1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2001
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _________________
COMMISSION FILE 0-18911
-------
GLACIER BANCORP, INC.
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE 81-0519541
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
49 Commons Loop, Kalispell, Montana 59901
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (406) 756-4200
- --------------------------------------------------------------------------------
N/A
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of Registrant's common stock outstanding on May 8th, 2001
was 16,272,572. No preferred shares are issued or outstanding.
1
2
GLACIER BANCORP, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page #
------
PART I. FINANCIAL INFORMATION
Item 1 -- Financial Statements
Consolidated Statements of Financial Condition -- March 31, 2001,
December 31, and March 31, 2000 (unaudited) ........................... 3
Consolidated Statements of Operations --
Three months ended March 31, 2001 and 2000 (unaudited) ................ 4
Consolidated Statements of Stockholders' Equity and Comprehensive
Income -- Years ended December 31, 1999 2000 and Quarter ended
March 31, 2001 (unaudited) ............................................ 5
Consolidated Statements of Cash Flows -- Three months ended
March 31, 2001 and 2000 (unaudited) ................................... 6
Notes to Consolidated Financial Statements ............................ 7
Item 2 -- Management's Discussion and Analysis
Of Financial Condition and Results of Operations ................... 14
Item 3 -- Quantitative and Qualitative Disclosure about Market Risk .......... 17
PART II. OTHER INFORMATION ..................................................... 18
Item 1 -- Legal Proceedings .................................................. 18
Item 2 -- Changes in Securities and Use of proceeds .......................... 18
Item 3 -- Defaults Upon Senior Securities .................................... 18
Item 4 -- Submission of Matters to a Vote of Security Holders ............... 18
Item 5 -- Other Information ................................................. 18
Item 6 -- Exhibits and Reports on Form 8-K ................................... 18
Signatures ................................................................... 19
2
3
GLACIER BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
- -------------------------------------------------------------------- ------------ ------------ ------------
(Unaudited - dollars in thousands except per share data) MARCH 31, December 31, March 31,
- -------------------------------------------------------------------- 2001 2000 2000
------------ ------------ ------------
ASSETS:
Cash on hand and in banks .......................................... $ 59,715 41,456 40,161
Federal funds sold ................................................. -- -- 1,450
Interest bearing cash deposits ..................................... 3,455 10,330 12,150
------------ ------------ ------------
Cash and cash equivalents ..................................... 63,170 51,786 53,761
------------ ------------ ------------
Investments:
Investment securities, available-for-sale ..................... 164,135 71,415 64,309
Mortgage backed securities, available-for-sale ................ 354,168 140,473 142,816
------------ ------------ ------------
Total Investments ........................................ 518,303 211,888 207,125
------------ ------------ ------------
Net loans receivable:
Real estate loans ............................................. 505,840 231,215 224,169
Commercial Loans .............................................. 563,269 340,391 295,104
Installment and other loans ................................... 339,570 169,754 160,194
Allowance for loan losses ..................................... (17,047) (7,799) (7,102)
------------ ------------ ------------
Total Loans, net ......................................... 1,391,632 733,561 672,365
------------ ------------ ------------
Premises and equipment, net ........................................ 58,286 25,016 24,592
Real estate and other assets owned, net ............................ 451 291 460
Federal Home Loan Bank of Seattle stock, at cost ................... 30,625 16,436 15,523
Federal Reserve stock, at cost ..................................... 1,722 1,662 1,527
Accrued interest receivable ........................................ 12,973 6,637 5,577
Core deposit intangible, net ....................................... 10,343 1,547 1,697
Goodwill, net ...................................................... 37,647 4,946 5,202
Deferred tax asset ................................................. -- -- 1,380
Other assets ....................................................... 7,627 2,942 3,686
------------ ------------ ------------
$ 2,132,779 1,056,712 992,895
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits - non-interest bearing .................................... $ 227,362 141,207 148,253
Deposits - interest bearing ........................................ 1,278,419 579,363 524,455
Advances from Federal Home Loan Bank of Seattle .................... 355,457 196,791 200,926
Securities sold under agreements to repurchase ..................... 28,270 24,877 12,979
Other borrowed funds ............................................... 12,304 4,652 9,885
Accrued interest payable ........................................... 12,121 4,591 2,186
Current income taxes ............................................... 887 17 1,581
Deferred tax liability ............................................. 3,327 578 --
Other liabilities .................................................. 20,568 6,185 4,830
Minority interest .................................................. 351 338 305
Trust preferred securities ......................................... 35,000 -- --
------------ ------------ ------------
Total liabilities ............................................. 1,974,066 958,599 905,400
------------ ------------ ------------
Preferred shares, 1,000,000 shares authorized. None outstanding .... -- -- --
Common stock, $.01 par value per share.
