<PAGE> 1
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 June 30, 1996
[ ] 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
G L A C I E R B A N C O R P , I N C.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 81-0468393
- ----------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
P.O. Box 27; 202 Main Street, Kalispell, Montana 59903-0027
- --------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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 August 2,
1996, was 3,363,297. No preferred shares are issued or outstanding.
1
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GLACIER BANCORP, INC.
QUARTERLY REPORT ON FORM 10-Q
Index
<TABLE>
<CAPTION>
Page #
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Financial Condition -
June 30, 1996, December 31, and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Operations -
Three and six months ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows -
Six months ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
2
<PAGE> 3
GLACIER BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited - dollars in thousands) June 30, December 31, June 30,
- ------------------------------------------------- 1996 1995 1995
-------- ------------ --------
<S> <C> <C> <C>
ASSETS:
Cash on hand and in banks $ 15,804 15,367 15,577
Interest bearing cash deposits 860 710 840
--------- ------- -------
Cash and cash equivalents 16,664 16,077 16,417
--------- ------- -------
Investments:
Investment securities, held-to-maturity (note 7) 10,269 9,366 11,943
Investment securities, available-for-sale
(note 7) 33,425 28,524 13,365
Mortgaged backed securities, held-to-maturity
(note 7) 3,723 3,943 20,619
Mortgaged backed securities, available-for-sale
(note 7) 31,895 31,084 8,530
--------- ------- -------
Total Investments 79,312 72,917 54,457
--------- ------- -------
Net loans receivable:
Real estate loans 181,404 174,675 169,945
Commercial Loans 48,889 49,262 49,980
Installment and other loans 63,255 57,104 51,681
--------- ------- -------
Total Loans 293,548 281,040 271,606
--------- ------- -------
Office properties, equipment and leasehold
improvements, at cost less accumulated
depreciation of $4,617, $4,212 and $4,064,
at June 30, 1996, December 31, 1995 and
June 30, 1995, respectively 7,788 7,476 6,987
Real estate and other assets owned 36 52 10
Federal Home Loan Bank of Seattle stock, at cost 7,728 7,123 6,424
Federal Reserve stock, at cost 90 90 90
Accrued interest receivable 2,698 2,622 2,235
Other assets 603 660 616
--------- ------- -------
$ 408,467 388,058 358,842
========= ======= =======
Liabilities and stockholders' equity:
Deposits (Interest Bearing) $ 177,021 171,565 162,870
Demand deposits (Non-Interest Bearing) 30,425 26,268 26,176
Advances from Federal Home Loan Bank of Seattle 120,892 120,714 110,507
Securities sold under agreements to repurchase 31,327 20,805 14,871
Accrued interest payable 1,267 479 918
Advance payments by borrowers for taxes and
insurance 1,045 1,007 886
Current federal and state income taxes 305 87 149
Deferred federal and state income taxes 1,221 2,232 1,686
Accrued expenses and other liabilities 6,101 6,632 5,082
Minority Interest 390 501 529
--------- ------- -------
Total liabilities 369,994 350,290 323,674
--------- ------- -------
Preferred stock, $.01 par value per share,
7,500,000 shares authorized, none issued 0 0 0
Common stock, $.01 par value per share,
12,500,000 shares authorized; 3,361,133,
3,356,191, and 3,366,711 shares issued and
outstanding at June 30, 1996, December 31,
1995, and June 30, 1995, respectively (1) 34 31 31
Paid-in capital 29,369 22,465 22,383
Retained earnings 10,746 15,411 13,316
Treasury stock at cost (1,066) (874) (559)
Net unrealized gain (loss) on securities available
for sale (610) 735 (3)
--------- ------- -------
Total stockholders' equity 38,473 37,768 35,168
--------- ------- -------
$ 408,467 388,058 358,842
========= ======= =======
Book value per share $ 11.45 11.25 10.45
========= ======= =======
</TABLE>
(1) Number of shares outstanding adjusted for 10% stock dividend in 1996.
