Business context and reporting period
Glacier Bancorp, Inc. filed this Form 10-K for the fiscal year ended December 31, 2021. The Montana-based bank holding company provides retail, commercial, real estate, agricultural and consumer banking across eight western states through Glacier Bank, its sole operating segment. It had 224 locations at year-end.
On October 1, 2021, Glacier acquired Altabancorp (Alta), adding a Utah-based division. The $840 million consideration was primarily stock, and Alta contributed $4.1 billion in acquired assets. Year-end results therefore include Alta only from the acquisition date.
Financial results and condition
| Metric | FY 2021 / Dec. 31, 2021 | FY 2020 / Dec. 31, 2020 |
|---|---|---|
| Net interest income | $662.5 million | $599.7 million |
| Net interest margin, tax-equivalent | 3.42% | 4.09% |
| Net income | $284.8 million | $266.4 million |
| Diluted earnings per share | $2.86 | $2.81 |
| Total assets | $25.94 billion | $18.50 billion |
| Loans, net of allowance | $13.26 billion | $10.96 billion |
| Total deposits | $21.34 billion | $14.80 billion |
| Total stockholders’ equity | $3.18 billion | $2.31 billion |
- Revenue and earnings: Total income—net interest income plus non-interest income—was $807.3 million, up 4%. Net income rose 7%, while return on average assets fell to 1.33% from 1.62% and return on average equity fell to 11.08% from 12.15%.
- Drivers and margins: Net interest income increased 10%, helped by the Alta acquisition, loan and securities growth, and lower funding costs. The 67-basis-point decline in net interest margin reflected low asset yields and a shift toward lower-yielding securities. Non-interest income fell 16% to $144.8 million, mainly as mortgage loan-sale gains declined 37% from unusually high 2020 levels. Non-interest expense rose 7% to $434.8 million; the efficiency ratio worsened to 51.35% from 49.97%.
- Credit and asset quality: Provision for credit losses was $23.1 million, down from $39.8 million. Net charge-offs were $2.3 million. The allowance was $172.7 million, or 1.29% of loans. Non-performing assets increased to $67.7 million, or 0.26% of subsidiary assets, from $35.4 million, primarily due to Alta and one credit relationship. Early-stage delinquencies also increased.
- Funding, debt and liquidity: Deposits grew 44%, including 22% organic core deposit growth; non-interest-bearing deposits were $7.78 billion. The loan-to-deposit ratio declined to 63.24% from 76.29%. Year-end borrowings included $1.02 billion in repurchase agreements and $132.6 million in subordinated debentures; FHLB advances were zero. Cash and cash equivalents were $437.7 million. Additional disclosed capacity included $2.99 billion of available FHLB borrowing capacity, $1.45 billion at the Federal Reserve discount window, $635 million in unsecured lines and $7.68 billion of unencumbered debt securities.
- Cash flow: Operating activities provided $572.0 million; investing activities used $3.91 billion, reflecting securities purchases and loan activity; financing activities provided $3.14 billion, mainly from deposit growth. Cash and cash equivalents decreased $195.5 million during the year.
- Capital: Glacier Bank’s year-end ratios were 13.53% total capital, 12.56% Tier 1 and common equity Tier 1, and 8.70% Tier 1 leverage. The Bank was categorized as well capitalized. Tangible book value per share increased 6% to $19.33.
Material changes, outlook and risks
- Total assets increased 40%, primarily due to Alta and substantial securities purchases. Loans grew 21% reported; excluding PPP loans and Alta, organic loan growth was 11%. Core deposits rose 44% reported and 22% organically.
- Alta added $471.4 million of goodwill; total goodwill reached $985.4 million, about 31% of stockholders’ equity. The company reported no goodwill impairment. Acquisition-related expenses were $9.8 million. Alta’s reported post-acquisition operations had approximately $30.0 million of income and a $9.4 million net loss for the fourth quarter.
- Available-for-sale securities recorded a significant unrealized loss in 2021, contributing to a $115.7 million decline in other comprehensive income and lower accumulated other comprehensive income. Management attributed the security-value declines to interest rates and market spreads, not credit losses, and recorded no securities credit-loss allowance.
- Fourth-quarter provision for credit losses was $28.0 million, compared with a $5.7 million provision benefit in the third quarter; fourth-quarter net income was $50.7 million, versus $75.6 million in the third quarter. These results merit attention alongside the annual improvement.
- Management provided no specific earnings or growth guidance. It said future performance depends on economic conditions, interest rates, competition for deposits and loans, loan quality and growth, acquisition integration, and regulatory requirements. It noted the Federal Reserve’s shift toward addressing inflation and warned that higher rates and competitive pressures could affect margins and funding.
- Key risks include commercial real estate and other concentrated real-estate lending, credit deterioration, interest-rate and securities valuation exposure, acquisition integration and goodwill, cybersecurity and operational disruptions, regulatory changes, climate and economic conditions, and continuing effects of COVID-19. The filing identifies no material pending litigation; management believes ordinary-course claims will not materially affect financial condition or results.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The internal-control audit excluded Alta, which represented 16% of consolidated assets and 4% of annual net interest income.
Most important facts for investors to verify
- Whether the increase in non-performing assets and early-stage delinquencies, including the identified large credit relationship, leads to further provisions, charge-offs or collateral losses.
- How quickly the acquired Alta business is integrated and contributes earnings, and whether acquisition costs or goodwill valuation change.
- Whether deposit growth persists and how the large securities portfolio, low loan-to-deposit ratio and available borrowing capacity translate into liquidity and future asset yields.
- How net interest margin responds to rate changes, deposit repricing and securities maturities or prepayments; the filing’s sensitivity scenarios are hypothetical, not forecasts.
- Whether unrealized securities losses affect capital, liquidity or management’s ability to hold securities until recovery, and how the 2021 OCI decline evolves.
- How the company sustains dividends and capital levels as it integrates Alta; 2021 dividends declared were $1.37 per share, and regulatory limits apply.