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 June 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 August 2, 2000
was 11,441,234. No preferred shares are issued or outstanding.
1
<PAGE>
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 -
June 30, 2000, December 31, and June 30, 1999 (unaudited) ..... 3
Consolidated Condensed Statements of Operations -
Three months and six months ended June 30, 2000 and 1999
(unaudited) ................................................... 4
Consolidated Condensed Statements of Cash Flows -
Six months ended June 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 ... 14
Item 4 - Submission of Matters to a Vote of Securities Holders ....... 15
Part II Other Information ............................................. 15
Signatures ........................................................... 16
2
<PAGE>
GLACIER BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
------------ ------------ ------------
(Unaudited - $ in thousands except per share and per share data) June 30, December 31, June 30,
2000 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Assets:
Cash on hand and in banks ......................................... $ 42,870 50,590 34,322
Federal funds sold ................................................ 0 64 3,042
Interest bearing cash deposits .................................... 2,533 1,711 2,934
------------ ------------ ------------
Cash and cash equivalents ................................. 45,403 52,365 40,298
------------ ------------ ------------
Investments:
Investment securities, held-to-maturity ................... 0 500 500
Investment securities, available-for-sale ................. 65,350 61,560 61,597
Mortgage backed securities, held-to-maturity .............. 0 251 274
Mortgage backed securities, available-for-sale ............ 140,141 147,001 139,545
------------ ------------ ------------
Total Investments .................................... 205,491 209,312 201,916
------------ ------------ ------------
Net loans receivable:
Real estate loans ......................................... 231,691 225,041 223,350
Commercial Loans .......................................... 318,836 279,341 252,239
Installment and other loans ............................... 167,768 154,548 137,013
Allowance for losses ...................................... (7,484) (6,722) (6,245)
------------ ------------ ------------
Total Loans, net ..................................... 710,811 652,208 606,357
------------ ------------ ------------
Premises and equipment, net ....................................... 25,413 24,670 21,050
Real estate and other assets owned ................................ 436 550 264
Federal Home Loan Bank of Seattle stock, at cost .................. 16,048 15,134 14,265
Federal Reserve stock, at cost .................................... 1,467 1,467 1,430
Accrued interest receivable ....................................... 6,130 5,611 4,576
Goodwill, net ..................................................... 6,764 7,035 2,636
Deferred taxes .................................................... 2,940 3,004 130
Other assets ...................................................... 3,089 2,645 3,812
------------ ------------ ------------
$ 1,023,992 974,001 896,734
============ ============ ============
Liabilities and stockholders' equity:
Deposits - non-interest bearing ................................... $ 138,718 126,927 117,958
Deposits - interest bearing ....................................... 520,701 517,179 421,870
Advances from Federal Home Loan Bank of Seattle ................... 241,223 208,650 202,741
Securities sold under agreements to repurchase .................... 21,277 19,766 49,113
Other borrowed funds .............................................. 3,138 6,848 9,941
Accrued interest payable .......................................... 3,086 2,717 2,675
Current income taxes .............................................. 308 108 121
Other liabilities ................................................. 7,109 6,442 6,929
Minority Interest ................................................. 311 308 310
------------ ------------ ------------
Total liabilities ......................................... 935,871 888,945 811,658
------------ ------------ ------------
Common stock, $.01 par value per share ............................ 114 104 104
Paid-in capital ................................................... 101,757 87,386 86,837
Retained earnings (deficit) - substantially restricted ............ (8,194) 2,997 49
Accumulated other comprehensive (loss) ............................ (5,556) (5,431) (1,914)
------------ ------------ ------------
Total stockholders' equity ................................ 88,121 85,056 85,076
------------ ------------ ------------
$ 1,023,992 974,001 896,734
============ ============ ============
Number of shares outstanding ...................................... 11,441,234 10,394,701 10,369,617
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
<PAGE>
GLACIER BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