3
<PAGE> 4
GLACIER BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------- ------------------------- -------------------------
(unaudited - dollars in thousands except per share data) Three months ended Year to Date (Six months)
- -------------------------------------------------------- ------------------------- -------------------------
06/30/96 06/30/95 06/30/96 06/30/95
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest on real estate loans $ 3,713 3,595 7,370 7,168
Interest on mortgage backed securities 679 577 1,325 1,160
Interest on installment, commercial, and other loans 2,494 2,246 4,922 4,316
Interest and dividends on investments 958 547 1,859 1,047
---------- ---------- ---------- ----------
Total interest income 7,844 6,965 15,476 13,691
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits, net of penalties on
early withdrawals 1,676 1,445 3,341 2,778
Interest on advances and repurchase agreements 2,004 1,728 3,969 3,381
---------- ---------- ---------- ----------
Total interest expense 3,680 3,173 7,310 6,159
---------- ---------- ---------- ----------
Net interest income: 4,164 3,792 8,166 7,532
Provision for loan losses 56 144 95 200
---------- ---------- ---------- ----------
Net Interest Income after provision for loan losses 4,108 3,648 8,071 7,332
---------- ---------- ---------- ----------
Non-interest income:
Loan fees and service charges 1,138 981 2,215 1,781
Gains (Losses) on sale of investments 0 0 0 0
Other income 260 252 485 505
---------- ---------- ---------- ----------
Total fees and other income 1,398 1,233 2,700 2,286
---------- ---------- ---------- ----------
Non-interest expense:
Compensation, employee benefits
and related expenses 1,452 1,223 2,842 2,466
Occupancy expense 307 265 558 570
Data processing expense 141 131 278 252
Other expenses 1,009 986 2,048 1,951
Minority interest 17 21 36 42
---------- ---------- ---------- ----------
Total non-interest expense 2,926 2,626 5,762 5,281
---------- ---------- ---------- ----------
Earnings before income taxes 2,580 2,255 5,009 4,337
Federal and state income tax expense 996 878 1,936 1,690
---------- ---------- ---------- ----------
Net earnings $ 1,584 1,377 3,073 2,647
========= ========== ========== ==========
Earnings per common share (1) 0.47 0.41 0.92 0.78
Dividends declared per common share (1) 0.16 0.14 0.31 0.26
Return on average assets (annualized) 1.57% 1.57% 1.54% 1.52%
Return on beginning equity (annualized) 16.53% 16.06% 16.27% 15.94%
Weighted average shares outstanding (1) 3,356,818 3,367,189 3,568,27 3,375,264
(1) Adjusted for 10% stock dividend in 1996.
</TABLE>
4
<PAGE> 5
GLACIER BANCORP, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For six months ended June 30
----------------------------
(dollars in thousands) 1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES :
Net Earnings.................................................$ 3,073 2,647
Adjustments to reconcile Net Earnings to Net
Cash Provided by Operating Activities:
Provision for loan and real estate owned losses............ 95 200
Depreciation of premises and equipment and
amortization of purchase premium .................... 271 431
Loss (gain) on sale of investments and other real estate
owned.................................................... 0 0
Amortization of investment securities premiums, net........ 14 62
Net increase (decrease) in deferred income taxes .......... (130) 258
Net decrease (increase) in interest receivable............. (76) (194)
Net increase (decrease) in interest payable................ 788 606
Net increase (decrease) in current income taxes ........... 218 149
Net increase (decrease) in other assets/other liabilities.. (474) 1,063
FHLB stock dividends....................................... (279) (176)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES............... 3,500 5,046
----------- -----------
INVESTING ACTIVITIES:
Proceeds from sales, maturities and prepayments of investment
securities available-for-sale............................$ 5,576 1,481
Purchases of investment securities available-for-sale........ (13,529) (3,508)
Proceeds from sales, maturities and prepayments of investment
securities held-to-maturity.............................. 307 1,380
Purchases of investment securities held-to-maturity.......... (995) 0
