Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
GBCI > SEC Filings for GBCI > Form 10-Q on 8-Nov-2012All Recent SEC Filings

Show all filings for GLACIER BANCORP INC

Form 10-Q for GLACIER BANCORP INC


8-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements
This Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about management's plans, objectives, expectations and intentions that are not historical facts, and other statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "should," "projects," "seeks," "estimates" or words of similar meaning. These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. In addition to the factors set forth in the sections titled "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations", as applicable, in this report and the Annual Report on Form 10-K for the year ended December 31, 2011 (the "2011 Annual Report"), the following factors, among others, could cause actual results to differ materially from the anticipated results:
local and national economic conditions could be less favorable than expected or could have a more direct and pronounced effect on the Company than expected;

the risks associated with lending and potential adverse changes of the credit quality of loans in the Company's portfolio, including as a result of declines in the housing and real estate markets in its geographic areas;

increased loan delinquency rates;

the risks presented by a continued economic downturn, which could adversely affect credit quality, loan collateral values, other real estate owned values, investment values, liquidity and capital levels, dividends and loan originations;

changes in market interest rates, which could adversely affect the Company's net interest income and profitability;

legislative or regulatory changes that adversely affect the Company's business, ability to complete pending or prospective future acquisitions, limit certain sources of revenue, or increase cost of operations;

changes in accounting principles, policies and guidelines applicable to banking;

costs or difficulties related to the integration of acquisitions;

the goodwill the Company has recorded in connection with acquisitions could become additionally impaired, which may have an adverse impact on our earnings and capital;

reduced demand for banking products and services;

the risks presented by public stock market volatility, which could adversely affect the market price of our common stock and our ability to raise additional capital in the future;

competition from other financial services companies in our markets;

loss of services from the senior management team; and

the Company's success in managing risks involved in the foregoing.

Please take into account that the forward-looking statements only apply as of the date of this report or documents incorporated by reference herein. The Company does not undertake any obligation to publicly correct or update any forward-looking statement if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statement.


Table of Contents

Non-GAAP Financial Measures
In addition to the results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), this Form 10-Q contains certain non-GAAP financial measures. The Company believes that providing these non-GAAP financial measures provides investors with information useful in understanding the Company's financial performance, performance trends, and financial position. While the Company uses these non-GAAP measures in its analysis of the Company's performance, this information should not be considered an alternative to measurements required by GAAP.

The preceding results summary table provides a reconciliation of certain GAAP financial measures to non-GAAP financial measures. The reconciling item between the GAAP and non-GAAP financial measures was the prior year third quarter goodwill impairment charge (net of tax) of $32.6 million.
The goodwill impairment charge was $40.2 million with a tax benefit of $7.6 million which resulted in a goodwill impairment charge (net of tax) of $32.6 million. The tax benefit applied only to the $19.4 million of goodwill associated with taxable acquisitions and was determined based on the Company's marginal income tax rate of 38.9 percent.

The diluted earnings per share reconciling item was determined based on the goodwill impairment charge (net of tax) divided by the weighted average diluted shares of 71,915,073.

The goodwill impairment charge (net of tax) was included but not annualized in determining annualized earnings for both the GAAP return on average assets and GAAP return on average equity. The average assets used in the GAAP and non-GAAP return on average assets ratios were $6.996 billion and $6.854 billion for the three and nine month periods, respectively. The average equity used in the GAAP and non-GAAP return on average equity ratios were $877 million and $860 million for the three and nine month periods, respectively.