----------------------------- -----------------------------
(unaudited - $ in thousands except per share data) Three months ended June 30, Six months ended June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Real estate loans ............................ $ 4,685 4,386 9,245 8,956
Commercial loans ............................. 6,975 5,160 13,305 10,011
Consumer and other loans ..................... 3,758 2,950 7,257 5,763
Investment securities ........................ 3,875 2,980 7,732 5,144
----------- ----------- ----------- -----------
Total interest income .................. 19,293 15,476 37,539 29,874
----------- ----------- ----------- -----------
Interest expense:
Deposits ..................................... 5,274 3,823 10,221 7,742
Advances ..................................... 3,553 2,263 6,697 4,110
Repurchase agreements ........................ 184 222 371 407
Other borrowed funds ......................... 123 162 190 184
----------- ----------- ----------- -----------
Total interest expense ................. 9,134 6,470 17,479 12,443
----------- ----------- ----------- -----------
Net interest income ............................... 10,159 9,006 20,060 17,431
Provision for loan losses .................... 505 410 992 768
----------- ----------- ----------- -----------
Net Interest Income after provision for loan losses 9,654 8,596 19,068 16,663
----------- ----------- ----------- -----------
Non-interest income:
Service charges and other fees ............... 2,055 1,727 3,914 3,282
Miscellaneous loan fees and charges .......... 868 1,287 1,803 2,779
Gains on sale of investments ................. 30 1 0 20
Other income ................................. 348 149 799 472
----------- ----------- ----------- -----------
Total fees and other income ............. 3,301 3,164 6,516 6,553
----------- ----------- ----------- -----------
Non-interest expense:
Compensation, employee benefits
and related expenses .................. 3,854 3,692 7,811 7,036
Occupancy expense ............................ 1,232 991 2,347 2,059
Data processing expense ...................... 603 287 879 569
Other expenses ............................... 2,268 2,036 4,556 4,247
Minority interest ............................ 14 12 29 23
----------- ----------- ----------- -----------
Total non-interest expense .............. 7,971 7,018 15,622 13,934
----------- ----------- ----------- -----------
Earnings before income taxes ...................... 4,983 4,742 9,962 9,282
Federal and state income tax expense .............. 1,791 1,654 3,542 3,225
----------- ----------- ----------- -----------
Net earnings ...................................... $ 3,192 3,088 6,420 6,057
=========== =========== =========== ===========
Basic earnings per share (1) ...................... 0.28 0.27 0.56 0.54
Diluted earnings per share (1) .................... 0.28 0.27 0.56 0.53
Dividends declared per share (1) .................. 0.15 0.14 0.29 0.26
Return on average assets (annualized) ............. 1.28% 1.54% 1.30% 1.52%
Return on average equity (annualized) ............. 14.58% 14.68% 15.05% 14.29%
Average outstanding shares - basic (1) ............ 11,440,519 11,302,305 11,438,576 11,401,474
Average outstanding shares - diluted (1) .......... 11,551,404 11,481,258 11,553,474 11,606,737
</TABLE>
(1) Adjusted for stock dividends
See accompanying notes to consolidated financial statements.
4
<PAGE>
GLACIER BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------
(Unaudited -dollars in thousands) Six months ended June 30,
-------------------------
2000 1999
--------- -------
<S> <C> <C>
OPERATING ACTIVITIES :
Net earnings ........................................................ $ 6,420 6,057
Adjustments to reconcile net nearnings to net
cash provided by operating activities:
Mortgage loans held for sale originated or acquired ............... (53,848) (83,974)
Proceeds from sales of mortgage loans held for sale ............... 52,345 94,349
Proceeds from sales of commercial loans ........................... 19,493 7,920
Provision for loan losses ......................................... 992 766
Depreciation of premises and equipment ............................ 1,191 868
Amortization of goodwill .......................................... 271 112
Amortization of investment securities premiums and discounts, net . 75 423
Net loss gain on investment sales ................................. 0 (20)
Net decrease in deferred income taxes ............................. 88 102
Net (increase) in accrued interest receivable ..................... (519) (554)
Net increase in accrued interest payable .......................... 369 397
Net increase in current income taxes .............................. 200 121
Net (increase) in other assets .................................... (444) (556)
Net increase (decrease) in other liabilities and minority interest 670 (1,204)
FHLB stock dividends .............................................. (649) (520)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...................... 26,654 24,586
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sales, maturities and prepayments of securities