Principal collected on installment and commercial loans...... 31,417 22,094
Installment and commercial loans originated or acquired...... (37,339) (38,665)
Principal collections on mortgage loans...................... 15,232 16,531
Mortgage loans originated or acquired........................ (34,616) (23,498)
Proceeds from sales of loans................................. 12,704 9,923
Net proceeds from sales of real estate owned................. 15 84
Net purchase of FHLB stock................................... (326) (559)
Net addition of premises and equipment....................... (581) (407)
Acquisition of minority interest............................. (109) (14)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES................... (22,244) (15,158)
----------- -----------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits..........................$ 9,613 6,005
Net increase in FHLB advances & other borrowing.............. 178 27,966
Net increase (decrease) in advance payments from
borrowers for taxes and insurance.......................... 38 200
Net increase (decrease) in securities sold under repurchase
agreements................................................. 10,522 (18,181)
Cash dividends paid to stockholders.......................... (1,034) (883)
Treasury stock purchased..................................... (192) (399)
Proceeds from exercise of stock options...................... 206 138
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................ 19,331 14,846
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 587 4,734
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............. 16,077 11,683
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................$ 16,664 16,417
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for: Interest....................$ 6,522 5,553
Income taxes................$ 1,718 1,541
</TABLE>
5
<PAGE> 6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS:
1) Basis of Presentation:
In the opinion of Management, the accompanying unaudited consolidated
statements contain all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of Glacier Bancorp Inc's
(the "Company") Financial Condition as of June 30, 1996, December 31,
and June 30, 1995 and the Results of Operations for the six and three
months ended June 30, 1996 and 1995 and the Statements of Cash Flows
for the six months ended June 30, 1996 and 1995.
2) Organizational Structure:
The Company is the parent company for four subsidiaries: Glacier Bank
(the "Savings Bank"); First National Bank of Whitefish ("Whitefish");
First National Bank of Eureka ("Eureka") and Community First, Inc.
(CFI). At June 30, 1996, the Company owned 100%, 94%, 93% and 100% of
the Savings Bank, Whitefish, Eureka and CFI, respectively. CFI
provides full service brokerage services through INVEST Financial
Services. The following abbreviated organizational chart illustrates
the various relationships:
Glacier
Bancorp, Inc.
<TABLE>
<S> <C> <C> <C>
Glacier First National Bank First National Bank Community First
Bank Whitefish Eureka Inc.
</TABLE>
3) Stock Dividend:
The company paid a 10% stock dividend May 23, 1996. As a result, all
per share amounts from time periods preceding this date have been
restated to illustrate the effect of the stock dividend. Any
fractional shares were paid in cash.
4) Computation of Earnings Per Share:
Earnings per common share were computed by dividing net income by the
weighted average number of shares of common stock outstanding during
the period presented. Stock options are considered common stock
equivalents, but are excluded from earnings per share computations due
to immateriality.
The weighted average number of shares for the three months ended June
30, 1996 and 1995 (after adjustment for 10% stock dividend) were
3,356,818 shares and 3,367,189 shares, respectively.
6
<PAGE> 7
5) Ratios:
Return on Average Assets (ROAA) was calculated based on the average of
the total assets for each month-end in the period. Return on
Beginning Equity (ROBE) was calculated based on the Shareholders'
Equity (Capital) at the beginning of each period presented.
6) Cash Dividend Declared:
On June 26, 1996, the Board of Directors declared a $.16 per share
quarterly cash dividend to stockholders of record on July 11, 1996,
payable on July 25, 1996.
