Glacier Bancorp, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; balance-sheet comparisons are to December 31, 2020. Glacier Bancorp is a regional banking company operating through Glacier Bank across eight western states. Unless stated otherwise, dollar amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 2021 | Comparable period / change |
|---|---|---|
| Net interest income | $156.8 million | Up 17% year over year; down 5% from Q4 2020 |
| Net interest margin, tax-equivalent | 3.74% | 4.36% in Q1 2020; 4.03% in Q4 2020 |
| Non-interest income | $40.1 million | Up 21% year over year |
| Non-interest expense | $96.6 million | Up 1% year over year; down 13% from Q4 2020 |
| Credit loss expense | $48,000 | $19.2 million in Q1 2020 |
| Net income / diluted EPS | $80.8 million / $0.85 | $43.3 million / $0.46 in Q1 2020 |
| Efficiency ratio | 46.75% | 52.55% in Q1 2020 |
| Cash dividends declared per share | $0.31 | $0.29 in Q1 2020 |
Return on average assets was 1.73% and return on average equity was 14.12%. Management reported tax-equivalent core net interest margin of 3.56%, excluding specified PPP, non-accrual and purchase-accounting effects. The effective tax rate was 19.4%.
Financial condition, cash flow and liquidity
- Assets: $19.77 billion, up $1.27 billion from year-end 2020. Cash and cash equivalents were $878.5 million. Total debt securities were $6.44 billion, up $914 million during the quarter.
- Loans: Gross loans were $11.27 billion, up $147 million from year-end; excluding PPP loans, management reported quarterly growth of $80.6 million, or 3% annualized. Commercial real estate represented $6.47 billion of loans.
- Deposits: $16.10 billion, up $1.31 billion from year-end. Core deposits rose by the same approximate amount; management cited PPP proceeds, federal stimulus deposits and higher customer savings as factors in the unusually large year-over-year deposit increase.
- Borrowings and capital: Repurchase agreements were $996.9 million; subordinated debentures were $132.5 million. There were no FHLB advances outstanding at quarter-end. Glacier Bank’s total capital, Tier 1, common equity Tier 1 and leverage ratios were 14.01%, 12.90%, 12.90% and 9.40%, respectively; management said the Company and Bank met applicable capital requirements.
- Liquidity: Reported available capacity included $2.49 billion from FHLB advances, $1.36 billion at the Federal Reserve discount window, $635 million in unsecured lines and $4.07 billion of unencumbered debt securities. The loan-to-deposit ratio was 70.72%.
- Cash flows: Operating activities provided $147.7 million, investing activities used $1.18 billion, and financing activities provided $1.28 billion. Cash, cash equivalents and restricted cash increased $245.3 million to $878.5 million. Deposit growth was the primary funding source reflected in financing cash flow.
Changes versus prior periods
- Net income rose 86% year over year, supported by higher net interest income and loan-sale gains and sharply lower credit loss expense than the COVID-affected Q1 2020 comparison.
- Net interest margin continued to compress: management attributed the decline to lower earning-asset yields, including the larger share of lower-yielding securities. PPP interest and fees contributed $13.5 million of Q1 interest income, including $7.8 million of accelerated deferred fees from loan forgiveness.
- Loan-sale gains were $21.6 million, up 82% year over year, but down 18% from Q4 2020. Management linked elevated gains to low interest rates and mortgage purchase/refinance activity.
- Loans grew more slowly than deposits, and management invested excess liquidity in securities. The loan-to-deposit ratio declined from 88.10% in Q1 2020 to 70.72%.
- Accumulated other comprehensive income fell $63.2 million during Q1, primarily reflecting lower fair values of available-for-sale securities as interest rates and market spreads changed. Stockholders’ equity declined $11.7 million from year-end despite quarterly earnings, while tangible book value per share was $18.10, down $0.11 sequentially.
Credit, outlook, risks and unusual items
- The allowance for credit losses was $156.4 million, or 1.39% of loans, compared with 1.42% at year-end. Net charge-offs were $2.3 million. Non-performing assets were $36.6 million, or 0.19% of subsidiary assets.
- Loans 30–89 days past due increased to $44.6 million from $22.7 million at year-end; management said the increase was primarily isolated to one credit relationship. The filing states that credit estimates incorporate economic forecasts but remain uncertain and may require future allowance changes.
- At March 31, $81.3 million of COVID-related loan modifications remained in deferral, down from $94.9 million at year-end. Separately, $272 million of Montana business loans benefited from the state’s deferment grant program. Loans in management’s identified higher-risk industries totaled $642.8 million, or 6.24% of loans excluding PPP; $14.9 million of those loans had remaining modifications.
- PPP loans outstanding totaled $975.8 million. The Company originated $486.6 million of Round 2 loans during Q1 and reported $426 million of Round 1 forgiveness during the quarter. PPP fees and forgiveness affected reported interest income and operating results.
- The Company transferred $403.8 million of available-for-sale securities to held-to-maturity. Available-for-sale unrealized losses were attributed primarily to interest-rate and market-spread movements, not credit losses; the Company recorded no securities ACL and said it did not intend or expect to be required to sell the loss-position securities before recovery.
- Outlook: The filing provides no specific earnings or financial guidance. Management noted that results for the quarter are not necessarily indicative of full-year results. Risks include credit deterioration, interest-rate changes, regulatory changes (including consequences of exceeding $10 billion in assets), acquisition execution and integration, competition, cybersecurity and system disruption, and natural disasters.
- Management said pending ordinary-course litigation was not expected to materially affect financial position, results or liquidity. The filing reported no material change in previously disclosed risk factors, and management concluded disclosure controls were effective.
Important facts for investors to verify
- Whether deposit growth persists and how the Company deploys excess liquidity as PPP balances are forgiven or decline.
- Whether margin compression continues, including the effects of asset yields, securities growth, deposit pricing and PPP fee recognition.
- Trends in early-stage delinquencies, higher-risk industry exposures, COVID-related modifications, charge-offs and the adequacy of the ACL under changing economic forecasts.
- The sensitivity of equity and tangible book value to further interest-rate or market-spread changes affecting available-for-sale securities.
- Capital, liquidity and compliance implications of the Company’s asset size, and the sustainability of earnings and dividends absent unusually high PPP and mortgage-related income.