                          Financial Condition Analysis

Assets
The following table summarizes the asset balances as of the dates indicated, and
the amount of change from December 31, 2011 and September 30, 2011:
                                                                         $ Change      $ Change
                                                                           from          from
                           September 30,     December      September     December      September
(Dollars in thousands)          2012         31, 2011      30, 2011      31, 2011      30, 2011
Cash and cash equivalents  $    172,399       128,032       133,771        44,367        38,628
Investment securities,
available-for-sale            3,586,355     3,126,743     2,935,011       459,612       651,344
Loans receivable
Residential real estate         528,177       516,807       518,786        11,370         9,391
Commercial                    2,272,959     2,295,927     2,336,744       (22,968 )     (63,785 )
Consumer and other              606,958       653,401       668,052       (46,443 )     (61,094 )
Loans receivable              3,408,094     3,466,135     3,523,582       (58,041 )    (115,488 )
Allowance for loan and
lease losses                   (136,660 )    (137,516 )    (138,093 )         856         1,433
Loans receivable, net         3,271,434     3,328,619     3,385,489       (57,185 )    (114,055 )
Other assets                    602,017       604,512       588,418        (2,495 )      13,599
Total assets               $  7,632,205     7,187,906     7,042,689       444,299       589,516


Table of Contents

Investment securities increased $182 million, or 5 percent, during the current quarter and increased $651 million, or 22 percent, from September 30, 2011. The Company continues to purchase investment securities to primarily offset the lack of loan growth and to maintain interest income. The increase in investment securities for the current quarter occurred in U.S. Agency collateralized mortgage obligation ("CMO"), corporate and municipal bonds. The majority of the purchases were short weighted-average life CMOs which were significantly offset by CMO principal paydowns during the quarter. Investment securities represent 47 percent of total assets at September 30, 2012 versus 44 percent at December 31, 2011 and 42 percent at September 30, 2011.

The continued uncertainty in the sluggish economy and low levels of loan demand continue to put pressure on the Company and was the primary cause of the decrease in the loan portfolio. The loan portfolio decreased during the current quarter by $37.1 million, or 1 percent, to a total of $3.408 billion at September 30, 2012. The largest decrease in dollars during the current quarter was in commercial loans which decreased $20.9 million, or 1 percent, from June 30, 2012. The largest decrease by percentage during the current quarter was in consumer and other loans which decreased $18.8 million, or 3 percent, from June 30, 2012. The decrease in consumer and other loans was primarily attributable to the reduction in consumer land and lot loans in combination with customers paying down lines of credit and reducing other debt. During the past nine months, the loan portfolio decreased $58 million, or 2 percent, from total loans of $3.466 billion at December 31, 2011. Excluding net charge-offs of $20.1 million and loans of $21.0 million transferred to other real estate owned, loans decreased $16.9 million, or 1 percent annualized, during the past nine months. The Company continues to reduce its exposure to land, lot and other construction loans which totaled $333 million as of September 30, 2012, a decrease of $69 million, or 17 percent, since the prior year third quarter.

Liabilities
The following table summarizes the liability balances as of the dates indicated,
and the amount of change from December 31, 2011 and September 30, 2011:
                                                                            $ Change      $ Change
                                                                              from          from
                              September 30,     December      September     December      September
(Dollars in thousands)             2012         31, 2011      30, 2011      31, 2011      30, 2011
Non-interest bearing deposits $  1,180,066     1,010,899       996,265       169,167       183,801
Interest bearing deposits        4,023,031     3,810,314     3,774,263       212,717       248,768
Federal funds purchased                  -             -        45,000             -       (45,000 )
Repurchase agreements              414,836       258,643       301,820       156,193       113,016
FHLB advances                      917,021     1,069,046       889,053      (152,025 )      27,968
Other borrowed funds                10,152         9,995        14,792           157        (4,640 )
Subordinated debentures            125,382       125,275       125,239           107           143
Other liabilities                   71,560        53,507        44,869        18,053        26,691
Total liabilities             $  6,742,048     6,337,679     6,191,301       404,369       550,747