50,000,000 shares authorized .................................... 161 114 104
Paid-in capital .................................................... 158,294 101,828 87,410
Retained earnings (deficit) - substantially restricted ............. (2,586) (4,087) 4,664
Accumulated other comprehensive income (loss) ...................... 2,844 258 (4,683)
------------ ------------ ------------
Total stockholders' equity .................................... 158,713 98,113 87,495
------------ ------------ ------------
$ 2,132,779 1,056,712 992,895
============ ============ ============
Number of shares outstanding ....................................... 16,061,254 11,447,150 11,437,279
Book value of equity per share ..................................... 9.88 8.57 7.65
Tangible book value per share ...................................... 6.89 8.00 7.05
See accompanying notes to consolidated financial statements
3
4
GLACIER BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------- -----------------------------
(unaudited - dollars in thousands except per share data) THREE MONTHS ENDED MARCH 31,
- ----------------------------------------------------------------- -----------------------------
2001 2000
----------- -----------
INTEREST INCOME:
Real estate loans ........................................... $ 6,689 4,560
Commercial loans ............................................ 9,377 6,330
Consumer and other loans .................................... 5,052 3,499
Investments ................................................. 5,257 3,857
----------- -----------
Total interest income ................................. 26,375 18,246
----------- -----------
INTEREST EXPENSE:
Deposits .................................................... 8,734 4,947
FHLB Advances ............................................... 3,611 3,144
Repurchase agreements ....................................... 263 187
Trust preferred securities .................................. 601 --
Other borrowed funds ........................................ 64 67
----------- -----------
Total interest expense ................................ 13,273 8,345
----------- -----------
NET INTEREST INCOME ............................................. 13,102 9,901
Provision for loan losses ................................... 585 487
----------- -----------
Net interest income after provision for loan losses .... 12,517 9,414
----------- -----------
NON-INTEREST INCOME:
Service charges and other fees .............................. 2,443 1,855
Miscellaneous loan fees and charges ......................... 693 568
Gains on sale of loans ...................................... 467 370
Gains (losses) on sale of investments, net .................. 64 (30)
Other income ................................................ 460 452
----------- -----------
Total non-interest income .............................. 4,127 3,215
----------- -----------
NON-INTEREST EXPENSE:
Compensation, employee benefits
and related expenses ................................. 5,257 3,957
Occupancy expense ........................................... 1,459 1,115
Data processing expense ..................................... 261 276
Core deposit intangibles amortization ....................... 168 50
Goodwill amortization ....................................... 224 86
Other expenses .............................................. 3,131 2,151
Minority interest ........................................... 15 15
----------- -----------
Total non-interest expense ............................. 10,515 7,650
----------- -----------
EARNINGS BEFORE INCOME TAXES .................................... 6,129 4,979
Federal and state income tax expense ........................ 2,215 1,751
----------- -----------
NET EARNINGS .................................................... $ 3,914 3,228
=========== ===========
Basic earnings per share (1)..................................... 0.30 0.28
Diluted earnings per share (1) .................................. 0.29 0.28
Dividends declared per share (1) ............................... 0.15 0.14
Return on average assets (annualized) .......................... 1.14% 1.33%
Return on average equity (annualized) ........................... 13.14% 15.06%
Return on tangible average equity (annualized) .................. 14.64% 16.33%
Average outstanding shares - basic (1) ......................... 13,020,217 11,436,633
Average outstanding shares - diluted (1) ....................... 13,569,827 11,585,464
(1) Adjusted for stock dividends on May 25, 2000
See accompanying notes to consolidated financial statements.
4
5
GLACIER BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Years ended December 31, 2000, 1999, and Quarter ended March 31, 2001
Retained
earnings Accumulated
(accumulated other comp- Total
- ------------------------------------------- Common Stock deficit) rehensive stock-
(Unaudited - dollars in thousands except -------------------------- Paid-in substantially income holders'
per share data) Shares Amount capital restricted (loss) equity
- ------------------------------------------- ----------- ----------- ----------- ------------ ----------- -----------
Balance at December 31, 1998 ............. 9,344,093 $ 93 66,180 16,700 1,173 84,146
Comprehensive income:
Net earnings ......................... -- -- -- 12,352 -- 12,352
Unrealized loss on securities, net
of reclassification adjustment ..... -- -- -- -- (6,604) (6,604)
-----------
Total comprehensive income ................ 5,748
-----------
Cash dividends declared ($.64 per share) .. -- -- -- (6,076) -- (6,076)
Stock options exercised ................... 113,049 1 1,091 -- -- 1,092
Tax benefit from stock related
compensation ............................ -- -- 240 -- -- 240
10% stock dividend ........................ 936,899 10 19,876 (19,905) -- (19)
Fiscal year conforming adjustment ......... -- -- -- (75) -- (75)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 ............. 10,394,041 $ 104 87,387 2,996 (5,431) 85,056
Comprehensive income:
Net earnings ......................... -- -- -- 14,003 -- 14,003
Unrealized gain on securities, net
of reclassification adjustment ..... -- -- -- -- 5,689 5,689
-----------
Total comprehensive income ................ 19,692
-----------
Cash dividends declared ($.59 per share) .. -- -- -- (6,752) -- (6,752)
Stock options exercised ................... 14,161 -- 134 -- -- 134
Tax benefit from stock related
compensation ............................ -- -- 16 -- -- 16
10% stock dividend ........................ 1,039,608 10 14,302 (14,334) -- (22)
Dissenting Mountain West shareholders ..... (660) -- (11) -- -- (11)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2000 .............. 11,447,150 $ 114 101,828 (4,087) 258 98,113
Comprehensive income:
Net earnings ......................... -- -- -- 3,914 -- 3,914
Unrealized gain on securities, net
of reclassification adjustment ..... -- -- -- -- 2,586 2,586
-----------
Total comprehensive income ................ 6,500
-----------
Cash dividends declared ($.15 per share) .. -- -- -- (2,413) -- (2,413)
Stock options exercised ................... 83,642 1 798 -- -- 799
Stock issued in connection with merger
of WesterFed Financial Corporation ...... 4,530,462 46 55,668 -- -- 55,714
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2001 ................. 16,061,254 $ 161 158,294 (2,586) 2,844 158,713
