<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 March 31, 1997
[ ] 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)
DELAWARE 81-0468393
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. BOX 27; 202 MAIN STREET, KALISPELL, MONTANA 59903-0027
(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 April 30, 1997,
was 4,533,668. No preferred shares are issued or outstanding.
1
<PAGE> 2
GLACIER BANCORP, INC.
QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
Index
Page #
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Financial Condition -
March 31, 1997, December 31, and March 31, 1996......... 3
Consolidated Statements of Operations -
Three months ended March 31, 1997 and 1996.............. 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 1997 and 1996.............. 5
Notes to Consolidated Financial Statements.............. 6
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations ....... 11
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 except per share data) MARCH 31, DECEMBER 31, MARCH 31,
- -------------------------------------------------------- 1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
ASSETS:
Cash on hand and in banks............................ $ 21,353 24,666 19,274
Federal funds sold .................................. 0 1,483 4,161
Interest bearing cash deposits ...................... 10,570 1,000 1,469
--------- ------- -------
Cash and cash equivalents ......................... 31,923 27,149 24,904
--------- ------- -------
Investments:
Investment securities, held-to-maturity ........... 16,429 16,410 17,346
Investment securities, available-for-sale ......... 37,380 42,989 49,363
Mortgaged backed securities, held-to-maturity ..... 3,434 4,045 3,844
Mortgaged backed securities, available-for-sale ... 47,088 42,061 33,179
--------- ------- -------
Total Investments ............................ 104,331 105,505 103,732
--------- ------- -------
Net loans receivable:
Real estate loans ................................. 197,576 198,607 191,502
Commercial Loans .................................. 101,933 100,070 86,024
Installment and other loans ....................... 92,582 91,248 79,727
Allowance for losses .............................. (3,331) (3,284) (3,051)
--------- ------- -------
Total Loans, net ............................. 388,760 386,641 354,202
--------- ------- -------
Premises and equipment, net ......................... 11,430 11,292 10,295
Real estate and other assets owned .................. 214 410 70
Federal Home Loan Bank of Seattle stock, at cost .... 9,446 8,586 7,769
Federal Reserve stock, at cost ...................... 340 340 280
Accrued interest receivable ......................... 3,518 3,473 3,363
Goodwill, net ....................................... 1,484 1,526 1,652
Other assets ........................................ 926 1,070 780
--------- ------- -------
$ 552,372 545,992 507,047
========= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits - interest bearing.......................... $ 266,042 257,409 245,956
Deposits - non-interest bearing ..................... 57,190 64,330 51,943
Advances from Federal Home Loan Bank of Seattle ..... 136,601 143,289 125,279
Securities sold under agreements to repurchase ...... 15,149 9,791 19,764
Other borrowed funds ................................ 12,239 5,202 3,111
Accrued interest payable ............................ 1,430 799 1,252
Advance payments by borrowers for taxes and insurance 2,597 940 2,542
Current income taxes ................................ 839 0 1,528
Deferred income taxes ............................... 1,108 1,446 1,495
Other liabilities ................................... 5,934 10,409 5,691
Minority Interest ................................... 430 429 486
--------- ------- -------
Total liabilities ................................. 499,559 494,044 459,047
--------- ------- -------
Common stock, $.01 par value per share,
12,500,000 shares authorized (1) .................. 46 46 42
Paid-in capital ..................................... 34,548 34,571 27,062
Retained earnings - substantially restricted ........ 19,727 18,392 21,596
Treasury stock at cost (2) .......................... (1,066) (1,066) (958)
Net unrealized gain (loss) on securities available-
for-sale .......................................... (442) 5 258
--------- ------- -------
Total stockholders' equity ........................ 52,813 51,948 48,000
--------- ------- -------
$ 552,372 545,992 507,047
========= ======= =======
Book value per share............................... $ 11.65 11.47 10.76
========= ===== =====
</TABLE>
(1) Number of shares outstanding adjusted for 10% stock dividend in 1996.