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 JUNE 30, 1996
<TABLE>
<CAPTION>
Gross Unrealized
- ------------------------------------------------- Amortized ----------------------- Estimated
(dollars in thousands) Cost Gains Losses Fair Value
- ------------------------------------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
HELD TO MATURITY:
U.S. Government and Federal Agencies $ 7,977 11 (291) 7,697
State, Local Government and other issues 2,291 30 (14) 2,307
Mortgage-backed securities 3,724 0 (170) 3,554
--------- ---------- ---------- ----------
TOTAL HELD TO MATURITY SECURITIES $ 13,992 41 (475) 13,558
========= ========== ========== ==========
AVAILABLE FOR SALE:
U.S. Government and Federal Agencies $ 20,536 25 (650) 19,911
State, Local Government and other issues 5,773 113 (183) 5,703
Mortgage-backed securities 31,895 339 (508) 31,726
Real Estate Mortgage Investment Conduit 8,152 13 (185) 7,980
--------- ---------- ---------- ----------
TOTAL AVAILABLE FOR SALE SECURITIES 66,356 490 (1,526) 65,320
========= ========== =========== ==========
</TABLE>
INVESTMENT SECURITIES AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
Gross Unrealized
- ------------------------------------------------- Amortized ----------------------- Estimated
(dollars in thousands) Cost Gains Losses Fair Value
- ------------------------------------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
HELD TO MATURITY:
U.S Government and Federal Agencies $ 7,973 156 0 8,129
State, Local Government and other issues 1,393 65 (1) 1,457
Mortgage-backed securities 3,943 11 0 3,954
--------- ---------- ---------- ----------
TOTAL HELD TO MATURITY SECURITIES $ 13,309 232 (1) 13,540
========= ========== ========== ==========
AVAILABLE FOR SALE:
U.S. Government and Federal Agencies $ 20,541 211 (7) 20,745
State, Local Government and other issues 5,535 186 (116) 5,605
Mortgage-backed securities 30,157 990 (63) 31,084
Real Estate Mortgage Investment Conduit 2,174 7 (7) 2,174
--------- ---------- ---------- ----------
TOTAL AVAILABLE FOR SALE SECURITIES $ 58,407 1,394 (193) 59,608
========= ========== ========== ==========
</TABLE>
7
<PAGE> 8
8) Consolidated Statements of Cash Flows:
Cash equivalents include demand deposits at other financial
institutions and short term certificates of deposit.
9) Regulatory Capital Requirements -
The following chart illustrates the compliance by the Savings Bank
with currently applicable regulatory capital requirements at June 30,
1996 (in thousands except percentages):
<TABLE>
<CAPTION>
Actual Requirement Excess
-------- ----------- --------
<S> <C> <C> <C>
Tangible Capital:
$ amount $30,679 $5,236 $25,443
% of tangible assets 8.8% 1.5% 7.3%
Core Capital:
$ amount $30,679 $10,471 $20,208
% of tangible assets 8.8% 3.0% 5.8%
Risk-based Capital:
$ amount $32,080 $14,314 $17,766
% of risk-weighted assets 17.9% 8.0% 9.9%
</TABLE>
Each of the two Banks (Whitefish and Eureka) also have similar
specific capital standards which they must meet. At both December 31,
1995 and June 30, 1996, both Banks met, without exception, all
regulatory capital standards.
The Office of Thrift Supervision (OTS) has adopted, but postponed
implementation until further notice, an additional capital component
requirement based upon an institution's exposure to losses from
changes in market interest rates (interest rate risk). This additional
capital requirement is equal to 50% of the estimated decline in market
value of an institution's portfolio equity after an instantaneous 200
basis points increase or decrease (whichever results in the larger
decrease) in market interest rates. The market value of portfolio
equity represents the net present value of an institution's assets,
liabilities and any off balance sheet items. This net present value
is calculated by OTS based upon information submitted in quarterly
reports and using discount rates derived from rates paid and received
on various financial instruments. The requirement provides for a two
quarter lag between calculating interest rate risk and recognizing any
deduction from capital. The amount to be deducted from capital is the
lowest interest rate risk component reported in an institution's
exposure reports to the OTS for the three most recent quarters. Based
on interest rate risk exposure calculations as provided by the OTS for
the period ended March 31, 1996, the most recent date such information
is available from the OTS, the Savings Bank would be subject to a
$563,000 deduction under this requirement.
8
<PAGE> 9
Qualified Thrift Lender - In order to avoid certain restrictions on
their operations, all savings associations are required to meet a
Qualified Thrift Lender ("QTL") test. The regulations require that
institutions maintain a percentage of qualifying lending activity of
at least 65% as measured monthly. The Savings Bank reported on its
June 30, 1996 Thrift Financial Report QTL ratios of 81%, 80%, and 81%
for April, May, and June 1996.