available-for-sale .............................................. 26,060 18,466
Purchases of securities available-for-sale .......................... (22,463) (109,951)
Proceeds from maturities and prepayments of securities
held-to-maturity ................................................ 0 828
Principal collected on installment and commercial loans ............. 108,782 108,305
Installment and commercial loans originated or acquired ............. (181,220) (170,230)
Principal collections on mortgage loans ............................. 57,717 62,433
Mortgage loans originated or acquired ............................... (62,750) (54,354)
Net proceeds from sales (acquisition) of real estate owned .......... 0 (117)
Net purchase of FHLB and FRB stock .................................. (265) (1,019)
Net addition of premises and equipment .............................. (1,934) (1,348)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES .......................... (76,073) (146,988)
--------- ---------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits ................................. 15,313 (4,202)
Net increase in FHLB advances and other borrowed funds .............. 28,863 85,155
Net increase in securities sold under repurchase agreements ......... 1,511 31,874
Cash dividends paid to stockholders ................................. (3,294) (2,746)
Proceeds from exercise of stock options and other stock issued ...... 64 747
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ....................... 42,457 110,828
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............ (6,962) (11,574)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................... 52,365 51,872
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................... $ 45,403 40,298
========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES (See Note 12)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for: Interest ........................... $ 17,109 12,715
Income taxes ....................... $ 3,342 3,021
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
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 June 30, 2000,
December 31, 1999, and June 30, 1999 and the results of operations and
cash flows for the six months ended June 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 June 30, 2000 are not
necessarily indicative of the results anticipated for the year ending
December 31, 2000. Certain reclassifications have been made to the 1998
financial statements to conform to the 1999 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"), Mountain West
Bank (Mountain West) and Community First, Inc. ("CFI"). 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 June 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 (Commercial bank) (Brokerage services)
(Commercial bank) (Commercial bank)
----------------- ------------------- ----------------- ---------------------
6
<PAGE>
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 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 Six months ended
June 30, 1999 June 30, 1999
------------------ ----------------
Net earnings of:
Glacier Bancorp, Inc ................... $ 3,003 5,897
Mountain West Bank ..................... 85 160
--------- ---------
Combined ............................... $ 3,088 6,057
========= =========
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. 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 June 29, 2000, the Board of Directors declared of $.15 per share
quarterly cash dividend to stockholders of record on July 11, 2000,
payable on July 20, 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.
<TABLE>
<CAPTION>
Six Six
Three Three months months
months ended months ended ended ended
(Dollars in thousands except per June 30, June 30, June 30, June 30,
share amounts) 2000 1999 2000 1999
------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Net income available to common
stockholders, basic and diluted $ 3,192 3,088 6,420 6,057
=========== ========== ========== ==========
Average outstanding shares - basic 11,440,519 11,302,305 11,438,576 11,401,474
Add: dilutive stock options 110,885 178,953 114,898 205,263
----------- ---------- ---------- ----------
Average outstanding shares - diluted 11,551,404 11,481,258 11,553,474 11,606,737
=========== ========== ========== ==========
Basic earnings per share $ .28 .27 .56 .54
=========== ========== ========== ==========
Diluted earnings per share $ .28 .27 .56 .53
=========== ========== ========== ==========
</TABLE>
7
<PAGE>
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, 2000
<TABLE>
<CAPTION>
Estimated
Available for Sale Weighted Amortized Gross Unrealized Fair
U.S. Government and Federal Agencies Yield Cost Gains Losses Value
-------- --------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
maturing within one year .................. 5.10% $ 960 0 (9) 951
maturing one year through five years ...... 6.29% 4,474 0 (133) 4,341
maturing five years though ten years ...... 6.62% 3,548 0 (124) 3,424
maturing after ten years .................. 7.59% 1,172 1 (12) 1,161
