2 million, or 5 percent, from the prior year fourth quarter. Other expense increased $1.5 million, or 17 percent, from the prior quarter and increased $1.3 million, or 15 percent, from the same quarter last year as a result of changes in several categories.

Efficiency Ratio

The efficiency ratio for the current quarter was 50 percent compared to 51 percent for the prior year fourth quarter. The lower efficiency ratio was primarily the result of an increase in interest income from investment securities.

Operating Results for Years Ended December 31, 2011 Compared to December 31, 2010

Revenue Summary

Net Interest Income

Net interest income for 2011 remained stable compared to 2010. During 2011, interest income decreased $8.3 million, or 3 percent, while interest expense decreased $9.1 million, or 17 percent from 2010. The decrease in interest income from the prior year resulted from the increase in premium amortization (as interest rates declined) coupled with the reduction in loan balances, the combination of which put further pressure on earning asset yields. Interest income also continues to reflect the Company's purchase of a significant amount of investment securities over the course of several quarters at lower yields than the loans they replaced. Interest income included $35.8 million in premium amortization (net of discount accretion) on CMOs which was an increase of $18.1 million from the prior year. This increase was the result of both the increased purchases of CMOs combined with the continued refinance activity. The decrease in interest expense in 2011 was primarily attributable to the rate decreases on interest bearing deposits. The funding cost for 2011 was 87 basis points compared to 116 basis points for 2010.

The net interest margin decreased 32 basis points from 4.21 percent for 2010 to 3.89 for 2011. The reduction was attributable to a lower yield and volume of loans coupled with an increase in lower yielding investment securities and higher CMO premium amortization. The premium amortization in 2011 accounted for a 56 basis point reduction in the net interest margin compared to a 30 basis point reduction in the net interest margin for the same period last year.

Non-interest Income

Non-interest income of $78.2 million for 2011 decreased $9.3 million, or 11 percent, over non-interest income of $87.5 million for 2010. Gain on sale of loans for 2011 decreased $6.1 million, or 22 percent, from 2010 due to a significant reduction in refinance activity. Excluding the prior year $2.0 million gain on the sale of merchant card servicing portfolio, other income for 2011 increased $3.1 million, or 56 percent, over 2010 of which $1.7 million was from debit card income and $1.3 million was from the combination of operating revenue from other real estate owned and gain on sale of other real estate owned.

Non-interest Expense Summary

Excluding the goodwill impairment charge, non-interest expense for 2011 increased by $4.0 million, or 2 percent, from 2010. Compensation and employee benefits for 2011 decreased $2.0 million, or 2 percent, and was the result of the reduction in full time equivalent employees. Occupancy and equipment expense decreased $662 thousand, or 3 percent, from the prior year. Other real estate owned expense of $27.3 million increased $5.1 million, or 23 percent, from the prior year. The other real estate owned expense for 2011 included $5.8 million of operating expenses, $16.3 million of fair value write-downs, and $5.2 million of loss on sale of other real estate owned. FDIC premium expense decreased $952 thousand, or 10 percent, from the prior year as a result of a change in the FDIC assessment calculation. Other expense increased $3.6 million, or 11 percent, from the prior year and was primarily driven by increases in debit card expenses and expenses associated with New Market Tax Credit investments.

Provision for loan losses

The Company provisioned slightly more than the amount of net charged-off loans during 2011. The provision for loan losses was $64.5 million for 2011, a decrease of $20.2 million, or 24 percent, from the prior year. Net charged-off loans during 2011 was $64.1 million, a decrease of $26.4 million from 2010. The largest category of net-charge offs was in land, lot and other construction loans which had net-charge offs of $31.3 million, or 49 percent of total net charged-off loans.

Efficiency Ratio

The efficiency ratio was 50 percent for both 2011 and 2010. There was a notable decrease in gain on sale of loans for 2011 compared to 2010 as refinance activity slowed during 2011. The decrease in gain on sale of loans was offset by increases in tax-exempt investment security income.

About Glacier Bancorp, Inc.

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

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

Forward Looking Statements

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

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

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

Visit our website at www.glacierbancorp.com