Glacier Bancorp, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Financial statements are unaudited. Glacier provides community banking across eight western states through Glacier Bank.
Financial results and condition
| Metric | Q3 2021 / September 30, 2021 | Comparison |
|---|---|---|
| Net income | $75.6 million; diluted EPS $0.79 | Q3 2020: $77.8 million; $0.81 per diluted share |
| Nine-month net income | $234.0 million; diluted EPS $2.45 | Nine months 2020: $184.5 million; $1.95 per diluted share |
| Net interest income | Q3: $162.6 million; nine months: $474.9 million | Q3 increased 7%; nine months increased 9% year over year |
| Net interest margin, tax-equivalent | Q3: 3.39%; nine months: 3.52% | Q3 2020: 3.92%; nine months 2020: 4.12% |
| Total assets | $21.314 billion | Up $2.810 billion from December 31, 2020 |
| Loans receivable, gross | $11.294 billion | Up $171.2 million from year-end; excluding PPP loans, management reported growth of $382 million in Q3 |
| Deposits | $17.503 billion | Up $2.706 billion from year-end; core deposits were $17.477 billion |
| Debt securities | $8.519 billion | Up $2.991 billion from year-end; 40% of total assets |
| Stockholders’ equity | $2.388 billion | Tangible equity ratio: 8.80%; tangible book value: $19.11 per share |
| Allowance and credit quality | Loan allowance: $153.6 million, or 1.36% of loans; non-performing assets: $51.2 million | Non-performing assets were 0.24% of subsidiary assets; allowance was 301% of non-performing loans |
Cash flow, liquidity and capital
- For the first nine months, operating cash flow was $417.3 million, investing cash flow was negative $3.361 billion, and financing cash flow was positive $2.659 billion. Cash and cash equivalents ended at $348.9 million, down $284.3 million from year-end.
- Available liquidity included $5.958 billion of unencumbered debt securities, $2.820 billion of available FHLB capacity, $1.422 billion of FRB discount-window capacity, and $635 million of unsecured lines. These are reported capacities, not cash balances.
- At September 30, Glacier Bank’s regulatory capital ratios were 13.32% total capital, 12.32% Tier 1 and common equity Tier 1, and 8.75% leverage. Management said the Company and Bank met applicable capital requirements.
- Repurchase agreements were $1.041 billion; subordinated debentures were $132.6 million. No FHLB advances were outstanding.
Material changes and management commentary
- Q3 net income declined 3% year over year, mainly because gains on residential mortgage loan sales fell $21.6 million from unusually strong prior-year levels. Nine-month net income rose 27%, supported by higher net interest income and a $46.2 million year-over-year swing in provision for credit losses, from expense to benefit.
- For nine months, non-interest income declined 14% to $110.5 million, chiefly reflecting lower loan-sale gains. Non-interest expense rose 2% to $300.8 million. The Q3 efficiency ratio was 50.17%; nine-month ratio was 48.94%.
- Management attributed margin pressure to low yields on loans and securities and a larger share of lower-yielding securities in earning assets. Deposit costs fell, but did not offset lower asset yields. Q3 core margin was 3.17%, excluding specified PPP, non-accrual and discount-accretion effects.
- Deposit growth, including stimulus-related funds, PPP proceeds and customer savings, supported substantial securities purchases. The Company transferred $844 million of available-for-sale securities to held-to-maturity during the first half. Available-for-sale securities had $65.8 million of net-of-tax unrealized losses in accumulated other comprehensive income at period-end; management attributed the declines to rates and market spreads, not credit losses, and reported no securities allowance.
- Loan allowance decreased from $158.2 million at year-end to $153.6 million. Management cited improved economic forecast and qualitative factors; the nine-month loan provision was a $2.9 million benefit. Q3 provision was $2.3 million, primarily reflecting organic loan growth. Non-performing assets increased $6.5 million year over year. Early-stage delinquencies rose to $26.0 million from $12.1 million in the prior quarter, with management noting that much of the increase was concentrated in one relationship.
- PPP loans outstanding were $368.9 million at September 30, down from $909.2 million at year-end; $1.103 billion was forgiven in the first nine months. PPP income recognized in Q3 was $12.9 million, including accelerated deferred fees.
- On October 1, 2021, the Company acquired Altabancorp/Altabank. Alta had $3.648 billion of assets, $1.901 billion of gross loans and $3.279 billion of deposits at September 30. Preliminary consideration was $839.9 million, paid with 15,173,480 Glacier shares; purchase accounting was incomplete at filing. This is a subsequent event and is not included in September 30 balances.
Outlook, risks and contingencies
The filing provides no specific earnings or financial guidance. Management cautioned that results are subject to economic, interest-rate, competitive, credit and regulatory uncertainty. Credit-loss estimates depend on judgments and forecasts, and future deterioration could require additional provision. Other stated risks include acquisition integration and goodwill impairment, cybersecurity or system disruption, natural disasters, and increased regulation as consolidated assets exceed $10 billion. Management reported no material change to previously disclosed risk factors, no material expected effect from pending litigation, and no material change in market-risk disclosures. The annual goodwill impairment test found no impairment; future changes in conditions could alter that conclusion.
Key facts for investors to verify
- Post-close Alta integration, final purchase-price allocation, goodwill, and the effect of the share issuance on per-share results and capital.
- Whether the rise in early delinquencies and non-performing commercial loans persists, particularly the relationship management identified as driving much of the delinquency increase.
- Future net interest margin and securities valuation sensitivity to interest rates, including the impact of the large securities portfolio and unrealized losses.
- Normalization of PPP-related interest and fee income and mortgage-sale gains, and the resulting effect on recurring earnings and efficiency.
- Deposit trends, liquidity use, capital ratios and any added regulatory costs following the acquisition and growth beyond $10 billion in assets.