=========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements
5
6
GLACIER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------- ----------------------------
(Unaudited - dollars in thousands) THREE MONTHS ENDED MARCH 31,
- -------------------------------------------------------------------------------- ----------------------------
2001 2000
--------- ---------
OPERATING ACTIVITIES:
Net earnings ............................................................... $ 3,914 3,228
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Mortgage loans held for sale originated or acquired ...................... (43,098) (20,171)
Proceeds from sales of mortgage loans held for sale ...................... 27,583 15,909
Proceeds from sales of commercial loans .................................. 7,314 3,139
Provision for loan losses ................................................ 585 487
Depreciation of premises and equipment ................................... 716 599
Amortization of goodwill and deposit premium ............................. 392 136
Net (gain) loss on sale of investments ................................... (64) 30
Gain on sale of loans .................................................... (467) (370)
Amortization of investments premiums and discounts, net .................. 146 38
FHLB stock dividends ..................................................... (343) (236)
Deferred tax expense (benefit) ........................................... (1,859) 771
Net (increase) decrease in accrued interest receivable ................... (79) 34
Net decrease in accrued interest payable ................................. (511) (531)
Net decrease (increase) in other assets .................................. 288 (589)
Net decrease in other liabilities and minority interest .................. (2,766) (142)
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ................... (8,249) 2,332
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sales, maturities and prepayments of
investments available-for-sale ......................................... 81,243 10,932
Purchases of investments available-for-sale ................................ (197,529) (7,574)
Principal collected on installment and commercial loans .................... 74,874 57,190
Installment and commercial loans originated or acquired .................... (83,012) (81,738)
Principal collections on mortgage loans .................................... 44,102 32,117
Mortgage loans originated or acquired ...................................... (35,702) (26,720)
Net purchase of FHLB and FRB stock ......................................... (845) (213)
Acquisition of WesterFed Financial Corporation and several branches,
net of cash and cash equivalents acquired of $162,254 ................ 109,905 --
Net addition of premises and equipment ..................................... (1,990) (521)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES ................................. (8,954) (16,527)
--------- ---------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits ........................................ (2,312) 28,602
Net decrease in FHLB advances and other borrowed funds ..................... 1,282 (4,687)
Net increase (decrease) in securities sold under repurchase agreements ..... (4,459) (6,787)
Proceeds from issuance of trust preferred securities ....................... 35,000 --
Cash dividends paid to stockholders ........................................ (1,723) (1,561)
Proceeds from exercise of stock options and other stock issued ............. 799 24
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES .............................. 28,587 15,591
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .............................. 11,384 1,396
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................... 51,786 52,365
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................. $ 63,170 53,761
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for: Interest ................................ $ 5,743 8,876
Income taxes ............................ 85 278
NON-CASH INVESTING AND FINANCING ACTIVITY
During the first quarter ended March 31, 2001, the Company
purchased a bank and seven branches with net loans of $650,248
and deposits of $787,523. At March 31, 2001 and 2000, the
Company had declared dividends, but not yet paid of $2,413 and
$1,560. Dividends payable are included in other liabilities.
See accompanying notes to consolidated condensed financial statements.
6
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) Basis of Presentation:
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of Glacier
Bancorp Inc.'s (the "Company") financial condition as of March 31, 2001,
December 31, 2000, and March 31, 2000 and the results of operations and
cash flows for the three months ended March 31, 2001 and 2000.
The accompanying consolidated financial statements do not include all of
the information and footnotes required by accounting principles
generally accepted in the United States of America for complete
financial statements. These consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 2000. Operating results for the three months
ended March 31, 2001 are not necessarily indicative of the results
anticipated for the year ending December 31, 2001. Certain
reclassifications have been made to the 2000 financial statements to
conform to the 2001 presentation.
2) Organizational Structure:
The Company, headquartered in Kalispell, Montana, a Delaware corporation
incorporated in 1998, is the successor corporation in a merger with the
original Glacier Bancorp, Inc., a Delaware corporation incorporated in
1990, pursuant to the reorganization of Glacier Bank, FSB into a bank
holding company. The formation of the new corporation, and subsequent
merger, was effected to resolve technical deficiencies in the May 9,
1997 stock split.
The Company is the parent company for ten subsidiaries: Glacier Bank
("Glacier"); Glacier Bank of Whitefish ("Whitefish"); Glacier Bank of
Eureka ("Eureka"); First Security Bank of Missoula ("Missoula"); Valley
Bank of Helena ("Helena"), Big Sky Western Bank ("Big Sky"), Western
Security Bank ("Western"), Glacier Capital Trust I ("Glacier Trust"),
and Community First, Inc. ("CFI"), all located in Montana, and Mountain
West Bank ("Mountain West") which is located in Idaho and Utah. CFI
provides full service brokerage services through Raymond James Financial
Services, Inc. At March 31, 2001, the Company owned 100% of Glacier,
Missoula, Helena, Big Sky, Mountain West, Western, Glacier Trust and
CFI; 94% of Whitefish, and 98% of Eureka.
The Company formed Glacier Capital Trust I (Glacier Trust) as a
financing subsidiary on December 18, 2000. On January 25, 2001, Glacier
Trust offered 1,400,000 preferred securities at $25 per preferred
security. The purchase of the securities entitles the shareholder to
receive cumulative cash distributions at an annual interest rate of
9.40% from payments on the junior subordinated debentures of Glacier
Bancorp, Inc. The subordinated debentures will mature and the preferred
securities must be redeemed by February 1, 2031. In exchange for the
Company's capital contribution, the Company obtained all of the
outstanding common securities of the trust.
7
8
The following abbreviated organizational chart illustrates the various
relationships:
Glacier Bancorp, Inc.
