<PAGE> 1
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 March 31, 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 (IRS Employer Identification No.)
of incorporation or organization)
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 May 5, 2000 was
10,401,701 No preferred shares are issued or outstanding.
1
<PAGE> 2
GLACIER BANCORP, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page #
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Condensed Statements of Financial Condition -
March 31, 2000, December 31, and March 31, 1999 (unaudited) .... 3
Consolidated Condensed Statements of Operations -
Three months ended March 31, 2000 and 1999 (unaudited) ........ 4
Consolidated Condensed Statements of Cash Flows -
Three months ended March 31, 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 .............. 11
Item 3 - Quantitative and Qualitative Disclosure about Market Risk .... 13
PART II. OTHER INFORMATION .............................................. 14
Signatures .................................................................... 15
</TABLE>
2
<PAGE> 3
GLACIER BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(Unaudited - dollars in thousands except per share data) MARCH 31, December 31, March 31,
- -------------------------------------------------------- 2000 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Assets:
Cash on hand and in banks .............................. $ 40,161 50,590 33,215
Federal funds sold ..................................... 1,450 64 0
Interest bearing cash deposits ......................... 12,150 1,711 13,807
------------ ------------ ------------
Cash and cash equivalents ....................... 53,761 52,365 47,022
------------ ------------ ------------
Investments:
Investment securities, held-to-maturity ......... 0 500 500
Investment securities, available-for-sale ....... 64,309 61,560 62,169
Mortgage backed securities, held-to-maturity .... 0 251 280
Mortgage backed securities, available-for-sale .. 142,816 147,001 90,706
------------ ------------ ------------
Total Investments .......................... 207,125 209,312 153,655
------------ ------------ ------------
Net loans receivable:
Real estate loans ............................... 224,169 225,041 243,487
Commercial Loans ................................ 295,104 279,341 213,077
Installment and other loans ..................... 160,194 154,548 116,933
Allowance for losses ............................ (7,102) (6,722) (5,956)
------------ ------------ ------------
Total Loans, net ........................... 672,365 652,208 567,541
------------ ------------ ------------
Premises and equipment, net ............................ 24,592 24,670 20,789
Real estate and other assets owned ..................... 460 550 106
Federal Home Loan Bank of Seattle stock, at cost ....... 15,523 15,134 13,636
Federal Reserve stock, at cost ......................... 1,527 1,467 1,430
Accrued interest receivable ............................ 5,577 5,611 4,849
Goodwill, net .......................................... 6,899 7,035 2,545
Deferred taxes.......................................... 1,380 2,642 0
Other assets ........................................... 3,686 3,007 2,860
------------ ------------ ------------
$ 992,895 974,001 814,433
============ ============ ============
Liabilities and stockholders' equity:
Deposits - non-interest bearing ........................ $ 148,253 126,927 113,905
Deposits - interest bearing ............................ 524,455 517,179 428,756
Advances from Federal Home Loan Bank of Seattle ........ 200,926 208,650 154,675
Securities sold under agreements to repurchase ......... 12,979 19,766 16,839
Other borrowed funds ................................... 9,885 6,848 1,741
Accrued interest payable ............................... 2,186 2,717 2,437
Current income taxes ................................... 1,581 108 1,871
Deferred income taxes .................................. 0 0 1,355
Other liabilities ...................................... 4,830 6,442 6,277
Minority Interest ...................................... 305 308 319
------------ ------------ ------------
Total liabilities ............................... 905,400 888,945 728,175
------------ ------------ ------------
Common stock, $.01 par value per share ................. 104 96 95
Paid-in capital ........................................ 87,410 87,394 66,785
Retained earnings - substantially restricted ........... 4,664 2,997 18,297
Accumulated other comprehensive earnings (loss) ........ (4,683) (5,431) 1,081
------------ ------------ ------------
Total stockholders' equity ...................... 87,495 85,056 86,258
------------ ------------ ------------
$ 992,895 974,001 814,433
============ ============ ============
(1) Number of shares outstanding ................ 10,397,526 9,550,444 9,516,450
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
<PAGE> 4
GLACIER BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------- --------------------------------
(Unaudited - dollars in thousands except per share data) THREE MONTHS ENDED MARCH 31,
- -------------------------------------------------------- --------------------------------
2000 1999
------------ ------------
<S> <C> <C>
INTEREST INCOME:
Real estate loans .................................................... $ 4,560 4,570
