Glacier Bancorp(GBCI) - 2021 Q1 - Quarterly Report

Part I. Financial Information This section presents Glacier Bancorp, Inc.'s unaudited condensed consolidated financial statements and notes for the first quarter of 2021 Item 1 – Financial Statements This section presents Glacier Bancorp, Inc.'s unaudited condensed consolidated financial statements for Q1 2021, with notes on accounting policies Unaudited Condensed Consolidated Statements of Financial Condition This statement presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Consolidated Statements of Financial Condition (March 31, 2021 vs. December 31, 2020) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $878,450 | $633,142 | | Total debt securities | $6,442,066 | $5,527,650 | | Loans receivable, net | $11,113,483 | $10,964,453 | | Total assets | $19,770,552 | $18,504,206 | | Non-interest bearing deposits | $6,040,440 | $5,454,539 | | Interest bearing deposits | $10,063,884 | $9,342,990 | | Total liabilities | $17,475,167 | $16,197,165 | | Total stockholders' equity | $2,295,385 | $2,307,041 | Unaudited Condensed Consolidated Statements of Operations This statement outlines the company's revenues, expenses, and net income over specific periods, reflecting operational performance Consolidated Statements of Operations (Three Months Ended March 31, 2021 vs. 2020) | Metric | Three Months ended March 31, 2021 (in thousands) | Three Months ended March 31, 2020 (in thousands) | YoY Change (%) | | :----------------------- | :------------------------------------- | :------------------------------------- | :------------- | | Net Income | $80,802 | $43,339 | 86.4% | | Basic earnings per share | $0.85 | $0.46 | 84.8% | | Diluted earnings per share | $0.85 | $0.46 | 84.8% | | Total interest income | $161,552 | $142,865 | 13.1% | | Total interest expense | $4,740 | $8,496 | -44.2% | | Net Interest Income | $156,812 | $134,369 | 16.7% | | Credit loss expense | $48 | $19,185 | -99.7% | | Total non-interest income | $40,121 | $33,272 | 20.6% | | Total non-interest expense | $96,585 | $95,487 | 1.1% | Unaudited Condensed Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income items, providing a complete view of changes in equity from non-owner sources Consolidated Statements of Comprehensive Income (Three Months Ended March 31, 2021 vs. 2020) | Metric | Three Months ended March 31, 2021 (in thousands) | Three Months ended March 31, 2020 (in thousands) | YoY Change (%) | | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------- | | Net Income | $80,802 | $43,339 | 86.4% | | Net unrealized (losses) gains on available-for-sale securities (net of tax) | $(63,613) | $59,498 | -206.9% | | Total Comprehensive Income | $17,632 | $102,837 | -82.8% | Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity This statement details the changes in each component of stockholders' equity over the reporting period, including net income and dividends Changes in Stockholders' Equity (Three Months Ended March 31, 2021) | Metric | Balance at January 1, 2021 (in thousands) | Net Income (in thousands) | Other Comprehensive Loss (in thousands) | Cash Dividends Declared (in thousands) | Stock-based Compensation & Taxes (in thousands) | Balance at March 31, 2021 (in thousands) | | :------------------------------------- | :------------------------------------- | :-------------------------- | :------------------------------------ | :------------------------------------- | :--------------------------------------------- | :------------------------------------- | | Total Stockholders' Equity | $2,307,041 | $80,802 | $(63,170) | $(29,674) | $386 | $2,295,385 | Unaudited Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities, showing liquidity changes Consolidated Statements of Cash Flows (Three Months Ended March 31, 2021 vs. 2020) | Activity | Three Months ended March 31, 2021 (in thousands) | Three Months ended March 31, 2020 (in thousands) | | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net cash provided by operating activities | $147,745 | $25,762 | | Net cash used in investing activities | $(1,178,720) | $(720,130) | | Net cash provided by financing activities | $1,276,283 | $636,848 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $245,308 | $(57,520) | | Cash, cash equivalents and restricted cash at end of period | $878,450 | $273,441 | - Net increase in deposits from financing activities was $1.31 billion for the three months ended March 31, 2021, compared to $178.13 million for the same period in 2020[16] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the financial statements, clarifying accounting policies and specific line items Note 1. Nature of Operations and Summary of Significant Accounting Policies This note describes the company's business activities and outlines the key accounting principles applied in preparing the financial statements - Glacier Bancorp, Inc. provides a full range of banking services, including retail, business, real estate, commercial, agriculture, and consumer loans, and mortgage origination services across eight states[18] - The Company's consolidated financial statements include the parent holding company and its wholly-owned bank subsidiary, Glacier Bank, which is considered the sole operating segment[22] - On January 1, 2020, the Company adopted FASB ASU 2016-13 (CECL), significantly changing accounting policies for the allowance for credit losses on debt securities and loans[26][37] - Debt securities are classified as held-to-maturity (amortized cost) or available-for-sale (fair value with