<TABLE>
<S> <C> <C> <C>
(1) Total shares outstanding at end of period 4,532,637 4,529,109 4,461,109
(2) Treasury Shares 57,260 57,260 53,260
</TABLE>
3
<PAGE> 4
GLACIER BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(unaudited - $ in thousands except per share data) Three months ended
- -------------------------------------------------- ------------------
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
INTEREST INCOME:
Real estate loans............................... $ 3,999 3,904
Commercial loans................................ 2,376 2,179
Consumer and other loans........................ 2,212 1,872
Mortgage backed securities...................... 829 729
Investments..................................... 1,095 1,141
---------- ----------
Total interest income..................... 10,511 9,825
---------- ----------
INTEREST EXPENSE:
Deposits........................................ 2,690 2,473
Advances........................................ 1,950 1,766
Repurchase agreements........................... 148 216
Other borrowed funds............................ 50 6
---------- ----------
Total interest expense.................... 4,838 4,461
---------- ----------
NET INTEREST INCOME............................... 5,673 5,364
Provision for loan losses....................... 163 99
---------- ----------
Net Interest Income after provision for loan losses 5,510 5,265
---------- ----------
NON-INTEREST INCOME:
Loan fees and service charges................... 1,697 1,654
Gains (Losses) on sale of investments........... 0 0
Other income.................................... 181 258
---------- ----------
Total fees and other income................ 1,878 1,912
---------- ----------
NON-INTEREST EXPENSE:
Compensation, employee benefits
and related expenses..................... 2,279 2,038
Occupancy expense............................... 477 364
Data processing expense......................... 185 137
Other expenses.................................. 1,295 1,262
Minority interest............................... 13 19
---------- ----------
Total non-interest expense................. 4,249 3,820
---------- ----------
EARNINGS BEFORE INCOME TAXES...................... 3,139 3,357
Federal and state income tax expense.............. 1,153 1,329
---------- ----------
NET EARNINGS...................................... $ 1,986 2,028
========== ==========
Earnings per common share (1)..................... $ 0.44 0.45
Dividends declared per common share (1)........... 0.16 0.15
Return on average assets (annualized)............. 1.47% 1.64%
Return on beginning equity (annualized)........... 15.29% 17.33%
Weighted average shares outstanding (1)........... 4,530,939 4,461,109
</TABLE>
(1) Adjusted for 10% stock dividend in 1996.
4
<PAGE> 5
GLACIER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
(dollars in thousands) 1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES :
Net Earnings................................................... $ 1,986 2,028
Adjustments to reconcile Net Earnings to Net
Cash Provided by Operating Activities:
Provision for loan losses.................................... 163 99
Depreciation of premises and equipment....................... 210 228
Amortization of goodwill..................................... 42 42
Loss (gain) on sale of investments........................... 0 0
Amortization of investment securities premiums and discounts,
net........................................................ 20 0
Net increase (decrease) in deferred income taxes ............ (27) 14
Net increase in interest receivable.......................... (45) (10)
Net increase in interest payable............................. 631 585
Net increase in current income taxes ........................ 839 984
Net decrease in other assets................................. 144 24
Net decrease in other liabilities and minority interest...... (4,474) (1,216)
FHLB stock dividends......................................... (204) (134)
-------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES.......... (715) 2,644
-------- -------
INVESTING ACTIVITIES:
Proceeds from sales, maturities and prepayments of investment
securities available-for-sale.............................. $ 9,143 8,613
Purchases of investment securities available-for-sale.......... (9,343) (22,512)
Proceeds from maturities and prepayments of investment