Whitefish and Eureka do not have a similar requirement.
10) Changes in Accounting Methods
Loan Impairment
In 1995, the Company adopted the provisions of SFAS Statement No. 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS Statement
No. 118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures," (collectively the Statements). The
Statements provide guidance for establishing a reserve for losses on
specific loans which are deemed to be impaired and apply only to
specific impaired loans. Groups of small balance homogenous basis
loans (generally consumer loans) are evaluated for impairment
collectively. A loan is considered impaired when, based upon current
information and events, it is probable that the Company will be unable
to collect, on a timely basis, all principal and interest according to
the contractual terms of the loan's original agreement. When a
specific loan is determined to be impaired, the reserve for possible
loan losses is increased through a charge to expense for the amount of
the impairment. The amount of the impairment is measured using cash
flows discounted at the loan's effective interest rate, except when it
is determined that the sole source of repayment for the loan is the
operations, or liquidation of the underlying collateral. In such
cases the current value of the collateral, reduced by anticipated
selling costs, will be used in place of discounted cash flows. The
Company uses the cash basis of income recognition on impaired loans.
The Company's adoption of the statements did not have a material
impact on the Company's financial position or results of operations.
During 1995 and the first six months of 1996, the amount of impaired
loans was not material.
Mortgage Servicing Rights
On May 6, 1995 SFAS No. 122, "Accounting for Mortgage Servicing
Rights", an amendment of SFAS No. 65 was issued. Under SFAS No. 122
mortgage servicing rights are recognized as an asset regardless of
whether the servicing rights are acquired or originated and retained.
Additionally, SFAS No. 122 requires mortgage servicing rights assets
be assessed for impairment based on the fair value of the mortgage
servicing rights. The Statement provides for adoption as of the
beginning of the reporting period on a prospective basis, and was
adopted by the Company effective January 1, 1995. As of June 30,
1996, the carrying value of originated servicing rights was $271,952.
There was no material impairment of value at June 30, 1996.
9
<PAGE> 10
Impairment of Assets
As of January 1, 1996, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be disposed of." SFAS No. 121 provides that long-lived assets and
identifiable intangibles should be reviewed for impairment whenever
events or circumstances provide evidence that suggests the carrying
amount of the asset may not be recoverable. The determination of
whether an asset is impaired is based on undiscounted cash flows. An
impairment, if any, is measured based on the fair value of the asset,
if readily determinable. Otherwise, impairment would be measured
based on the present value of the expected future net cash flows
calculated using either a market interest rate or the entity's
incremental borrowing rate. As of June 30, 1996, there are no assets
that are considered impaired.
Stock Based Compensation
On October 23, 1995, the FASB issued SFAS No. 123, "Accounting for
Stock Based Compensation." SFAS No. 123 defines a "fair value based
method" of accounting for an employee stock option plan. However, it
also allows an entity to continue to measure compensation cost for
those plans using the "intrinsic value based method" of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Entities electing to remain with the accounting in APB
Opinion No. 25 must make pro forma disclosures of net income and
earnings per share, as if the fair value based method of accounting
defined in SFAS No. 123 had been applied. The Company will adopt SFAS
No. 123, retaining the accounting treatment of APB No. 25, in 1996,
with appropriate disclosures presented in the December 31, 1996
financial statements.
11) Stock Repurchase - The Board of Director's authorization of the
repurchase of up to 5% of the Company's shares outstanding remains in
place; 57,260 shares, approximately 1.7% of outstanding shares, had
been acquired as of June 30, 1996.
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, 1995 to June 30, 1996.
At June 30, 1996, total consolidated assets increased by $20,408,000, or 5.26%,
over the December 31, 1995 level. This increase was primarily in loan growth
of $12,508,000, or 4.45%, and investments of $6,394,000, or 8.77%.
Real Estate loans increased $6.7 million during the period, commercial loans
declined $.4 million, and Consumer loans increased $6.1 million.
Loans sold to the secondary market amounted to $12.7 million and $9.9 million
during the first six months of 1996 and 1995, respectively.