-------- ----- ------ -------
6.44% 10,154 1 (278) 9,877
-------- ----- ------ -------
State and Local Governments and other issues:
maturing within one year .................. 5.64% 555 0 (34) 521
maturing one year through five years ...... 5.40% 1,284 12 (7) 1,289
maturing five years through ten years ..... 7.58% 4,669 26 (50) 4,645
maturing after ten years .................. 5.56% 50,839 256 (2,077) 49,018
-------- ----- ------ -------
5.72% 57,347 294 (2,168) 55,473
-------- ----- ------ -------
Mortgage-Backed Securities .................. 6.93% 40,228 35 (1,277) 38,986
Real Estate Mortgage Investment Conduits .... 7.15% 106,864 63 (5,772) 101,155
-------- ----- ------ -------
Total Available-for-Sale Securities .. 6.69% $214,593 393 (9,495) 205,491
======== ===== ====== =======
</TABLE>
INVESTMENT SECURITIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Estimated
Dollars in thousands Weighted Amortized Gross Unrealized Fair
Held-to-Maturity Yield Cost Gains Losses Value
-------- --------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
U.S. Government and Federal Agencies
maturing one year through five years ...... 6.26% $ 500 0 (5) 495
Mortgage-Backed Securities .................. 6.50% 251 0 (6) 245
------ -------- ----- ------ -------
Total Held-to-Maturity Securities .... 6.42% 751 0 (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 0 (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
====== ======== ===== ====== =======
</TABLE>
8
<PAGE>
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 June 30, 2000:
<TABLE>
<CAPTION>
Tier 1 (Core) Tier 2 (Total) Leverage
(dollars in thousands) Capital Capital Capital
------- ------- -------
<S> <C> <C> <C>
GAAP Capital ............................................ $ 88,121 $ 88,121 $ 88,121
Less: Goodwill .......................................... (6,764) (6,764) (6,764)
Plus: Accumulated other comprehensive
loss on AFS securities ............................. 5,556 5,556 5,556
Minority Interest ....................................... 311 311 311
Allowance for loan losses ............................... -- 7,484 --
Other regulatory adjustments ............................ (100) (100) (100)
----------- ----------- -----------
Regulatory capital computed ............................. $ 87,124 $ 94,608 $ 87,124
=========== =========== ===========
Risk weighted assets .................................... $ 706,709 $ 706,709
=========== ===========
Total average assets .................................... $ 1,003,140
===========
Capital as % of defined assets .......................... 12.33% 13.39% 8.69%
Regulatory "well capitalized" requirement ............... 6.00% 10.00% 5.00%
----------- ----------- -----------
Excess over "well capitalized" requirement .............. 6.33% 3.39% 3.69%
=========== =========== ===========
</TABLE>
9) Comprehensive Earnings:
The Company's only component of other comprehensive earnings is the
unrealized gains and losses on available-for-sale securities.
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
Dollars in thousands 2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net earnings ............................................ $ 3,192 3,088 6,420 6,057
Unrealized holding gains losses arising during the period (1,388) (4,722) (138) (5,368)
Transfer from held-to-maturity .......................... 0 0 (11) 288
Tax expense ............................................. 533 1,821 24 2,060
------- ------- ------- -------
Net after tax ................................... (855) (2,901) (125) (3,020)
Less: reclassification adjustment for amounts
included in net income ............................... 30 1 0 20
Tax expense ............................................. (12) 0 0 (8)
------- ------- ------- -------
Net after tax ................................... 18 1 0 12
Net unrealized loss on securities ............... (873) (2,902) (125) (3,032)
------- ------- ------- -------
Total comprehensive earnings ................. $ 2,319 186 6,295 3,025
======= ======= ======= =======
</TABLE>
9
<PAGE>
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 estimated usage of those services. The operating segment
identified as "Other" includes the Parent, Community First, Inc., and
inter-company eliminations.
<TABLE>
<CAPTION>
Six months ended and as of June 30, 2000
------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
------- --------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Revenues from external customers 19,094 2,389 1,271 9,266 3,999
Intersegment revenues 630 5 1 -- 50
Expenses 16,522 1,937 1,024 7,445 3,573
Intercompany eliminations -- -- -- -- --
------- ------- ------- ------- -------
Net income 3,202 457 249 1,820 476
======= ======= ======= ======= =======
Total Assets 486,748 56,374 30,279 201,445 85,543
======= ======= ======= ======= =======
<CAPTION>
Mountain Total
Big Sky West Other Consolidated
------- -------- ------- ------------
<S> <C> <C> <C> <C>
Revenues from external customers 2,961 4,919 156 44,055
Intersegment revenues -- -- 7,990 8,676
Expenses 2,731 4,509 (105) 37,635