unrealized gains/losses in OCI); the Company does not hold trading securities[27] - The Company's loan segments are residential real estate, commercial real estate, other commercial, home equity, and other consumer loans, each with specific credit risk characteristics[38][45] - The CARES Act and related regulatory guidance allowed certain COVID-19 related loan modifications not to be designated as Troubled Debt Restructurings (TDRs)[60] - Revenue from contracts with customers, primarily service charges and debit card fees, totaled $13.7 million for the three months ended March 31, 2021[86] Note 2. Debt Securities This note details the company's debt securities portfolio, including classifications, fair values, and unrealized gains or losses Debt Securities Portfolio (March 31, 2021) | Type | Amortized Cost (in thousands) | Fair Value (in thousands) | Gross Unrealized Gains (in thousands) | Gross Unrealized Losses (in thousands) | | :------------------------------------- | :----------------------------- | :-------------------------- | :------------------------------------ | :------------------------------------ | | Available-for-sale: | | | | | | U.S. government and federal agency | $36,122 | $35,863 | $231 | $(490) | | State and local governments | $914,572 | $978,652 | $64,593 | $(513) | | Residential mortgage-backed securities | $3,369,683 | $3,363,627 | $16,420 | $(22,476) | | Commercial mortgage-backed securities | $1,145,668 | $1,181,139 | $39,958 | $(4,487) | | Total available-for-sale | $5,750,190 | $5,853,315 | $131,176 | $(28,051) | | Held-to-maturity: | | | | | | State and local governments | $588,751 | $598,960 | $10,937 | $(728) | | Total held-to-maturity | $588,751 | $598,960 | $10,937 | $(728) | | Total debt securities | $6,338,941 | $6,452,275 | $142,113 | $(28,779) | - The Company's available-for-sale debt securities in an unrealized loss position totaled $2.46 billion with unrealized losses of $(28.05) million at March 31, 2021, primarily due to changes in interest rates and market spreads[96][99] - All held-to-maturity debt securities were investment grade, with no Allowance for Credit Losses (ACL) recorded for debt securities at March 31, 2021, or December 31, 2020[100][102] Note 3. Loans Receivable, Net This note provides a breakdown of the loan portfolio by segment, along with details on the allowance for credit losses and loan quality Loans Receivable by Portfolio Segment (March 31, 2021) | Loan Segment | Amount (in thousands) | Percentage of Total | | :----------------------- | :-------------------- | :------------------ | | Commercial real estate | $6,474,701 | 57.4% | | Other commercial | $3,100,584 | 27.5% | | Residential real estate | $745,097 | 6.6% | | Home equity | $625,369 | 5.5% | | Other consumer | $324,178 | 2.9% | | Total Loans Receivable | $11,269,929 | 100% | | Allowance for credit losses | $(156,446) | | | Loans receivable, net | $11,113,483 | | Allowance for Credit Losses (ACL) Activity (Three Months Ended March 31, 2021) | Metric | Total (in thousands) | Residential Real Estate (in thousands) | Commercial Real Estate (in thousands) | Other Commercial (in thousands) | Home Equity (in thousands) | Other Consumer (in thousands) | | :----------------------- | :-------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :-------------------- | | Balance at beginning of period | $158,243 | $9,604 | $86,999 | $49,133 | $8,182 | $4,325 | | Provision for credit losses | $489 | $(582) | $7,463 | $(7,265) | $(89) | $962 | | Charge-offs | $(4,246) | $(38) | $0 | $(2,762) | $(45) | $(1,401) | | Recoveries | $1,960 | $34 | $789 | $279 | $20 | $838 | | Balance at end of period | $156,446 | $9,018 | $95,251 | $39,385 | $8,068 | $4,724 | - The ACL decreased primarily due to an improvement in quantitative factors, including economic forecasts, during the three months ended March 31, 2021[109] - Total past due and non-accrual loans were $78.24 million at March 31, 2021, including $41.74 million in accruing loans 30-59 days past due[111] - Collateral-dependent loans totaled $86.02 million at March 31, 2021, with no significant changes to collateral during the period[114] - Seven Troubled Debt Restructurings (TDRs) occurred during Q1 2021, with a post-modification recorded balance of $1.75 million; no TDRs subsequently defaulted[115] Note 4. Leases This note outlines the company's lease arrangements, including right-of-use assets, lease liabilities, and associated expenses Lease Balances (March 31, 2021) | Metric | Finance Leases (in thousands) | Operating Leases (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | | Net ROU assets | $5,665 | $46,298 | | Lease liabilities | $5,864 | $49,250 | | Weighted-average remaining lease term | 24 years | 17 years | | Weighted-average discount rate | 2.6% | 3.4% | - Total lease expense for the three months ended March 31, 2021, was $1.71 million[127] Note 5. Goodwill This note reports the carrying value of goodwill and confirms the absence of impairment based on recent assessments - The net carrying value of goodwill was $514.01 million at March 31, 2021, with no impairment identified during the annual test in the third quarter of 2020[128] Note 6. Loan Servicing This note provides information on mortgage servicing rights, including their carrying value and the principal balances of loans serviced for others Mortgage Servicing Rights (MSRs) (March 31, 2021 vs. December 31, 2020) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | | Carrying value at end of period | $9,936 | $8,976 | | Principal balances of loans serviced