The amount of loans serviced for others on June 30, 1996 was $62.8 million.
10
<PAGE> 11
Total deposits increased nearly $9.6 million, with $5.5 million of the increase
occurring in interest bearing deposits. Non-interest bearing deposits were
$4.1 million over the December 31, 1995 level, an increase of $15.8%. Advances
from the Federal Home Loan Bank ("FHLB") remained near the year end level while
securities sold under repurchase agreements increased $10.5 million.
The OTS' minimum average liquidity requirement for the Savings Bank is 5.0%.
For the three months ended June 30, 1996, the Savings Bank's liquidity
percentage averaged 6.5%. The Savings Bank's principal source of funds are
generated by deposits, payments on loans and securities, short and long term
borrowings and net income. If there should ever be insufficient funds derived
from these areas, the Savings Bank may borrow additional amounts from the FHLB,
subject to regulatory limits.
All three institutions are members of the FHLB at June 30, 1996. 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 June 30, 1996:
<TABLE>
<CAPTION>
Available line Amount used Available
-------------- ----------- ---------
<S> <C> <C> <C>
The Savings Bank 139,446,000 90,723,000 48,723,000
Whitefish 6,484,000 4,300,000 2,184,000
Eureka 6,329,000 1,891,000 4,438,000
</TABLE>
Classified Assets and Reserves
Non-performing assets, consisting of non-accrual loans, accruing loans 90 days
or more overdue, and real estate and other assets acquired by foreclosure or
deed-in-lieu thereof, net of related reserves, amounted to $1,045,000 or .26%
of total assets at June 30, 1996, as compared to $314,000, or .08% of total
assets, at December 31, 1995.
Non-performing assets continue to remain at a relatively low level.
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
--------------- -----------------
<S> <C> <C>
Total Reserves for Loan
and Real Estate Owned losses: $2.1 million $2.1 million
Reserves as a percentage
of Total Loans: 0.70% .73%
Reserves as a percentage
of Non-performing Assets: 197% 656%
</TABLE>
Impaired Loans
The company adopted SFAS No. 114 "Accounting by Creditor for Impairment of a
Loan" and SFAS No. 118 "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures" as of January 1, 1995. As of June 30, 1996,
there were no loans considered impaired as measured under SFAS No. 114
criterion. 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 per the terms
of the loan.
11
<PAGE> 12
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.
The Company has extended an offer to each minority stockholder notifying them
that the Company would buy their shares at the current book value. As of June
30, 1996, the Company owns 46,900 shares of Whitefish and 46,389 shares of
Eureka. The Company's ownership of Whitefish and Eureka is 94% and 93%,
respectively.
Results of Operations - The six months ended 6/30/96 compared to the six months
ended 6/30/95. The following discussion pertains to the consolidated income
for the Company.
Net income increased $426,000, or 16.1 percent, to $3.073 million, or $.92 per
share, from $2.647 million, or $.78 per share, for the same period in 1995.
Return on average assets and return on beginning equity for the six months was
1.54 percent and 16.27 percent, respectively, up from the 1.52 percent and
15.94 percent for the same period in 1995.
Net Interest Income
Net interest income increased $634,000, or 8.4 percent over the first six
months of 1995 reflecting the growth in loans and investments. Total interest
income increased $1.785 million or 13.0 percent, while total interest expense
increased $1.151 million, or 18.7 percent. The increased interest costs have
narrowed the net interest margin ratio; however, the earnings power from the
increased earning asset levels has resulted in the significant net interest
income increase.
The Company's net interest income is determined by its interest rate spread
(i.e., the difference between the yields earned on its earning assets, and the
rates paid on its interest-bearing liabilities) and the relative amounts of
earning assets and interest-bearing liabilities. The following table sets
forth information concerning the Company's interest rate spread at June 30,
1996 and 1995:
<TABLE>
<CAPTION>
June 30,
------------
For the six months ended: 1996 1995
---- ----
<S> <C> <C>
Combined weighted average yield on loans and investments [2]...................... 8.28% 8.45%
Combined weighted average rate paid on interest-bearing deposits and borrowings... 4.56% 4.47%
Net interest spread............................................................... 3.72% 3.98%
Net interest margin [3]........................................................... 4.37% 4.69%
</TABLE>
___________________
[1] Weighted averages are computed without the effect of compounding daily
interest.
