NEWS RELEASE
October 23, 2008
FOR IMMEDIATE RELEASE | Contact: | Michael J. Blodnick |
| | | (406) 751-4701 |
| | | Ron J. Copher |
| | | (406) 751-7706 |
GLACIER BANCORP, INC.
EARNINGS FOR QUARTER ENDED SEPTEMBER 30, 2008
HIGHLIGHTS:
• Net earnings for the quarter of $12.785 million and net earnings year to date of $48.643 million.
• Diluted earnings per share of $.24 for the quarter and $.90 year to date.
• Other than temporary impairment charge (after-tax) of $4.6 million ($.09 per share) for Freddie Mac and Fannie Mae securities.
• Loans increased $102 million for the quarter (11 percent annualized) with loan growth of $311 million (11 percent annualized) for the first nine months.
• Tangible stockholders’ equity increased $47 million, up 13 percent from last year’s third quarter.
• Net interest income increased $6.6 million, up 14 percent from last year’s third quarter.
• Net interest margin (tax equivalent) of 4.65 percent, up 15 basis points from last year’s third quarter.
• Efficiency ratio of 53 percent for the quarter, excluding nonrecurring items.
• Acquisition of Bank of the San Juans in Durango, Colorado expected to close December 1, 2008.
• Cash dividend of $.13 per share declared for the quarter.
KALISPELL, MONTANA - Glacier Bancorp, Inc. (Nasdaq GS: GBCI) reported net earnings of $12.785 million for the third quarter, a decrease of $4.854 million, or 28 percent, from the $17.639 million for the third quarter of 2007. Diluted earnings per share of $.24 for the quarter decreased 27 percent from the diluted earnings per share of $.33 for the same quarter of 2007. Included in net earnings for the third quarter of 2008 is a nonrecurring charge (after-tax) of $4.602 million for other than temporary impairment with respect to investments in Federal Home Loan Mortgage Corporation (“Freddie Mac”) preferred stock and Federal National Mortgage Association (“Fannie Mae”) common stock. Also included in the net earnings for the third quarter is a nonrecurring gain (after-tax) of $1.0 million ($.02 per share) from the sale and relocation of Mountain West Bank’s office facility in Ketchum, Idaho. “Our performance in the third quarter was much stronger than the net earnings number would indicate,” said Mick Blodnick, President and Chief Executive Officer. “Considering we wrote down our entire investment in Freddie Mac and Fannie Mae and increased our loan loss provision by $7.4 million (pre-tax) over last year’s third quarter validates the Company’s ability to do well even in the most difficult of operating environments.” Annualized return on average assets and return on average equity for the third quarter were 1.01 percent and 9.15 percent, respectively, which compares with prior year returns for the third quarter of 1.50 percent and 13.76 percent, respectively.
Net earnings of $48.643 million for the first nine months of 2008 is a decrease of $1.814 million, or 4 percent, of the same period last year. Diluted earnings per share of $0.90 versus $0.94 for the same period last year is a decrease of 4 percent. Included in earnings for the first nine months of 2007 is a nonrecurring $1.0 million gain ($1.6 million pre-tax) from the sale of Western Security Bank’s Lewistown, Montana branch, which was partially offset by approximately $500 thousand of nonrecurring expenses from the merger of three of the acquired Citizens Development Company’s (“CDC”) five subsidiaries into Glacier Bancorp, Inc. subsidiaries. Included in earnings for the first nine months of 2008 are a nonrecurring gain of $150 thousand ($248 thousand pre-tax) from the first quarter sale of Principal Financial Group and mandatory redemption of a portion of Visa, Inc. shares, the above referenced nonrecurring gain of $1.0 million ($1.7 million pre-tax) from the sale of the Ketchum office facility, and the above-referenced nonrecurring charge of $4.6 million ($7.6 million pre-tax) related to the Company’s investments in Freddie Mac and Fannie Mae stock.
