Glacier Bancorp(GBCI) - 2022 Q3 - Quarterly Report

Part I. Financial Information Item 1 – Financial Statements This section presents Glacier Bancorp's unaudited condensed consolidated financial statements, with total assets at $26.73 billion and nine-month net income at $223.53 million Condensed Consolidated Statements of Financial Condition | | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $425.21M | $437.69M | | Total debt securities | $9.51B | $10.37B | | Loans receivable, net | $14.67B | $13.26B | | Goodwill | $985.39M | $985.39M | | Total assets | $26.73B | $25.94B | | Liabilities | | | | Total deposits | $21.88B | $21.34B | | Federal Home Loan Bank advances | $705.00M | $0 | | Total liabilities | $23.96B | $22.76B | | Stockholders' Equity | | | | Total stockholders' equity | $2.77B | $3.18B | | Total liabilities and stockholders' equity | $26.73B | $25.94B | Condensed Consolidated Statements of Operations (Nine Months Ended) | | September 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Net Interest Income | $584.32M | $474.89M | | Provision for credit losses | $13.84M | $(4.88M) | | Total non-interest income | $92.25M | $110.46M | | Total non-interest expense | $389.89M | $300.78M | | Net Income | $223.53M | $234.05M | | Diluted earnings per share | $2.02 | $2.45 | Condensed Consolidated Statements of Cash Flows (Nine Months Ended) | | September 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $350.75M | $417.31M | | Net cash used in investing activities | $(1.40B) | $(3.36B) | | Net cash provided by financing activities | $1.04B | $2.66B | | Net decrease in cash, cash equivalents | $(12.47M) | $(284.25M) | Note 1. Nature of Operations and Summary of Significant Accounting Policies Glacier Bancorp provides banking services across eight western states, with key accounting estimates including allowance for credit losses and debt securities valuation - The company provides retail banking, business banking, real estate, commercial, agriculture, and consumer loans, as well as mortgage origination and servicing across Montana, Idaho, Utah, Washington, Wyoming, Colorado, Arizona, and Nevada[21] - Material estimates susceptible to significant change include the allowance for credit losses (ACL) on loans, valuation of debt securities, valuation of other real estate owned (OREO), and the evaluation of goodwill impairment[24] - The allowance for credit losses (ACL) for loans is based on expected contractual life, using a model that considers historical loss, current conditions, and a reasonable and supportable forecast period of four consecutive quarters[44][46] Provision for Credit Losses (Loans vs. Unfunded Commitments) | | Three Months ended Sep 30, 2022 | Nine Months ended Sep 30, 2022 | | :--- | :--- | :--- | | Provision for credit loss loans | $8.38M | $11.37M | | Provision for credit losses unfunded | $(0.04M) | $2.47M | | Total provision for credit losses | $8.34M | $13.84M | Note 2. Debt Securities Total debt securities were $9.51 billion, with $5.76 billion in AFS securities experiencing $659 million in unrealized losses due to rising interest rates, but no credit losses were recorded Debt Securities Portfolio Composition (Fair Value) | | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Available-for-sale | $5.76B | $9.17B | | U.S. government and federal agency | $443.47M | $1.35B | | Residential mortgage-backed securities | $3.39B | $5.70B | | Commercial mortgage-backed securities | $1.14B | $1.21B | | Held-to-maturity (Amortized Cost) | $3.76B | $1.20B | | Total Debt Securities | $9.51B | $10.37B | - The company determined that the decline in fair value of its AFS debt securities was primarily due to changes in interest rates and market spreads, not credit losses. As of September 30, 2022, management did not intend to sell these securities and did not expect to be required to sell them before recovery[100] - No allowance for credit losses (ACL) was recorded for either AFS or HTM debt securities as of September 30, 2022, as management expects an insignificant amount of credit losses[100][104] Note 3. Loans Receivable, Net Net loans receivable grew to $14.67 billion, with commercial real estate dominating, while the allowance for credit losses increased to $178.19 million and past due loans significantly decreased to $45.9 million Loans Receivable by Segment | | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Residential real estate | $1.37B | $1.05B | | Commercial real estate | $9.58B | $8.63B | | Other commercial | $2.73B | $2.66B | | Home equity | $793.56M | $736.29M | | Other consumer | $376.60M | $348.84M | | Total Loans receivable | $14.85B | $13.43B | Allowance for Credit Losses (ACL) Activity (Nine Months Ended Sep 30, 2022) | | Total | | :--- | :--- | | Balance at beginning of period | $172.67M | | Provision for credit losses | $11.37M | | Charge-offs | $(10.91M) | | Recoveries | $5.06M | | Balance at end of period | $178.19M | - Total past due and non-accrual loans decreased substantially from $118.2 million at the end of 2021 to $45.9 million as of September 30, 2022[111] Note 9. Derivatives and Hedging Activities The company uses derivative instruments, primarily interest rate caps with a fair value of $7.64 million, and residential real estate derivatives to manage interest rate risk on variable-rate debentures and mortgage loans held for sale - The company entered into interest rate caps with notional amounts of $130.5 million to hedge its variable rate subordinated debentures. At September 30, 2022, these derivatives had a fair value of $7.64 million, reported in other assets[141] - To mitigate risk on residential real estate loans held for sale, the company uses interest rate lock commitments and forward commitments to sell to-be-announced (TBA) securities. At September 30, 2022, TBA commitments totaled $37 million[143] Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting Q3 2022 net income of $79.3 million (up 5% YoY) and nine-month net income of $224 million (down 5% YoY) due to various factors Financial Highlights Q3 2022 net income increased 5% to $79.3 million, while nine-month net income decreased 5% to $224 million, influenced by acquisition, loan growth, and reduced PPP income Quarterly Performance Summary | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Net Income | $79.3M | $75.6M | | Diluted EPS | $0.72 | $0.79 | | Return on average assets | 1.18% | 1.43% | | Efficiency ratio | 52.76% | 50.17% | - The 5% YoY increase in Q3 net income was primarily driven by the acquisition of Altabancorp (Alta) and organic loan growth, which offset a $10.1 million decrease in gain on sale of residential loans and a $7.6 million increase in provision for credit loss[178] - The 5% YoY decrease in nine-month net income was driven by a $38.3 million decrease in PPP-related income, a $33.8 million decrease in gain on sale of residential loans, and an $18.7 million increase in provision for credit loss[179] Financial Condition Analysis Total assets reached $26.73 billion, with loan portfolio growth of $457 million, while tangible stockholders' equity decreased by $121.2 million due to unrealized losses on AFS securities Asset Composition Changes | | Sep 30, 2022 | Dec 31, 2021 | $ Change | | :--- | :--- | :--- | :--- | | Total debt securities | $9.51B | $10.37B | $(858.30M) | | Loans receivable, net | $14.67B | $13.26B | $1.41B | | Total assets | $26.73B | $25.94B | $792.31M | - Core deposits increased by $96.0 million (2% annualized) in Q3 2022, with non-interest bearing deposits growing by $233 million (12% annualized)[184] - Tangible book value per common share decreased to $15.73 from $19.33 at year-end 2021, primarily due to the increase in unrealized losses on available-for-sale securities[186] Operating Results Analysis Q3 2022 net interest income increased 26% to $205 million, while non-interest income decreased 13% to $30.4 million and non-interest expense rose 25% to $130 million - Q3 2022 net interest income increased by $42.7 million (26%) YoY, driven by the Alta acquisition and organic loan growth[191] - The tax-equivalent net interest margin for Q3 2022 was 3.34%, an increase of 11 basis points from the prior quarter, primarily due to increased core loan yields[193] - Gain on sale of residential loans for Q3 2022 was $3.8 million, a decrease of $10.1 million (72%) from Q3 2021, reflecting reduced mortgage activity due to rising rates[195] - The provision for credit losses was $13.8 million for the first nine months of 2022, compared to a benefit of $4.9 million in the same period of 2021, primarily due to organic loan growth[211] Credit Quality and Allowance for Credit Losses Credit quality improved, with non-performing assets decreasing to $35.06 million (0.13% of assets) and the Allowance for Credit Losses (ACL) on loans at $178.19 million (1.20% of total loans) Non-Performing Assets Trend | | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | :--- | | Total non-performing assets | $35.06M | $67.69M | $51.18M | | NPA as a % of subsidiary assets | 0.13% | 0.26% | 0.24% | - Early stage delinquencies (accruing loans 30-89 days past due) decreased to $10.9 million at Q3 2022, down from $50.6 million at year-end 2021[229] Allowance for Credit Losses (ACL) on Loans | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | ACL Balance | $178.19M | $172.67M | | ACL as a % of total loans | 1.20% | 1.29% | Liquidity and Capital Resources The company maintains strong liquidity, primarily from deposits, with $2.88 billion available from FHLB, and robust capital ratios exceeding 'well-capitalized' requirements - Primary sources of funds are customer deposits, loan repayments, and borrowings from the FHLB. Total deposits were $21.9 billion as of September 30, 2022[253][254] Available Liquidity Sources (Sep 30, 2022) | | Amount Available | | :--- | :--- | | FHLB advances | $2.88B | | FRB discount window | $1.81B | | Unsecured lines of credit | $635.00M | | Total unencumbered debt securities | $6.76B | Glacier Bank Regulatory Capital Ratios (Sep 30, 2022) | Ratio | Actual | Well Capitalized Requirement | | :--- | :--- | :--- | | Common Equity Tier 1 | 12.46% | 6.50% | | Tier 1 Capital | 12.46% | 8.00% | | Total Capital | 13.43% | 10.00% | | Leverage Ratio | 8.85% | 5.00% | Item 3 – Quantitative and Qualitative Disclosure about Market Risk No material changes in quantitative and qualitative disclosures about market risk were reported from the 2021 Annual Report on Form 10-K - There are no material changes in the quantitative and qualitative disclosures about market risk from those in the Company's 2021 Annual Report on Form 10-K[279] Item 4 – Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during Q3 2022 - The CEO and CFO have concluded that the Company's disclosure controls and procedures are effective as of September 30, 2022[280] - No material changes to the Company's internal control over financial reporting were identified during the third quarter of 2022[281] Part II. Other Information Item 1 – Legal Proceedings The company is involved in various legal actions, but management expects no material adverse effect on financial condition or operations - The Company is involved in various claims and legal actions arising in the ordinary course of business, but management does not expect them to have a material adverse effect on financial condition or operations[283] Item 1A – Risk Factors No material changes from the risk factors previously disclosed in the Company's 2021 Annual Report on Form 10-K were reported - There have been no material changes from the risk factors previously disclosed in the Company's 2021 Annual Report on Form 10-K[284]