[2] Includes dividends received on capital stock of the Federal Home Loan
Bank.
[3] The net interest margin (net yield on average interest earning assets) is
interest income from loans and investments less interest expense from
deposits, FHLB advances, and other borrowings, divided by the total amount
of earning assets.
Non-Interest Income
Non-interest income is also up from the prior year, $414,000, or 18.1 percent.
Loan fees and service charges on deposit accounts, were the largest
contributors to the increase. Loan origination fees are deferred and recognized
over the life of the loan, as prescribed by FASB #91. However, origination
fees on loans sold are recognized at the time of sale.
12
<PAGE> 13
Loan Loss Provision
The provision for loan losses is $105,000 less than for the same period in
1995, reflecting the small net charge offs during the past year. For more
discussion concerning the reserve for loan losses and related issues, see
"Classified Assets and Reserves" above.
Non-Interest Expense
Non-interest expense has also increased during 1996, with the total $481,000 or
9.1 percent greater than the same six months in 1995. The efficiency ratio
(non-interest expense)/(net interest income + non-interest income), 53 percent
in 1996, and 54 percent in 1995, is substantially better than similar sized
bank holding companies which average about 63 percent. Salary and employee
benefits have increased $376,000, or 15.3 percent, the result of the expansion
of the Billings branch to a full service branch, expansion of banking services
to include Saturdays and holidays, other growth related expenses, and normal
cost increases. Occupancy and equipment expenses are down $12,000 over the
prior year's six months, some of which is the result of lower maintenance costs
from using an employee for repairs vs. outside vendors. Other expenses
increased $97,000 from 1995, or 5.0%, which are volume related increases in
several classifications of expenses.
Tax Expense
Income tax expense increased by $246,000 during the six months ended June 30,
1996, as compared to the same period in the prior year, reflecting the $672,000
increase in pre-tax income during the same period. Effective federal and state
tax rates were approximately 39% for each of the six month periods ended June
30, 1996 and 1995.
FDIC BIF/SAIF Assessment
The deposits in the subsidiary banks are insured by the FDIC, with the Savings
Bank part of the Savings Association Insurance Fund (SAIF) and Whitefish and
Eureka part of the Bank Insurance Fund (BIF). The FDIC has eliminated the BIF
premium, for the highest rated banks, which include Whitefish and Eureka, with
only a minimum expense fee of $2,000 per year assessed. The SAIF rate remains
at $.23 per $100 of deposits, the rate for the Savings Bank. To eliminate
disparity in premiums, various proposals have been discussed, including a
one-time assessment of $.85 per $100 of deposits as of March 31, 1995, to be
paid by SAIF institutions. This would have a negative impact on earnings in
the period the assessment would be paid of approximately $753,000 after income
tax effects, or $.25 per share, but could result in lower premium assessments
similar to those paid by BIF insured institutions in future periods. As of
this date, it is uncertain what, if any, action ultimately will be taken by
Congress regarding SAIF.
Results of Operations - The three months ended 6/30/96 compared to the three
months ended 6/30/95. The following discussion relates to the consolidated
income for the Company.
Net income increased $206,000 or 15.0%, to $1.584 million, compared to $1.377
million for 1995. The net earnings per share of $.47 was as 15.4% increase
over the $.41 per share, adjusted for the May 23, 1996 10% stock dividend, for
the second quarter of 1995. Annualized return on average assets was at 1.57%
for each year. By maintaining the return on average assets at the 1.57% level,
the sizeable asset growth of $49.625 million, or 13.8%, provided the net income
increase. Annualized return on beginning equity increased from 16.06% to
16.53%.