securities held-to-maturity................................ 596 76
Purchases of investment securities held-to-maturity............ 0 0
Principal collected on installment and commercial loans........ 20,402 21,284
Installment and commercial loans originated or acquired........ (24,487) (26,614)
Proceeds from sales of commercial loans........................ 772 2,934
Principal collections on mortgage loans........................ 9,560 11,921
Mortgage loans originated or acquired.......................... (22,308) (29,731)
Proceeds from sales of mortgage loans.......................... 13,779 19,168
Net proceeds from sales (acquisition) of real estate owned..... 196 (18)
Net purchase of FHLB and FRB stock............................. (656) (280)
Net addition of premises and equipment......................... (348) (444)
Acquisition of minority interest............................... 0 (24)
-------- -------
NET CASH USED BY INVESTING ACTIVITIES..................... (2,694) (15,627)
-------- -------
FINANCING ACTIVITIES:
Net increase in deposits....................................... $ 1,493 6,314
Net increase in FHLB advances and other borrowed funds......... 349 6,176
Net increase in advance payments from borrowers for taxes
and insurance................................................ 1,657 1,470
Net increase (decrease) in securities sold under repurchase
agreements................................................... 5,358 (1,041)
Cash dividends paid to stockholders............................ (726) (401)
Treasury stock purchased....................................... 0 (84)
Proceeds from exercise of stock options and additional shares
issued...................................................... 52 124
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES.................. 8,183 12,558
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS.................. 4,774 (425)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............... 27,149 25,329
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................... $ 31,923 24,904
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for: Interest................... $ 4,207 3,876
Income taxes............... $ 314 345
</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 March 31, 1997, December 31,
and March 31, 1996 and the Results of Operations for the three months
ended March 31, 1997 and 1996 and the Statements of Cash Flows for the
three months ended March 31, 1997 and 1996.
The First Security Bank of Missoula was acquired on December 31, 1996
through an exchange of stock with Missoula Bancshares, Inc. formerly
the parent company of First Security Bank. The pooling of interest
accounting method is being used for this merger transaction. Under this
method, financial information for each of the periods presented include
the combined companies as though the merger had occurred prior to the
earliest date presented.
2) Organizational Structure:
The Company is the parent company for five subsidiaries: Glacier Bank
(the "Savings Bank"); Glacier National Bank (formerly the First
National Bank of Whitefish) ("Whitefish"); First National Bank of
Eureka ("Eureka"); First Security Bank of Missoula (Missoula) and
Community First, Inc. (CFI). At March 31, 1997, the Company owned 100%,
94%, 93%, 100% and 100% of the Savings Bank, Whitefish, Eureka,
Missoula 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.
(Parent Holding Company)
Glacier First Security Bank
Bank OF Missoula
(Savings Bank) (Commercial bank)
Community First First National Bank
Inc, of Whitefish
(Brokerage services) (Commercial bank)
First National Bank
of Eureka
(Commercial bank)
6
<PAGE> 7
3) Stock Dividend:
The company paid a 10% stock dividend May 24, 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.
5) Ratios:
Return on Average Assets (ROAA) was calculated based on the average of
the total assets for 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 March 31, 1997, the Board of Directors declared a $.16 per share
quarterly cash dividend to stockholders of record on April 10, 1997,
payable on April 23, 1997.
On April 23, 1997, the Board of Directors approved a three for two
stock split for the common stock of Glacier Bancorp, Inc. on May 23,
1997 to stockholders of record on May 9, 1997. Fractional shares will
be paid in cash.