for others | $1,377,187 | $1,269,080 | | Fair value of servicing rights | $14,263 | $12,087 | Note 7. Variable Interest Entities This note details the company's involvement with and consolidation of variable interest entities, including associated assets and liabilities - The Company consolidates certain Certified Development Entities (CDEs) and tax credit funds (LIHTC) where it is the primary beneficiary, with total consolidated VIE assets of $149.53 million and liabilities of $27.77 million at March 31, 2021[133][134][136] - Equity investments in unconsolidated LIHTC partnerships had carrying values of $45.30 million at March 31, 2021, with future unfunded contingent equity commitments totaling $45.49 million[137] - Amortization expense from LIHTC investments was $2.33 million, and tax credits and other tax benefits recognized were $3.10 million for the three months ended March 31, 2021[139] Note 8. Securities Sold Under Agreements to Repurchase This note describes the company's repurchase agreements, including the amounts outstanding and the collateral securing these obligations - Securities sold under agreements to repurchase totaled $996.88 million at March 31, 2021, secured by debt securities with carrying values of $1.15 billion[140] Note 9. Derivatives and Hedging Activities This note explains the company's use of derivative instruments for hedging interest rate risk and their fair value - The Company uses interest rate caps as cash flow hedges for variable rate subordinated debentures, with notional amounts totaling $130.5 million and a fair value of $752 thousand at March 31, 2021[143] - Residential real estate derivatives include interest rate lock commitments of $242.41 million and TBA commitments of $206 million at March 31, 2021, used to manage interest rate risk[145] Note 10. Other Expenses This note itemizes various non-interest expenses, providing a comparative breakdown for the reporting periods Other Expenses (Three Months Ended March 31, 2021 vs. 2020) | Metric | Three Months ended March 31, 2021 (in thousands) | Three Months ended March 31, 2020 (in thousands) | | :----------------------- | :------------------------------------- | :------------------------------------- | | Consulting and outside services | $2,171 | $2,235 | | Loan expenses | $1,624 | $864 | | Mergers and acquisition expenses | $104 | $2,791 | | Total other expenses | $12,646 | $15,104 | Note 11. Accumulated Other Comprehensive Income (Loss) This note details changes in accumulated other comprehensive income, including unrealized gains and losses on debt securities and derivatives Accumulated Other Comprehensive Income (Loss) Activity (Three Months Ended March 31, 2021) | Metric | Balance at January 1, 2021 (in thousands) | Net Current Period Other Comprehensive Income (Loss) (in thousands) | Balance at March 31, 2021 (in thousands) | | :------------------------------------- | :------------------------------------- | :---------------------------------------------------- | :------------------------------------- | | Gains (Losses) on Available-For-Sale Debt Securities | $143,443 | $(63,613) | $79,830 | | (Losses) Gains on Derivatives Used for Cash Flow Hedges | $(353) | $443 | $90 | | Total | $143,090 | $(63,170) | $79,920 | Note 12. Earnings Per Share This note presents the calculation of basic and diluted earnings per share, along with net income available to common stockholders Earnings Per Share (Three Months Ended March 31, 2021 vs. 2020) | Metric | Three Months ended March 31, 2021 | Three Months ended March 31, 2020 | | :------------------------------------- | :---------------------------------- | :---------------------------------- | | Net income available to common stockholders (in thousands) | $80,802 | $43,339 | | Basic earnings per share | $0.85 | $0.46 | | Diluted earnings per share | $0.85 | $0.46 | Note 13. Fair Value of Assets and Liabilities This note describes fair value measurement methodologies for assets and liabilities, distinguishing recurring and non-recurring measurements - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[153] - Total assets measured at fair value on a recurring basis were $5.98 billion at March 31, 2021, all classified as Level 2, including available-for-sale debt securities and derivatives[161] - Total assets measured at fair value on a non-recurring basis were $19.73 million at March 31, 2021, all classified as Level 3, primarily consisting of collateral-dependent impaired loans[166] - For financial instruments not carried at fair value, loans receivable, net of ACL, had a carrying amount of $11.11 billion and an estimated fair value of $11.39 billion (Level 3) at March 31, 2021[175] Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Glacier Bancorp, Inc.'s operating results and financial condition, analyzing assets, liabilities, equity, and performance FORWARD-LOOKING STATEMENTS This section highlights the inherent uncertainties and risks associated with forward-looking statements, advising caution to readers - The Form 10-Q contains forward-looking statements subject to significant business, economic, and competitive uncertainties, including risks related to lending, policy changes, regulatory changes, acquisitions, market volatility, and operational risks[178] - The Company does not undertake any obligation to update or revise forward-looking statements, except as required by law[179] MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a detailed analysis of the company's financial performance and condition, covering key operational