Glacier Bancorp, Inc. Announces Results for the Quarter Ended December 31, 2017

4th Quarter 2017 Highlights:

• Recognized a one-time tax expense of $19.7 million from the revaluation of the net deferred tax asset as a result of the Tax Cuts and Jobs Act ("Tax Act").   The Company believes that the financial results are more comparable excluding the impact of the revaluation of the net deferred tax asset, so we have included a Non-GAAP Financial Measures section within the earnings release that shows certain key business measures without the impact of the one-time tax adjustment.
  
  
• Net income of $34.7 million for the current quarter, an increase of $3.7 million over the prior year fourth quarter net income of $31.0 million, excluding the impact of the Tax Act.  Including the impact from the Tax Act, net income was $15.0 million.
  
  
• Current quarter diluted earnings per share of $0.44, an increase of 7 percent from the prior year fourth quarter diluted earnings per share of $0.41, excluding the impact of the Tax Act.  Including the impact from the Tax Act, diluted earnings per share was $0.19.
  
  
• Net interest margin of 4.23 percent as a percentage of earning assets, on a tax equivalent basis, a 21 basis point increase over the 4.02 percent net interest margin in the fourth quarter of the prior year.
  
  
• Declared and paid a regular quarterly dividend of $0.21 per share.  The dividend was the 131st consecutive quarterly dividend.
  
  
• The Company announced the signing of a definitive agreement to acquire Inter-Mountain Bancorp, Inc., the holding company for First Security Bank, a community bank in Bozeman, Montana, with total assets of $1.028 billion as of December 31, 2017.
  
  
• Total assets of $9.7 billion at year end enabled the Company to delay the impact of the Durbin Amendment for one additional year.

Year 2017 Highlights:

• Record net income of $136 million for 2017, an increase of $14.9 million, or 12 percent, over the prior year net income of $121 million, excluding the impact of the Tax Act.  Including the impact from the Tax Act, net income was $116 million.
  
  
• Diluted earnings per share of $1.75, an increase of 10 percent from the prior year diluted earnings per share of $1.59, excluding the impact of the Tax Act.  Including the impact from the Tax Act, diluted earnings per share was $1.50.
  
  
• Organic loan growth of $601 million, or 11 percent, for the current year.
  
  
• Net interest margin of 4.12 percent as a percentage of earning assets, on a tax equivalent basis, a 10 basis point increase over the 4.02 percent net interest margin in the prior year.

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

The following table provides a reconciliation of certain GAAP financial measures to non-GAAP financial measures.  The reconciling item between the GAAP and non-GAAP financial measures was the current quarter one-time net tax expense of $19.7 million.  The one-time net tax expense was driven by the Tax Act and the change in the current year federal marginal rate of 35 percent to 21 percent for future years, which resulted in this revaluation of its deferred tax assets and deferred tax liabilities ("net deferred tax asset").  The Company believes that the financial results are more comparable excluding the impact of the revaluation of the net deferred tax asset.

Financial Highlights

KALISPELL, Mt., Jan. 25, 2018 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. GBCI reported net income of $34.7 million for the current quarter, an increase of $3.7 million, or 12 percent, from the $31.0 million of net income for the prior year fourth quarter, excluding the impact of the Tax Act.  Diluted earnings per share for the current quarter was $0.44 per share, an increase of $0.03, or 7 percent, from the prior year fourth quarter diluted earnings per share of $0.41, excluding the impact from the Tax Act.  Included in the current quarter was $937 thousand of acquisition-related expenses.  "2017 was an excellent year for the Company and we are extremely pleased to see our core business perform at these levels.  We thank all of our customers for their continued confidence in us and our employees for turning in another record year," said Randy Chesler, President and Chief Executive Officer.

Record net income for the year ended December 31, 2017 was $136 million, an increase of $14.9 million, or 12 percent, from the $121 million of net income for the prior year excluding the impact from the Tax Act.  Diluted earnings per share for 2017 was $1.75 per share, an increase of $0.16, or 10 percent, from the diluted earnings per share of $1.59 for the same period in the prior year, excluding the impact from the Tax Act.

During the fourth quarter of 2017, the Company announced the signing of a definitive agreement to acquire Inter-Mountain Bancorp, Inc., the holding company for First Security Bank, a community bank in Bozeman, Montana (collectively, "FSB").  As of December 31, 2017, FSB had total assets of $1.028 billion, gross loans of $640 million and total deposits of $891 million.  The acquisition marks the Company's 20th acquisition since 2000 and its ninth announced transaction in the past five years.  The acquisition has received the required regulatory approvals, is subject to other customary conditions of closing and is expected to be completed in February 2018.