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 MARCH 31, 1997
<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 $ 13,029 9 (198) 12,840
State, Local Government and other issues 3,400 60 (2) 3,458
Mortgage-backed securities 3,434 0 (62) 3,372
------------- --- ------ ------
TOTAL HELD TO MATURITY SECURITIES $ 19,863 69 (262) 19,670
============= === ====== ======
AVAILABLE FOR SALE:
U.S. Government and Federal Agencies $ 20,444 42 (362) 20,124
State, Local Government and other issues 17,393 143 (280) 17,256
Mortgage-backed securities 23,515 398 (320) 23,593
Real Estate Mortgage Investment Conduit 23,869 0 (374) 23,495
------------- --- ------ ------
TOTAL AVAILABLE FOR SALE SECURITIES $ 85,221 583 (1,336) 84,468
============= === ====== ======
</TABLE>
7
<PAGE> 8
INVESTMENT SECURITIES AS OF DECEMBER 31, 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 $ 12,971 16 (81) 12,906
State, Local Government and other issues 3,439 77 (1) 3,515
Mortgage-backed securities 4,045 2 (32) 4,015
------------- ---- ---- -------
TOTAL HELD TO MATURITY SECURITIES $ 20,455 95 (114) 20,436
============= ==== ==== =======
AVAILABLE FOR SALE:
U.S. Government and Federal Agencies $ 27,480 50 (205) 27,325
State, Local Government and other issues 15,573 130 (39) 15,664
Mortgage-backed securities 24,319 534 (164) 24,689
Real Estate Mortgage Investment Conduit 17,684 0 (312) 17,372
------------- ---- ---- -------
TOTAL AVAILABLE FOR SALE SECURITIES $ 85,056 714 (720) 85,050
============= ==== ==== =======
</TABLE>
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 Federal Reserve Board has adopted capital adequacy guidelines pursuant to
which it assesses the adequacy of capital in supervising a bank holding company.
The following table illustrates the Federal Reserve Boards capital adequacy
guidelines and the Company's compliance with those guidelines as of March 31,
1997.
<TABLE>
<CAPTION>
Tier I (Core) Capital Tier II (Total) Capital Leverage Capital
--------------------- ----------------------- ----------------
(dollars in thousands) $ % $ % $ %
- ------------------------------------------ --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
GAAP Capital.............................. $ 52,813 $ 52,813 $ 52,813
Goodwill.................................. (1,484) (1,484) (1,484)
Net unrealized losses on securities
available-for-sale................... 442 442 442
Allowance for loan losses................. -- 3,331 --
-------- --------- ---------
Regulatory capital computed............... $ 51,771 $ 55,102 $ 51,771
======== ========= =========
Capital as % of assets.................... 16.19% 17.05% 9.48%
Regulatory "well capitalized" requirement. 6.00% 10.00% 5.00%
----- ----- ----
Excess over "well capitalized" requirement 10.19% 7.05% 4.48%
===== ===== ====
</TABLE>
Interest-Rate-Risk ("IRR") Component
FDICIA requires each federal banking agency to revise its risk-based capital
standards to ensure that they take adequate account of IRR, concentration of
credit risk and the risks of nontraditional activities, as well as reflect the
actual performance and expected risk of loss on multi-family residential loans.
Since January of 1994, the OTS has included an IRR component to its risk-based
capital standards. An association's measured IRR is the change that occurs in
its Net Portfolio Value ("NPV") as a result of a 200 basis point increase or
decrease in interest rates (whichever leads to the lower NPV) divided by the
estimated economic value (present value) of
8
<PAGE> 9
interest rates (whichever leads to the lower NPV) divided by the estimated
economic value (present value) of its assets; NPV equals the present value of
expected cash inflows from existing assets less the present value of expected
cash outflows from existing liabilities, plus the present value of net expected
cash inflows from existing off-balance sheet contracts. A normal level of IRR is
less than 2%. Only institutions whose measured IRR exceeds 2% must maintain an
IRR component. An association must maintain capital of at least 8% of risk-
weighted assets after the IRR component is deducted.
In August of 1995, the Agencies adopted a joint final rule to revise their
risk-based capital standards to ensure that they take adequate account of
interest rate risk. As of September 1, 1995, when evaluating the capital
adequacy of a bank, examiners from the Agencies consider exposure to declines in
the economic value of the bank's capital due to changes in interest rates. A
bank may be required to hold additional capital for IRR if it has significant
exposure or a weak interest rate risk management process. Concurrent with the
publication of this final rule, the Agencies proposed for comment a joint policy
statement describing the process they will use to measure and assess a bank's
interest rate risk. This joint policy statement was superseded by an updated
Joint Policy Statement in June of 1996. Any impact the joint final rule and
Joint Policy Statement may have on the National Banks or the State Bank cannot
be predicted at this time.