Table of Contents

Another beneficial trend for the Company has been the increase in deposits over the past several years which has allowed the Company to fund the increase in the investment securities portfolio at lower funding costs. The increase in deposits during the first nine months of 2012 and throughout 2011 has been driven by the Company's success in generating new personal and business customer relationships, as well as existing customers retaining cash deposits for liquidity purposes due to the continued uncertainty in the current economic environment. At September 30, 2012, non-interest bearing deposits of $1.180 billion increased $113 million, or 11 percent, since June 30, 2012 and increased $184 million, or 18 percent, since September 30, 2011. Interest bearing deposits of $4.023 billion at September 30, 2012 included $744 million of wholesale deposits of which $167 million were reciprocal deposits (e.g., Certificate of Deposit Account Registry System deposits). In addition to reciprocal deposits, wholesale deposits include brokered deposits classified as NOW, money market deposit and certificate accounts. Interest bearing deposits increased $107 million, or 3 percent, since June 30, 2012 and included an increase of $99.0 million in wholesale deposits. Interest bearing deposits increased $249 million, or 7 percent, from September 30, 2011 and included a increase of $97.4 million in wholesale deposits.

The Company's level and mix of borrowings has fluctuated as needed to supplement deposit growth and to fund the growth in investment securities. Federal Home Loan Bank ("FHLB") advances decreased $152 million from the prior year and have increased $28.0 million since the prior year third quarter. The increase in funding through repurchase agreements from the prior year end and the prior year third quarter was primarily due to the $116 million in wholesale repurchase agreements as of current quarter end compared to no wholesale repurchase agreements as of year end and only $40.0 million of wholesale repurchase agreements as of the prior year third quarter end. The wholesale repurchase agreements were utilized as a source of low cost alternative funding.

Stockholders' Equity
The following table summarizes the stockholders' equity balances as of the dates
indicated, and the amount of change from December 31, 2011 and September 30,
2011:
                                                                            $ Change       $ Change
                                                                              from           from
(Dollars in thousands,      September 30,     December      September     December 31,    September
except per share data)           2012         31, 2011       30, 2011         2011         30, 2011
Common equity               $   842,301        816,740       811,738          25,561         30,563
Accumulated other
comprehensive income             47,856         33,487        39,650          14,369          8,206
Total stockholders' equity      890,157        850,227       851,388          39,930         38,769
Goodwill and core deposit
intangible, net                (112,765 )     (114,384 )    (114,941 )         1,619          2,176
Tangible stockholders'
equity                      $   777,392        735,843       736,447          41,549         40,945
Stockholders' equity to
total assets                      11.66 %        11.83 %       12.09 %
Tangible stockholders'
equity to total tangible
assets                            10.34 %        10.40 %       10.63 %
Book value per common share $     12.37          11.82         11.84            0.55           0.53
Tangible book value per
common share                $     10.81          10.23         10.24            0.58           0.57
Market price per share at
end of period               $     15.59          12.03          9.37            3.56           6.22


Table of Contents

Tangible stockholders' equity and tangible book value per share increased $41.5 million and $0.58 per share from the prior year end, resulting in tangible stockholders' equity to tangible assets of 10.34 percent and tangible book value per share of $10.81 as of September 30, 2012. The increases came from earnings retention and an increase in accumulated other comprehensive income.

On September 26, 2012, the Company's Board of Directors declared a cash dividend of $0.13 per share, payable October 18, 2012 to shareholders of record on October 9, 2012. Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations.

       Results of Operations - The Three Months ended September 30, 2012
    Compared to the Three Months ended June 30, 2012 and September 30, 2011

Performance Summary
                                                               Three Months ended
                                                  September 30,      June 30,     September 30,
(Dollars in thousands, except per share data)         2012             2012            2011
Net income (loss) (GAAP)                         $      19,444         18,981         (19,048 )
Add goodwill impairment charge, net of tax                   -              -          32,613
Operating net income (non-GAAP)                  $      19,444         18,981          13,565
Diluted earnings (loss) per share (GAAP)         $        0.27           0.26           (0.27 )
Add goodwill impairment charge, net of tax                   -              -            0.46
Diluted earnings per share (non-GAAP)            $        0.27           0.26            0.19
Return on average assets (annualized) (GAAP)              1.03 %         1.04 %         (1.08 )%
Add goodwill impairment charge, net of tax                   - %            - %          1.85  %
Return on average assets (annualized) (non-GAAP)          1.03 %         1.04 %          0.77  %
Return on average equity (annualized) (GAAP)              8.68 %         8.69 %         (8.61 )%
Add goodwill impairment charge, net of tax                   - %            - %         14.74  %
Return on average equity (annualized) (non-GAAP)          8.68 %         8.69 %          6.13  %

