10-Q 1 0001.txt FORM 10-Q 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 September 30, 2000 |_| 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 incorporation or organization) Identification No.) 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 October 31, 2000 was 11,441,234. No preferred shares are issued or outstanding. 1 GLACIER BANCORP, INC. Quarterly Report on Form 10-Q Index
Page # ------ Part I. Financial Information Item 1 - Financial Statements Consolidated Condensed Statements of Financial Condition - September 30, 2000, December 31, and September 30, 1999 (unaudited) ................. 3 Consolidated Condensed Statements of Operations - Three months and nine months ended September 30, 2000 and 1999 (unaudited) 4 Consolidated Condensed Statements of Cash Flows - Nine months ended September 30, 2000 and 1999 (unaudited) ................ 5 Notes to Consolidated Condensed Financial Statements ...................... 6 Item 2 - Management's Discussion and Analysis Of Financial Condition and Results of Operations ......................... 12 Item 3 - Quantitative and Qualitative Disclosure about Market Risk .............. 15 Part II Other Information ............................................................ 16 Item 6 Exhibits and Reports on Form 8-K ......................................... 16 Signatures ...................................................................... 17
2 GLACIER BANCORP, INC. CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
------------- ------------ ------------- (Unaudited - $ in thousands except per share and per share data) September 30, December 31, September 30, 2000 1999 1999 ------------- ------------ ------------- Assets: Cash on hand and in banks ..................................... $ 33,700 50,590 33,435 Federal funds sold ............................................ -- 64 278 Interest bearing cash deposits ................................ 4,255 1,711 8,742 ------------ ------------ ------------ Cash and cash equivalents ................................ 37,955 52,365 42,455 ------------ ------------ ------------ Investments: Investment securities, held-to-maturity .................. -- 500 500 Investment securities, available-for-sale ................ 65,419 61,560 61,351 Mortgage backed securities, held-to-maturity ............. -- 251 264 Mortgage backed securities, available-for-sale ........... 138,430 147,001 142,945 ------------ ------------ ------------ Total Investments ................................... 203,849 209,312 205,060 ------------ ------------ ------------ Net loans receivable: Real estate loans ........................................ 236,071 225,041 220,443 Commercial Loans ......................................... 325,974 279,341 258,704 Installment and other loans .............................. 168,789 154,548 147,016 Allowance for losses ..................................... (7,808) (6,722) (6,549) ------------ ------------ ------------ Total Loans, net .................................... 723,026 652,208 619,614 ------------ ------------ ------------ Premises and equipment, net ................................... 25,005 24,670 22,429 Real estate and other assets owned ............................ 97 550 183 Federal Home Loan Bank of Seattle stock, at cost .............. 16,146 15,134 14,624 Federal Reserve stock, at cost ................................ 1,639 1,467 1,431 Accrued interest receivable ................................... 6,233 5,611 4,871 Goodwill, net ................................................. 6,628 7,035 2,432 Deferred taxes ................................................ 1,512 2,895 125 Other assets .................................................. 3,951 2,754 4,916 ------------ ------------ ------------ $ 1,026,041 974,001 918,140 ============ ============ ============ Liabilities and stockholders' equity: Deposits - non-interest bearing ............................... $ 152,022 126,927 134,824 Deposits - interest bearing ................................... 564,965 517,179 441,960 Advances from Federal Home Loan Bank of Seattle ............... 177,909 208,650 193,942 Securities sold under agreements to repurchase ................ 20,699 19,766 43,771 Other borrowed funds .......................................... 7,985 6,848 7,769 Accrued interest payable ...................................... 3,387 2,717 2,992 Current income taxes .......................................... 941 108 178 Other liabilities ............................................. 5,970 6,442 7,137 Minority Interest ............................................. 325 308 307 ------------ ------------ ------------ Total liabilities ........................................ 934,203 888,945 832,880 ------------ ------------ ------------ Common stock, $ 01 par value per share ........................ 114 104 104 Paid-in capital ............................................... 101,756 87,386 87,052 Retained earnings (deficit) - substantially restricted ........ (6,057) 2,997 1,884 Accumulated other comprehensive (loss) ........................ (3,975) (5,431) (3,780) ------------ ------------ ------------ Total stockholders' equity ............................... 91,838 85,056 85,260 ------------ ------------ ------------ $ 1,026,041 974,001 918,140 ============ ============ ============ Number of shares outstanding .................................. 11,441,234 10,394,701 10,385,246
See accompanying notes to consolidated condensed financial statements 3 GLACIER BANCORP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