In addition, the Agencies published a joint final rule on September 6, 1996,
amending their respective risk-based capital standards to incorporate a measure
for market risk to cover all positions located in an institution's trading
account and foreign exchange and commodity positions wherever located. This
final rule took effect on January 1, 1997 and implements an amendment to the
BASLE Capital Accord that sets forth a supervisory framework for measuring
market risk. The final rule effectively requires banks and bank holding
companies with significant exposure to market risk to measure that risk using
their own internal value-at-risk model, subject to the parameters of the final
rule, and to hold a sufficient amount of capital to support the institution's
risk exposure.
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 March
31, 1997 Thrift Financial Report QTL ratios of 76%, 77%, and 75% for
January, February, and March 1997.
Whitefish, Eureka and Missoula do not have a similar requirement.
Accounting for Transfers of Assets and Extinguishments of Liabilities
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities"
(the "Statement"). This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings, and provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities.
This Statement amends SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," to clarify that a debt security may not
be classified as held-to-maturity if it can be prepaid or otherwise
settled in such a way that the holder of the security would not recover
substantially all of its recorded investment.
9
<PAGE> 10
This Statement also rescinded all previous guidance regarding the
accounting for mortgage servicing rights and provides guidance for the
capitalization of originated as well as purchased mortgage servicing
rights and the measurement of impairment of those rights. At March 31,
1997, the carrying value of originated servicing rights was $478,000.
There was no material impairment of value at March 31, 1997.
This Statement is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31,
1996, and is to be applied prospectively. Earlier or retroactive
application is not permitted. The Company adopted the provisions of
SFAS No. 125 as of January 1, 1997. There was no material effect on the
financial condition or results of operations for the first quarter of
1997.
Earnings Per Share
In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share" (the
"Statement"). The Statement applies to entities with publicly held
common stock or potential common stock and is effective for financial
statements issued for periods ending after December 15, 1997.
SFAS No. 128 replaces APB Opinion 15, "Earnings Per Share." Opinion 15
required that entities with simple capital structures present a single
"earnings per common share" on the face of the income statement,
whereas those with complex capital structures had to present both
"primary" and "fully diluted" earnings per share ("EPS"). Primary EPS
shows the amount of income attributed to each share of common stock if
every common stock equivalent were converted into common stock. Fully
diluted EPS considers common stock equivalents and all other securities
that could be converted into common stock.
SFAS No. 128 simplifies the computation of EPS by replacing the
presentation of primary EPS with a presentation of basic EPS. The
Statement requires dual presentation of basic and diluted EPS by
entities with complex capital structures. Basic EPS includes no
dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
of securities that could share in the earnings of an entity, similar to
fully diluted EPS. The Company has a simple capital structure,
therefore minimal impact from SFAS No. 128 is expected.
Disclosure of Information About Capital Structure
In March 1997, the FASB issued SFAS No. 129, "Disclosure of Information
About Capital Structure" (the "Statement"). The Statement applies to
all entities and is effective for financial statements issued for
periods ending after December 15, 1997. Statement No. 129 consolidates
existing disclosure requirements.
10
<PAGE> 11
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, 1996 to March 31, 1997.
At March 31, 1997, total consolidated assets increased by $6,381,000, or 1.17%,
over the December 31, 1996 level. This increase was primarily in loan growth of
$2,119,000, and interest bearing cash deposits with other financial
institutions.
Real Estate loans decreased $1.0 million during the period, while commercial
loans increased $1.8 million and Consumer loans increased $1.3 million,
offsetting the decline in real estate loans.
Loans sold to the secondary market amounted to $13.8 million and $19.2 million
during the first three months of 1997 and 1996, respectively.
The amount of loans serviced for others on March 31, 1997 was $115.7 million.
Total deposits increased nearly $1.5 million, with the increase occurring in
interest bearing deposits. Advances from the Federal Home Loan Bank ("FHLB")
decreased $6.7 million while securities sold under repurchase agreements and
other borrowed funds increased $5.4 million, and $7.0 million respectively.