and balance sheet trends Financial Highlights This section summarizes key financial performance indicators and operational metrics for the reporting period Operating Results (Three Months Ended March 31, 2021 vs. 2020) | Metric | Mar 31, 2021 | Mar 31, 2020 | Change | YoY Change (%) | | :----------------------- | :----------- | :----------- | :----- | :------------- | | Net income (in thousands) | $80,802 | $43,339 | $37,463 | 86.4% | | Diluted earnings per share | $0.85 | $0.46 | $0.39 | 84.8% | | Return on average assets (annualized) | 1.73% | 1.25% | 48 bps | | Return on average equity (annualized) | 14.12% | 8.52% | 560 bps | | Efficiency ratio | 46.75% | 52.55% | -580 bps | | Loan to deposit ratio | 70.72% | 88.10% | -1738 bps | - The Company reported 2,994 full-time equivalent employees, 193 locations, and 250 ATMs as of March 31, 2021[181] Financial Condition Analysis This section analyzes the company's balance sheet components, including assets, liabilities, and stockholders' equity, and their changes Assets This section reviews changes in the company's asset composition, including cash, debt securities, and loans receivable Total Assets (March 31, 2021 vs. December 31, 2020 vs. March 31, 2020) | Metric | Mar 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | Change from Dec 31, 2020 (in thousands) | Change from Mar 31, 2020 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :------------------------------------- | :------------------------------------- | | Cash and cash equivalents | $878,450 | $633,142 | $273,441 | $245,308 | $605,009 | | Total debt securities | $6,442,066 | $5,527,650 | $3,633,704 | $914,416 | $2,808,362 | | Loans receivable, net | $11,113,483 | $10,964,453 | $9,938,016 | $149,030 | $1,175,467 | | Total assets | $19,770,552 | $18,504,206 | $15,158,384 | $1,266,346 | $4,612,168 | - Total debt securities increased by $914 million (17%) during Q1 2021 and $2.81 billion (77%) from Q1 2020, representing 33% of total assets at March 31, 2021[184] - The loan portfolio increased by $147 million (5% annualized) in Q1 2021, and $1.18 billion (12%) from Q1 2020; excluding PPP loans, the portfolio increased by $80.6 million (3% annualized) in Q1 2021, primarily in commercial real estate[185][186] Liabilities This section examines the company's liabilities, focusing on deposits, repurchase agreements, and other borrowings Total Liabilities (March 31, 2021 vs. December 31, 2020 vs. March 31, 2020) | Metric | Mar 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | Change from Dec 31, 2020 (in thousands) | Change from Mar 31, 2020 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :------------------------------------- | :------------------------------------- | | Deposits, total | $16,104,324 | $14,797,529 | $11,557,837 | $1,306,795 | $4,546,487 | | Securities sold under agreements to repurchase | $996,878 | $1,004,583 | $580,335 | $(7,705) | $416,543 | | Federal Home Loan Bank advances | $0 | $0 | $513,055 | $0 | $(513,055) | | Total liabilities | $17,475,167 | $16,197,165 | $13,021,740 | $1,278,002 | $4,453,427 | - Core deposits increased by $1.31 billion (35% annualized) in Q1 2021 and $4.57 billion (40%) from Q1 2020; non-interest bearing deposits increased by $586 million (11%) in Q1 2021 and $2.17 billion (56%) from Q1 2020, comprising 38% of total core deposits[188] - The Company paid off $7.5 million of subordinated debt in Q1 2021, reflecting reduced reliance on borrowings due to significant core deposit growth[189] Stockholders' Equity This section discusses changes in stockholders' equity, including tangible equity and book value per share Stockholders' Equity Balances (March 31, 2021 vs. December 31, 2020 vs. March 31, 2020) | Metric | Mar 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | Change from Dec 31, 2020 (in thousands) | Change from Mar 31, 2020 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :------------------------------------- | :------------------------------------- | | Total stockholders' equity | $2,295,385 | $2,307,041 | $2,136,644 | $(11,656) | $158,741 | | Tangible stockholders' equity | $1,728,351 | $1,737,519 | $1,559,943 | $(9,168) | $168,408 | | Book value per common share | $24.03 | $24.18 | $22.39 | $(0.15) | $1.64 | | Tangible book value per common share | $18.10 | $18.21 | $16.35 | $(0.11) | $1.75 | - Tangible stockholders' equity decreased by $9.2 million QoQ, primarily due to a decrease in unrealized gains on available-for-sale debt securities driven by increased interest rates, but increased by $168 million YoY due to earnings retention[190] - Stockholders' equity to total assets was 11.61% and tangible stockholders' equity to total tangible assets was 9.00% at March 31, 2021, both decreasing from prior periods due to asset growth[190] Cash Dividend This section reports on the company's declared cash dividend, highlighting its consistency - The Board of Directors declared a quarterly cash dividend of $0.31 per share on March 31, 2021, marking the 144th consecutive dividend[191] Operating Results for Three Months Ended March 31, 2021 Compared to December 31, 2020, and March 31, 2020 This section provides a comparative analysis of the company's operating performance across different periods, focusing on income and expense trends Income Summary This section summarizes total net interest income and non-interest income, along with the net interest margin Total Income (Three Months Ended March 31, 2021 vs. December 31, 2020 vs. March 31, 2020) | Metric | Mar 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | QoQ Change (in thousands) | YoY Change (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :-------------------------- | :-------------------------- | | Total net interest income | $156,812 | $165,758 | $134,369 | $(8,946) | $22,443 | | Total non-interest income | $40,121 | $44,704 | $33,272 | $(4,583) | $6,849 | | Total income | $196,933 | $210,462 | $167,641 | $(13,529) | $29,292 | | Net interest margin (tax-equivalent) | 3.74% | 4.03% | 4.36% | | | Net Interest Income This section analyzes the components of net interest income, including interest income from loans and securities, and interest expense on deposits - Net interest income for Q1 2021 was $156.8 million, a decrease of $8.9 million (5%) QoQ but an increase of $22.4 million (17%) YoY[195] - Interest income from PPP loans was $13.5 million in Q1 2021, down from $21.5 million in Q4 2020, with overall interest income increasing YoY due to PPP loans and debt securities[195] - Interest expense decreased by $810 thousand (15%) QoQ and $3.8 million (44%) YoY, primarily due to lower deposit and borrowing interest rates, with the total cost of funding declining by 2 bps QoQ and 17 bps YoY to 12 bps[196] - The core net interest margin (excluding specific adjustments) decreased by 20 bps QoQ and 74 bps YoY, driven by lower earning asset yields due to increased lower-yielding debt securities and decreased yields on loans and debt securities[197] Non-interest Income This section details the various sources of non-interest income, such as service charges, loan sale gains, and other fees - Non-interest income totaled $40.1 million in Q1 2021, a decrease of $4.6 million (10%) QoQ but an increase of $6.8 million (21%) YoY[198] - Service charges and other fees decreased by $921 thousand QoQ and $1.2 million YoY due to decreased overdraft activity[198] - Gain on sale of loans was $21.6 million in Q1 2021, decreasing $4.6 million (18%) QoQ but increasing $9.8 million (82%) YoY due to increased purchase and refinance activity[198] - Other income decreased by $2.6 million (50%) YoY due to a $2.4 million gain on the sale of a former branch building in the prior year[198] Non-interest Expense This section reviews the company's non-interest expenses, including compensation, occupancy, and other operating costs - Total non-interest expense was $96.6 million in Q1 2021, a decrease of $14.6 million (13%) QoQ but an increase of $1.1 million (1%) YoY[199] - Compensation and employee benefits decreased by $8.1 million (11%) QoQ, primarily due to a $5.2 million increase in deferred compensation on originating Round 2 PPP loans[199] - Other expenses decreased by $6.1 million (32%) QoQ and $2.5 million (16%) YoY, with acquisition-related expenses dropping from $2.8 million in Q1 2020 to $104 thousand in Q1 2021[199] Efficiency Ratio This section discusses the company's efficiency ratio, indicating operational effectiveness in generating income relative to expenses - The efficiency ratio improved to 46.75% in Q1 2021 from 50.34% in Q4 2020[200] - Excluding PPP loans, the efficiency ratio was 52.89% in Q1 2021, a 307 bps decrease from Q4 2020 (55.96%) and a 176 bps decrease from Q1 2020 (54.65%), driven by decreased non-interest expense and increased income[200] Provision for Credit Losses This section details the provision for credit losses on loans, net charge-offs, and the adequacy of the allowance for credit losses - The provision for credit losses on loans was $489 thousand in Q1 2021, an increase of $2.0 million from the prior quarter's benefit but a $22.3 million decrease from Q1 2020[202] - Net charge-offs for Q1 2021 were $2.3 million, compared to $4.8 million in Q4 2020 and $813 thousand in Q1 2020[202] - The Allowance for Credit Losses (ACL) as a percentage of total loans was 1.39% in Q1 2021 (1.51% excluding PPP loans), considered adequate by management[202] ADDITIONAL MANAGEMENT'S DISCUSSION AND ANALYSIS This section provides further in-depth analysis on specific financial areas, including investment, lending, funding, liquidity, and capital Investment Activity This section reviews the company's investment portfolio, including debt and equity securities, and their performance Debt Securities This section details the composition, classification, and credit quality of the company's debt securities portfolio Debt Securities Portfolio (March 31, 2021) | Type | Carrying Amount (in thousands) | Percent of Total | | :------------------------------------- | :----------------------------- | :------------------ | | Available-for-sale | $5,853,315 | 91% | | Held-to-maturity | $588,751 | 9% | | Total debt securities | $6,442,066 | 100% | - The Company transferred $404 million of available-for-sale securities into the held-to-maturity portfolio in Q1 2021, with the portfolio primarily comprised of state and local government securities and mortgage-backed securities[206] - All debt securities were determined to be investment grade, and no ACL was recognized for debt securities at March 31, 2021[207][213] - Weighted-average yields for available-for-sale and held-to-maturity debt securities were 1.82% and 2.60%, respectively, at March 31, 2021[213] Equity securities This section describes the company's equity securities, primarily FHLB stock, and their impairment status - Non-marketable equity securities primarily consist of FHLB stock carried at cost, with no impairment identified for any equity securities as of March 31, 2021[215][216] Lending Activity This section provides an overview of the company's loan portfolio, including segment