(Parent Holding Company)
Glacier Bank First Security Bank Glacier Bank Glacier Bank
(Commercial bank) of Missoula of Whitefish of Eureka
(Commercial bank) (Commercial bank) (Commercial bank)
Big Sky Valley Bank Mountain West Bank Western Security Bank
Western Bank of Helena of Coeur d'Alene (Savings bank)
(Commercial bank) (Commercial bank) (Commercial bank)
Glacier Capital Community First, Inc.
Trust I (Brokerage services)
(Financing services)
3) Ratios:
Returns on average assets and average equity were calculated based on
daily averages.
4) Cash Dividend Declared:
On March 28, 2001, the Board of Directors declared a $.15 per share
quarterly cash dividend to stockholders of record on April 10, 2001,
payable on April 19, 2001.
5) Computation of Earnings Per Share:
Basic earnings per common share is computed by dividing net earnings by
the weighted average number of shares of common stock outstanding during
the period presented. Diluted earnings per share is computed by
including the net increase in shares if dilutive outstanding stock
options were exercised, using the treasury stock method. Previous period
amounts are restated for the effect of the 2000 stock dividend.
8
9
The following schedule contains the data used in the calculation of
basic and diluted earnings per share.
Three Three
months months
ended ended
March 31, March 31,
2001 2000
---------- ----------
Net earnings available to common
stockholders, basic ......................... 3,914,266 3,227,733
After tax effect of interest on
convertible subordinated debentures ...... 4,000 4,000
---------- ----------
Net earnings available to common
stockholders, diluted ....................... 3,918,266 3,231,733
========== ==========
Average outstanding shares - basic ............. 13,020,217 11,436,633
Add: Dilutive stock options ................... 516,585 115,806
Convertible subordinated debentures ...... 33,025 33,025
---------- ----------
Average outstanding shares - diluted ........... 13,569,827 11,585,464
========== ==========
Basic earnings per share ....................... 0.30 0.28
========== ==========
Diluted earnings per share ..................... 0.29 0.28
========== ==========
6) Investments:
A comparison of the amortized cost and estimated fair value of the
Company's investments is as follows:
INVESTMENTS AS OF MARCH 31, 2001
- ---------------------------------------------------
(Dollars in thousands)
- ---------------------------------------------------
Estimated
Weighted Amortized Gross Unrealized Fair
U.S. GOVERNMENT AND FEDERAL AGENCIES Yield Cost Gains Losses Value
-------- --------- ---------- -------- ---------
maturing within one year ........................ 4.99% 500 -- -- 500
maturing after ten years ........................ 8.02% 1,685 14 (6) 1,693
-------- -------- -------- --------
7.33% 2,185 14 (6) 2,193
-------- -------- -------- --------
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
maturing within one year ........................ 5.37% 12,395 1 (7) 12,389
maturing one year through five years ............ 5.68% 12,314 140 (4) 12,450
maturing five years through ten years ........... 5.37% 5,158 55 (36) 5,177
maturing after ten years ........................ 5.67% 129,900 2,486 (460) 131,926
-------- -------- -------- --------
5.67% 159,767 2,682 (507) 161,942
-------- -------- -------- --------
MORTGAGE-BACKED SECURITIES ........................ 7.14% 149,444 990 (151) 150,283
REAL ESTATE MORTGAGE INVESTMENT CONDUITS .......... 6.49% 202,241 1,676 (32) 203,885
-------- -------- -------- --------
TOTAL AVAILABLE-FOR-SALE INVESTMENTS ....... 6.42% 513,637 5,362 (696) 518,303
======== ======== ======== ========
9
10
INVESTMENTS AS OF DECEMBER 31, 2000
- --------------------------------------------------- Estimated
(Dollars in thousands) Weighted Amortized Gross Unrealized Fair
- --------------------------------------------------- Yield Cost Gains Losses Value
-------- --------- -------- -------- ---------
U.S. GOVERNMENT AND FEDERAL AGENCIES
maturing within one year ........................ 5.05% 500 -- (3) 497
maturing one year through five years ............ 6.33% 4,975 5 (25) 4,955
maturing five years though ten years ............ 6.92% 3,050 24 (11) 3,063
maturing after ten years ........................ 7.20% 1,070 -- (12) 1,058
-------- -------- -------- --------
6.55% 9,595 29 (51) 9,573
-------- -------- -------- --------
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
maturing within one year ........................ 5.47% 600 1 (19) 582
maturing one year through five years ............ 5.17% 1,635 41 (1) 1,675
maturing five years through ten years ........... 7.53% 4,047 34 (99) 3,982
maturing after ten years ........................ 5.50% 54,561 1,612 (570) 55,603
-------- -------- -------- --------
5.63% 60,843 1,688 (689) 61,842
-------- -------- -------- --------
MORTGAGE-BACKED SECURITIES ........................ 6.79% 39,374 268 (157) 39,485
REAL ESTATE MORTGAGE INVESTMENT CONDUITS .......... 6.94% 101,635 396 (1,043) 100,988
-------- -------- -------- --------
TOTAL AVAILABLE FOR SALE INVESTMENTS ......... 6.52% $211,447 2,381 (1,940) 211,888
======== ======== ======== ========
7) Stockholders' Equity:
The Federal Reserve Board has adopted capital adequacy guidelines that
are used to assess the adequacy of capital in supervising a bank holding
company. The following table illustrates the Federal Reserve Board's
capital adequacy guidelines and the Company's compliance with those
guidelines as of March 31, 2001:
CONSOLIDATED Tier 1 Tier 2
- ------------------------------------------------ (Core) (Total) Leverage
(Dollars in thousands) Capital Capital Capital
- ------------------------------------------------ ----------- ----------- -----------
GAAP Capital ................................... $ 158,713 158,713 158,713
Less: Goodwill ................................ (47,990) (47,990) (47,990)
Accumulated other comprehensive
gain on AFS securities ..................... (2,844) (2,844) (2,844)
Plus: Minority interest ....................... 351 351 351
Allowance for loan losses .................. -- 16,496 --
Trust preferred secuirities ................ 35,000 35,000 35,000
Other regulatory adjustments ................... (3,707) (5,271) (3,707)
----------- ----------- -----------
Regulatory capital computed .................... $ 139,523 154,455 139,523
=========== =========== ===========
Risk weighted assets ........................... $ 1,439,705 1,439,705
=========== ===========
Total average assets ........................... 1,966,065
===========
Capital as % of defined assets ................. 9.69% 10.73% 7.10%
Regulatory "well capitalized" requirement ...... 6.00% 10.00% 5.00%
----------- ----------- -----------
Excess over "well capitalized" requirement ..... 3.69% 0.73% 2.10%
=========== =========== ===========
10
11
8) Comprehensive Earnings:
The Company's only component of other comprehensive earnings is the
unrealized gains and losses on available-for-sale securities.
For the three months
ended March 31,
- -------------------------------------------------------- ----------------------
Dollars in thousands 2001 2000
- -------------------------------------------------------- -------- --------
Net earnings ........................................... $ 3,914 3,228
Unrealized holding gains arising during the period ..... 4,212 1,309
Transfer from held-to-maturity ......................... -- (11)
Tax expense ............................................ (1,665) (532)
-------- --------
Net after tax .............................. 2,547 766
Reclassification adjustment for gains (losses)
included in net income .............................. 64 (30)
Tax expense (benefit) .................................. (25) 12
-------- --------
Net after tax .............................. 39 (18)
Net unrealized gains on securities ........ 2,586 748
-------- --------
Total comprehensive earnings ........... $ 6,500 3,976
======== ========
9) Segment Information
The Company evaluates segment performance internally based on individual
bank charter, and thus the operating segments are so defined. The
following schedule provides selected financial data for the Company's
operating segments. Centrally provided services to the Banks are
allocated based on estimated usage of those services. The operating
segment identified as "Other" includes the Parent, Community First,
Inc., Glacier Trust, and intercompany eliminations.
Three months ended and as of March 31, 2001
- --------------------------------------- ----------------------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
- --------------------------------------- ---------- --------- ---------- ---------- ----------
Revenues from external customers ...... 9,487 1,298 676 5,068 2,037
Intersegment revenues ................. 311 -- 3 10 31
Expenses .............................. 8,173 1,059 557 4,098 1,741
Intercompany eliminations ............. -- -- -- -- --
---------- --------- ---------- ---------- ----------
Net income ..... 1,625 239 122 980 327
========== ========= ========== ========== ==========
Total Assets ..... 462,992 59,315 31,909 212,027 86,992
========== ========= ========== ========== ==========
Mountain Total
Big Sky West Western Other Consolidated
---------- --------- ---------- ---------- ------------
Revenues from external customers ...... 1,714 3,716 6,280 226 30,502
Intersegment revenues ................. -- 143 -- 5,244 5,742
Expenses .............................. 1,548 3,694 5,480 238 26,588
Intercompany eliminations ............. -- -- -- (5,742) (5,742)
---------- --------- ---------- ---------- ----------
Net income ..... 166 165 800 (510) 3,914
========== ========= ========== ========== ==========
Total Assets ..... 77,955 308,467 916,113 (22,991) 2,132,779
========== ========= ========== ========== ==========
11
12
Three months ended and as of March 31, 2000
- ------------------------------------------------ -------------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
-------- --------- -------- -------- --------
Revenues from external customers ............... 9,315 1,178 626 4,604 1,873
Intersegment revenues .......................... 373 2 -- -- 54
Expenses ....................................... 8,120 949 507 3,668 1,611
Intercompany eliminations ...................... -- -- -- -- --
-------- -------- -------- -------- --------
Net income ...... 1,568 231 119 936 316
======== ======== ======== ======== ========
Total Assets ...... 461,303 54,380 27,734 196,223 83,609
======== ======== ======== ======== ========
Mountain Total
Big Sky West Other Consolidated
-------- -------- -------- ------------
Revenues from external customers ............... 1,436 2,303 126 21,461
Intersegment revenues .......................... -- -- 4,007 4,436
Expenses ....................................... 1,300 2,144 (66) 18,233
Intercompany eliminations ...................... -- -- (4,436) (4,436)
-------- -------- -------- --------
Net income ...... 136 159 (237) 3,228
======== ======== ======== ========
Total Assets ...... 68,437 97,938 3,271 992,895
======== ======== ======== ========
10) Recent Acquisitions
On February 28, 2001 the Company completed the acquisition of WesterFed
Financial Corporation. The Company issued 4,530,462 shares and
$37,274,000 cash to shareholders in consideration of the merger. The
acquisition is being accounted for, using the purchase method of
accounting. Accordingly, the assets and liabilities of WesterFed were
recorded by the Company at their respective fair values at the time of
the completion of the merger and the results of WesterFed have been
included with those of the Company since the date of the acquisition.
The excess of the Company's purchase price over the net fair value of
the assets acquired and liabilities assumed, including identifiable
intangible assets, is recorded as goodwill and will be amortized over a
useful life of 20 years.