Commercial loans ..................................................... 6,330 4,851
Consumer and other loans ............................................. 3,499 2,813
Investment securities ................................................ 3,857 2,164
------------ ------------
Total interest income .......................................... 18,246 14,398
------------ ------------
INTEREST EXPENSE:
Deposits ............................................................. 4,947 3,919
Advances ............................................................. 3,144 1,847
Repurchase agreements ................................................ 187 185
Other borrowed funds ................................................. 67 22
------------ ------------
Total interest expense ......................................... 8,345 5,973
------------ ------------
NET INTEREST INCOME ....................................................... 9,901 8,425
Provision for loan losses ............................................ 487 358
------------ ------------
Net Interest Income after provision for loan losses ....................... 9,414 8,067
------------ ------------
NON-INTEREST INCOME:
Service charges and other fees ....................................... 1,859 1,555
Miscellaneous loan fees and charges .................................. 935 1,492
Gains (Losses) on sale of investments ................................ (30) 19
Other income ......................................................... 451 323
------------ ------------
Total fees and other income ..................................... 3,215 3,389
------------ ------------
NON-INTEREST EXPENSE:
Compensation, employee benefits
and related expenses .......................................... 3,957 3,344
Occupancy expense .................................................... 1,115 1,068
Data processing expense .............................................. 276 282
Other expenses ....................................................... 2,288 2,211
Minority interest .................................................... 15 11
------------ ------------
Total non-interest expense ...................................... 7,650 6,916
------------ ------------
EARNINGS BEFORE INCOME TAXES .............................................. 4,979 4,540
Federal and state income tax expense ...................................... 1,751 1,571
------------ ------------
NET EARNINGS .............................................................. $ 3,228 2,969
============ ============
Basic earnings per share (1) .............................................. $ 0.31 0.29
Diluted earnings per share (1) ........................................... 0.31 0.29
Dividends declared per share (1) .......................................... 0.15 0.14
Return on average assets (annualized) ..................................... 1.33% 1.46%
Return on average equity (annualized) .................................... 15.06% 13.91%
Basic weighted average shares outstanding (1) ............................ 10,396,939 10,184,669
Diluted weighted average shares outstanding ............................... 10,502,217 10,367,848
</TABLE>
(1) Number of shares outstanding adjusted for 10% stock dividend in 1999
See accompanying notes to consolidated condensed financial statements
4
<PAGE> 5
GLACIER BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------
THREE MONTHS ENDED MARCH 31,
- ------------------------------------------------------------------------------ -------------------------------
(Unaudited -dollars in thousands) 2000 1999
- ------------------------------------------------------------------------------ ------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES :
Net earnings ............................................................ $ 3,228 2,969
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Mortgage loans held for sale originated or acquired ................... (20,171) (44,786)
Proceeds from sales of mortgage loans held for sale ................... 15,539 51,792
Proceeds from sales of commercial loans ............................... 3,139 7,920
Provision for loan losses ............................................. 487 358
Depreciation of premises and equipment ................................ 599 412
Amortization of goodwill .............................................. 136 56
Amortization of investment securities premiums and discounts, net ..... 38 246
Net loss (gain) on investment sales and loan sales .................... 30 (19)
Net decrease (increase) in deferred income taxes ...................... 771 (230)
Net decrease (increase) in accrued interest receivable ................ 34 (106)
Net increase (decrease) in accrued interest payable ................... (531) 76
Net increase in current income taxes .................................. 1,473 1,653
Net (increase) in other assets ........................................ (679) (198)
Net (decrease) in other liabilities and minority interest ............. (1,615) (562)
FHLB stock dividends .................................................. (236) (281)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......................... 2,242 19,299
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sales, maturities and prepayments of investment
securities available-for-sale ....................................... 10,932 8,170
Purchases of investment securities available-for-sale ................... (7,574) (46,508)