13
<PAGE> 14
Net Interest Income
Net interest income increased $372,000, or 9.8% over the 1995 quarter,
reflecting the growth in loans and investments. Total interest income
increased $879,000, a 12.6% increase over 1995. Interest expense increased
$507,000, or 16.0%. The increased interest costs have narrowed the net
interest margin ratio, however, the earning power from the increased earning
asset levels has resulted in the significant net income increase.
Non-Interest Income
Non-interest income is also up from the second quarter of 1995, $165,000, or
13.4%. Loan fees and service charges on deposit amounts, accounted for most of
this increase.
Loan Loss Provision
The provision for loan losses was $88,000 less than the amount provided in the
second quarter of 1995, reflecting the small net charge offs during the past
year. For more discussion concerning the reserve for loan losses and related
issues, see "Classified Assets and Reserves" above.
Non-Interest Expense
Non-interest expense increased by $300,000, or 11.4% over the second quarter of
1995. The largest portion of the increase was in compensation and employee
benefits which increased $229,000, or 18.7%. Expansion of the Billings loan
production office into a full service branch, staffing of the first supermarket
branch which opened on July 22, expansion of banking services to include
Saturdays and holidays, other growth related staffing additions, plus normal
cost increases resulted in these increased costs. The other categories of
expense were primarily volume related.
Subsequent Events
On August 9, 1996, Glacier Bancorp, Inc. announced the signing of a definitive
agreement to acquire Missoula Bancshares, Inc. of Missoula, Montana, the parent
company of First Security Bank of Missoula, a state chartered commercial bank
with $110 million in assets.
Under terms of the agreement, Glacier Bancorp, Inc. will issue approximately
1.1 million shares in a transaction which is to be accounted for as a pooling
of interests. Based on a price per share of $21.50, Missoula Bancshares's
shareholders would receive stock of Glacier Bancorp, Inc. worth approximately
$24.0 million. If the average closing price of Glacier Bancorp, Inc. stock for
the five days prior to the effective date of the merger remains between $18.81
and $24.19, the exchange ratio will remain fixed. If the average closing price
moves outside of these parameters, the parties have the right to renegotiate
the terms. The transaction, which is subject to approval by shareholders of
both parties, and appropriate regulatory agencies, is expected to close as
early as December 31, 1996.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the
registrant or it's subsidiaries are a party.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS ON 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.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLACIER BANCORP, INC.
---------------------
August 12, 1996 By /s/ Michael J. Blodnick
- --------------- --------------------------------
Date Michael J. Blodnick
Executive Vice President/COO
August 12, 1996 By /s/ James H. Strosahl
- --------------- --------------------------------
Date James H. Strosahl
Senior Vice President/
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION JUNE 30, 1996 CONSOLIDATED
STATEMENTS OF OPERATIONS JUNE 30, 1996 REFERENCE TO QUARTERLY REPORT FORM 10-Q
JUNE 30, 1996 LEGEND
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,804
<INT-BEARING-DEPOSITS> 860
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 65,320
<INVESTMENTS-CARRYING> 13,991
<INVESTMENTS-MARKET> 13,558
<LOANS> 295,602
<ALLOWANCE> 2,054
<TOTAL-ASSETS> 408,467
<DEPOSITS> 207,446
<SHORT-TERM> 96,616
<LIABILITIES-OTHER> 10,329
<LONG-TERM> 55,603
0
0
<COMMON> 34
<OTHER-SE> 38,439
<TOTAL-LIABILITIES-AND-EQUITY> 408,467
<INTEREST-LOAN> 12,292
<INTEREST-INVEST> 3,184
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 15,476
<INTEREST-DEPOSIT> 3,341
<INTEREST-EXPENSE> 7,310
<INTEREST-INCOME-NET> 8,166
<LOAN-LOSSES> 95
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,762
<INCOME-PRETAX> 5,009
<INCOME-PRE-EXTRAORDINARY> 3,073
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,073
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
<YIELD-ACTUAL> 4.73
<LOANS-NON> 109
<LOANS-PAST> 900
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,061
<CHARGE-OFFS> 152
<RECOVERIES> 50
<ALLOWANCE-CLOSE> 2,054
<ALLOWANCE-DOMESTIC> 2,054
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