During the second quarter of 2017, the Company announced the signing of a definitive agreement to acquire Columbine Capital Corp., the holding company for Collegiate Peaks Bank, a community bank in Buena Vista, Colorado (collectively, "Collegiate").  As of December 31, 2017, Collegiate had total assets of $533 million, gross loans of $346 million and total deposits of $464 million.  The acquisition has received the required regulatory approvals, is subject to other customary conditions of closing and is expected to be completed in January 2018.

On April 30, 2017, the Company completed the acquisition of TFB Bancorp, Inc., the holding company for The Foothills Bank, a community bank based in Yuma, Arizona (collectively, "Foothills").  The Company's results of operations and financial condition include the acquisition of Foothills from the acquisition date and the following table provides information on the fair value of selected classifications of assets and liabilities acquired:

Asset Summary

The Company successfully executed its strategy to stay below $10 billion in total assets as of year end to delay the impact of the Durbin Amendment for one additional year.  The Company accomplished this strategy in part by redeploying investment cash flow selectively and selling securities into the higher yielding loan portfolio.  The Durbin Amendment, which was passed as part of Dodd-Frank, establishes limits on the amount of interchange fees that can be charged to merchants for debit card processing and will reduce the Company's service charge fee income in the future.

Total investment securities of $2.427 billion at December 31, 2017 decreased $115 million, or 5 percent, during the current quarter and decreased $675 million, or 22 percent, from the prior year fourth quarter.  Investment securities represented 25 percent of total assets at December 31, 2017 compared to 33 percent of total assets at December 31, 2016.

The loan portfolio of $6.6 billion had seasonally slower growth in the fourth quarter of 2017, increasing $68.4 million, or 1 percent, during the quarter.  The loan category with the largest increase was commercial real estate loans which increased $73.2 million, or 2 percent.  Excluding the Foothills acquisition, the loan portfolio increased $601 million, or 11 percent, since the prior year end and primarily came from growth in commercial real estate and other commercial loans of $357 million and $209 million, respectively.

Credit Quality Summary

Non-performing assets at December 31, 2017 were $65.1 million, a decrease of $6.2 million, or 9 percent, from a year ago.  Non-performing assets as a percentage of subsidiary assets at December 31, 2017 was 0.68 percent which was a decrease of 8 basis points from the prior year end of 0.76 percent.  Early stage delinquencies (accruing loans 30-89 days past due) of $37.7 million at December 31, 2017 increased $8.6 million from the prior quarter and increased $12.1 million from the prior year end.  The allowance for loan and lease losses ("allowance") as a percent of total loans outstanding at December 31, 2017 was 1.97 percent, a decrease of 31 basis points from 2.28 percent at December 31, 2016, such decrease was driven by loan growth, stabilizing credit quality, and no allowance carried over from the Foothills acquisition as a result of the acquired loans recorded at fair value.

Credit Quality Trends and Provision for Loan Losses

Net charge-offs for the current quarter were $2.9 million compared to $3.6 million for the prior quarter and $4.1 million from the same quarter last year.  There was $2.9 million of current quarter provision for loan losses, compared to $3.3 million in the prior quarter and $1.1 million in the prior year fourth quarter.  Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will continue to determine the level of the loan loss provision.

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

Liability Summary

The Company reduced the amount of on-balance sheet deposits during the quarter as part of its strategy to stay below $10 billion in total assets.  Core deposits decreased $161 million, or 2 percent, from the prior quarter, and decreased $380 million, or 5 percent, from the prior year end.  The Company utilized a third party vendor to transfer $433 million of deposits off balance sheet as of December 31, 2017, an increase of $268 million over the prior quarter, or 162 percent, over the prior quarter.  These deposits can be brought back onto the Company's balance sheet at the Company's discretion.  Including the deposit accounts transferred, organic core deposits increased $478 million, or 7 percent, from December 31, 2016.  At December 31, 2017, wholesale deposits were $160 million, a decrease of $26.0 million, or 14 percent, over the prior quarter and a decrease of $173 million, or 52 percent, over the prior year end.