Proceeds from maturities and prepayments of investment
securities held-to-maturity ......................................... 0 828
Principal collected on installment and commercial loans ................. 57,190 45,247
Installment and commercial loans originated or acquired ................. (81,738) (65,285)
Principal collections on mortgage loans ................................. 32,117 27,280
Mortgage loans originated or acquired ................................... (26,720) (18,419)
Net proceeds from sales (acquisition) of real estate owned .............. 90 41
Net purchase of FHLB and FRB stock ...................................... (213) (640)
Net addition of premises and equipment .................................. (521) (631)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES .............................. (16,437) (49,917)
------------ ------------
FINANCING ACTIVITIES:
Net increase (decrease) increase in deposits ............................ 28,602 (2,071)
Net increase (decrease) in FHLB advances and other borrowed funds ....... (4,687) 28,889
Net (decrease) in securities sold under repurchase agreements ........... (6,787) (400)
Cash dividends paid to stockholders ..................................... (1,561) (1,297)
Proceeds from exercise of stock options and other stock issued .......... 24 647
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........................... 15,591 25,768
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ 1,396 (4,850)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................ 52,365 51,872
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............................. $ 53,761 47,022
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for: Interest ............................... $ 8,876 6,919
Income taxes ........................... 278 161
</TABLE>
See accompanying notes to consolidated condensed financial statements
5
<PAGE> 6
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 March
31, 2000, December 31, 1999, and March 31, 1999 and the results of
operations and cash flows for the three months ended March 31, 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 March
31, 2000 are not necessarily indicative of the results anticipated for
the year ending December 31, 2000.
2) Organizational Structure:
The Company is the parent company for seven 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 March 31, 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:
<TABLE>
<CAPTION>
Glacier Bancorp, Inc.
(Parent Holding Company)
<S> <C> <C> <C>
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)
</TABLE>
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)
6
<PAGE> 7
<TABLE>
<CAPTION>
Three months ended
March 31, 1999
------------------
<S> <C>
Net earnings of:
Glacier Bancorp, Inc. .......... $2,894
Mountain West Bank ............. 75
------
Combined ....................... $2,969
======
</TABLE>
3) Stock Dividend:
On May 27, 1999, a 10% stock dividend was approved by the Board of
Directors. As a result, all per share amounts from time periods
proceeding this date have been restated to illustrate the effect of the
stock dividend. Any fractional shares were paid in cash.
4) Ratios:
Return on average assets and average equity was calculated based on
daily averages.
5) Cash Dividend Declared:
On March 29, 2000, the Board of Directors declared of $.15 per share
quarterly cash dividend to stockholders of record on April 11, 2000,
payable on April 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 1999 stock dividend. The
following schedule contains the data used in the calculation of basic
and diluted earnings per share.
<TABLE>
<CAPTION>
Three Three
months ended months ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net income available to common
stockholders, basic and diluted $ 3,227,733 2,969,212
=========== ==========
Average outstanding shares - basic 10,396,939 10,184,669
Add: dilutive stock options 105,278 183,179
----------- ----------
Average outstanding shares - diluted 10,502,217 10,367,848
=========== ==========
Basic earnings per share $ .31 .29
Diluted earnings per share $ .31 .29
</TABLE>
7
<PAGE> 8
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, 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..................... 5.75% 1,698 1 (2) 1,697
maturing one year through five years......... 6.43% 4,980 10 (97) 4,893
maturing five years though ten years......... 6.59% 4,547 0 (137) 4,410
maturing after ten years..................... 7.08% 1,276 1 (14) 1,263
---- ------- ------- ------- -------
6.46% 12,501 12 (250) 12,263
---- ------- ------- ------- -------
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
maturing within one year..................... 6.54% 377 1 (49) 329
maturing one year through five years......... 5.22% 1,297 11 (6) 1,302
maturing five years through ten years........ 7.32% 4,611 30 (17) 4,624
maturing after ten years..................... 5.21% 47,838 265 (2,312) 45,791
---- ------- ------- ------- -------
5.40% 54,123 307 (2,384) 52,046
---- ------- ------- ------- -------
MORTGAGE-BACKED SECURITIES..................... 6.94% 39,861 43 (1,347) 38,557
REAL ESTATE MORTGAGE INVESTMENT CONDUITS....... 7.13% 108,354 140 (4,235) 104,259
---- ------- ------- ------- -------
TOTAL AVAILABLE-FOR-SALE SECURITIES..... 6.62% 214,839 502 (8,216) 207,125
==== ======= ======= ======= =======