The estimated fair values of net assets acquired at the acquisition date
are summarized as follows:
- -------------------------------------------------
(Dollars in thousands)
- -------------------------------------------------
Cash and due from banks .......................... $ 24,891
Investments available-for-sale ................... 185,984
FHLB stock ....................................... 13,062
Loans ............................................ 613,676
Premises and equipment ........................... 25,546
Goodwill ......................................... 15,609
Core deposit intangible .......................... 7,449
Other assets ..................................... 11,034
--------
897,251
--------
Deposits ......................................... $603,555
FHLB advances .................................... 165,386
Repurchase agreements ............................ 7,851
Other liabilities ................................ 26,747
--------
803,539
--------
Total consideration paid ....................... $ 93,712
========
12
13
On March 15, 2001, the Company completed the acquisition, subject to
certain adjustments, of seven Wells Fargo & Company and First Security
Corporation subsidiary banks located in Idaho and Utah. The acquisition
is being accounted for using the purchase method of accounting.
Accordingly, the assets and liabilities of the acquired banks were
recorded by the Company at there respective fair values at the date of
the acquisition and the results of the banks operations have been
included with those of the Company since the date of the acquisition.
The excess of the Company's purchase price over the net fair value of
the assets acquired and liabilities assumed, including identifiable
intangible assets, is recorded as goodwill and will be amortized over a
useful life of 20 years.
The estimated fair values of the branches net assets acquired at the
acquisition date are summarized as follows:
- -------------------------------------------------
(Dollars in thousands)
- -------------------------------------------------
Cash and due from banks .......................... $122,288
Loans ............................................ 36,573
Premises and equipment ........................... 6,449
Core deposit intangible .......................... 1,514
Other assets ..................................... 196
--------
167,020
--------
Deposits ......................................... $183,968
Other liabilities ................................ 454
--------
184,422
--------
Net liabilities assumed in excess of
identifiable net assets acquired ............. $ 17,402
========
The following pro forma information presents the consolidated results of
operations as if the acquisitions had occurred at the beginning of each of the
periods presented below.
For the three months
- --------------------------------------------------------- ended March 31,
(unaudited - dollars in thousands except per share data) 2001 2000
- --------------------------------------------------------- --------- ---------
Total interest and non-interest income .................. $ 47,629 38,588
========= =========
Net earnings ............................................. $ 4,676 3,991
========= =========
Net earnings per common share - basic(1) ................ 0.29 0.25
Net earnings per common share - diluted(1) .............. 0.28 0.24
(1) Adjusted for stock dividends on May 25, 2000
The pro forma information does not purport to be indicative of the results of
operations that would have occurred had the transactions taken place at the
beginning of the periods presented or of future results of operations.
13
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Recent Developments
Completed Acquisitions
The acquisition of Missoula, Montana based WesterFed with December 31, 2000
assets of $929 million, loans of $623 million, and deposits of $606 million was
completed on February 28, 2001. WesterFed shareholders received 4,530,462 shares
of Glacier Bancorp stock and $37,274,000 in cash as compensation for the
acquisition. WesterFed was the holding company for Western Security Bank,
Montana's largest savings bank with twenty-seven offices in fourteen Montana
communities. Western Security Bank is a separate banking subsidiary of the
Company. It is intended that by the end of the fiscal year, several of the
branch offices will become branches of other Glacier Bank subsidiaries, based on
their geographic location. The remaining branches will continue as a separate
subsidiary under the Western Security Bank name, with the main office located in
Billings, Montana.
The acquisition of seven Wells Fargo & Company and First Security Corporation
branches located in Boise, Nampa, Hailey, and Ketchum, Idaho and Brigham City
and Park City, Utah by Mountain West Bank of Coeur d'Alene, Idaho was completed
on March 15, 2001. The purchase included approximately $184 million in deposits,
$37 million in loans, and real estate and equipment of the branches.
Both acquisitions were accounted for using the purchase method of accounting.
Accordingly, the assets and liabilities were recorded by the Company at their
respective fair values at the time of the completion of the acquisitions and
the results of operations include the results of the acquired operations since
the dates of acquisitions.
As a result of these acquisitions, the Company is now the largest publicly
traded bank holding company headquartered in the inland northwest, with assets
exceeding $2 billion.
Sale of Six Branch Offices
On March 23, 2001 the sale of six branch locations with assets of $79 million to
Stockman Bank was announced. Stockman Bank will acquire five Western Security
Bank offices located in Conrad, Havre, and three branches in Great Falls and one
Glacier Bank office located in Cutbank.
The proposed acquisition is subject to the approval of federal banking
regulators, and the parties expect to receive such approval by early June. It is
anticipated the transaction will close by the end of June 2001.
Financial Condition
This section discusses the changes in Statement of Financial Condition items
from December 31, 2000 to March 31, 2001.
Since December 31, 2000 total assets have increased $1.076 billion, or 102
percent, to $2.133 billion, the result of completion of the WesterFed Financial
Corporation acquisition, and branch purchases in Idaho and Utah from Wells Fargo
and First Security Corporation. Total loans, net of the reserve for loan losses,
have increased $658 million, or 90 percent, of which $650 million came from the
acquisitions. The loan growth has occurred in all loan classifications.
Commercial loans increased $222.9 million, or 65 percent, consumer loans
increased $169.8 million, or 100 percent, and residential real estate loans
increased $274.6 million or 119 percent. Internal growth in loans since March
31, 2000 was $69 million, a 10 percent increase.
