Glacier Bancorp, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Glacier Bancorp is a regional banking company operating through Glacier Bank across eight western states. Unless otherwise noted, amounts below are in U.S. dollars; financial statement amounts are in millions.
Financial results and key metrics
| Metric | Q1 2022 | Comparable period / change |
|---|---|---|
| Net interest income | $185.6 million | Up $28.7 million, or 18%, year over year |
| Net interest margin, tax-equivalent | 3.20% | 3.74% in Q1 2021; 3.21% in Q4 2021 |
| Non-interest income | $33.6 million | Down $6.6 million, or 16%, year over year |
| Non-interest expense | $130.3 million | Up $33.7 million, or 35%, year over year |
| Net income / diluted EPS | $67.8 million / $0.61 | Down 16% / 28% from $80.8 million / $0.85 |
| Operating cash flow | $78.4 million provided | $147.7 million provided in Q1 2021 |
| Loans / deposits | $13.73 billion / $21.70 billion | Loans up 22% and deposits up 35% year over year |
At March 31, 2022, total assets were $26.10 billion, net loans were $13.55 billion, and total debt securities were $10.11 billion. Deposits totaled $21.70 billion; borrowings included $958.5 million of repurchase agreements, $80.0 million of FHLB advances, $57.3 million of other borrowed funds and $132.7 million of subordinated debentures. The loan-to-deposit ratio was 63.52%.
The allowance for credit losses was $176.2 million, or 1.28% of loans. Non-performing assets were $62.5 million, or 0.24% of subsidiary assets; net charge-offs were $0.85 million. Commercial real estate represented 65% of loans. Glacier Bank reported regulatory capital ratios of 13.26% total capital, 12.25% Tier 1 and common equity Tier 1, and an 8.68% leverage ratio.
Cash and cash equivalents were $436.8 million. Reported available liquidity included $3.16 billion of FHLB borrowing capacity, $1.65 billion of FRB discount-window capacity, $635 million of unsecured credit lines and $7.37 billion of unencumbered debt securities. Investing activities used $456.3 million of cash and financing activities provided $377.0 million.
Material changes and notable items
- Net income declined year over year primarily due to lower PPP-related income, reduced residential loan-sale gains, higher credit-loss expense and acquisition-related costs. Net interest income increased, principally reflecting the Alta acquisition.
- Gain on sale of loans fell to $9.0 million from $21.6 million a year earlier as mortgage purchase and refinance activity slowed from recent highs.
- Non-interest expense included $6.2 million of merger and acquisition expense, versus $0.1 million in Q1 2021. The efficiency ratio was 57.11%, compared with 46.75% a year earlier; excluding acquisition costs, it was 54.33%.
- Higher interest rates drove substantial unrealized losses on available-for-sale securities: the quarter recorded $275.2 million of total other comprehensive loss after tax. Accumulated other comprehensive loss reached $247.8 million, contributing to lower stockholders’ equity and tangible book value. Management attributed the securities declines primarily to rates and market spreads, not credit losses, and recorded no securities ACL.
- The company reclassified approximately $2.2 billion of available-for-sale securities to held-to-maturity, citing intent and ability to hold them to maturity. The transfer amount is reported differently in sections of the filing; investors should verify the precise amount and related accounting effects.
- The board declared a regular quarterly dividend of $0.33 per share, up $0.01 from the prior-quarter regular dividend. The filing provides no earnings or financial guidance for the remainder of 2022.
Management commentary, risks and contingencies
Management said core deposits continued to grow but at a slower pace than during 2020 and 2021. It considered the loan allowance adequate, while noting that credit-loss estimates depend on uncertain economic forecasts, collateral values and portfolio conditions. Non-performing assets increased 71% year over year, primarily due to the Alta acquisition and two credit relationships, although they declined from the prior quarter. Management reported substantial borrowing capacity and said the company and bank met applicable capital requirements.
Key risks include changes in interest rates affecting net interest income and securities values; deterioration in borrower credit quality and regional economic conditions; acquisition completion and integration risks; competition, regulation, cybersecurity and system disruptions; and potential goodwill impairment. Management reported no material change in the previously disclosed risk factors. Pending ordinary-course legal matters were not expected by management to materially affect financial condition, results or liquidity. The internal-control assessment excluded Alta, representing $4.1 billion, or 16% of consolidated assets, and $29.0 million of net interest income.
Important facts for investors to verify
- How rising rates, deposit repricing and the securities portfolio affect future net interest margin, accumulated other comprehensive loss and tangible book value.
- The amount and accounting treatment of the securities transferred to held-to-maturity, including the difference in reported transfer figures.
- Whether loan growth, especially in commercial real estate, changes credit quality, non-performing assets or allowance needs.
- How much of earnings and expense trends reflect Alta, PPP runoff, mortgage activity and one-time acquisition costs.
- Liquidity and capital resilience under adverse deposit, funding, interest-rate and credit scenarios, and the progress of integrating Alta’s controls.