</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) 500
Mortgage-Backed Securities..................... 6.50% 251 0 (6) 247
---- ------- ------- ------- -------
TOTAL HELD-TO-MATURITY SECURITIES....... 6.42% 751 0 (11) 747
---- ------- ------- ------- -------
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> 9
8) Stockholders' Equity:
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 Board's capital adequacy guidelines and the Company's compliance
with those guidelines as of March 31, 2000:
<TABLE>
<CAPTION>
- ----------------------------------------- Tier 1 (Core) Tier 2 (Total) Leverage
(dollars in thousands) Capital Capital Capital
- ----------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
GAAP Capital................................. $ 87,495 $ 87,495 $ 87,495
Less: Goodwill.............................. (6,899) (6,899) (6,899)
Plus: Net unrealized losses on securities
available-for-sale...................... 4,683 4,683 4,683
Minority Interest............................ 305 305 305
Allowance for loan losses.................... -- 7,102 --
--------- --------- ---------
Regulatory capital computed.................. $ 85,584 $ 92,686 $ 85,584
========= ========= =========
Risk weighted assets......................... $ 665,971 $ 665,971
========= =========
Total average assets........................ $ 973,010
=========
Capital as % of defined assets.............. 12.85% 13.92% 8.80%
Regulatory "well capitalized" requirement... 6.00% 10.00% 5.00%
--------- --------- ---------
Excess over "well capitalized" requirement.. 6.85% 3.92% 3.80%
========= ========= =========
</TABLE>
9) Comprehensive Earnings:
The Company's only component of comprehensive earnings is the unrealized
gains and losses on available-for-sale securities.
<TABLE>
<CAPTION>
For the three months
ended March 31,
- ----------------------------------------------------------- ---------------------
Dollars in thousands 2000 1999
- ----------------------------------------------------------- ------- -------
<S> <C> <C>
Net earnings................................................. $ 3,228 2,969
------- -------
Unrealized holding gains (losses) arising during the period.. 1,250 (646)
Transfer from held-to-maturity............................... (11) 288
Tax expense.................................................. (509) 239
------- -------
Net after tax.................................... 730 (119)
Less: reclassification adjustment for amounts
included in net income.................................... (30) 19
Tax expense.................................................. 12 (8)
------- -------
Net after tax.................................... (18) 11
Net unrealized gain (loss) on securities......... 748 (130)
------- -------
Total comprehensive earnings................. $ 3,976 2,839
======= =======
</TABLE>
9
<PAGE> 10
10) Subsequent Events
The Board of Directors, at their meeting held on April 26, 2000,
declared a 10 percent stock dividend payable May 25, 2000 in common
stock of the Company, to shareholders of record on May 16, 2000.
Fractional shares will be paid in cash
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>
Three months ended and as of March 31, 2000
- ---------------------------------- ----------------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
- ---------------------------------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers 9,315 1,178 626 4,604 1,873
Intersegment revenues 373 2 - - 54
Expenses 8,120 949 507 3,668 1,612
Intercompany eliminations - - - - -
-------- -------- -------- ------- --------
Net income 1,568 231 119 936 315
======== ======== ======== ======= ========
Total Assets 461,303 54,380 27,734 196,223 83,610
======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Mountain Total
Big Sky West Other Consolidated
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenues from external customers 1,436 2,303 126 21,461
Intersegment revenues - - 4,007 4,436
Expenses 1,300 2,144 (66) 18,233
Intercompany eliminations - - (4,436) (4,436)
-------- -------- -------- --------
Net income 136 159 (236) 3,228
======== ======== ======== ========
Total Assets 68,437 97,938 3,271 992,895
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Three months ended and as of March 31, 1999
- ---------------------------------- ----------------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
- ---------------------------------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues from external customers 7,920 875 526 3,703 1,716
Intersegment revenues 199 46 3 18 8
Expenses 6,699 749 445 2,814 1,444
Intercompany eliminations - - - - -
-------- -------- -------- ------- --------
Net income 1,420 172 84 907 280
======== ======== ======== ======= ========
Total Assets 370,341 41,888 27,734 169,776 74,756
======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Mountain Total
Big Sky West Other Consolidated
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenues from external customers 790 1,921 336 17,787
Intersegment revenues 50 - 3,362 3,686
Expenses 768 1,846 53 14,818
Intercompany eliminations - - (3,686) (3,686)
-------- -------- -------- --------
Net income 72 75 (41) 2,969
======== ======== ======== ========
Total Assets 48,611 80,867 460 814,433
======== ======== ======== ========
</TABLE>
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, 1999 to March 31, 2000.