Intercompany eliminations -- -- (8,676) (8,676)
------ ------- ------- ---------
Net income 230 410 (425) 6,420
====== ======= ======= =========
Total Assets 70,926 106,888 (14,211) 1,023,992
====== ======= ======= =========
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Six months ended and as of June 30, 2000
------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
------- --------- ------ -------- ------
Revenues from external customers 15,943 1,768 1,079 8,121 3,540
Intersegment revenues 146 47 5 21 23
Expenses 13,183 1,460 928 6,282 2,938
Intercompany eliminations -- -- -- -- --
------- ------- ------- ------- -------
Net income 2,885 360 167 1,839 602
======= ======= ======= ======= =======
Total Assets 432,079 46,005 27,401 178,534 79,161
======= ======= ======= ======= =======
<CAPTION>
Mountain Total
Big Sky West Other Consolidated
------- -------- ------- ------------
<S> <C> <C> <C> <C>
Revenues from external customers 1,718 3,772 486 36,427
Intersegment revenues -- 7,008 7,250
Expenses 1,551 3,612 402 30,370
Intercompany eliminations -- -- (7,250) (7,250)
------ ------- ------- ---------
Net income 202 160 (158) 6,057
====== ======= ======= =========
Total Assets 54,410 78,356 1,679 897,625
====== ======= ======= =========
</TABLE>
Three months ended and as of June 30, 2000
--------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
---------------------- ------- --------- ------ ------ --------
Revenues from external
customers 9,779 1,211 645 4,662 2,126
Intersegment revenues 257 3 1 -- (4)
Expenses 8,402 988 517 3,777 1,961
Intercompany eliminations -- -- -- -- --
------- ------- ------- ------- --------
Net income 1,634 226 130 884 161
======= ======= ======= ======== =======
Total Assets 486,748 56,374 30,279 201,445 85,543
======= ======= ======= ======== =======
Mountain Total
Big Sky West Other Consolidated
------- -------- ------- ------------
Revenues from external
customers 1,525 2,616 30 22,594
Intersegment revenues -- -- 3,983 4,240
Expenses 1,431 2,365 (39) 19,402
Intercompany eliminations -- -- (4,240) (4,240)
------ ------- --------- ----------
Net income 94 251 (188) 3,192
====== ======= ========= ==========
Total Assets 70,926 106,88 8 (14,211) 1,023,992
====== ======= ========= ==========
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended and as of June 30, 1999
----------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
---------------------- ------- --------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers 8,023 893 553 4,418 1,824
Intersegment revenues (53) 1 2 3 15
Expenses 6,484 711 483 3,468 1,494
Intercompany eliminations -- -- -- -- --
-------- -------- -------- -------- --------
Net income 1,465 188 83 932 322
======== ======== ======== ======== ========
Total Assets 432,079 46,005 27,401 178,534 79,161
======== ======== ======== ======== ========
</TABLE>
Mountain Total
Big Sky West Other Consolidated
--------- ------- ------ ------------
Revenues from external
customers 928 1,851 150 18,640
Intersegment revenues (50) -- 3,646 3,564
Expenses 783 1,766 349 15,552
Intercompany eliminations -- -- (3,564) (3,564)
-------- -------- -------- --------
Net income 130 85 (117) 3,088
======== ======== ======== ========
Total Assets 54,410 78,356 1,679 897,625
======== ======== ======== ========
10
<PAGE>
12) Non-Cash Investing and Financing Activities
Non-cash investing and financing activities for the six months ended June
30, 2000 consist of the following (dollars in thousands):
<TABLE>
<S> <C>
Transfer from held-to-maturity to available for sale securities ..... $ 751
Transfer to other real estate owned from loan portfolio .............. $ 114
10% Stock dividend, transferred from retained earnings
to capital stock and additional paid in capital ................. $14,317
</TABLE>
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 June 30, 2000.
From December 31, 1999 total assets have grown $49.991 million, or 5.13 percent,
to $1.024 billion. This increase was primarily the net result of an increase in
loans of $58.603 million, or 8.99 percent, and a decrease in investments and
cash and cash equivalents of $10.783 million, or 4.12 percent.
Loan growth has occurred in all categories with commercial loans increasing
$39.495 million, or 14.14 percent, consumer loans increasing $13.220 million, or
8.55 percent, and residential real estate loans increasing $6,650 million, or
2.95 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 $71.839 million and $102.259
million during the first six months of 2000 and 1999, respectively.
The amount of loans serviced for others on June 30, 2000 was approximately $206
million.
Total deposits increased $15.313 million, or 2.38 percent, with $11.791 million
of the increase in non-interest bearing deposits. Advances from the FHLB and
other borrowed funds increased $30.373 million, a result of loan growth that
outpaced deposit growth.
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 June 30, 2000 (in thousands): Community
investment program advances not counted against the available line of credit
were $8,751 thousand.