-------------------------------- -------------------------------- (unaudited - $ in thousands except per share data) Three months ended Sept. 30, Nine months ended Sept. 30, -------------------------------- -------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Interest income: Real estate loans ........................... $ 4,891 4,395 14,136 13,351 Commercial loans ............................ 7,638 5,583 20,943 15,594 Consumer and other loans .................... 4,002 3,200 11,259 8,963 Investment securities ....................... 3,869 3,671 11,601 8,815 ------------ ------------ ------------ ------------ Total interest income ................. 20,400 16,849 57,939 46,723 ------------ ------------ ------------ ------------ Interest expense: Deposits .................................... 6,025 3,953 16,246 11,695 Advances .................................... 3,540 2,678 10,237 6,788 Repurchase agreements ....................... 272 599 643 1,006 Other borrowed funds ........................ 44 30 234 214 ------------ ------------ ------------ ------------ Total interest expense ................ 9,881 7,260 27,360 19,703 ------------ ------------ ------------ ------------ Net interest income ............................... 10,519 9,589 30,579 27,020 Provision for loan losses ................... 491 478 1,483 1,246 ------------ ------------ ------------ ------------ Net Interest Income after provision for loan losses 10,028 9,111 29,096 25,774 ------------ ------------ ------------ ------------ Non-interest income: Service charges and other fees .............. 1,997 1,724 5,911 5,006 Miscellaneous loan fees and charges ......... 508 364 1,344 1,244 Gain on sale of loans ....................... 545 708 1,512 2,607 Gains on sale of investments ................ (5) 1 (5) 21 Other income ................................ 536 402 1,335 874 ------------ ------------ ------------ ------------ Total fees and other income ............ 3,581 3,199 10,097 9,752 ------------ ------------ ------------ ------------ Non-interest expense: Compensation, employee benefits and related expenses ................. 3,992 3,627 12,078 10,663 Occupancy expense ........................... 1,221 997 3,568 3,056 Data processing expense ..................... 264 388 1,143 957 Other expenses .............................. 1,980 2,186 6,261 6,433 Minority interest ........................... 16 13 45 36 ------------ ------------ ------------ ------------ Total non-interest expense ............. 7,473 7,211 23,095 21,145 ------------ ------------ ------------ ------------ Earnings before income taxes ...................... 6,137 5,099 16,098 14,381 Federal and state income tax expense .............. 2,283 1,833 5,825 5,058 ------------ ------------ ------------ ------------ Net earnings ...................................... $ 3,853 3,266 10,273 9,323 ============ ============ ============ ============ Basic earnings per share (1) ...................... 0.34 0.29 0.90 0.82 Diluted earnings per share (1) .................... 0.33 0.28 0.89 0.81 Dividends declared per share (1) .................. 0.15 0.14 0.44 0.40 Return on average assets (annualized) ............. 1.50% 1.66% 1.37% 1.60% Return on average equity (annualized) ............. 17.30% 15.14% 15.82% 14.46% Average outstanding shares - basic (1) ............ 11,441,234 11,418,202 11,439,462 11,340,937 Average outstanding shares - diluted (1) .......... 11,536,174 11,607,113 11,547,895 11,554,851
(1) Adjusted for stock dividends See accompanying notes to consolidated financial statements. 4 GLACIER BANCORP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
--------------------------- (Unaudited -dollars in thousands) Nine months ended Sept 30, --------------------------- 2000 1999 ---------- ---------- OPERATING ACTIVITIES : Net earnings ...................................................... $ 10,273 9,323 Adjustments to reconcile net earnings to net cash provided by operating activities: Mortgage loans held for sale originated or acquired ............. (69,791) (117,322) Proceeds from sales of mortgage loans held for sale ............. 69,590 136,210 Proceeds from sales of commercial loans ......................... 8,270 7,538 Provision for loan losses ....................................... 1,483 1,246 Depreciation of premises and equipment .......................... 1,056 1,356 Amortization of goodwill ........................................ 407 169 Amortization of investment securities premiums and discounts, net 116 498 Net loss (gain) on investment sales ............................. 5 (21) Net decrease in deferred income taxes ........................... 387 231 Net (increase) in accrued interest receivable ................... (622) (606) Net increase in accrued interest payable ........................ 670 714 Net increase in current income taxes ............................ 833 451 Net (increase) in other assets .................................. (1,197) (874) Net (decrease) in other liabilities and minority interest ....... (455) (95) FHLB stock dividends ............................................ (745) (784) --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES .................... 30,280 38,033 --------- --------- INVESTING ACTIVITIES: Proceeds from sales, maturities and prepayments of securities available-for-sale ................................. 31,007 23,352 Purchases of securities available-for-sale ........................ (23,213) (120,965) Proceeds from maturities and prepayments of securities held-to-maturity ................................... -- 828 Principal collected on installment and commercial loans ........... 181,586 157,799 Installment and commercial loans originated or acquired ........... (261,127) (235,303) Principal collections on mortgage loans ........................... 98,727 75,018 Mortgage loans originated or acquired ............................. (109,556) (73,279) Net proceeds from sales (acquisition) of real estate owned ........ 453 (36) Net purchase of FHLB and FRB stock ................................ (439) (1,103) Net addition of premises and equipment ............................ (1,391) (3,210) --------- --------- NET CASH USED IN INVESTING ACTIVITIES ........................ (83,953) (176,900) --------- --------- FINANCING ACTIVITIES: Net increase (decrease) in deposits ............................... 72,881 31,874 Net increase (decrease) in FHLB advances and other borrowed funds . (29,604) 74,184 Net increase in securities sold under repurchase agreements ....... 933 26,532 Cash dividends paid to stockholders ............................... (5,010) (4,510) Proceeds from exercise of stock options and other stock issued .... 63 1,370 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES ..................... 39,263 129,450 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS ..................... (14,410) (9,417) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................. 52,365 51,872 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................ $ 37,955 42,455 ========= ========= NON-CASH INVESTING AND FINANCING ACTIVITIES (See Note 12) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest ......................... $ 26,690 19,036 Income taxes ..................... 4,992 5,333
See accompanying notes to consolidated condensed financial statements 5 Notes to Consolidated Condensed Financial Statements 1) Basis of Presentation: In the opinion of Management, the accompanying unaudited consolidated condensed 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 September 30, 2000, December 31, 1999, and September 30, 1999 and the results of operations and cash flows for the nine months ended September 30, 2000 and 1999. The accompanying consolidated condensed financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated condensed 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, 1999. Operating results for the three months ended September 30, 2000 are not necessarily indicative of the results anticipated for the year ending December 31, 2000. Certain reclassifications have been made to the 1999 financial statements to conform to the 2000 presentation. 2) Organizational Structure: The Company is the parent company for eight 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"), and Community First, Inc. ("CFI"), all located in Montana, and Mountain West Bank (Mountain West) which is located in Idaho. CFI provides full service brokerage services through Raymond James Financial Services, Inc. Big Sky Western Bank became a subsidiary of the Company on January 20, 1999 and Mountain West became a subsidiary on February 4, 2000. The pooling of interests accounting method was used for both acquisitions. Under this method, financial information for each of the periods presented includes the combined companies as though the mergers had occurred prior to the earliest date presented. At September 30, 2000, the Company owned 100% of Glacier, Missoula, Helena, Big Sky, Mountain West and CFI; 94% of Whitefish, and 98% of Eureka. 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 Community First, Inc. Western Bank of Helena of Coeur d'Alene, Idaho (Brokerage services) (Commercial bank) (Commercial bank) (Commercial bank) ------------------ -------------------- ----------------------- ---------------------
On February 4, 2000, the Company issued 844,257 shares of common stock in exchange for all of the outstanding stock of Mountain West Bank. This business combination has been accounted for as a 6 pooling-of-interests combination and, accordingly, the consolidated condensed financial statements for periods prior to the combination have been restated to include the accounts and results of operations of Mountain West Bank. The results of operations previously reported by the separate companies and the combined amounts presented in the accompanying consolidated condensed financial statements are summarized below: (Dollars in thousands)
Three months ended Nine months ended Sept. 30, 1999 Sept. 30, 1999 ------------------ ----------------- Net earnings of: Glacier Bancorp, Inc ................... $3,163 9,060 Mountain West Bank ..................... 103 263 ------ ------ Combined ............................... $3,266 9,323 ====== ======
3) Stock Dividend: On April, 26, 2000, a 10% stock dividend was approved by the Board of Directors. As a result all per share amounts from time periods preceding this date have been restated to illustrate the effect of the stock dividend. The current deficit in retained earnings is a result of the stock dividend. Any fractional shares were paid in cash. 4) Ratios: Returns on average assets and average equity were calculated based on daily averages. 5) Cash Dividend Declared: On September 27, 2000, the Board of Directors declared of $.15 per share quarterly cash dividend to stockholders of record on October 10, 2000, payable on October 19, 2000. 6) 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. The following schedule contains the data used in the calculation of basic and diluted earnings per share.
