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Glacier Bancorp cautious about using M&A to cross $10B mark


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Glacier Bancorp cautious about using M&A to cross $10B mark

Kalispell, Mont.-based Glacier Bancorp Inc. is cautiously approaching the M&A market as a strategy for crossing the key $10 billion regulatory asset threshold.

With $9.45 billion in total assets, Glacier is continuing to watch potential acquisitions, although President and CEO Randall Chesler acknowledged in Glacier's fourth-quarter 2016 earnings call that the company is conservatively thinking about deals since "pricing has gone up."

"We're not going to stretch to do a deal just to leapfrog over to $10 billion," Chesler said. "If one comes along and it meets our requirements and it's a large deal, then we'll certainly look at it."

Chesler's comments as the company awaits approval on its pending merger with Yuma, Ariz.-based TFB Bancorp Inc., which would add another $316 million in assets if given the thumbs up by regulators. Chesler added that if another deal outside of the TFB merger doesn't close in 2017, there's the "good possibility" that Glacier will manage its asset level just shy of $10 billion through the end of the year.

Glacier's affinity for using the "M&A pipeline" — as Chesler described it — did have some consequences on its books, since the company had to log expenses related to the acquisition of Missoula, Mont.-based Treasure State Bank, which was finalized in August. The company recorded $368,000 in acquisition-related expenses and $749,000 in costs related to conversion costs in linking 13 of its banks and Treasure to one core operating platform. Total noninterest expenses for the fourth-quarter of 2016 rose $1.5 million, or 2.4%, quarter-over-quarter as a result.

Chesler said the company completed the conversion project and is not expecting to carry forward any substantial conversion costs into 2017, although Chesler said Glacier could take on new projects in the future to improve efficiency.

Overall, the company reported earnings of $31.0 million for the fourth quarter of 2016, or 41 cents per share, compared to net income of $29.5 million, or 39 cents per share, for the fourth quarter in the prior year. The S&P Capital IQ consensus estimate for EPS in the latest quarter was 40 cents per share.

Chesler said the company went into the fourth quarter "a bit unsure" about loan growth given slower seasonality. But Glacier ended up seeing loan growth of $88.5 million, or 2%, over the quarter primarily driven by an increase in commercial loans of $39 million. Excluding the loan portfolio acquired by the completion of the Treasure acquisition, Glacier's portfolio increased $554 million since Dec. 31, 2015.

On the deposits side, the company added $69.8 million, or 1%, quarter over quarter in total core deposits although its noninterest-bearing deposits fell $56.9 million quarter-over-quarter due to seasonal factors. The company's net interest margin for the quarter was 4.02%, unchanged from the same period linked to the prior year.