Available line Amount Used Available
-------------- ----------- ---------
Glacier Bank $194,699 147,680 47,019
Glacier Bank of Whitefish 14,094 12,760 1,334
Glacier Bank of Eureka 9,084 7,448 1,636
First Security Bank Missoula 40,289 30,380 9,909
Valley Bank of Helena 17,109 5,994 11,115
Big Sky Western Bank 21,278 16,170 5,108
Mountain West Bank 32,066 12,050 20,016
-------- -------- --------
Totals $328,619 232,482 96,137
-------- -------- --------
11
<PAGE>
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 June
30, 2000 were $2,430 thousand, an increase $152 thousand or 6.67 percent from
December 31, 1999, while the allowance for losses increased $762 thousand or
11.35 percent during the same period. Changes in the information related to the
allowance for loan loss account are shown in the following table:
12
<PAGE>
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
-------------------------------------
<S> <C> <C>
Total Allowance for Loan and Real Estate Owned Losses: $7.484 million $6.722 million
Allowance as a percentage of Total Loans: 1.05% 1.03%
Allowance as a percentage of Non-performing Assets: 308% 295%
</TABLE>
Impaired Loans
As of June 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 June 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 $3.065 million, or 3.60 percent, primarily
the result of earnings retention.
Results of Operations - The three months ended 6/30/00 compared to the
three months ended 6/30/99.
Quarterly earnings including data system conversion expenses were $3.192
million, or fully diluted earnings per share of $.28 compared to $.27 last year,
an increase of 4 percent. Return on average assets and return on average equity,
including these expenses, were 1.28 percent and 14.58 percent, respectively.
Excluding the after-tax impact of data system conversion expenses of $225
thousand, the Company reported record net operating earnings of $3.417 million,
or fully diluted earnings per share of $.30, for the second quarter of 2000,
compared with $3.088 million, or fully diluted earnings per share of $.27, for
the same quarter of 1999, an increase of 11 percent. Return on average assets
and return on average equity for the quarter were 1.37 percent and 15.61
percent, respectively, which compares to returns of 1.54 percent and 14.68
percent for the same quarter of 1999.
Net Interest Income
Net interest income for the quarter was $10.159 million, an increase of $1.153
million, or 13 percent, over the same period in 1999. The Federal Reserve Bank
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
4.6 percent in 1999 to 4.3 percent in 2000. Funding costs continue to put
pressure on the net interest margin.
Non-interest Income
Fee income from loans was significantly lower in 2000 with less activity due to
higher mortgage rates. Loan fees declined $419 thousand, or 33 percent, from the
1999 amount. Offsetting this decline was an increase in other fee income of $328
thousand, and other income of $228 thousand for a net increase of $137 thousand
in non-interest income.
13
<PAGE>
Non-interest Expense
Non-interest expense increased by $953 thousand, or 14 percent, over the second
quarter of 1999. Included in this amount was $366 thousand for contract
termination and other conversion expense connected with moving Valley Bank of
Helena and Big Sky Western Bank data processing from outside service providers
to the Company's data system. Without the one-time data conversion expenses
non-interest expense increased $587 thousand, or 8 percent. Compensation and
employee benefits increased $162 thousand, or 4 percent. Occupancy and equipment
expense was up $241 thousand, or 24 percent. Other expenses were up $232
thousand, or 11 percent. The reasons for the increased operating expenses
include the addition of the two Butte branches and $78 thousand in amortization
of the premium paid for that acquisition, the start-up of the new Bozeman office
by Big Sky Western Bank, and other growth related expenses.
Operating results six months ended June 30, 2000 compared to June 30, 1999
Earnings were $6.420 million, or fully diluted earnings per share of $.56
compared to $.54 last year, an increase of 4 percent. Return on average assets
and return on average equity, were 1.30 percent and 15.05 percent, respectively.
The 1999 return on average assets was 1.52 percent and the return on average
equity was 14.29 percent.
Net operating earnings, without the after tax data conversion expense of $225
thousand, were $6.645 million, an increase of $588 thousand, or 10 percent over
the same six months in 1999, and fully diluted operating earnings per share were
$.58 an increase of $.05, or 9 percent over the same period in 1999. The return
on average assets and the return on average equity, without the data conversion
expense, were 1.35 percent and 15.58 percent, respectively.
Net interest income
Net interest income for the six months was $20.060 million an increase of $2.629
million, or 15 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 4.4 percent, a decline from 4.7 percent in 1999. Interest
income increased $7,665 million, or 25.66 percent over the same period last
year. Interest expense increased $5.036 million, or 40.47 percent due to the
increase in borrowings, a 175 basis point increase short term interest rates on
borrowings, and the increase in interest-bearing deposits.
