Glacier Bancorp, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Glacier Bancorp provides banking services through Glacier Bank across eight western states; it reported 222 locations. Unless noted otherwise, dollar amounts below are in millions.
Financial performance
| Metric | Q2 2023 | Comparable period / change |
|---|---|---|
| Net interest income | $172.0 | Down $21.5, or 11%, from Q2 2022 |
| Net interest margin, tax-equivalent | 2.74% | 3.23% in Q2 2022; 3.08% in Q1 2023 |
| Net income | $55.0 | Down 28% from $76.4 in Q2 2022 |
| Diluted EPS | $0.50 | Down from $0.69 in Q2 2022 |
| Non-interest income / expense | $29.1 / $130.6 | Expense up $1.1 from Q2 2022 |
| Provision for credit losses | $2.8 | Compared with a $1.5 benefit in Q2 2022 |
| Dividend declared per share | $0.33 | Unchanged from Q2 2022 |
For the first half of 2023, net interest income was $358.2 million, down 5%; net income was $116.2 million, down 19%; and diluted EPS was $1.05 versus $1.30. Tax-equivalent net interest margin was 2.91%, compared with 3.21% in the first half of 2022. First-half total income was $415.1 million, down 6%.
Interest income benefited from loan growth and higher loan yields, but sharply higher deposit and borrowing costs more than offset the increase. Q2 total funding cost, including non-interest-bearing deposits, rose to 1.26% from 0.79% in Q1 and 0.11% a year earlier. Management attributed lower earnings and margin primarily to continued funding-cost increases. The efficiency ratio rose to 62.73% from 55.74% a year earlier.
Financial condition, liquidity and capital
- Total assets were $27.53 billion at June 30, up $892 million from year-end 2022. Loans were $15.95 billion, up $708 million, or 5%, from year-end; commercial real estate represented 65% of loans.
- Total deposits were $20.01 billion, down $598 million from year-end. Non-interest-bearing deposits were $6.46 billion, or 32% of deposits, versus 37% at year-end. Certificate accounts increased $1.13 billion from year-end.
- Cash and cash equivalents were $1.05 billion, up $649 million from year-end. The company reported $15.1 billion of available liquidity, including cash, borrowing capacity, unpledged securities, brokered deposits and other sources.
- At quarter-end, FHLB advances were zero after repayment of the higher-rate advances; FRB Bank Term Funding Program borrowings were $2.74 billion, repurchase agreements were $1.36 billion, and subordinated debentures were $132.9 million.
- Stockholders’ equity was $2.93 billion; tangible book value was $17.18 per share. Glacier Bank’s regulatory capital ratios were 13.67% total capital, 12.64% Tier 1 and CET1, and 8.95% leverage. Management said the Company and Bank met applicable capital requirements.
First-half cash flow was $219.5 million provided by operations, $282.8 million used in investing, and $712.6 million provided by financing, producing a $649.3 million increase in cash and cash equivalents. Financing included $2.74 billion of BTFP proceeds, offset in part by $1.80 billion of FHLB advance repayments and a $598 million net deposit decline.
Credit, securities and material changes
- The allowance for credit losses on loans was $189.4 million, or 1.19% of loans, versus $182.3 million and 1.20% at year-end. First-half loan provision was $11.5 million; a $3.3 million benefit on unfunded commitments reduced total provision to $8.2 million.
- Non-performing assets were $32.0 million, or 0.12% of subsidiary assets, versus $43.97 million, or 0.16%, a year earlier. Loans 30–89 days past due were $24.9 million, up from $16.6 million a year earlier. First-half net charge-offs were $4.4 million, compared with $2.7 million.
- Debt securities totaled $8.61 billion, down $414 million from year-end. Available-for-sale securities had $575.7 million of gross unrealized losses; management attributed the declines principally to interest rates and market spreads, and recorded no securities credit-loss allowance. Held-to-maturity securities had a $3.21 billion fair value against $3.61 billion carrying value; management disclosed about $295 million of net unrealized loss not included in AOCI.
- Accumulated other comprehensive loss was $430.8 million at quarter-end, improving $38.0 million from year-end, mainly reflecting the change in available-for-sale securities marks. These valuation changes remain relevant to equity and liquidity considerations.
- Q2 net interest income fell despite higher loan yields: the loan yield was 5.12%, up from 4.52% a year earlier, while margin compression reflected faster increases in funding costs. FDIC assessments and insurance expense rose 66% in the first half, primarily following the industry-wide premium increase. Acquisition-related expense declined to $0.6 million from $8.3 million in the first half of 2022.
Outlook, risks and contingencies
The filing provides no specific earnings, revenue or margin guidance. Management said operating results for the first half are not necessarily indicative of full-year results. It identified credit quality, interest-rate and funding-cost changes, deposit behavior, economic conditions, regulatory changes, competition, cybersecurity, natural disasters and acquisition execution or goodwill impairment among material risks. Management’s interest-rate model estimated a 5.99% decrease in one-year net interest income under an instantaneous +100 basis-point shock and a 22.94% decrease under +400 basis points; the filing cautions that these scenarios are not forecasts and depend on assumptions.
The Company reported $114.97 million of future unfunded contingent equity commitments for low-income housing tax-credit investments. It stated that ordinary-course legal matters were not expected to have a material adverse effect and reported no material changes to previously disclosed risk factors. Disclosure controls were judged effective, with no material second-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Whether deposit outflows and the shift from non-interest-bearing balances to certificates continue, and how they affect funding costs and margins.
- The sustainability of liquidity and reliance on BTFP, repurchase agreements and other wholesale funding, including collateral availability and borrowing capacity.
- Commercial real estate exposure, delinquency trends, charge-offs and whether the allowance remains adequate as economic conditions change.
- How securities valuation losses, especially the HTM fair-value shortfall, affect capital, liquidity flexibility and potential asset sales.
- Whether reported capital ratios, dividend payments and the $15.1 billion liquidity estimate remain consistent with future regulatory, credit and funding needs.