Three Three Nine Nine months ended months ended months ended months ended (Dollars in thousands except per share amounts) Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999 -------------- -------------- -------------- -------------- Net income available to common stockholders, basic and diluted $ 3,853 3,266 10,273 9,323 =========== =========== =========== =========== Average outstanding shares - basic 11,441,234 11,418,202 11,439,462 11,340,937 Add: dilutive stock options 94,940 188,911 108,433 213,914 ----------- ----------- ----------- ----------- Average outstanding shares - diluted 11,536,174 11,607,113 11,547,895 11,554,851 =========== =========== =========== =========== Basic earnings per share $ .34 .29 .90 .82 =========== =========== =========== =========== Diluted earnings per share $ .33 .28 .89 .81 =========== =========== =========== ===========
7 7) Investments: A comparison of the amortized cost and estimated fair value of the Company's investment securities is as follows: INVESTMENT SECURITIES AS OF SEPT 30, 2000
Dollars in thousands Available for Sale Estimated Weighted Amortized Gross Unrealized Fair U.S. Government and Federal Agencies Yield Cost Gains Losses Value -------- --------- ----- ---------- --------- maturing within one year .................... 5.21% 700 0 (7) 693 maturing one year through five years ........ 6.30% 4,975 -- (106) 4,869 maturing five years though ten years ........ 6.66% 3,049 -- (65) 2,984 maturing after ten years .................... 8.11% 1,098 1 (11) 1,088 ---- ------- ------- ------- ------- 6.54% 9,822 1 (189) 9,634 ---- ------- ------- ------- ------- State and Local Governments and other issues: maturing within one year .................... 5.61% 500 0 (34) 466 maturing one year through five years ........ 5.91% 1,822 30 (3) 1,849 maturing five years through ten years ....... 7.61% 4,020 23 (57) 3,986 maturing after ten years .................... 5.56% 50,499 485 (1,500) 49,484 ---- ------- ------- ------- ------- 5.72% 56,841 538 (1,594) 55,785 ---- ------- ------- ------- ------- Mortgage-Backed Securities .................... 6.84% 40,682 57 (854) 39,885 Real Estate Mortgage Investment Conduits ...... 7.12% 103,005 117 (4,577) 98,545 ---- ------- ------- ------- ------- Total Available-for-Sale Securities .... 6.66% 210,350 713 (7,214) 203,849 ==== ======= ======= ======= =======
INVESTMENT SECURITIES AS OF DECEMBER 31, 1999
Estimated Dollars in thousands Weighted Amortized Gross Unrealized Fair Held-to-Maturity Yield Cost Gains Losses Value -------- --------- ------- ------- --------- U.S. Government and Federal Agencies maturing one year through five years ............... 6.26% $ 500 -- (5) 495 Mortgage-Backed Securities ........................... 6.50% 251 -- (6) 245 ---- -------- --- ------ ------- Total Held-to-Maturity Securities ............. 6.42% 751 -- (11) 740 ==== ======== === ====== ======= Available for Sale U.S. Government and Federal Agencies maturing within one year ............................ 5.98% 1,998 3 (4) 1,997 maturing one year through five years ................ 6.37% 4,480 15 (105) 4,391 maturing five years though ten years ................ 6.76% 4,546 -- (221) 4,325 maturing after ten years ............................ 5.20% 1,322 2 (13) 1,310 ---- -------- --- ------ ------- 6.33% 12,346 20 (343) 12,023 ---- -------- --- ------ ------- State and Local Governments and other issues: maturing within one year ............................ 6.50% 397 1 (49) 349 maturing one year through five years ................ 4.92% 1,302 14 (5) 1,311 maturing five years through ten years ............... 6.88% 4,120 25 (20) 4,125 maturing after ten years ............................ 5.21% 46,698 39 (2,985) 43,752 ---- -------- --- ------ ------- 5.34% 52,517 79 (3,059) 49,537 ---- -------- --- ------ ------- Mortgage-Backed Securities ............................ 6.96% 44,277 164 (1,310) 43,131 Real Estate Mortgage Investment Conduits .............. 6.94% 108,374 126 (4,630) 103,870 ---- -------- --- ------ ------- Total Available for Sale Securities ................... 6.52% $217,514 389 (9,342) 208,561 ==== ======== === ====== =======
8) 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 Sept. 30, 2000 8