Loan loss provision
The provision for loan losses was $992 thousand, an increase of $224 thousand or
29 percent from the six-month period in 1999, exceeding the 17 percent growth in
loans. The level of non-performing loans remains at a relatively low level
compared to the peer group and has declined from a year ago.
Non-interest income
Loan fee income declined by $976 thousand, or 35 percent, the result of lower
volume of mortgage loan activity due to increased interest rates. Increases in
service charges and other fee income of $632 thousand, or 19 percent, and other
income of $327 thousand offset the decline in loan fee income.
Non-interest expense
Non-interest expense, including $366 thousand of data conversion expense, has
increased $1.688 million, or 12 percent. The addition of two Butte, Montana
offices, staffing increases in the Boise, Sun Valley, and Bozeman offices, and
other growth related expenses are the primary reasons for the increases.
Compensation, employee benefits and related expenses have increased $775
thousand, or 11 percent. Occupancy and equipment expense increased $288
thousand, or 14 percent. Other expenses, including $156 thousand in premium
amortization for the Butte offices, increased $309 thousand, or 7 percent.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
14
<PAGE>
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/prices such as interest rates, foreign currency exchange
rates, commodity prices, and equity prices. The Company's primary market risk
exposure is interest rate risk. The ongoing monitoring and management of this
risk is an important component of the Company's asset/liability management
process which is governed by policies established by its Board of Directors that
are reviewed and approved annually. The Board of Directors delegates
responsibility for carrying out the asset/liability management policies to the
Asset/Liability committee (ALCO). In this capacity ALCO develops guidelines and
strategies impacting the Company's asset/liability management related activities
based upon estimated market risk sensitivity, policy limits and overall market
interest rate levels/trends.
Interest Rate Risk:
Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. As interest rates change the interest income and expense streams
associated with the Company's financial instruments also change thereby
impacting net interest income (NII), the primary component of the Company's
earnings. ALCO utilizes the results of a detailed and dynamic simulation model
to quantify the estimated exposure of NII to sustained interest rate changes.
While ALCO routinely monitors simulated NII sensitivity over a rolling two-year
horizon, it also utilizes additional tools to monitor potential longer-term
interest rate risk.
The simulation model captures the impact of changing interest rates on the
interest income received and interest expense paid on all assets and liabilities
reflected on the Company's balance sheet. This sensitivity analysis is compared
to ALCO policy limits which specify a maximum tolerance level for NII exposure
over a one year horizon, assuming no balance sheet growth, given a 200 basis
point (bp) upward and downward shift in interest rates. A parallel and pro rata
shift in rates over a 12 month period is assumed. The following reflects the
Company's NII sensitivity analysis as of December 31, 1999, the most recent
information available, as compared to the 10% Board approved policy limit
(dollars in thousands). There have been no material changes in the analysis from
December 31, 1999 to June 30, 2000.
Interest Rate Sensitivity
+200 bp -200 bp
------- -------
Estimated sensitivity -3.66% 2.68%
Estimated increase (decrease) in net interest income (372) 272
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
15
<PAGE>
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
At the April 26 annual meeting of shareholders held in Kalispell, Montana,
two proposals were voted on. The first proposal was for the election of
Directors, and the second proposal was an amendment to the certificate of
incorporation to increase the number of shares of common stock that the
Company is authorized to issue from 15 million shares to 50 million
shares, thereby increasing the total number of authorized shares (common
and preferred) to 51 million shares. Following is a tabulation of results:
Proposal One - Election of Directors
Name For Against Abstain
---- -------- --------- -------
William L. Bouchee 8,814,632 723 212,155
Jon W. Hippler 8,812,713 2,641 212,155
L. Peter Larson 8,814,631 0 212,878
Everit A. Sliter 8,809,715 2,458 212,878
Proposal Two - Amendment to the certificate of incorporation
For Against Abstain
-------- --------- -------
7,554,076 1,423,376 50,290
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibit 27 - Financial data schedule
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.
16
<PAGE>
GLACIER BANCORP, INC.
August 10, 2000 /s/ Michael J. Blodnick
President/CEO
August 10, 2000 /s/James H. Strosahl
Executive Vice President/CFO
17