The Company reported net income for the current quarter of $19.4 million, an increase of $5.9 million, or 43 percent, compared to $13.6 million of operating net income (net income excluding goodwill impairment charge) for the prior year third quarter. Net operating income is considered a non-GAAP financial measure and additional information regarding this measurement and reconciliation is provided herein. Diluted earnings per share for the current quarter was $0.27 per share, an increase of $0.08, or 42 percent, from the prior year third quarter diluted earnings per share of $0.19.


Table of Contents

Revenue Summary
The following tables summarize revenue for the periods indicated, including the
amount and percentage change from June 30, 2012 and September 30, 2011:

                                                  Three Months ended
                                     September 30,      June 30,     September 30,
(Dollars in thousands)                   2012             2012            2011
Net interest income
Interest income                     $      62,015         64,192           71,433
Interest expense                            8,907          9,044           11,297
Total net interest income                  53,108         55,148           60,136
Non-interest income
Service charges, loan fees, and
other fees                                 13,019         12,404           12,536
Gain on sale of loans                       8,728          7,522            5,121
Loss on sale of investments                     -              -              813
Other income                                2,227          1,865            2,466
Total non-interest income                  23,974         21,791           20,936
                                    $      77,082         76,939           81,072
Net interest margin
(tax-equivalent)                             3.24 %         3.49 %           3.92 %



                                      $ Change from     $ Change from     % Change from      % Change from
                                        June 30,        September 30,        June 30,        September 30,
(Dollars in thousands)                    2012              2011               2012              2011
Net interest income
Interest income                      $      (2,177 )   $      (9,418 )          (3 )%             (13 )%
Interest expense                              (137 )          (2,390 )          (2 )%             (21 )%
Total net interest income                   (2,040 )          (7,028 )          (4 )%             (12 )%
Non-interest income
Service charges, loan fees, and
other fees                                     615               483             5  %               4  %
Gain on sale of loans                        1,206             3,607            16  %              70  %
Loss on sale of investments                      -              (813 )         n/m               (100 )%
Other income                                   362              (239 )          19  %             (10 )%
Total non-interest income                    2,183             3,038            10  %              15  %
                                     $         143     $      (3,990 )           -  %              (5 )%


Table of Contents

Net Interest Income
The current quarter net interest income of $53.1 million decreased $2.0 million, or 4 percent, over the prior quarter and decreased $7.0 million, or 12 percent, over the prior year third quarter. The current quarter interest income of $62.0 million decreased $2.2 million, or 3 percent, over the prior quarter and decreased $9.4 million, or 13 percent, over the prior year third quarter. The primary driver of the decrease in interest income was the $19.5 million of premium amortization (net of discount accretion) on investment securities in the current quarter which was an increase of $3.6 million over the prior quarter and an increase of $11.3 million over the prior year third quarter. The current quarter decrease in interest expense of $137 thousand, or 2 percent, from the prior quarter and the decrease of $2.4 million, or 21 percent, in interest expense from the prior year third quarter was the result of a decrease in interest rates on deposits as a result of the Company's continued focus on reducing deposit and borrowing costs. The funding cost (including non-interest bearing deposits) for the current quarter was 54 basis points compared to 57 basis points for the prior quarter and 74 basis points for the prior year third quarter.