Tier 1 (Core) Tier 2 (Total) Leverage (dollars in thousands) Capital Capital Capital ----------- ----------- ----------- GAAP Capital ............................. $ 91,838 91,838 91,838 Less: Goodwill .......................... (6,628) (6,628) (6,628) Plus: Accumulated other comprehensive loss on AFS securities .............. 3,975 3,975 3,975 Minority Interest ........................ 325 325 325 Allowance for loan losses ................ -- 7,808 -- Other regulatory adjustments ............. (169) (169) (169) ----------- ----------- ----------- Regulatory capital computed .............. $ 89,341 97,149 89,341 =========== =========== =========== Risk weighted assets ..................... $ 737,468 737,468 =========== =========== Total average assets ..................... 1,037,097 =========== Capital as % of defined assets ........... 12.11% 13.17% 8.61% Regulatory "well capitalized" requirement 6.00% 10.00% 5.00% ----------- ----------- ----------- Excess over "well capitalized" requirement 6.11% 3.17% 3.93% =========== =========== ===========
9) 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 For the nine months ended Sept 30, ended Sept 30, Dollars in thousands 2000 1999 2000 1999 ------- ----- ------ ----- Net earnings .............................................. $ 3,853 3,266 10,273 9,323 Unrealized holding gains (losses) arising during the period 2,598 (2,888) 2,460 (8,256) Transfer from held-to-maturity ............................ -- -- (11) 288 Tax expense ............................................... (1,020) 916 (996) 2,977 ------- ----- ------ ----- Net after tax ................................. 1,578 (1,972) 1,453 (4,991) Less: reclassification adjustment for amounts included in net income ................................. (5) 1 (5) 21 Tax expense ............................................... 2 -- 2 (7) ------- ----- ------ ----- Net after tax ................................. (3) 1 (3) 14 Net unrealized gain (loss) on securities ..... 1,581 (1,973) 1,456 (5,005) ------- ----- ------ ----- Total comprehensive earnings .............. $ 5,434 1,293 11,729 4,318 ======= ===== ====== =====
10) Subsequent Events None 11) 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 9 estimated usage of those services. The operating segment identified as "Other" includes the Parent, Community First, Inc., and inter-company eliminations.
Nine months ended and as of Sept. 30, 2000 ----------------------------------------------------------- (Dollars in thousands) Glacier Whitefish Eureka Missoula Helena ------- --------- ------ -------- ------ Revenues from external customers 29,340 3,665 1,985 14,190 6,230 Intersegment revenues 866 6 2 -- 75 Expenses 25,244 2,980 1,605 11,326 5,458 Intercompany eliminations -- -- -- -- -- ------- ------- ------- ------- ------- Net income 4,962 691 382 2,864 847 ======= ======= ======= ======= ======= Total Assets 459,096 55,206 30,907 202,782 86,678 ======= ======= ======= ======= ======= Mountain Total Big Sky West Other Consolidated ------- --------- ----- ------------ Revenues from external customers 4,648 7,634 344 68,036 Intersegment revenues -- -- 12,513 13,462 Expenses 4,259 6,943 (52) 57,763 Intercompany eliminations -- -- (13,462) (13,462) ------ ------- ------ --------- Net income 389 691 (553) 10,273 ====== ======= ====== ========= Total Assets 72,806 116,477 2,089 1,026,041 ====== ======= ====== =========
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Nine months ended and as of Sept. 30, 1999 ----------------------------------------------------------- (Dollars in thousands) Glacier Whitefish Eureka Missoula Helena ------- --------- ------ -------- ------ Revenues from external customers 24,732 2,816 1,687 12,371 5,395 Intersegment revenues 461 50 2 51 75 Expenses 20,638 2,297 1,410 9,578 4,560 Intercompany eliminations -- -- -- -- -- ------- ------- ------- ------- ------- Net income 4,555 569 279 2,844 910 ======= ======= ======= ======= ======= Total Assets 433,910 48,518 27,487 183,410 78,836 ======= ======= ======= ======= ======= Mountain Total Big Sky West Other Consolidated ------- --------- ----- ------------ Revenues from external customers 3,400 5,675 399 56,475 Intersegment revenues 33 -- 9,667 10,339 Expenses 3,111 5,412 146 47,152 Intercompany eliminations -- -- (10,339) (10,339) ------ ------ ------ ------- Net income 322 263 (419) 9,323 ====== ====== ====== ======= Total Assets 58,356 82,884 4,739 918,140 ====== ====== ====== =======
10
