Glacier Bancorp(GBCI) - 2021 Q2 - Quarterly Report

Part I. Financial Information Financial Statements The unaudited condensed consolidated financial statements for Glacier Bancorp, Inc. as of June 30, 2021, show significant growth in the company's financial position and net income Consolidated Statement of Financial Condition Highlights (Unaudited) | Financial Metric | June 30, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $20.49 billion | $18.50 billion | +10.7% | | Total Debt Securities | $7.17 billion | $5.53 billion | +29.7% | | Loans Receivable, net | $11.09 billion | $10.96 billion | +1.1% | | Total Deposits | $16.76 billion | $14.80 billion | +13.3% | | Total Liabilities | $18.13 billion | $16.20 billion | +12.0% | | Total Stockholders' Equity | $2.35 billion | $2.31 billion | +2.0% | Consolidated Statement of Operations Highlights (Unaudited) | Financial Metric | Six Months ended June 30, 2021 | Six Months ended June 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $312.3 million | $282.6 million | +10.5% | | Provision for credit losses | $(5.6 million) | $36.1 million | N/A | | Non-Interest Income | $75.6 million | $74.5 million | +1.5% | | Non-Interest Expense | $196.7 million | $190.3 million | +3.4% | | Net Income | $158.4 million | $106.8 million | +48.4% | | Diluted Earnings Per Share | $1.66 | $1.13 | +46.9% | Note 2. Debt Securities As of June 30, 2021, total debt securities increased to $7.17 billion, with $6.15 billion classified as available-for-sale (AFS) and $1.02 billion as held-to-maturity (HTM) Debt Securities Portfolio Composition (June 30, 2021) | Security Type | Available-for-Sale (Fair Value) | Held-to-Maturity (Amortized Cost) | | :--- | :--- | :--- | | U.S. government & federal agency | $34,481 | - | | U.S. government sponsored enterprises | $48,016 | - | | State and local governments | $536.5 million | $1.02 billion | | Corporate bonds | $257.9 million | - | | Residential mortgage-backed securities | $4.14 billion | - | | Commercial mortgage-backed securities | $1.13 billion | - | | Total | $6.15 billion | $1.02 billion | - The company evaluated its AFS debt securities with unrealized losses of $19.5 million and determined the decline was primarily due to interest rate changes, not credit losses As a result, no ACL was recorded for AFS securities[97][100] - Similarly, after evaluating the HTM portfolio, which consists of highly-rated state and local government securities, the company concluded that expected credit losses were insignificant and recorded no ACL[101][103] Note 3. Loans Receivable, Net The net loan portfolio stood at $11.09 billion as of June 30, 2021, with the Allowance for Credit Losses (ACL) decreasing to $151.4 million due to an improved economic forecast Loan Portfolio Composition (June 30, 2021) | Loan Segment | Amount | % of Total | | :--- | :--- | :--- | | Commercial real estate | $6.58 billion | 58.6% | | Other commercial | $2.93 billion | 26.1% | | Residential real estate | $734.8 million | 6.5% | | Home equity | $648.8 million | 5.8% | | Other consumer | $337.7 million | 3.0% | | Total Loans Receivable | $11.24 billion | 100.0% | - The Allowance for Credit Losses (ACL) decreased by $6.8 million during the first six months of 2021, from $158.2 million to $151.4 million This was driven by a net provision benefit of $5.2 million, reflecting improvements in quantitative factors like economic forecasts[110] - Total past due and non-accrual loans were $64.3 million as of June 30, 2021, up from $56.4 million at December 31, 2020 Non-accrual loans increased to $48.1 million from $32.0 million over the same period[113] Note 13. Fair Value of Assets and Liabilities The company details its fair value measurements, categorizing assets and liabilities into a three-level hierarchy, with most recurring measurements classified as Level 2 - Assets measured at fair value on a recurring basis totaled $6.25 billion, with the vast majority consisting of available-for-sale debt securities ($6.15 billion) and loans held for sale ($98.4 million) All of these assets were valued using Level 2 inputs (significant observable inputs)[162] - Assets measured at fair value on a non-recurring basis were $15.4 million, consisting entirely of collateral-dependent impaired loans These were valued using Level 3 inputs (significant unobservable inputs) based on the fair value of the underlying collateral[169] Fair Value of Financial Instruments Not Carried at Fair Value (June 30, 2021) | Instrument | Carrying Amount | Estimated Fair Value | | :--- | :--- | :--- | | Assets | | | | Debt securities, held-to-maturity | $1.02 billion | $1.05 billion | | Loans receivable, net of ACL | $11.09 billion | $11.35 billion | | Liabilities | | | | Term deposits | $939.6 million | $943.0 million | | Subordinated debentures | $132.5 million | $127.8 million | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management reported strong Q2 2021 results driven by increased net interest income and reduced credit loss provisions, with balance sheet expansion and a pending acquisition - Net income for Q2 2021 was $77.6 million, or $0.81 per diluted share, a 22% increase from $63.4 million, or $0.66 per diluted share, in Q2 2020[184] - The company announced a definitive agreement to acquire Altabancorp, a Utah-based community bank with $3.5 billion in assets The acquisition is expected to close in Q4 2021[185] - Total debt securities increased by 92% year-over-year to $7.17 billion as the company deployed excess liquidity from strong core deposit growth and PPP loan forgiveness[188] - Core deposits grew by $3.42 billion, or 26%, from the prior year's second quarter, reaching $16.74 billion This growth was attributed