14
15
Loans sold to the secondary market amounted to $34.430 million and $18.678
million during the first three months of 2001 and 2000, respectively.
The amount of loans serviced for others on March 31, 2001 was approximately $352
million.
Total deposits have increased $785 million, or 109 percent, over the December
31, 2000 balances. Total deposits acquired were $787 million, leaving a decrease
of $2 million from internal activity. Total deposits are also up $833 million
from March 31, 2000, of which $48 million is from internal growth. Non-interest
bearing deposits are up $86 million, or 61 percent from December 31, 2000, and
interest-bearing deposits have increased $699 million, or 121 percent from
December 31, 2000. Borrowed funds, including the subordinated debentures issued
with the trust preferred security, and repurchase agreements, have increased
$205 million, or 90 percent.
All eight banking subsidiaries are members of the FHLB. Accordingly, management
of the Company has a wide range of versatility in managing the liquidity and
asset/liability mix for each individual institution as well as the Company as a
whole. As of March 31, 2001, the Company had $710,113,000 of available FHLB line
of which $355,457,000 was utilized.
Loan Loss Provision and Non-Performing Assets
Asset quality continued to be very strong during the quarter. Non-performing
assets as a percentage of total assets at March 31, 2001 were .37 percent versus
.23 at the same time last year, but still well below the Peer Group average of
.53 percent at December 31, 2000, the most recent information available. The
reserve for loan losses was 216 percent of non-performing assets at March 31,
2001, down from 310 percent a year ago.
With the growth in loan balances, and the continuing change in loan mix from
residential real estate to commercial and consumer loans, which historically
have greater credit risk, the Company has increased the balance in the reserve
for loan losses account. The reserve balance has increased $9.248 million, or
119 percent, to $17.047 million, of which $8.893 million is from acquisitions.
The reserve balance is 1.21 percent of total loans outstanding, up from 1.05
percent of loans at December 31, 2000. The first quarter provision expense for
loan losses was $585 thousand, up from $487 thousand during the same quarter in
2000. Changes in the information related to the allowance for loan loss account
are shown in the following table:
March 31, 2001 December 31, 2000
-------------- -----------------
Total Allowance for Loan and Real Estate Owned Losses: $17.047 million $7.799 million
Allowance as a percentage of Total Loans: 1.21% 1.05%
Allowance as a percentage of Non-performing Assets: 216% 372%
Impaired Loans
As of March 31, 2001, there was $5.885 million in impaired loans. Interest
income on impaired loans and interest recoveries on loans that have been charged
off, is recognized on a cash basis after principal has been fully paid, or at
the time a loan becomes fully performing based on the terms of the loan.
Minority Interest
The minority interest on the consolidated statement of financial condition
represents the minority stockholders' share in the retained earnings of the
Company. These are shares of Eureka and Whitefish that are still outstanding. As
of March 31, 2001, the Company owns 47,280 shares of Whitefish and 49,084 shares
of Eureka. The Company's ownership of Whitefish and Eureka is 94% and 98%,
respectively. Glacier has a plan in place to purchase the minority interest in
the two subsidiaries and subsequently merge the two subsidiaries. It is
anticipated that the transactions will occur in the second quarter of 2001.
15
16
Stockholders' Equity
Total stockholders' equity increased $61 million, or 62 percent, primarily the
result of the stock issued in connection with the recent acquisition of
WesterFed Financial Corporation.
Results of Operations -- The three months ended March 31, 2001 compared to the
three months ended March 31, 2000.
The Company reported quarterly earnings of $3.9 million, or fully diluted
earnings per share of $.29 compared to $3.2 million, and diluted earnings of
$.28 last year, an increase of 21 percent. Return on average assets and return
on average equity, were 1.14 percent and 13.14 percent compared to 1.33 percent
and 15.06 percent for the same quarter last year. The Company's results of
operations comparability has been affected by the acquisitions completed during
the first quarter of 2001 as described under recent developments and in footnote
10 to the consolidated financial statements.
Net Interest Income
Top line revenue growth continues to accelerate as a result of the Company's
growth both internally and from acquisitions. Net interest income for the
quarter was $13.102 million, an increase of $3.201 million, or 32 percent, over
the same period in 2000. The growth in earning assets and the increase in
non-interest bearing deposits resulted in a significant increase in net interest
income. The net interest margin continues to be a challenge as the spread on
assets acquired is less than the spread on the previous asset base. As a
percentage of earning assets, on a tax equivalent basis, the margin has declined
from 4.4 percent for the quarter ending March 31, 2000 to 4.0 percent this year.
Non-interest Income
Fee income from loans was $125 thousand, or 22 percent higher in the first
quarter of 2001 than the same quarter in 2000. There also was an increase in
service charge and other fee income of $588 thousand, or 32 percent. Gain on
sale of loans increased $97 thousand, or 26 percent. Net gains on securities
sales of $64 thousand in 2001, compared to a net loss of $30 thousand in 2000,
were recorded.
Non-interest Expense
Non-interest expense increased by $2.865 million, or 37 percent, over the first
quarter of 2000. Included in the 2001 total is $406 thousand in merger and
conversion expense. Without those non-recurring expenses non-interest expense
increased by $2.459 million, or 32 percent. Compensation and employee benefits
increased $1.300 million or 33 percent. Occupancy and equipment expense was up
$334 thousand, or 31 percent, and other expenses, which include the merger and
conversion expenses, were up $984 thousand, or 46 percent. Amortization of core
deposits and goodwill was $168 thousand and $224 thousand, respectively, which
is an increase of $252 thousand over the prior year due primarily to the
acquisitions.