breakdown, non-performing assets, and credit quality Loan Portfolio Summary This section presents a summary of the loan portfolio, categorized by segment and their respective proportions Loan Portfolio by Segment (March 31, 2021) | Loan Segment | Amount (in thousands) | Percent of Total | | :----------------------- | :-------------------- | :------------------ | | Commercial real estate | $6,474,701 | 58% | | Other commercial | $3,100,584 | 28% | | Residential real estate | $745,097 | 7% | | Home equity | $625,369 | 6% | | Other consumer | $324,178 | 3% | | Loans receivable | $11,269,929 | 102% | | Allowance for credit losses | $(156,446) | (2)% | | Loans receivable, net | $11,113,483 | 100% | Non-performing Assets This section details the company's non-performing assets, including non-accrual loans and early-stage delinquencies Non-performing Assets (March 31, 2021 vs. December 31, 2020 vs. March 31, 2020) | Metric | Mar 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total non-performing assets | $36,585 | $35,433 | $39,378 | | Non-performing assets as a percentage of subsidiary assets | 0.19% | 0.19% | 0.26% | | Accruing loans 30-89 days past due | $44,616 | $22,721 | $41,375 | - Non-performing assets increased by $1.2 million QoQ but decreased by $2.8 million YoY, with early stage delinquencies increasing by $21.9 million QoQ, primarily due to one credit relationship[218][219] - The Company believes the value of underlying real estate collateral for most non-performing assets is adequate to minimize significant charge-offs or losses[220] Restructured Loans This section discusses Troubled Debt Restructurings (TDRs) and the impact of COVID-19 related loan modifications - The Company had $46.0 million in Troubled Debt Restructurings (TDRs) at March 31, 2021, a slight increase from $45.5 million at December 31, 2020[221] - The CARES Act and related regulatory guidance allowed certain COVID-19 related loan modifications to not be classified as TDRs[222] Other Real Estate Owned This section reports on the activity and balance of Other Real Estate Owned (OREO) during the period Other Real Estate Owned (OREO) Activity (Three Months Ended March 31, 2021) | Metric | Mar 31, 2021 (in thousands) | | :----------------------- | :----------------------------- | | Balance at beginning of period | $1,744 | | Additions | $1,397 | | Sales | $(176) | | Balance at end of period | $2,965 | PPP Loans This section provides an update on the company's Paycheck Protection Program (PPP) loan originations, forgiveness, and associated fees - The Company originated $487 million in Round 2 PPP loans in Q1 2021, generating $27.7 million in SBA processing fees (average 5.67%)[224] - Round 1 PPP loans decreased by $426 million due to forgiveness in Q1 2021, with $489 million (33% of original) remaining[225] - Interest income from PPP loans was $13.5 million in Q1 2021, including $7.8 million from accelerated net deferred fees due to forgiveness[226] - Net deferred fees remaining on PPP loans were $28.1 million at March 31, 2021[226] COVID-19 Bank Loan Modifications This section details the status of COVID-19 related loan modifications and their impact on the loan portfolio - Of the $1.52 billion in loans modified in Q2 2020 due to COVID-19, $81.3 million (0.79% of loans net of PPP) remained in deferral at March 31, 2021, a reduction of $1.43 billion[227] - The Montana Loan Deferment Program provided $272 million in interest-only modifications for Montana-based businesses, which were not classified as TDRs and are separate from the Bank's modifications[228] COVID-19 Higher Risk Industries - Enhanced Monitoring This section identifies loans to higher-risk industries impacted by COVID-19 and the associated monitoring efforts - The Company has $643 million (6.24% of loans net of PPP) with direct exposure to higher-risk industries (e.g., hotel/motel, restaurant) requiring enhanced monitoring[230] - Loan modifications in these higher-risk industries totaled $14.9 million at March 31, 2021, a 36% reduction from the prior quarter[230] Allowance for Credit Losses - Loans Receivable This section explains the allocation and adequacy of the allowance for credit losses on loans, including methodology and risk mitigation Allowance for Credit Losses (ACL) Allocation (March 31, 2021) | Loan Segment | ACL (in thousands) | Percent of ACL in Category | Percent of Loans in Category | | :----------------------- | :----------------- | :------------------------- | :------------------------- | | Commercial real estate | $95,251 | 61% | 57% | | Other commercial | $39,385 | 25% | 27% | | Residential real estate | $9,018 | 6% | 7% | | Home equity | $8,068 | 5% | 6% | | Other consumer | $4,724 | 3% | 3% | | Total | $156,446 | 100% | 100% | - The ACL as a percentage of total loans was 1.39% (1.51% excluding PPP loans) at March 31, 2021, a 3 bps decrease QoQ, with the provision for credit loss expense on loans being $489 thousand in Q1 2021, a significant decrease from $22.7 million in Q1 2020[236] - The ACL methodology estimates credit losses based on loan segments, credit quality indicators, and economic forecasts, with individual reviews for loans not sharing similar risk characteristics (primarily non-accrual loans)[239] - The Company's diverse market areas and decentralized bank division model help mitigate credit risk[240] Loans by Regulatory Classification This section categorizes loans receivable by regulatory classification, including non-performing assets and net charge-offs Loans Receivable by Regulatory Classification (March 31, 