Securities sold under agreements to repurchase ("repurchase agreements") of $363 million at December 31, 2017 decreased $91.0 million, or 20 percent, from the prior quarter and decreased $111 million, or 23 percent, from the prior year end.  Federal Home Loan Bank ("FHLB") advances of $354 million at December 31, 2017, increased $200 million over prior quarter and increased $102 million over the prior year end.  The increases were the result of strategically managing the deposit accounts to stay below $10 billion and utilizing FHLB advances to manage the daily liquidity needs for loan growth.

Stockholders' Equity Summary

Tangible stockholders' equity of $1.007 billion at December 31, 2017 decreased $6.5 million compared to the prior quarter which was the result of a decrease in accumulated other comprehensive income.  Tangible stockholders' equity increased $49.6 million, or 5 percent, from a year ago, the result of earnings retention and $46.7 million of Company stock issued in connection with the Foothills acquisition; such increases more than offset the increase in goodwill and core deposit intangibles.  Tangible book value per common share at quarter end decreased $0.08 per share from the prior quarter and increased $0.40 per share from a year ago.

Cash Dividend
On November 15, 2017, the Company's Board of Directors declared a quarterly cash dividend of $0.21 per share.  The dividend was payable December 14, 2017 to shareholders of record on December 5, 2017.  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, 2017
Compared to September 30, 2017, June 30, 2017, March 31, 2017 and December 31, 2016

Income Summary

Net Interest Income
In the current quarter, interest income of $96.9 million increased $434 thousand, or 45 basis points, from the prior quarter and increased $9.1 million, or 10 percent, over the prior year fourth quarter with both increases attributable to the increase in interest from commercial loans.  Interest income on commercial loans increased $1.5 million, or 2 percent, from the prior quarter and increased $11.6 million, or 23 percent, from the prior year fourth quarter.  As a result of the shrinking investment portfolio, interest income from investments decreased $1.3 million from the prior quarter and $3.0 million from the prior year fourth quarter.

The current quarter interest expense of $7.1 million decreased $580 thousand, or 8 percent, from the prior quarter and was driven primarily by the decrease in wholesale deposits.  Current quarter interest expense decreased $142 thousand, or 2 percent, from the prior year fourth quarter.  The total cost of funding (including non-interest bearing deposits) for the current quarter was 33 basis points compared to 35 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 4.23 percent compared to 4.11 percent in the prior quarter.  The 12 basis points increase in the net interest margin was the result of an 11 basis points increase on the earning asset yield and a decrease of 2 basis points in cost of funds.  The increase in earning asset yield was primarily driven by the continuing shift of lower yielding investments to higher yielding loans coupled with increased yields on loans and investments.  The decrease in cost of funds was driven by the decrease in wholesale deposits which more than offset the increase in interest expense on FHLB advances.  The current quarter net interest margin increased 21 basis points over the prior year fourth quarter net interest margin of 4.02 percent, due to the remix of earning assets to higher yielding loans and higher yielding earning assets.

Non-interest Income
Non-interest income for the current quarter totaled $27.7 million, a decrease of $3.5 million, or 11 percent, from the prior quarter and a decrease of $305 thousand, or 1 percent, over the same quarter last year.  Service charges and other fees of $17.3 million, increased $1.6 million, or 10 percent, from the prior year fourth quarter primarily  from the increased number of accounts.  Gain on sale of loans for the current quarter decreased $1.7 million, or 19 percent, from the prior quarter as a result of a seasonal slowdown in purchase activity.  Gain on sale of loans decreased $2.4 million, or 24 percent, from the prior year fourth quarter as a result of decreased refinance and purchase activity.  Other income of $2.1 million, decreased $1.4 million, or 40 percent, over the prior quarter due to the decrease in gain on sale of other real estate owned ("OREO").  Gain on sale of OREO during the fourth quarter of 2017 was $62.7 thousand compared to $1.5 million in the prior quarter.

Non-interest Expense Summary

During 2016, the Company consolidated its Bank divisions' individual core database systems into a single core database and re-issued debit cards with chip technology (the Core Consolidation Project or "CCP").  Expenses related to CCP were $741 thousand during the fourth quarter of 2016. Excluding CCP expenses, non-interest expense for the current quarter increased $2.4 million, or 4 percent, over the prior year fourth quarter.

Compensation and employee benefits increased by $1.6 million, or 4 percent, from the prior year fourth quarter due to salary increases and the increased number of employees from acquisitions.  Data processing expense increased $323 thousand, or 9 percent, from the prior quarter and increased $562, or 16 percent, from the prior year fourth quarter.  Other expenses increased $724 thousand, or 6 percent from the prior quarter and increased $988 thousand, or 8 percent, from the prior year fourth quarter with changes in several categories and the primary increase was from acquisition related expenses.

