Glacier Bancorp, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Glacier Bancorp is a regional bank holding company operating through Glacier Bank across eight western states.
Key financial metrics
| Metric | Q1 2023 | Comparable period / change |
|---|---|---|
| Net interest income | $186.2 million | $185.6 million in Q1 2022; down $17.9 million sequentially |
| Net interest margin, tax-equivalent | 3.08% | 3.20% in Q1 2022; 3.30% in Q4 2022 |
| Net income / diluted EPS | $61.2 million / $0.55 | $67.8 million / $0.61 in Q1 2022 |
| Total assets | $27.80 billion | Up $1.17 billion from Dec. 31, 2022 |
| Loans, gross | $15.52 billion | Up $272 million in the quarter; up 13% year over year |
| Total deposits | $20.15 billion | Down $458 million in the quarter; down $1.55 billion year over year |
| Allowance for credit losses | $186.6 million; 1.20% of loans | $182.3 million at year-end 2022 |
| Operating cash flow | $98.2 million | $78.4 million in Q1 2022 |
Quarter-end cash and cash equivalents were $1.53 billion, up $1.13 billion from year-end. Financing activities provided $1.06 billion, including $2.74 billion of Federal Reserve Bank Term Funding Program (BTFP) borrowing; investing activities used $29.9 million. Stockholders’ equity was $2.93 billion, including accumulated other comprehensive loss of $410.2 million. The quarterly dividend was $0.33 per share.
Changes and operating drivers
- Interest income increased 22% year over year, supported by loan growth and higher loan yields. Interest expense rose to $45.7 million from $5.0 million a year earlier as deposit and borrowing costs climbed; total funding cost was 0.79%, versus 0.09%.
- Net income fell 10% year over year. Management attributed the decline primarily to the significant increase in funding costs. Non-interest income declined 17%, largely because gains on residential loan sales were lower.
- The efficiency ratio rose to 60.39% from 57.11% a year earlier. Non-interest expense increased 4%, including higher employee costs and FDIC assessments.
- Commercial real estate loans were 65% of gross loans. Non-performing assets were $32.0 million, or 0.12% of subsidiary assets, compared with $62.5 million and 0.24% a year earlier. Early-stage delinquencies increased to $25.0 million from $16.1 million a year earlier.
Liquidity, capital, risks and outlook
Glacier used BTFP funding to repay $1.465 billion of FHLB advances, support its higher cash balance and offset deposit outflows. At March 31, available capacity included $3.60 billion of FHLB borrowing capacity, $1.64 billion at the FRB discount window, $836 million of unused BTFP capacity, and $805 million of unsecured lines. Management described liquidity as strong, citing core deposit relationships, cash, securities and diversified borrowing sources. Total borrowing balances included $2.74 billion of BTFP funding, $335 million of FHLB advances and $1.19 billion of repurchase agreements.
The Bank reported regulatory capital ratios above applicable minimums, including a 13.73% total capital ratio and 12.69% CET1 ratio. Management said the Bank and Company met capital adequacy requirements. The filing provides no earnings or margin guidance; results for the quarter are not necessarily indicative of full-year results.
Interest-rate and market risks remain important. The available-for-sale securities portfolio had $547.3 million of gross unrealized losses, which management attributed primarily to rates and market spreads and determined were not credit-related; no related credit-loss allowance was recorded. Held-to-maturity securities had a $374.1 million gross fair-value shortfall versus amortized cost (the filing also cites $278 million after-tax). The filing’s modeled net-interest-income sensitivity showed a 3.19% decline over one year under an instantaneous +100 basis-point shock and a 12.36% decline under +400 basis points; management said modeled sensitivity remained within policy limits and cautioned that scenarios are not forecasts.
The company added a risk factor concerning recent bank failures and industry confidence: deposit withdrawals, reduced demand, higher FDIC costs, and potential regulatory or capital changes could adversely affect liquidity, profitability and equity. Other stated risks include credit deterioration, economic and interest-rate changes, competition, cybersecurity and operational disruption, and acquisition or goodwill impairment risk. Management reported no material change in internal control over financial reporting and considered disclosure controls effective. Ordinary-course legal matters were not expected by management to have a material adverse effect.
Important facts for investors to verify
- Subsequent deposit trends, including uninsured deposit levels and customer concentration, and the stability and cost of deposits.
- Terms, maturity, collateral and ongoing use of BTFP and other borrowings, alongside remaining contingent borrowing capacity.
- Commercial real estate exposure by property type and geography, and subsequent trends in delinquencies, criticized loans, charge-offs and the allowance.
- Interest-rate exposure and the assumptions behind deposit pricing, securities valuations, AOCI and modeled net-interest-income sensitivity.
- Whether funding costs, margin pressure, FDIC assessments and loan-sale activity continue to affect earnings and the dividend.