2021) | Loan Type | Loans Receivable (in thousands) | % Change from Dec 31, 2020 | % Change from Mar 31, 2020 | | :------------------------------------- | :----------------------------- | :-------------------------- | :-------------------------- | | Total residential construction | $307,538 | 0% | (13)% | | Total land, lot, and other construction | $992,296 | 6% | 19% | | Total commercial real estate | $4,345,953 | 3% | 8% | | Commercial and industrial | $1,883,438 | 2% | 64% | | Agriculture | $728,579 | 1% | 5% | | Total 1-4 family | $1,165,569 | (8)% | (8)% | | Multifamily residential | $380,172 | (3)% | 8% | | Home equity lines of credit | $664,800 | 1% | 1% | | Other consumer | $191,152 | 1% | 6% | | States and political subdivisions | $546,086 | (5)% | (4)% | | Other | $183,077 | 17% | 56% | | Total loans receivable | $11,269,929 | 1% | 12% | - Total non-performing assets by regulatory classification were $36.59 million at March 31, 2021, comprising $29.89 million in non-accrual loans, $3.73 million in accruing loans 90 days or more past due, and $2.97 million in OREO[247] - Accruing loans 30-89 days delinquent totaled $44.62 million at March 31, 2021, a 96% increase from December 31, 2020, with a notable increase in agriculture loans[248] - Net charge-offs for Q1 2021 were $2.29 million, with significant amounts in 'Other' and 'Commercial and industrial' categories[250] Sources of Funds This section describes the company's funding sources, including deposits, repurchase agreements, and other borrowings Deposits This section details the composition of deposits, including non-interest bearing and interest bearing categories Total Deposits (March 31, 2021 vs. December 31, 2020 vs. March 31, 2020) | Metric | Mar 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Non-interest bearing deposits | $6,040,440 | $5,454,539 | $3,875,848 | | Total interest bearing deposits | $10,063,884 | $9,342,990 | $7,681,989 | | Total deposits | $16,104,324 | $14,797,529 | $11,557,837 | - Non-interest bearing deposits constituted 37% of total deposits at March 31, 2021, up from 34% at March 31, 2020[252] Securities Sold Under Agreements to Repurchase, Federal Home Loan Bank Advances and Other Borrowings This section outlines the company's use of repurchase agreements, FHLB advances, and other borrowing lines for liquidity management - The Company uses repurchase agreements and FHLB advances as funding sources, collateralized by eligible loans and debt securities, with FHLB advances fluctuating to meet liquidity needs and support growth[253] - Other secured and unsecured borrowing lines are also available to the Company[254] Short-term borrowings This section details the company's short-term borrowing activities, including repurchase agreements and their associated interest rates - Short-term borrowing sources include FHLB advances, federal funds purchased, and repurchase agreements, with repurchase agreements outstanding totaling $996.88 million at March 31, 2021, at a weighted interest rate of 0.29%[255][256] Subordinated Debentures This section reports on the outstanding subordinated debentures and their classification as Tier 2 capital - Subordinated debentures totaled $132 million at March 31, 2021, and are included in Tier 2 capital for regulatory purposes[257] Contractual Obligations and Off-Balance Sheet Arrangements This section describes the company's off-balance sheet credit exposures, including loan commitments and letters of credit - The Company has off-balance sheet credit exposures, including unfunded loan commitments and letters of credit, with the ACL for off-balance sheet credit exposures being $15.6 million at March 31, 2021, deemed adequate[258] Liquidity Risk This section addresses the company's approach to managing liquidity risk and its available sources of funds - The Company manages liquidity risk to fund present and future obligations, maintaining a cushion for unanticipated cash flow needs[260] Available Liquidity Sources (March 31, 2021) | Source | Amount Available (in thousands) | | :----------------------- | :----------------------------- | | FHLB advances | $2,494,255 | | FRB discount window | $1,355,044 | | Unsecured lines of credit | $635,000 | | Unencumbered debt securities | $4,067,013 | Capital Resources This section outlines the company's capital management objectives and regulatory capital ratios, ensuring compliance and financial strength - Maintaining capital strength is a long-term objective to support growth, provide protection against asset value declines, and safeguard depositors' funds[263] Glacier Bank Regulatory Capital Ratios (March 31, 2021) | Ratio | Glacier Bank | Minimum Capital Requirements | Minimum + Capital Conservation Buffer | Well Capitalized Requirements | | :------------------------------------- | :----------- | :----------------------------- | :------------------------------------ | :------------------------------------ | | Total Capital (To Risk-Weighted Assets) | 14.01% | 8.00% | 10.50% | 10.00% | | Tier 1 Capital (To Risk-Weighted Assets) | 12.90% | 6.00% | 8.50% | 8.00% | | Common Equity Tier 1 (To Risk-Weighted Assets) | 12.90% | 4.50% | 7.00% | 6.50% | | Leverage Ratio/Tier 1 Capital (To Average Assets) | 9.40% | 4.00% | N/A | 5.00% | - The Company has elected a five-year transition period for the CECL accounting standard's impact on regulatory capital, delaying the initial adoption impact for two years[265] Federal and State Income Taxes This section explains the company's effective tax rate and the impact of tax-exempt income