As reflected in the table below, total assets at September 30, 2008 were $5.173 billion, which is $356 million, or 7 percent, greater than total assets of $4.817 billion at December 31, 2007, and $473 million, or 10 percent, greater than the September 30, 2007 total assets of $4.700 billion.
At September 30, 2008, total loans were $3.923 billion, an increase of $102 million, or 2.7 percent (11 percent annualized) over total loans of $3.821 billion at June 30, 2008, and an increase of $311 million, or 8.6 percent (11 percent annualized) over total loans of $3.612 billion at December 31, 2007. Over the first nine months of 2008, commercial loans increased the most with an increase of $205 million, or 9 percent, followed by consumer loans, which are primarily comprised of home equity loans, increasing by $62 million, or 10 percent, and real estate loans increased $44 million, or 6 percent from the fourth quarter of 2007. Since September 30, 2007, total loans have increased $436 million, or 12 percent, of which commercial loans increased $423 million, or 21 percent, consumer loans grew by $75 million, or 12 percent, while real estate loans decreased $62 million, or 7 percent.
Investment securities, including interest bearing deposits in other financial institutions and federal funds sold, have increased $85 million, or 11 percent, from December 31, 2007 and have increased $64 million, or 8 percent, from September 30, 2007. Investment securities represented 17 percent of total assets at September 30, 2008, compared to 16 percent of total assets at December 31, 2007, and 17 percent at September 30, 2007.
As of September 30, 2008, non-interest bearing deposits decreased $24 million, or 3 percent, since June 30, 2008, decreased $33 million, or 4 percent, since December 31, 2007, and decreased $65 million, or 8 percent, since September 30, 2007. Interest bearing deposits decreased $114 million, or 5 percent, from December 31, 2007. The decrease of $265 million, or 10 percent, in interest bearing deposits since September 30, 2007 includes a $201 million decrease in higher cost brokered CD’s in favor of lower cost alternative funding. Federal Home Loan Bank (“FHLB”) advances at September 30, 2008 increased $475 million, or 189 percent, from September 30, 2007 and increased $188 million, or 35 percent, from December 31, 2007. Repurchase agreements and other borrowed funds were $690 million at September 30, 2008, an increase of $294 million, or 74 percent, from September 30, 2007, and an increase of $288 million, or 72 percent, from December 31, 2007. Included in this latter category are U.S. Treasury Tax and Loan funds of $357 million at September 30, 2008, an increase of $134 million from December 31, 2007, and an increase of $145 million from September 30, 2007.
Total stockholders’ equity and book value per share amounts have increased $44 million and $.68 per share, respectively, from September 30, 2007, the result of earnings retention and exercised stock options. Tangible stockholders equity has increased $47 million, or 13 percent since September 30, 2007, with tangible stockholders’ equity at 8.11 percent of total tangible assets at September 30, 2008, up from 7.93 percent at September 30, 2007. Accumulated other comprehensive income, representing net unrealized gains or losses on investment securities designated as available for sale, decreased $8 million from September 30, 2007. “We believe our decision last year to grow our capital base has been a good one,” Blodnick said “This high level of capital hopefully will give us the flexibility to take advantage of opportunities as they present themselves.”
Operating Results for Three Months Ended September 30, 2008
Compared to June 30, 2008 and September 30, 2007
Net Interest Income
Net interest income for the quarter increased $1 million, or 2 percent, from the prior quarter, and increased $7 million, or 14 percent, over the same period in 2007. While total interest income has decreased by $3 million, or 3 percent, from the same period last year, total interest expense has decreased by $9 million, or 30 percent, from the same period last year. The decrease in total interest expense is primarily attributable to rate decreases in interest bearing deposits and lower cost borrowings. The net interest margin as a percentage of earning assets, on a tax equivalent basis, was 4.65 percent which is 10 basis points lower than the 4.75 percent achieved for the prior quarter and 15 basis points higher than the 4.50 percent result for the third quarter of 2007. “Our cost of funds, including non-interest bearing deposits, for the quarter was 1.98%, something we feel very positive about,” said Ron Copher, Chief Financial Officer.