Federal and State Income Tax Expense
Tax expense during the fourth quarter of 2017 was $31.3 million, an increase $19.7 million, or 169 percent, over the prior quarter and an increase of  $21.7 million, or 224 percent, over the prior year fourth quarter with the increases due to the revaluation of the Company's net deferred tax asset.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the years in which the temporary differences are expected to be recognized.  The effect on deferred tax assets and liabilities from a change in tax rates is recognized in net income in the period that includes the enactment date which occurred on December 22, 2017 with the enactment of the Tax Act.  The current year federal marginal rate was 35 percent and will decrease to 21 percent in 2018.  Excluding the impact of the Tax Act, the effective federal and state income tax rate for the Company was 25.1 percent in 2017 and is expected to decrease to a range of 17 to 18 percent during 2018 as a result of the Tax Act.

Efficiency Ratio
The current quarter efficiency ratio was 54.02 percent, a 58 basis points increase from the prior quarter efficiency ratio of 53.44 percent which was primarily driven by a seasonal slowing of residential refinance and purchase activity which caused a decrease in the gain on sale of loans.  The current quarter efficiency ratio decreased 106 basis points from the prior year fourth quarter ratio of 55.08 percent and was attributable to the increase in net interest income primarily due to higher interest income on commercial loans.  "The Bank divisions' success in growing loans at higher yields while controlling funding costs throughout the year is reflected in the efficiency ratio improvement," said Ron Copher, Chief Financial Officer.

Operating Results for Year ended December 31, 2017
Compared to December 31, 2016

Income Summary

Net Interest Income
Interest income for the current year increased $30.9 million, or 9 percent, from the prior year and was attributable to a $38.4 million increase in income from commercial loans which more than offset the decrease of $8.4 million in interest income on investments.

Interest expense of $29.9 million for the current year increased $233 thousand over the prior year.  Interest expense on deposits decreased $1.6 million, or 9 percent, and was due to the decrease in wholesale deposits.  Interest expense on repurchase agreements, FHLB advances, and subordinated debt increased $1.8 million, or 16 percent, over the prior year and was primarily driven by the increase in interest rates.  The total funding cost (including non-interest bearing deposits) for 2017 was 36 basis points compared to 37 basis points for 2016.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for 2017 was 4.12 percent, a 10 basis point increase from the net interest margin of 4.02 percent for 2016.  The increase in the margin was primarily attributable to a shift in earning assets to higher yielding loans.  Additionally, there was an increase in  yields on earning assets combined with a continued increase in low cost deposits during the current year.

Non-interest Income
Non-interest income of $112.2 million for 2017 increased $4.9 million, or 5 percent, over last year.  Service charges and other fees of $67.7 million for 2017 increased $5.3 million, or 9 percent, from the prior year as a result of an increased number of deposit accounts.  The gain on sale of loans of $30.4 million for 2017 decreased $3.2 million, or 9 percent, from prior year which was due to a lower volume of refinanced and purchased mortgages.  Other income of $10.4 million for 2017 increased $2.2 million, or 27 percent, over last year and was the result of an increase on gain on sale of OREO.

Non-interest Expense Summary

Expenses related to CCP were $4.3 million during 2016. Excluding CCP expenses, non-interest expense for the current year increased $11.2 million, or 4 percent, over the prior year.  Compensation and employee benefits for 2017 increased $8.8 million, or 6 percent, from the same period last year due to salary increases and the increased number of employees from the acquired banks.  Occupancy and equipment expense increased $652 thousand, or 3 percent from the prior year as a result of increased costs from acquisitions.  Data processing expense decreased $240 thousand, or 2 percent, from the prior year as a result of decreased costs associated with CCP.  Current year other expenses of $47.0 million decreased $525 thousand, or 1 percent, from the prior year and was principally driven by decreased costs associated with CCP.

Provision for Loan Losses
The provision for loan losses was $10.8 million for 2017, an increase of $8.5 million from the same period in the prior year.  Net charge-offs during 2017 were $10.8 million compared to $2.5 million during 2016.

Federal and State Income Tax Expense
Tax expense of $64.6 million in 2017 increased $25.0 million, or 63 percent, over the prior year as a result of the $19.7 million revaluation of the Company's deferred tax asset related to the Tax Act.

Efficiency Ratio
The efficiency ratio of 53.94 percent for 2017 decreased 194 basis points from the prior year efficiency ratio of 55.88 percent which resulted from the increase in net interest income largely due to higher interest income on commercial loans.

