Glacier Bancorp, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Amounts below are in millions unless otherwise noted. Glacier provides banking and mortgage services across eight western states through Glacier Bank.
Financial performance
| Metric | Q2 2021 | Comparable period / change |
|---|---|---|
| Net income | $77.6 | Up 22% from Q2 2020 ($63.4); down from Q1 2021 ($80.8) |
| Diluted EPS | $0.81 | $0.66 in Q2 2020; $0.85 in Q1 2021 |
| Net interest income | $155.5 | Up $7.3, or 5%, year over year; down $1.3 quarter over quarter |
| Tax-equivalent net interest margin | 3.44% | 4.12% in Q2 2020; 3.74% in Q1 2021 |
| Non-interest income | $35.5 | Down 14% year over year, mainly reflecting lower loan-sale gains |
| Non-interest expense | $100.1 | Up 6% year over year |
| Provision for credit losses | Benefit of $5.7 | Expense of $16.9 in Q2 2020 |
For the first half, net income was $158.4 versus $106.8 in 2020, and diluted EPS was $1.66 versus $1.13. Net interest income rose 11% to $312.3; total income rose 9% to $387.9. The first-half provision was a benefit of $5.6, compared with $36.1 of expense in 2020. The efficiency ratio was 49.92% for Q2 and 48.31% for the first half.
Balance sheet, liquidity and capital
- Total assets were $20.49 billion at June 30, up $1.98 billion from year-end 2020. Cash and cash equivalents were $921 million.
- Loans were $11.24 billion, up $115 million from year-end but down $215 million year over year. Excluding PPP loans, management reported loan growth of $249 million in Q2 and $517 million year over year.
- Total deposits were $16.76 billion, up $1.96 billion from year-end. Core deposits reached $16.73 billion; non-interest-bearing deposits were $6.31 billion, or 38% of core deposits. Management attributed deposit growth partly to PPP proceeds, government stimulus and customer savings.
- Debt securities totaled $7.17 billion, up $1.64 billion from year-end. The company transferred $844 million of securities from available-for-sale to held-to-maturity during the first half.
- The loan allowance was $151.4 million, or 1.35% of loans, down from $158.2 million and 1.42% at year-end. Non-performing assets were $53.0 million, or 0.26% of subsidiary assets, up $16.5 million from Q1; management said the increase was primarily isolated to one credit relationship.
- Stockholders’ equity was $2.35 billion; tangible book value was $18.74 per share. Glacier Bank’s regulatory ratios were 13.71% total capital, 12.67% Tier 1 and common equity Tier 1, and 9.00% leverage—above the stated minimums.
- Available liquidity included $2.59 billion of unused FHLB capacity, $1.33 billion of FRB discount-window capacity, $635 million of unsecured lines and $4.70 billion of unencumbered securities. These sources are distinct disclosures and should not be assumed to be additive without reviewing terms and potential overlap.
First-half cash flows were $290.1 million provided by operations, $1.90 billion used in investing and $1.90 billion provided by financing. Cash and cash equivalents increased $288.1 million to $921.2 million. These flows principally reflect securities purchases, loan activity and deposit growth.
Changes, outlook and risks
- Profit improved year over year, supported by lower funding costs, higher net interest income and a lower credit-loss provision. Margin pressure persisted: management cited lower earning-asset yields and a shift toward lower-yielding securities. Q2 PPP income, including deferred fees and costs, was $10.3 million.
- Mortgage activity remained elevated but was below prior periods; Q2 loan-sale gains fell 38% year over year to $16.1 million. Compensation, employee benefits and regulatory assessments increased, while acquisition-related expense declined.
- Management said the allowance reduction reflected improved economic forecasts and qualitative factors, but warned that COVID-19-related uncertainty could lead to further credit losses if forecasts change. Credit quality also bears watching given the Q2 increase in non-performing assets.
- In May, Glacier agreed to acquire Altabancorp and Altabank, which had $3.52 billion of assets, $1.80 billion of loans and $3.16 billion of deposits at March 31, 2021. The deal was subject to approvals and customary conditions and was expected to close in Q4 2021. The filing provides no earnings guidance.
- The securities transfer and market-rate changes contributed to first-half other comprehensive loss of $52.6 million; accumulated other comprehensive income fell to $90.4 million. Management attributed unrealized securities losses primarily to interest rates and market spreads, not credit deterioration, and recorded no securities credit-loss allowance.
- Other disclosed risks include lending and local economic conditions, interest-rate and regulatory changes (including requirements associated with assets above $10 billion), acquisition execution and integration, competition, cybersecurity, systems disruption and natural disasters. Management stated there were no material changes to previously disclosed risk factors or market-risk disclosures. Pending ordinary-course litigation was not expected to have a material effect.
Important facts for investors to verify
- Whether the Altabancorp transaction received approvals, closed as expected and achieved anticipated integration and financial results.
- Whether deposit growth is durable and how excess liquidity and securities purchases affect net interest margin as rates and asset mix change.
- Whether the Q2 increase in non-performing assets tied to one credit relationship is contained, and whether the allowance remains adequate as economic forecasts evolve.
- How much future earnings depend on PPP fee recognition and elevated mortgage activity, both of which may change as forgiveness and loan volumes progress.
- The impact of securities valuation and classification on accumulated other comprehensive income, capital and liquidity.