Non-interest Income
Non-interest income for the quarter decreased $6 million, or 32 percent, from the prior quarter, and also decreased $5 million, or 29 percent, over the same period in 2007. The Other Income category of non-interest income includes the $1.7 million gain from the sale and relocation of Mountain West Bank’s office facility in Ketchum, Idaho. Excluding this nonrecurring item and also excluding the nonrecurring $7.6 million other than temporary impairment charge on the Freddie Mac and Fannie Mae stock, non-interest income for the quarter increased $248 thousand from the prior quarter and $1.1 million over the same period in 2007. Fee income increased $577 thousand, or 5 percent, during the quarter, compared to the increase of $947 million, or 8 percent, over the same period last year. The fee income increases are attributable to the continued growth in the number of checking accounts and related service charges. Gain on sale of loans decreased $716 thousand, or 17 percent, for the quarter and increased $326 thousand, or 10 percent, over the same period last year.
Non-interest Expense
Non-interest expense increased by $1.3 million, or 4 percent, from the prior quarter and increased by $2.6 million, or 7 percent, from the same quarter of 2007. Compensation and benefit expense increased $221 thousand, or 1 percent, over the prior quarter, and increased $902 thousand, or 4 percent, over the same quarter of 2007. The year-over-year increase is primarily attributable to increased staffing levels, including new branches, as well as increased compensation and employee benefits, including health insurance. The number of full-time-equivalent employees has increased from 1,476 to 1,539 since September 30, 2007.
Occupancy and equipment expense increased $662 thousand, or 14 percent, while other expenses increased $795 thousand, or 11 percent, since September 30, 2007, reflecting the cost of facility upgrades, additional branch locations, and other general and administrative costs. Advertising and promotion expense increased $109 thousand, or 6 percent, from the prior quarter, and increased $266 thousand, or 16 percent, from the same quarter of 2007, such increases attributable to branch promotions and the banks continuing focus on attracting and retaining non-interest bearing and other low cost deposits.
Excluding nonrecurring items, the efficiency ratio (non-interest expense/net interest income plus non-interest income) was 53 percent for the quarter, compared to 55 percent for the 2007 third quarter, a two percentage point improvement. “Such improvement underscores the banks’ success in controlling operating expenses and generating solid interest and non-interest income,” said Copher.
Allowance for Loan and Lease Losses and Non-Performing Assets
At September 30, 2008, the allowance for loan and lease losses was $65.633 million, an increase of $13 million, or 25 percent, from a year ago. The allowance was 1.67 percent of total loans outstanding at September 30, 2008, up from 1.59 percent at the prior quarter end, and up from 1.51 percent at September 30, 2007. The allowance was 93 percent of non-performing assets at September 30, 2008, down from 203 percent for the prior quarter end and down from 449 percent a year ago. The current quarter provision for loan loss expense was $8.7 million, an increase of $7.4 million from the same quarter in 2007. Charged-off loans for the current quarter exceeded recoveries of previously charged-off loans by $3.9 million. Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will determine the level of additional provision expense.
Non-performing assets as a percentage of total bank assets at September 30, 2008 were at 1.30 percent, up from .58 percent as of June 30, 2008, and up from .24 percent at September 30, 2007. “We expected non-performing assets to move up in the third quarter to around 1.00 percent of assets. Instead non-performing assets were 1.30 percent of assets as we placed a couple of construction and development credits on non-accrual because of little or no sales activity for the past 90 days,” Blodnick said. “In addition, we wrote down three credits by approximately $2.5 million, increasing our net charge-offs year to date to $5 million. On the plus side, our 30-89 day past due loans continue to decline since the start of 2008. At the same time, we have provisioned $16.3 million so far this year, increasing our allowance for loan losses as a percentage of loans from 1.51 percent to 1.67 percent.”
Operating Results for Nine Months Ended September 30, 2008 Compared to September 30, 2007
Net Interest Income
Net interest income for the current year nine months increased $19 million, or 14 percent, over the same period in 2007. Total interest income increased $635 thousand, while total interest expense decreased $19 million, or 21 percent. 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, was 4.65 percent, an increase of 15 basis points from the 4.50 percent for the same period in 2007.