Three months ended and as of Sept. 30, 2000 ----------------------------------------------------------- (Dollars in thousands) Glacier Whitefish Eureka Missoula Helena ------- --------- ------ -------- ------ Revenues from external customers 10,246 1,276 714 4,924 2,231 Intersegment revenues 236 1 1 -- 25 Expenses 8,722 1,043 581 3,881 1,885 Intercompany eliminations -- -- -- -- -- ------- ------- ------- ------- ------- Net income 1,760 234 133 1,044 371 ======= ======= ======= ======= ======= Total Assets 459,096 55,206 30,907 202,782 86,678 ======= ======= ======= ======= ======= Mountain Total Big Sky West Other Consolidated ------- --------- ----- ------------ Revenues from external customers 1,687 2,715 188 23,981 Intersegment revenues -- -- 4,523 4,786 Expenses 1,528 2,434 53 20,128 Intercompany eliminations -- -- (4,786) (4,786) ------ ------- ----- --------- Net income 159 281 (128) 3,853 ====== ======= ===== ========= Total Assets 72,806 116,477 2,089 1,026,041 ====== ======= ===== =========
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Three months ended and as of Sept. 30, 1999 ----------------------------------------------------------- (Dollars in thousands) Glacier Whitefish Eureka Missoula Helena ------- --------- ------ -------- ------ Revenues from external customers 8,789 1,048 608 4,250 1,855 Intersegment revenues 315 3 (3) 30 52 Expenses 7,455 837 482 3,296 1,622 Intercompany eliminations -- -- -- -- -- ------- ------- ------- ------- ------- Net income 1,670 209 112 1,005 308 ======= ======= ======= ======= ======= Total Assets 433,910 48,518 27,487 183,410 78,836 ======= ======= ======= ======= ======= Mountain Total Big Sky West Other Consolidated ------- --------- ----- ------------ Revenues from external customers 1,682 1,903 (87) 20,048 Intersegment revenues 33 -- 2,659 3,089 Expenses 1,560 1,800 (256) 16,782 Intercompany eliminations -- -- (3,089) (3,089) ------ ------ ----- ------- Net income 120 103 (261) 3,266 ====== ====== ===== ======= Total Assets 58,356 82,884 4,739 918,140 ====== ====== ===== =======
12) Non-Cash Investing and Financing Activities Non-cash investing and financing activities consist of the following (dollars in thousands):
Nine months ended September 30, ------------------------------- 2000 1999 ----------- ------------ Transfer from held-to-maturity to available-for-sale securities $ 751 8,272 10% stock dividend, transferred from retained earnings to capital stock and additional paid in capital $ 14,317 19,886
11 13) Pending Acquisitions On September 14, 2000, the Company entered into agreements to purchase seven Wells Fargo & Company and First Security Corporation branches located in Boise, Nampa, Hailey, and Ketchum, Idaho and Brigham City and Park City, Utah to be operated by its wholly owned subsidiary, Mountain West Bank of Coeur d'Alene, Idaho. The purchase includes approximately $185 million in deposits, $50 million in loans, and real estate and equipment of the branches. The acquisition is expected to be completed by March 31, 2000, pending regulatory approvals. On September 20, 2000, the Company announced that it had entered into a definitive agreement for the acquisition of Missoula, Montana based WesterFed Financial Corporation with June 30, 2000 assets of $946 million, loans of $619 million, and deposits of $607 million. WesterFed is the holding company for Western Security Bank, Montana's largest savings bank with twenty-seven offices in fourteen Montana communities. Shareholders of WesterFed will be allowed to elect to receive shares of Glacier common stock or cash, within certain limitations. The acquisition is expected to be completed in the first quarter of 2001, pending regulatory approval and approval by both company's shareholders. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition - This section discusses the changes in Statement of Financial Condition items from December 31, 1999 to September 30, 2000. From December 31, 1999, total assets have grown $52.040 million, or 5.3 percent, to $1.026 billion. This increase was primarily the net result of an increase in loans of $70.818 million, or 10.9 percent, a decrease in investments of $5.463 million, or 2.6 percent, and cash and cash equivalents of $14.410 million, or 27.5 percent. Loan growth has occurred in all categories with commercial loans increasing $46.633 million, or 16.7 percent, consumer loans increasing $14.241 million, or 9.2 percent, and residential real estate loans increasing $11,030 million, or 4.9 percent, which is consistent with management's plan to retain fewer real estate loans that generally have lower interest rates than other types of loans. Loans sold to the secondary market amounted to $87.860 million and $143.748 million during the first nine