to PPP loan proceeds, federal stimulus, and increased customer savings[191] Financial Condition Analysis As of June 30, 2021, total assets reached $20.49 billion, primarily funded by a $1.96 billion increase in deposits, with significant expansion in the debt securities portfolio Change in Key Balance Sheet Items (Dec 31, 2020 to June 30, 2021) | Item | Change | | :--- | :--- | | Total Debt Securities | +$1.64 billion | | Loans Receivable, net | +$122.1 million | | Total Deposits | +$1.96 billion | | Total Stockholders' Equity | +$46.9 million | - The loan portfolio, excluding PPP loans, increased by $249 million (10% annualized) during Q2 2021[189] - Tangible book value per common share increased by 10% year-over-year to $18.74 at June 30, 2021, driven by strong earnings retention[194] Operating Results Analysis For the six months ended June 30, 2021, net interest income grew 11% to $312.3 million, driven by PPP loan income and reduced interest expense, despite net interest margin compression Operating Results Comparison (Six Months Ended June 30) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $312.3 million | $282.6 million | +11% | | Provision for Credit Losses | $(5.6 million) | $36.1 million | N/A | | Non-Interest Income | $75.6 million | $74.5 million | +2% | | Non-Interest Expense | $196.7 million | $190.3 million | +3% | | Net Income | $158.4 million | $106.8 million | +48% | - The tax-equivalent net interest margin for the first half of 2021 was 3.58%, a 65 basis point decrease from 4.23% in the same period of 2020, primarily due to lower earning asset yields[212] - The efficiency ratio for the first six months of 2021 improved to 48.31% from 50.86% in the prior year period[216] Credit Quality and Allowance for Credit Losses Credit quality remained strong with low non-performing assets and a net provision for credit loss benefit reflecting an improved economic outlook - Non-performing assets were $53.0 million, or 0.26% of subsidiary assets, at June 30, 2021, compared to $46.0 million, or 0.27%, a year prior[234] - The company recorded a provision for credit loss benefit on loans of $5.7 million in Q2 2021, a significant reversal from the $13.6 million provision expense in Q2 2020, which was driven by negative economic forecasts related to COVID-19[249] - The ACL as a percentage of total loans was 1.35% at quarter-end Excluding PPP loans, the ratio was 1.43%, down from 1.62% in the prior year second quarter[250] PPP Loans The Paycheck Protection Program (PPP) continued to significantly impact the company's results, contributing $10.3 million in interest income for Q2 2021 PPP Loan Balances and Fees (as of June 30, 2021) | Item | Amount | | :--- | :--- | | PPP Round 1 Loans Outstanding | $176.5 million | | PPP Round 2 Loans Outstanding | $518.1 million | | Total PPP Loans | $694.6 million | | Total Net Remaining Fees | $24.0 million | - In Q2 2021, PPP loans generated $10.3 million in interest income This included $6.0 million from the acceleration of net deferred fees due to SBA loan forgiveness[244] Liquidity and Capital Resources The company maintained a strong liquidity position with significant borrowing capacity and unencumbered debt securities, while capital ratios remained well above regulatory minimums Available Liquidity Sources (June 30, 2021) | Source | Amount Available | | :--- | :--- | | FHLB Advances | $2.59 billion | | FRB Discount Window | $1.33 billion | | Unsecured Lines of Credit | $635.0 million | | Unencumbered Debt Securities | $4.70 billion | Glacier Bank Regulatory Capital Ratios (June 30, 2021) | Ratio | Bank Ratio | Well Capitalized Requirement | | :--- | :--- | :--- | | Total Capital to Risk-Weighted Assets | 13.71% | 10.00% | | Tier 1 Capital to Risk-Weighted Assets | 12.67% | 8.00% | | Common Equity Tier 1 to Risk-Weighted Assets | 12.67% | 6.50% | | Tier 1 Capital to Average Assets (Leverage) | 9.00% | 5.00% | - The company has elected to use the five-year transition period allowed by regulators to phase in the initial adoption impact of the CECL accounting standard on its regulatory capital[280] Quantitative and Qualitative Disclosure about Market Risk The company reports no material changes in its quantitative and qualitative disclosures about market risk from its 2020 Annual Report on Form 10-K - The company's assessment of market risk as of June 30, 2021, indicates no material changes from the disclosures in the 2020 Annual Report on Form 10-K[292] Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the second quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[293] - There were no material changes to the company's internal control over financial reporting during the second quarter of 2021[294] Part II. Other Information Legal Proceedings The company is involved in various legal actions in the ordinary course of business, but their disposition is not expected to materially affect its financial condition - The company is involved in various claims and legal actions arising in the ordinary course of business, which are not expected to have a material adverse effect on its financial condition[296] Risk Factors The company states that there have been no material changes from the risk factors previously disclosed in its 2020 Annual Report on Form 10-K - There have been no material changes from the risk factors disclosed in the company's 2020 Annual Report on Form 10-K[297] Exhibits This section lists the exhibits filed with the Form 10-Q, including the merger agreement with Altabancorp and required certifications - Key exhibits filed include the Agreement and Plan of Merger with Altabancorp, Restated Articles of Incorporation, Amended Bylaws, and CEO/CFO certifications[305]