The current quarter net interest margin as a percentage of earning assets, on a tax-equivalent basis, was 3.24 percent, a decrease of 25 basis points from the prior quarter net interest margin of 3.49 percent. Although the Company had a 3 basis points improvement in funding costs, there was a 28 basis points reduction in the yield on earning assets of which 17 basis points was attributable to premium amortization. The decrease in yield on earning assets from the current quarter compared to the prior quarter was the result of a 6 basis points reduction in yield on the loan portfolio and a 41 basis points reduction in yield on the investment securities. Of the 41 basis points reduction in yield on the investment securities, 32 basis points was due to the increase in premium amortization. The premium amortization in the current quarter accounted for a 111 basis points reduction in the net interest margin compared to a 94 basis points reduction in the prior quarter and 51 basis points reduction in the net interest margin in the prior year third quarter.

Non-interest Income
The $2.2 million increase in non-interest income for the current quarter offset the $2.2 million decrease in interest income for the current quarter and resulted in an increase of $6 thousand in net revenue (interest income and non-interest income) for the current quarter. Non-interest income for the current quarter totaled $24.0 million, an increase of $2.2 million over the prior quarter and an increase of $3.0 million over the same quarter last year. Gain on sale of loans increased $1.2 million, or 16 percent, over the prior quarter and $3.6 million, or 70 percent, over the prior year third quarter as there was an increase in origination and refinance volume due to lower interest rates and borrowers taking advantage of U.S. government loan modification programs. Service charge fee income increased $615 thousand from the prior quarter, the majority of which was from higher debit card income and overdraft fees driven by the increased number of deposit accounts. Service charge fee income increased $483 thousand, or 4 percent, from the prior year third quarter. Other income of $2.2 million for the current quarter increased $362 thousand, or 19 percent, from the prior quarter. Included in other income was operating revenue of $49 thousand from other real estate owned and gains of $482 thousand on the sale of other real estate owned, which total $531 thousand for the current quarter compared to $414 thousand for the prior quarter and $903 thousand for the prior year third quarter.


Table of Contents

Non-interest Expense
The following tables summarize non-interest expense for the periods indicated,
including the amount and percentage change from June 30, 2012 and September 30,
2011:

                                                   Three Months ended
                                     September 30,       June 30,      September 30,
(Dollars in thousands)                   2012              2012            2011
Compensation and employee benefits $        24,046         23,684            21,607
Occupancy and equipment                      6,001          5,825             6,027
Advertising and promotions                   1,820          1,713             1,762
Outsourced data processing                     801            788               740
Other real estate owned                      6,373          2,199             7,198
Federal Deposit Insurance
Corporation premiums                         1,767          1,300             1,638
Core deposit intangibles
amortization                                   532            535               599
Other expense                                8,838         10,146             8,568
Total non-interest expense before
goodwill impairment charge         $        50,178         46,190            48,139
Goodwill impairment charge                       -              -            40,159
Total non-interest expense         $        50,178         46,190            88,298



                                      $ Change from     $ Change from      % Change from      % Change from
                                        June 30,        September 30,         June 30,        September 30,
(Dollars in thousands)                    2012               2011               2012              2011
Compensation and employee benefits   $         362     $        2,439             2  %              11  %
Occupancy and equipment                        176                (26 )           3  %               -  %
Advertising and promotions                     107                 58             6  %               3  %
Outsourced data processing                      13                 61             2  %               8  %
Other real estate owned                      4,174               (825 )         190  %             (11 )%
Federal Deposit Insurance
Corporation premiums                           467                129            36  %               8  %
Core deposit intangibles
amortization                                    (3 )              (67 )          (1 )%             (11 )%
Other expense                               (1,308 )              270           (13 )%               3  %
Total non-interest expense before
goodwill impairment charge           $       3,988     $        2,039             9  %               4  %
Goodwill impairment charge                       -            (40,159 )         n/m               (100 )%
Total non-interest expense           $       3,988     $      (38,120 )           9  %             (43 )%

. . .

  Add GBCI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for GBCI - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.