Glacier Bancorp, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013; year-over-year comparisons are to 2012. The filing is an annual report, not a standalone fourth-quarter report. Glacier Bancorp is a community bank holding company operating 118 locations across six Rocky Mountain and Pacific Northwest states.
Financial performance and condition
| Metric | 2013 | 2012 |
|---|---|---|
| Total assets | $7.884 billion | $7.747 billion |
| Net interest income | $234.8 million | $218.0 million |
| Non-interest income | $93.0 million | $91.5 million |
| Net income | $95.6 million | $75.5 million |
| Diluted EPS | $1.31 | $1.05 |
| Net interest margin, tax-equivalent | 3.48% | 3.37% |
| Return on average assets | 1.23% | 1.01% |
| Return on average equity | 10.22% | 8.54% |
| Cash and cash equivalents, year-end | $155.7 million | $187.0 million |
- Net interest income plus non-interest income was $327.9 million, up 6%. The efficiency ratio, as defined by the company, rose to 55% from 54%.
- Loans receivable were $4.063 billion, up 20% including acquisitions; management reported organic loan growth of $278 million, or 8%. Commercial loans grew 27% on the reported balance-sheet comparison.
- Deposits totaled $5.580 billion, up 4%. Non-interest-bearing deposits increased 15% to $1.374 billion. FHLB advances declined 16% to $840.2 million; subordinated debentures were $125.6 million.
- Stockholders’ equity was $963.3 million, or 12.22% of assets. Tangible stockholders’ equity was $824.0 million; tangible book value per share was $11.08. The company and Bank exceeded regulatory well-capitalized thresholds.
- Operating cash flow was $334.1 million; investing activities provided $149.2 million, including $26.2 million net cash from acquisitions; financing activities used $514.7 million. Cash declined by $31.4 million during the year.
Changes, acquisitions, and credit quality
- Net income reached a company record, increasing 27%; diluted EPS rose 25%. Management attributed improvement mainly to higher net interest income and lower credit-quality costs.
- Net interest margin improved 11 basis points as funding costs fell, premium amortization on securities decreased, and the earning-asset mix shifted toward loans. Securities declined to 41% of assets from 48%.
- Credit indicators improved: provision for loan losses fell 68% to $6.9 million; net charge-offs declined to $7.4 million from $28.2 million. Non-performing assets fell 24% to $109.4 million, or 1.39% of subsidiary assets, from $143.5 million, or 1.87%.
- The allowance for loan and lease losses was $130.4 million, 3.21% of loans versus 3.85% a year earlier, and 158% of non-performing loans. Early-stage delinquencies (30–89 days past due) increased 19% to $32.1 million. Real-estate-secured lending and commercial real estate remain significant exposures.
- Wheatland and NCBI were acquired in May and July 2013, respectively, for total consideration of $69.9 million. The acquisitions added $630.6 million of assets, $550.2 million of deposits, and $23.6 million of goodwill. Acquisition-related expenses were $1.5 million.
Outlook, risks, and unusual items
- Management provided no numerical earnings or growth guidance. It said future performance depends on local economic conditions, interest rates, competition for deposits and loans, credit quality, and regulatory burden.
- Key risks include real-estate and commercial-loan concentration, borrower repayment and collateral values, possible additional loan-loss provisions, interest-rate changes, deposit competition and funding access, regulatory costs, acquisition integration, and cybersecurity or operational disruptions.
- Net unrealized losses on available-for-sale securities were $35.9 million at year-end; management attributed them primarily to interest-rate and market-spread changes and reported no other-than-temporary impairment. On January 1, 2014, the company reclassified about $484.6 million of municipal securities, including a $4.6 million net unrealized gain, from available-for-sale to held-to-maturity.
- Other comprehensive income included a $38.3 million net-of-tax loss, largely reflecting unrealized securities losses; net income was $95.6 million. The filing reports $130 million of goodwill at year-end and no impairment in 2013.
- Dividends declared increased to $0.60 per share from $0.53. Management cautioned that future dividends depend on earnings, capital, asset quality, economic conditions, and regulatory limits.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. Management and the auditor reported effective internal controls. Ordinary-course legal proceedings were not expected to have a material effect.
Important facts for investors to verify
- Whether organic loan growth and margin gains continue, and how sensitive earnings are to changing interest rates and securities premium amortization.
- Whether credit-quality improvement is durable, particularly in construction, commercial real estate, and other large commercial exposures; monitor early delinquencies, TDRs, non-performing assets, charge-offs, and allowance coverage.
- How the Wheatland and NCBI acquisitions perform relative to the expected benefits, including integration costs, acquired-loan performance, and goodwill.
- Liquidity and funding composition, including wholesale deposits, FHLB advances, and the availability and cost of contingent borrowing sources.
- The effects of securities-market movements and the 2014 available-for-sale-to-held-to-maturity reclassification on capital, liquidity, and reported comprehensive income.