Non-interest Income
Total non-interest income decreased $3 million, or 7 percent in 2008. Excluding the current year nonrecurring items, consisting of the $7.6 million charge for other than temporary impairment on the Freddie Mac and Fannie Mae securities, the $1.7 million gain from the sale and relocation of Mountain West Bank’s branch in Ketchum, Idaho, the first quarter $248 thousand combined gain from the sale of Principal Financial Group stock and mandatory redemption of a portion of Visa, Inc. shares, and also excluding the prior year nonrecurring gain from the first quarter sale of Western Security Bank’s Lewistown, Montana branch, non-interest income for the nine months of 2008 increased $7.2 million from the same period in 2007. Fee income for the first nine months of 2008 increased $2 million, or 7 percent, over the first nine months of 2007, driven primarily by an increased number of loan and deposit accounts, as well as additional products and service offerings. Gain on sale of loans for the first nine months of 2008 increased $2 million, or 17 percent, over the first nine months of last year.
Non-interest Expense
Non-interest expense increased by $6 million, or 6 percent, from the same period in 2007. The first nine months of 2007 included approximately $500,000 of non-recurring expenses and costs, including overtime, associated with the January 26, 2007 merger of three of the five CDC subsidiaries into Glacier Bancorp, Inc.’s subsidiaries, and related operating system conversions. Compensation and employee benefit expense increased $3 million, or 5 percent, from the first nine months of 2007. Occupancy and equipment expense increased $2 million, or 12 percent, while other expenses increased $2 million, or 8 percent, since September 30, 2007, reflecting the cost of additional locations and facility upgrades. Advertising and promotion expense increased $617 thousand, or 13 percent, from 2007, due primarily to branch promotions and the banks continuing focus on attracting and retaining non-interest bearing and other low cost deposits. Excluding nonrecurring items, the efficiency ratio (non-interest expense/net interest income plus non-interest income) was 53 percent for the first nine months of 2008, compared to 56 percent for the same period in 2007.
Allowance for Loan and Lease Losses and Non-Performing Assets
The provision for loan loss expense was $16.3 million for the first nine months of 2008, an increase of $12.5 million, or 337 percent, from the same period in 2007. Non-performing assets as a percentage of total bank assets at September 30, 2008 were at 1.30 percent, up from .24 percent at September 30, 2007. Net charged-off loans during the nine months ended September 30, 2008 were $5.037 million, compared to $1.002 million of net charged-off loans during the nine months ended September 30, 2007.
Acquisition Announced
A definitive agreement to acquire Bank of the San Juans (“BSJ”), a community bank based in Durango, Colorado was announced on August 19, 2008. As of September 30, 2008, BSJ had total assets of $146 million, net loans of $131 million and deposits of $131 million. The acquisition, which is subject to regulatory approval and other customary conditions, is expected to close on December 1, 2008. Upon closing, BSJ will become a wholly-owned subsidiary of Glacier Bancorp, Inc.
Cash Dividend
On September 24, 2008, the board of directors declared a cash dividend of $.13 per share, payable October 16, 2008 to shareholders of record on October 7, 2008.
About Glacier Bancorp, Inc.
Glacier Bancorp, Inc. is a regional multi-bank holding company providing commercial banking services in 53 communities in Montana, Idaho, Utah, Washington, and Wyoming. Glacier Bancorp, Inc. is headquartered in Kalispell, Montana, and conducts its operations principally through ten 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; as well as Mountain West Bank in Idaho, Utah and Washington; 1st Bank in Wyoming, Citizens Community Bank in Idaho, and First National Bank of Morgan in Utah.
This news release includes forward looking statements, which describe management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of the Company’s style of banking and the strength of the local economies in which it operates. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in the Company’s public filings, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on the Company than expected and adversely affect the company’s ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new banks and/or branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which the Company is engaged.
Visit our website at www.glacierbancorp.com.