Forward-Looking Statements
When used in this press release, the words or phrases `will likely result in',
`are expected to', `will continue', `is anticipated', `estimate', or `project'
or similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected including general economic conditions,
business conditions in the banking industry, the regulatory environment, new
legislation, vendor quality and efficiency, employee retention factors, rapidly
changing technology and evolving banking industry standards, competitive
standards, competitive factors including increased competition among financial
institutions and fluctuating interest rate environments. Readers are cautioned
not to place undue reliance on any such forward-looking statements, which speak
only as of the date made. Readers should also carefully review the risk factors
described in the company's most recent Annual Report on Form 10-K for the period
ending December 31, 2000 and other documents the company files from time to time
with the Securities and Exchange Commission.
16
17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/prices such as interest rates, foreign currency exchange
rates, commodity prices, and equity prices. The Company's primary market risk
exposure is interest rate risk. The ongoing monitoring and management of this
risk is an important component of the Company's asset/liability management
process which is governed by policies established by its Board of Directors that
are reviewed and approved annually. The Board of Directors delegates
responsibility for carrying out the asset/liability management policies to the
Asset/Liability committee (ALCO). In this capacity ALCO develops guidelines and
strategies impacting the Company's asset/liability management related activities
based upon estimated market risk sensitivity, policy limits and overall market
interest rate levels/trends.
Interest Rate Risk:
Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. As interest rates change the interest income and expense streams
associated with the Company's financial instruments also change thereby
impacting net interest income (NII), the primary component of the Company's
earnings. ALCO utilizes the results of a detailed and dynamic simulation model
to quantify the estimated exposure of NII to sustained interest rate changes.
While ALCO routinely monitors simulated NII sensitivity over a rolling two-year
horizon, it also utilizes additional tools to monitor potential longer-term
interest rate risk.
The simulation model captures the impact of changing interest rates on the
interest income received and interest expense paid on all assets and liabilities
reflected on the Company's balance sheet. This sensitivity analysis is compared
to ALCO policy limits which specify a maximum tolerance level for NII exposure
over a one year horizon, assuming no balance sheet growth, given a 200 basis
point (bp) upward and downward shift in interest rates. A parallel and pro rata
shift in rates over a 12 month period is assumed. The following reflects the
Company's NII sensitivity analysis as of December 31, 2000, the most recent
information available, as compared to the 10% Board approved policy limit
(dollars in thousands). There have been no material changes in the analysis from
December 31, 2000 to March 31, 2001.
Interest Rate Sensitivity
+200 bp -200 bp
------- -------
Estimated sensitivity -2.75% 1.73%
Estimated increase (decrease) in net interest income $ (2,007) 1,262
The preceding sensitivity analysis does not represent a Company forecast and
should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions including: the
nature and timing of interest rate levels including yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, reinvestment/replacement of assets and liability cashflows,
and others. While assumptions are developed based upon current economic and
local market conditions, the Company cannot make any assurances as to the
predictive nature of these assumptions including how customer preferences or
competitor influences might change.
Also, as market conditions vary from those assumed in the sensitivity analysis,
actual results will also differ due to: prepayment/refinancing levels likely
deviating from those assumed, the varying impact of interest rate change caps or
floors on adjustable rate assets, the potential effect of changing debt service
levels on customers with adjustable rate loans, depositor early withdrawals and
product preference changes, and other internal/external variables. Furthermore,
the sensitivity analysis does not reflect actions that ALCO might take in
responding to or anticipating changes in interest rates.
17
18
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the registrant
or its subsidiaries are a party.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
A special meeting was held on February 26, 2001 to vote upon the
proposal to adopt the Amended and Restated Plan and Agreement of Merger,
dated as of September 20, 2000, between Glacier Bancorp, Inc. and
WesterFed Financial Corporation, under the terms of which WesterFed
Financial corporation will merge with Glacier Bancorp, Inc. The merger
was approved at the meeting.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Current Report on Form 8-K
On January 30, 2001, a Form 8-K was filed disclosing that Glacier
Bancorp, Inc. had completed the sale of $35 million in 9.40% capital
securities representing preferred beneficial interest in Glacier Capital
Trust I, a business trust formed by the Company for the purpose of
facilitation the offering. The net proceeds to the Company from the
offering were to be used to finance, in part, the acquisition of
WesterFed Financial Corporation and the acquisition of seven branches
from Wells Fargo & Company, and for other general corporate purposes.
On February 28, 2001, a Form 8-K was filed disclosing that Glacier
Bancorp, Inc. had completed its pending acquisition of WesterFed
Financial Corporation and its subsidiary, Western Security Bank. The
acquisition was accomplished pursuant to an Amended and Restated Plan
and Agreement of Merger dated as of September 20, 2000.
On May 4th, 2001 a Form 8-Ka was filed disclosing the consolidated
balance sheets of WesterFed Financial Corporation and Subsidiaries as of
December 31, 2000 and 1999 and the related consolidated statements of
income, stockholders' equity and comprehensive income, and cash flows
for the year ended December 31, 2000, the six months ended December
31,1999 and the years ended June 30, 1999 and 1998. In addition, the pro
forma financial information Unaudited Combined Condensed Pro Forma
18
19
Statement of Financial Condition as of December 31, 2000 and Unaudited
Combined Condensed Pro Forma Statement of Operations for the year ended
December 31, 2000 were filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLACIER BANCORP, INC.
May 15, 2001 /s/ Michael J. Blodnick
President/CEO
May 15, 2001 /s/ James H. Strosahl
Executive Vice President/CFO
19