Glacier Bancorp, Inc. — 2012 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2012; fourth-quarter results are included below where reported. Glacier Bancorp provides community banking through Glacier Bank’s 11 divisions and 108 locations across six Rocky Mountain and Pacific Northwest states. On April 30, 2012, it combined its 11 bank subsidiaries into one bank subsidiary, retaining the divisions and their management teams.
Financial results and condition
| Metric | 2012 | 2011 |
|---|---|---|
| Total assets at year-end | $7.747 billion | $7.188 billion |
| Total deposits at year-end | $5.364 billion | $4.821 billion |
| Gross loans at year-end | $3.397 billion | $3.466 billion |
| Net interest income | $218.0 million | $235.6 million |
| Non-interest income | $91.5 million | $78.2 million |
| Net income | $75.5 million | $17.5 million |
| Diluted earnings per share | $1.05 | $0.24 |
| Net interest margin, tax-equivalent | 3.37% | 3.89% |
- Earnings comparison: 2011 included a $40.2 million pre-tax goodwill impairment charge ($32.6 million after tax). Excluding that charge, 2011 net income was $50.1 million and diluted EPS was $0.70; on that non-GAAP basis, 2012 net income rose 51% and diluted EPS rose 50%. Management attributed the improvement mainly to a $43.0 million reduction in loan-loss provision.
- Fourth quarter: Net income was $20.8 million and diluted EPS was $0.29, versus $14.3 million and $0.20 in fourth-quarter 2011.
- Credit and provision: The 2012 provision for loan losses was $21.5 million, down 67%; net charge-offs were $28.2 million, down from $64.1 million. Non-performing assets fell 33% to $143.5 million, or 1.87% of subsidiary assets. The allowance for loan and lease losses was $130.9 million, 3.85% of gross loans and 133% of non-performing loans.
- Revenue and expense trends: Net interest income declined 7%, as lower asset yields and higher investment-security premium amortization more than offset reduced funding costs. Gain on loan sales increased 53% to $32.2 million. Non-interest expense, excluding the prior-year goodwill impairment, increased 1% to $193.4 million; compensation expense rose 11%. The efficiency ratio increased to 54.02% from 51.34%.
- Cash flow: Operating cash flow was $183.8 million; investing cash outflow was $579.6 million; financing cash inflow was $454.9 million. Cash and cash equivalents increased $59.0 million to $187.0 million.
- Funding, debt and capital: Year-end borrowings included $997.0 million of FHLB advances, $289.5 million of repurchase agreements, $125.4 million of subordinated debentures and $10.0 million of other borrowed funds. Stockholders’ equity was $900.9 million, or 11.63% of assets. The company and Bank were reported well-capitalized; consolidated total risk-based capital was 20.09% and Tier 1 leverage was 11.31%.
Material changes, outlook and risks
- Investment securities available-for-sale grew 18% to $3.683 billion, equal to 48% of assets; gross loans declined 2%. Management said securities purchases helped offset weak loan demand, but low yields and elevated premium amortization weighed on net interest margin.
- Deposits grew 11%, including an 18% increase in non-interest-bearing deposits. FHLB advances declined $72.0 million. The unlimited FDIC coverage for certain non-interest-bearing transaction accounts expired December 31, 2012, creating a potential risk to deposit costs and liquidity.
- Management described improving regional housing and credit conditions, while noting that future results depend on local economic conditions, interest rates, loan quality, competition and regulatory costs. The filing provides no quantified earnings or growth guidance.
- Key risks include real-estate and commercial-loan concentration, further deterioration in collateral values, allowance-estimation uncertainty, rate sensitivity, deposit outflows or higher funding costs, investment valuation risk, acquisition integration, regulatory change and operational or cybersecurity incidents. Investment securities were 48% of assets, increasing exposure to changes in rates and security values.
- On February 25, 2013, the company announced an agreement to acquire First State Bank of Wyoming for cash and stock, with closing anticipated in the second quarter of 2013, subject to completion and approvals. First State Bank reported $281 million in assets, $179 million in gross loans and $249 million in deposits at December 31, 2012.
- The company reported no other-than-temporary impairment on its securities at year-end and no goodwill impairment in 2012; goodwill remained $106.1 million. Management and the independent auditor reported effective internal controls, and the auditor issued an unqualified opinion on the financial statements and controls.
Important facts for investors to verify
- Whether credit improvement continues: track non-performing assets, early-stage delinquencies, construction and land-related exposures, charge-offs and allowance coverage.
- Whether margin pressure persists: monitor net interest margin, premium amortization, securities portfolio composition and the effect of rate changes.
- Deposit stability and funding costs following expiration of unlimited transaction-account FDIC coverage; also review wholesale deposits and near-term FHLB maturities.
- Acquisition terms, regulatory approval, closing, integration costs and any dilution from the stock consideration.
- Dividend sustainability: 2012 dividends were $0.53 per share, and payment depends on earnings, capital, asset quality and regulatory limits.