Glacier Bancorp, Inc. — Q2 2022 Form 10-Q
Business context and reporting period. Glacier Bancorp is a regional banking company operating across eight western states. This unaudited 10-Q covers the quarter and six months ended June 30, 2022; comparisons are primarily with Q2 and first-half 2021. Results include Altabancorp (“Alta”), acquired in Q4 2021.
Financial performance and position
| Metric | Q2 2022 / June 30, 2022 | Comparison |
|---|---|---|
| Net income | $76.4 million; diluted EPS $0.69 | Net income down 2% and EPS down 15% from Q2 2021 |
| First-half net income | $144.2 million; diluted EPS $1.30 | Down from $158.4 million and $1.66 in first-half 2021 |
| Net interest income | $193.4 million | Up 24% year over year; first-half $379.0 million, up 21% |
| Net interest margin | 3.23% tax-equivalent | 3.44% in Q2 2021; first-half margin was 3.21% versus 3.58% |
| Non-interest income / expense | $28.3 million / $129.5 million | Income down 20% and expense up 29% year over year in Q2 |
| Loans / deposits | $14.40 billion / $21.78 billion | Loans up $967.7 million and deposits up $446.4 million from year-end 2021 |
| Cash and total assets | $415.4 million / $26.69 billion | Cash down $22.3 million and assets up $749.4 million from year-end 2021 |
| Credit quality | ACL $173.0 million, 1.20% of loans; nonperforming assets $44.0 million | NPA ratio 0.16% of subsidiary assets, versus 0.26% at June 2021 |
| Equity and capital | Stockholders’ equity $2.90 billion; tangible book value $16.83 per share | AOCI was a $327.2 million loss; Glacier Bank regulatory capital ratios exceeded stated minimums |
Material changes and management commentary
- Loan growth, investment yields, and Alta contributed to higher net interest income. Management reported Q2 core net interest margin of 3.16%, up from 3.07% in Q1, while the reported tax-equivalent margin remained below the prior-year quarter.
- Lower residential mortgage activity as rates rose reduced Q2 gain on loan sales to $5.0 million, down 69% year over year. First-half loan-sale gains fell 63% to $14.0 million.
- Q2 non-interest expenses rose mainly with Alta, staffing and technology costs. First-half acquisition-related expenses were $8.3 million versus $1.2 million in 2021. The efficiency ratio was 55.74% in Q2 and 56.42% for the first half.
- The company recorded a $1.5 million provision benefit for credit losses in Q2, citing improved credit quality and greater confidence in economic forecasts; first-half provision expense was $5.5 million, including $2.5 million for unfunded commitments. Q2 net charge-offs were $1.8 million.
- Loans grew 5% in Q2; commercial real estate was the largest portfolio segment at $9.31 billion, or about 65% of loans. Management said loan growth, credit conditions and economic forecasts will affect future provision levels.
Liquidity, securities, debt and cash flow
- Deposits were $21.78 billion. The company added $580 million of FHLB advances during the first half, including $500 million in Q2, to support liquidity needs associated with loan growth. Repurchase agreements were $968.2 million and subordinated debentures $132.7 million.
- Reported available funding included $2.82 billion of unused FHLB capacity, $1.79 billion of FRB discount-window capacity, $635 million of unsecured lines and $7.26 billion of unencumbered securities. These sources are subject to collateral and availability conditions.
- Six-month operating cash flow was $216.7 million, versus $290.1 million in 2021. Investing activities used $1.18 billion and financing activities provided $936.1 million; cash and cash equivalents declined $22.3 million.
- Debt securities totaled $10.00 billion. The company transferred $2.15 billion of AFS securities to HTM during Q1. At June 30, gross unrealized losses were $432.3 million on AFS securities and $329.7 million on HTM securities. Management attributed AFS losses primarily to interest rates and market spreads, reported no securities credit-loss allowance, and said it did not intend or expect to be required to sell the impaired AFS securities before recovery.
- The securities marks drove AOCI to a $327.2 million loss and reduced tangible book value. Management said the Bank met applicable regulatory capital requirements; Glacier Bank’s CET1 ratio was 12.35% and leverage ratio 8.74%.
Outlook, risks and contingencies
The filing provides no quantified earnings or revenue guidance. Management cautions that first-half results are not necessarily indicative of full-year results. Forward-looking risks include credit deterioration, interest-rate and funding-cost changes, competition, regulatory changes, acquisition completion and integration, goodwill impairment, cybersecurity or system disruption, and natural disasters. The company said there were no material changes to the risk factors in its 2021 Form 10-K.
Management reported pending legal matters arising in the ordinary course are not expected to materially affect financial position, results or liquidity. The company reported disclosure controls as effective; its assessment of internal control over financial reporting excluded Alta, representing 15% of consolidated assets and 15% of first-half net interest income. The company declared a $0.33 quarterly dividend, payable July 21, 2022.
Important facts for investors to verify
- How rising rates affect asset yields, deposit pricing, borrowing costs and net interest margin.
- The potential effect of securities unrealized losses, HTM classification and liquidity needs on capital and tangible book value.
- Commercial real estate exposure, loan growth, delinquencies, charge-offs and the adequacy of the ACL as economic conditions change.
- Whether Alta integration, acquisition expenses and operating-cost growth persist, and how the acquisition affects per-share performance and controls.
- Deposit trends and reliance on FHLB advances or other contingent funding sources.