and federal income tax credits - The Company's effective tax rate was 19.4% for Q1 2021, lower than the 21% federal statutory rate, due to income from tax-exempt debt securities, municipal loans, leases, and federal income tax credits[268] - The Company benefits from federal income tax credits from New Markets Tax Credits (NMTC), Low-Income Housing Tax Credits (LIHTC), and Qualified School Construction bonds, with expected total federal income tax credits of $129.48 million[268][270] Average Balance Sheet This section provides an average balance sheet analysis, detailing earning assets, interest-bearing liabilities, and net interest margin Average Earning Assets (Three Months Ended March 31, 2021) | Asset Type | Average Balance (in thousands) | Interest and Dividends (in thousands) | Average Yield | | :----------------------- | :----------------------------- | :------------------------------------ | :------------ | | Total loans | $11,255,069 | $135,633 | 4.89% | | Tax-exempt investment securities | $1,545,484 | $14,710 | 3.81% | | Taxable investment securities | $4,713,936 | $15,851 | 1.35% | | Total earning assets | $17,514,489 | $166,194 | 3.85% | Average Interest Bearing Liabilities (Three Months Ended March 31, 2021) | Liability Type | Average Balance (in thousands) | Interest and Dividends (in thousands) | Average Rate | | :----------------------- | :----------------------------- | :------------------------------------ | :----------- | | Total core deposits | $15,205,755 | $2,995 | 0.08% | | Repurchase agreements | $1,001,394 | $689 | 0.28% | | Subordinated debentures and other borrowed funds | $165,830 | $1,037 | 2.54% | | Total interest bearing liabilities | $16,411,055 | $4,740 | 0.12% | - Net interest spread (tax-equivalent) was 3.73% and net interest margin (tax-equivalent) was 3.74% for the three months ended March 31, 2021[273] Rate/Volume Analysis This section analyzes the impact of changes in interest rates and asset/liability volumes on net interest income - Net interest income (tax-equivalent) increased by $23.6 million for Q1 2021 compared to Q1 2020, primarily driven by a $42.3 million increase due to volume, partially offset by an $18.7 million decrease due to rate changes[275] Effect of inflation and changing prices This section discusses the primary financial impact of interest rate fluctuations on the company's monetary assets and liabilities - Interest rates generally have a more significant impact on the Company's performance than inflation, as virtually all assets are monetary in nature[276] Item 3 – Quantitative and Qualitative Disclosure about Market Risk This section confirms no material changes in market risk disclosures from the prior annual report - There have been no material changes in the quantitative and qualitative disclosures about market risk from those in the Company's 2020 Annual Report on Form 10-K[278] Item 4 – Controls and Procedures This section addresses the effectiveness of the company's disclosure controls and internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness and timeliness of the company's disclosure controls and procedures - The Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective and timely as of March 31, 2021[279] Changes in Internal Controls This section reports on the absence of material changes in the company's internal control over financial reporting - There have been no material changes in the Company's internal control over financial reporting during the first quarter of 2021[280] Part II. Other Information This section provides additional information not covered in financial statements or MD&A, including legal, risk factors, and exhibits Item 1 – Legal Proceedings This section addresses the company's involvement in legal claims, assessing their potential financial impact - The Company is involved in various legal claims in the ordinary course of business, but management believes these matters are adequately covered by insurance, lack merit, or are not material enough to adversely affect financial condition or results of operations[282] Item 1A – Risk Factors This section refers to previously disclosed risk factors, noting no material changes and advising review of potential business impacts - There have been no material changes from the risk factors previously disclosed in the Company's 2020 Annual Report on Form 10-K; readers are advised to review those risks, as additional unknown or immaterial risks could also adversely affect the business[283] Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the current reporting period - This item is marked as 'Not Applicable'[286] Item 3 – Defaults upon Senior Securities This item is not applicable for the current reporting period - This item is marked as 'Not Applicable'[286] Item 4 – Mine Safety Disclosures This item is not applicable for the current reporting period - This item is marked as 'Not Applicable'[287] Item 5 – Other Information This item is not applicable for the current reporting period - This item is marked as 'Not Applicable'[288] Item 6 – Exhibits This section lists the exhibits filed with the report, including certifications and XBRL documents - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002) and various XBRL (eXtensible Business Reporting Language) documents[291] Signatures This section provides the official signatures of the company's executive officers, certifying the report's accuracy - The report was signed by Randall M. Chesler, President and CEO, and Ron J. Copher, Executive Vice President and CFO, on May 3, 2021[295]