months of 2000 and 1999, respectively. The amount of loans serviced for others on September 30, 2000 was approximately $207 million. Total deposits increased $72.881 million, or 11.3 percent. $25.095 million of the increase was in non-interest bearing deposits, an increase of 19.8 percent.. Interest bearing deposits increased $47.786 million, or 9.2 percent. Included in interest bearing deposits are brokered certificates of deposit of approximately $16 million. Increased deposits reduced the demand for FHLB advances, which decreased $30.741 million, or 14.7 percent. All seven institutions 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. The following table demonstrates the available FHLB lines of credit and the extent of utilization as of September 30, 2000 (in thousands): Community investment program advances not counted against the available line of credit were $1.974 million. 12 Available line Amount Used Available -------------- ----------- --------- Glacier Bank $183,638 103,618 80,020 Glacier Bank of Whitefish 13,802 5,415 8,387 Glacier Bank of Eureka 9,272 6,587 2,685 First Security Bank Missoula 40,556 29,165 11,391 Valley Bank of Helena 17,336 1,650 15,686 Big Sky Western Bank 21,871 12,500 9,371 Mountain West Bank 34,943 17,000 17,943 -------- -------- -------- Totals $321,418 175,935 145,483 ======== ======== ======== Classified Assets and Reserves Non-performing assets consist of non-accrual loans, accruing loans that are 90 days or more overdue, and real estate and other assets acquired by foreclosure or deed-in-lieu thereof, net of related reserves. Non-performing assets at September 30, 2000 were $1.870 million, a decrease of $408 thousand or 17.9 percent from December 31, 1999, while the allowance for losses increased $1.086 million or 16.2 percent during the same period. Changes in the information related to the allowance for loan loss account are shown in the following table:
September 30, 2000 December 31, 1999 Total Allowance for Loan and Real Estate Owned Losses: $7.808 million $6.722 million Allowance as a percentage of Total Loans: 1.07% 1.02% Allowance as a percentage of Non-performing Assets: 418% 295%
Impaired Loans As of September 30, 2000, there were no loans considered impaired. 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 September 30, 2000, 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. Stockholders' Equity Total stockholders' equity increased $6.782 million, or 8.0 percent, primarily the result of earnings retention. Results of Operations - The three months ended September 30, 2000 compared to the three months ended September 30, 1999. The Company reported quarterly earnings of $3.853 million, or fully diluted earnings per share of $.33 compared to $3.266 million, and diluted earnings of $.28 last year, an increase of 17.9 percent. Return on average assets and return on average equity, were 1.50 percent and 17.30 compared to 1.66 percent and 15.14 percent for the same quarter last year. 13 Net Interest Income Net interest income for the quarter was $10.519 million, an increase of $930 thousand, or 9.7 percent, over the same period in 1999. The Federal Reserve Board has raised interest rates 175 basis points since June 30, 1999, which created a larger percentage increase in interest expense than in interest income. However, the growth in earning assets and the increase in non-interest bearing deposits resulted in a significant increase in net interest income. Net interest margin as a percentage of earning assets, on a tax equivalent basis, has declined from 4.67 percent in 1999 to 4.46 percent in 2000. Funding costs continue to put pressure on the net interest margin. Non-interest Income Fee income from loans was lower in 2000 with less activity due to higher mortgage rates. Loan fees declined $19 thousand, or 1.8 percent, from the 1999 amount. Offsetting this decline was an increase in service charge and other fee income of $273 thousand, and other income of $128 thousand for a net increase of $382 thousand, or 11.9 percent, in non-interest income. Non-interest Expense Non-interest expense increased by $262 thousand, or 3.6 percent, over the third quarter of 1999. Compensation and employee benefits increased $365 thousand, or 10.1 percent. The addition of the two Butte, Montana offices, staffing additions at Boise, Sun Valley, Bozeman and the data center were the primary reasons for the compensation increase. Occupancy and equipment expense was up $224 thousand, or 22.5 percent, for