The OTS' minimum average liquidity requirement for the Savings Bank is 5.0%. For
the three months ended March 31, 1997, the Savings Bank's liquidity percentage
averaged 6.6%. 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 four institutions are members of the FHLB at March 31, 1997. 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 March 31, 1997:
<TABLE>
<CAPTION>
Available line Amount used Available
-------------- ----------- ---------
<S> <C> <C> <C>
The Savings Bank 143,354,000 106,977,000 36,377,000
Whitefish 8,390,000 4,000,000 4,390,000
Eureka 6,146,000 2,759,000 3,387,000
Missoula 12,445,000 979,000 11,466,000
</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 $1.6 million or .28%
of total assets at March 31, 1997, as compared to $1.6 million, or .29% of total
assets, at December 31, 1996.
11
<PAGE> 12
Non-performing assets continue to remain at a relatively low level.
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------- -----------------
<S> <C> <C>
Total Reserves for Loan
and Real Estate Owned losses: $3.3 million $3.3 million
Reserves as a percentage
of Total Loans: .85% .85%
Reserves as a percentage
of Non-performing Assets: 212% 204%
</TABLE>
Impaired Loans
As of March 31, 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.
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 March
31, 1997, 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 three months ended 3/31/97 compared to the three
months ended 3/31/96. The following discussion pertains to the consolidated
income for the Company.
Net income was $1.986 million, or $.44 per share, for the first quarter of 1997,
compared with $2.028 million, or $.45 per share, for the first quarter of 1996,
a decrease of $42,000, or 2.1 percent. The decrease in net income is attributed
to the establishment of four additional branch locations, and extending banking
hours to Saturdays and some holidays. President John S. MacMillan said, "The
opening of these new offices were opportunities we felt were in the best
interest of the Company, and though it may take up to 18 months to reach a break
even point the expenses are an investment in the future." The dividend was
increased from $.15 to $.16 per share, adjusted for the 1996 10% stock dividend,
or 6.67 percent from the first quarter of 1996. Return on average assets and
return on beginning equity in the first quarter of 1997 were 1.47 percent and
15.29 percent, respectively, compared with returns of 1.64 percent and 17.33
percent for the first quarter of 1996. The lower return, as a percentage of
assets, was the result of the sizeable asset growth of $45.326 million, or 8.94
percent, and the net income decrease. Stockholder equity at the beginning of the
quarter increased 10.9 percent over the first quarter of 1996. The higher equity
amount and the decrease in net income resulted in the reduced return on equity
ratio.
12
<PAGE> 13
Net Interest Income
Net interest income increased $309,000, or 5.76 percent over the first three
months of 1996 reflecting the growth in loans. Total interest income increased
$686,000, or 7.0 percent, while total interest expense increased $377,000, or
8.5 percent. The increased interest costs have narrowed the net interest margin
ratio; however, the earnings power from the increased earning asset levels have
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 March 31, 1997 and
1996:
INTEREST RATE SPREAD
One way to protect against interest rate volatility is to maintain a comfortable
interest spread between yields on assets and the rates paid on interest bearing
liabilities. As shown below, our net interest margin decreased in 1997 from
4.72% to 4.62%, the result of higher interest rates on deposits and borrowings,
a greater percentage of assets funded with interest bearing liabilities, and
lower rates on earning assets. Although the interest spread, and net interest
margin are down from 1996, increased asset levels resulted in significantly
higher net interest income.
<TABLE>
<CAPTION>
March 31, [1]
-------------
FOR THE YEAR ENDED: 1997 1996
---- ----
<S> <C> <C>
Combined weighted average yield on loans and investments [2].......................... 8.54% 8.60%
Combined weighted average rate paid on savings deposits and borrowings................ 4.39% 4.32%
Net interest spread................................................................... 4.15% 4.27%
Net interest margin [3]............................................................... 4.62% 4.72%
</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 down from the prior year, $34,000, or 1.8 percent. Loan
fees and service charges on deposit accounts were up from the prior year,
however other income is down, primarily the result of reduced insurance income.
