Glacier Bancorp, Inc. — FY2020 Form 10-K
Business and reporting period: Annual report for the year ended December 31, 2020, filed March 1, 2021. Glacier Bancorp is a regional community bank holding company operating through Glacier Bank in eight Western states, with 193 locations. The year included the February acquisition of State Bank of Arizona (SBAZ). Fourth-quarter figures are noted where relevant; this filing reports full-year results.
Key financial results and position
| Metric | FY2020 / Dec. 31, 2020 | Comparison |
|---|---|---|
| Total assets | $18.50 billion | Up 35% from 2019 |
| Total income (net interest income plus non-interest income) | $772.6 million | Up 22% |
| Net interest income | $599.7 million | Up 19% |
| Net income / diluted EPS | $266.4 million / $2.81 | Up 27% / 18% |
| Net interest margin, tax-equivalent | 4.09% | Down 30 basis points |
| Provision for credit losses | $39.8 million | Versus $57,000 in 2019 |
| Loans receivable, net / allowance | $10.96 billion / $158.2 million | Allowance 1.42% of loans, versus 1.31% |
| Deposits | $14.80 billion | Up 37% |
| Stockholders’ equity | $2.31 billion | Up 18%; 12.47% of assets, versus 14.33% |
| Operating cash flow | $189.5 million | Versus $226.6 million |
Return on average assets was 1.62%, return on average equity 12.15%, and the efficiency ratio 49.97% (53.70% excluding PPP effects). Non-interest income rose 32%, led by loan-sale gains of $99.5 million, up 192%. Service charges and other fees fell 23% to $52.5 million. Non-interest expense increased 8% to $404.8 million.
Cash and cash equivalents were $633.1 million. The loan-to-deposit ratio fell to 76.29% from 88.92%. The company held $5.53 billion in debt securities, up 97%, reflecting investment of excess liquidity. FHLB advances were paid off by year-end; repurchase agreements were $1.00 billion and subordinated debentures $140.0 million. Available liquidity included $2.45 billion of FHLB capacity, $1.27 billion of Federal Reserve discount-window capacity, $635 million in unsecured lines, and $3.36 billion of unencumbered securities. Glacier Bank’s total capital ratio was 14.06% and common equity Tier 1 ratio 12.91%; the Bank was classified as well capitalized.
Material changes and notable items
- Organic deposits, excluding SBAZ, grew $3.43 billion, including a $1.62 billion increase in non-interest-bearing deposits. Organic loan growth was $1.16 billion including PPP loans, but $249 million, or 3%, excluding PPP and SBAZ.
- The company originated 16,090 PPP loans totaling $1.472 billion; $539 million had been forgiven by year-end. PPP loans generated $38.2 million of 2020 interest income, including accelerated recognition of fees on forgiven loans.
- COVID-related modifications covered 3,054 loans totaling $1.515 billion; $94.9 million remained in deferral at year-end. Loans in enhanced-monitoring industries totaled $642 million, or 6.29% of loans excluding PPP; $23.5 million of those loans remained modified.
- Non-performing assets declined to $35.4 million, or 0.19% of subsidiary assets, from $37.4 million and 0.27%. Net charge-offs were $7.7 million. The allowance increase and $39.8 million provision largely reflected the pandemic-related economic outlook and CECL estimates.
- CECL was adopted January 1, 2020, reducing opening retained earnings by $12.3 million. The company elected the five-year regulatory capital transition for CECL.
- Other comprehensive income increased $102.9 million, mainly from unrealized gains on available-for-sale securities. Tangible book value per share rose 17% to $18.21; tangible equity to tangible assets declined to 9.69% from 10.95% as assets expanded.
- Dividends declared were $1.33 per share, including a $0.15 special dividend; no shares were repurchased.
Outlook, risks, and contingencies
Management gave no specific financial guidance. It said it remained optimistic about delivering profitable results while emphasizing dependence on economic conditions, interest rates, loan quality and growth, competition, acquisition integration, and regulatory costs. The 2020 earnings increase reflected acquisitions, growth, PPP income, and unusually strong mortgage-sale gains; the lower margin reflected historically low rates and a shift toward lower-yielding securities.
Principal risks include uncertain pandemic effects on borrowers and local economies; concentration in commercial and real-estate lending; possible additional credit-loss provisions; interest-rate and deposit-flow sensitivity; securities valuation; LIBOR transition; acquisition execution and goodwill impairment; cybersecurity and third-party systems; and extensive banking regulation. Goodwill was $514 million and was not impaired in 2020. Management stated pending litigation was not expected to materially affect financial position, results, or liquidity. Outstanding unused credit lines and letters of credit totaled $3.02 billion; the related off-balance-sheet credit allowance was $16.1 million.
The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The allowance for credit losses and acquisition accounting were identified as critical audit matters, reflecting significant estimation and valuation judgments.
Most important facts for investors to verify
- Whether pandemic-related borrowers, especially commercial real estate, hotels, restaurants, and other monitored sectors, resume regular payments and whether the $158.2 million allowance proves adequate.
- How much reported earnings depended on PPP fee recognition and elevated mortgage-sale gains, and whether those sources persist.
- Whether deposit growth and excess liquidity can be deployed profitably without further pressure on the 4.09% net interest margin and tangible capital ratios.
- Acquisition integration, purchase-accounting assumptions, and the recoverability of $514 million of goodwill.
- Dividend capacity under future earnings, asset-quality, capital, and regulatory conditions; the filing cautions that recent dividend levels are not assured.