the same reasons as the increased compensation. All other expenses were down $327 thousand, or 4.4 percent, the result of general cost savings and the conversion of the Helena and Big Sky banks to the Company's data processing system. Operating results for the nine months ended September 30, 2000 compared to the nine months ended September 30, 1999 Earnings were $10.273 million, or fully diluted earnings per share of $.89 compared to $.81 last year, an increase of 9.9 percent. Return on average assets and return on average equity, were 1.37 percent and 15.82. percent, respectively. The 1999 return on average assets was 1.60 percent and the return on average equity was 14.46 percent. Net interest income Net interest income for the nine months was $30.579 million, an increase of $3.559 million, or 13.2 percent over the same 1999 period. Growth in earning assets combined with the increased percentage of higher yielding commercial and consumer loans was the primary reason for the increase in net interest income. The net interest margin as a percentage of average earning assets on a tax equivalent basis, was 4.46 percent, a decline from 4.67 percent in 1999. Interest income increased $11.216 million, or 24.0 percent over the same period last year. Interest expense increased $7.657 million, or 38.9 percent due to the 175 basis point increase in short term interest rates since June 1999, and the increase in the amount of interest-bearing deposits. Loan loss provision The provision for loan losses was $1.483 million, an increase of $237 thousand or 19.0 percent from the nine-month period in 1999, exceeding the 11 percent growth in loans. The level of non-performing loans remains at a relatively low level compared to the Company's peer group and has declined from a year ago. Non-interest income Loan fee income declined by $995 thousand, or 25.8 percent, the result of lower volume of mortgage loan activity due to increased interest rates. Increases in service charges and other fee income of $905 thousand, or 14 18.1 percent, and other income of $461 thousand offset the decline in loan fee income and resulted in an increase in total non-interest income of $345 thousand, or 3.5 percent. Non-interest expense Total non-interest expense increased 9.2 percent, or $1.950 million, and was primarily the result of increased compensation expense of $1.415 million and increased occupancy and equipment expense of $512 thousand. The compensation increases are primarily the result of the addition of two offices in Butte, Montana, staffing increases in Boise, Sun Valley, and Bozeman offices, and the Company's data center. Occupancy and equipment expense increases resulted from those same locations. Forward-Looking Statements When used in this report, 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 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 quarterly report on Form 10-Q for the period ending September 30, 2000, its Annual Report on Form 10-K for the period ending December 31, 1999 and other documents the company files from time to time with the Securities Exchange Commission. 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 15 Company's NII sensitivity analysis as of June 30, 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 June 30, 2000 to September 30, 2000. Interest Rate Sensitivity +200 bp -200 bp ------- ------- Estimated sensitivity -3.66% 2.68% Estimated increase (decrease) in net interest income (1,916) 1,521 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. 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 None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 16 3.1 Amendment to Certificate of Incorporation dated May 3, 2000. 3.2. Amended and Restated Certificate of Incorporation 27 - Financial data schedule (b) Current Report on Form 8-K On September 27, 2000, a Form 8-K was filed disclosing that Glacier Bancorp, Inc. had entered into a definitive agreement with WesterFed Financial Corporation. Under the terms of the Merger Agreement, WesterFed Financial corporation will become a separate, wholly-owned subsidiary of Glacier. The transaction is subject to regulatory and shareholder approval and is expected to close in early 2001. 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. November 1, 2000 By: /s/ Michael J. Blodnick ---------------------------- Michael J. Blodnick President/CEO November 1, 2000 By: /s/ James H. Strosahl ---------------------------- James H. Strosahl Executive Vice President/CFO 17