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.
Loan Loss Provision
The provision for loan losses is $64,000 more than for the same period in 1996,
reflecting the loan growth and net charge offs. 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 1997, with the total $429,000 or
11.2 percent greater than the same three months in 1996. The efficiency ratio
(non-interest expense)/(net interest income + non-interest income), 56 percent
in 1997, and 52 percent in 1996, is substantially better than similar sized bank
holding companies which average about 64 percent. Salary and employee benefits
have increased $241,000, or 11.8
13
<PAGE> 14
percent. Occupancy expense was also up substantially, $113,000, or 31.0%.
Opening supermarket branches in Billings and Hamilton, construction of the new
office in Thompson Falls, expansion of banking services to include Saturdays and
holidays, other growth related staffing additions, plus normal increases
resulted in these higher expenses.
Tax Expense
Income tax expense decreased by $176,000 during the three months ended March 31,
1997, as compared to the same period in the prior year, reflecting the $218,000
decrease in pre-tax income during the same period and a higher level of tax-free
income. Effective federal and state tax rates were approximately 37% and 40% for
the three month periods ended March 31, 1997 and 1996, respectively.
Bank Name Change and New Offices
On March 17, 1997 the First National Bank of Whitefish changed its name to
Glacier National Bank, and certain assets and the deposits of the Glacier Bank
Whitefish branch were acquired by Glacier National Bank, and the branch closed.
This is expected to result in cost reductions by eliminating duplicate
facilities.
The new full service branch at Thompson Falls opened on April 28, 1997. The
construction of the new supermarket facility in Helena is progressing with
opening in mid June expected. Both of these locations are in new communities for
Glacier Bank.
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.
Current report filed on January 8, 1997 announcing the completion of
the acquisition of Missoula Bancshares, Inc. Amended report filed on
March 17, 1997 with audited financial schedules as required for
Missoula Bancshares, Inc. merger.
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.
May 9, 1997 By /s/ Michael J. Blodnick
- ---------------------- ---------------------------------
Date Michael J. Blodnick
Executive Vice President/COO
May 9, 1997 By /s/ James H. Strosahl
- ---------------------- ---------------------------------
Date James H. Strosahl
Senior Vice President/
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Extracted from (A)
Consolidated Statements of Financial Condition Mar 31, 1997
Consolidated Statements of Operations Mar 31, 1997
Reference to (B)
Quarterly report form 10-Q Mar 31, 1997
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 21,353
<INT-BEARING-DEPOSITS> 10,570
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 84,468
<INVESTMENTS-CARRYING> 19,863
<INVESTMENTS-MARKET> 19,670
<LOANS> 392,091
<ALLOWANCE> 3,331
<TOTAL-ASSETS> 552,372
<DEPOSITS> 323,232
<SHORT-TERM> 104,967
<LIABILITIES-OTHER> 12,338
<LONG-TERM> 59,022
0
0
<COMMON> 46
<OTHER-SE> 52,767
<TOTAL-LIABILITIES-AND-EQUITY> 552,372
<INTEREST-LOAN> 8,587
<INTEREST-INVEST> 1,924
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 10,511
<INTEREST-DEPOSIT> 2,690
<INTEREST-EXPENSE> 4,838
<INTEREST-INCOME-NET> 5,673
<LOAN-LOSSES> 163
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,249
<INCOME-PRETAX> 3,139
<INCOME-PRE-EXTRAORDINARY> 1,986
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,986
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
<YIELD-ACTUAL> 4.62
<LOANS-NON> 632
<LOANS-PAST> 723
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,284
<CHARGE-OFFS> 152
<RECOVERIES> 36
<ALLOWANCE-CLOSE> 3,331
<ALLOWANCE-DOMESTIC> 3,331
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