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;
• ability to complete pending or prospective future acquisitions, limit certain sources of revenue, or increase cost of operations;
• costs or difficulties related to the completion and integration of acquisitions;
• the goodwill the Company has recorded in connection with acquisitions could become impaired, which may have an adverse impact on earnings and capital;
• reduced demand for banking products and services;
• the reputation of banks and the financial services industry could deteriorate, which could adversely affect the Company's ability to obtain (and maintain) customers;
• competition among financial institutions in the Company's markets may increase significantly;
• the risks presented by continued public stock market volatility, which could adversely affect the market price of the Company's common stock and the ability to raise additional capital or grow the Company through acquisitions;
• the projected business and profitability of an expansion or the opening of a new branch could be lower than expected;
• consolidation in the financial services industry in the Company's markets resulting in the creation of larger financial institutions who may have greater resources could change the competitive landscape;
• dependence on the Chief Executive Officer, the senior management team and the Presidents of Glacier Bank divisions;
• material failure, potential interruption or breach in security of the Company's systems and technological changes which could expose us to new risks (e.g., cybersecurity), fraud or system failures;
• natural disasters, including fires, floods, earthquakes, and other unexpected events;
• the Company's success in managing risks involved in the foregoing; and
• the effects of any reputational damage to the Company resulting from any of the foregoing.

The Company does not undertake any obligation to publicly correct or update any forward-looking statement if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statement.

Conference Call Information
A conference call for investors is scheduled for 11:00 a.m. Eastern Time on Friday, January 26, 2018.  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 5089588.  To participate on the webcast, log on to: https://edge.media-server.com/m6/p/oqu7ruzu.  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 5089588 by February 9, 2018.

About Glacier Bancorp, Inc.
Glacier Bancorp, Inc. is the parent company for Glacier Bank, Kalispell and Bank divisions First Security Bank of Missoula; Valley Bank of Helena; Big Sky Western Bank, Bozeman; Western Security Bank, Billings; and First Bank of Montana, Lewistown; all operating in Montana; as well as Mountain West Bank, Coeur d'Alene, with operations in Idaho, Utah and Washington; 1^st Bank, Evanston, operating in Wyoming and Utah; Citizens Community Bank, Pocatello, operating in Idaho; Bank of the San Juans, Durango, operating in Colorado; First Bank of Wyoming, Powell, and First State Bank, Wheatland, both operating in Wyoming; North Cascades Bank, Chelan, with operations in Washington; and The Foothills Bank, Yuma, with operations in Arizona.

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

Glacier Bancorp, Inc.
Unaudited Condensed Consolidated Statements of Operations

Glacier Bancorp, Inc.
Average Balance Sheets

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1    Includes tax effect of $1.8 million and $1.3 million on tax-exempt municipal loan and lease income for the three months ended December 31, 2017 and 2016, respectively.
²   Total loans are gross of the allowance for loan and lease losses, net of unearned income and include loans held for sale.  Non-accrual loans were included in the average volume for the entire period.
³    Includes tax effect of $5.3 million and $6.3 million on tax-exempt investment securities income for the three months ended December 31, 2017 and 2016, respectively.
⁴    Includes tax effect of $313 thousand and $353 thousand on federal income tax credits for the three months ended December 31, 2017 and 2016, respectively.
⁵    Wholesale deposits include brokered deposits classified as NOW, DDA, money market deposit and certificate accounts.

Glacier Bancorp, Inc.
Average Balance Sheets (continued)

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1    Includes tax effect of $6.4 million and $4.2 million on tax-exempt municipal loan and lease income for the years ended December 31, 2017 and 2016, respectively.
²   Total loans are gross of the allowance for loan and lease losses, net of unearned income and include loans held for sale.  Non-accrual loans were included in the average volume for the entire period.
³    Includes tax effect of $22.5 million and $25.9 million on tax-exempt investment securities income for the years ended December 31, 2017 and 2016, respectively.
⁴    Includes tax effect of $1.3 million and $1.4 million on federal income tax credits for the years ended December 31, 2017 and 2016, respectively.
⁵    Wholesale deposits include brokered deposits classified as NOW, DDA, money market deposit and certificate accounts.

Glacier Bancorp, Inc.
Loan Portfolio by Regulatory Classification

Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification

Glacier Bancorp, Inc.
Credit Quality Summary by Regulatory Classification (continued)