From December 31, 1999 total assets have grown $18.894 million, or 1.94 percent,
to $992.895 million. This increase was primarily the net result of an increase
in loans of $20.157 million, or 3.09 percent, and a decrease in investments and
cash and cash equivalents of $791 thousand.
Real estate loans decreased $800 thousand during the period, while commercial
loans increased $15.763 million, consistent with management's decision to
restructure the loan portfolio and to not retain long-term, low-interest rate
mortgage loans.
Total deposits increased $28.602 million, or 4.4 percent, with $21.326 million
of the increase in non-interest bearing deposits. Advances from the FHLB and
other borrowed funds decreased $11.474 million because of the deposit increases.
Loans sold to the secondary market amounted to $18.678 million and $60.585
million during the first three months of 2000 and 1999, respectively.
The amount of loans serviced for others on March 31, 2000 was approximately $175
million.
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 March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
Available line Amount Used Available
-------------- ----------- ---------
<S> <C> <C> <C>
Glacier Bank $160,338 123,966 36,372
Glacier Bank of Whitefish 12,131 10,225 1,906
Glacier Bank of Eureka 9,341 4,048 5,293
First Security Bank Missoula 31,411 28,000 3,411
Valley Bank of Helena 16,059 6,287 9,772
Big Sky Western Bank 17,126 15,600 1,526
Mountain West Bank 16,221 12,800 3,421
-------- -------- --------
Totals $262,627 200,926 61,701
======== ======== ========
</TABLE>
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 March 31, 2000 remained unchanged from
December 31, 1999, and were $2.3 million, or .23% of total assets. Changes in
the information related to the allowance for loan loss account are shown in the
following table:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Total Allowance for Loan and Real Estate Owned Losses: $7.102 million $6.722 million
Allowance as a percentage of Total Loans: 1.06% 1.03%
Allowance as a percentage of Non-performing Assets: 310% 295%
</TABLE>
11
<PAGE> 12
Impaired Loans
As of March 31, 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 March 31, 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.
Results of Operations - The three months ended 3/31/00 compared to the three
months ended 3/31/99.
Glacier Bancorp, Inc. reported net income of $3.228 million, or basic earnings
per share of $.31, for the first quarter of 2000, compared with $2.969 million,
or basic earnings per share of $.29, for the same quarter of 1999. Return on
average assets and return on average equity for the quarter were 1.33 percent
and 15.06 percent, respectively, which compares to returns of 1.46 percent and
13.91 percent for the same quarter of 1999.
The acquisition of the two Butte Montana offices of Washington Mutual, with
approximately $73 million in deposits, was completed as of October 8, 1999.
Those branches have been fully integrated into Glacier Bank, the largest
subsidiary of the Company. The information contained in this document includes
the impact of that acquisition which was accounted for as a purchase. Under
purchase accounting rules only results from the purchase date forward are
affected and prior periods have not been adjusted to reflect the acquisition.
Net Interest Income
Net interest income for the quarter was $9.901 million, an increase of $1.476
million, or 17 percent, over the same period in 1999. Growth in earning assets
was the main reason for this increase. The net interest margin as a percentage
of earning assets, on a tax equivalent basis, has declined from 4.8 percent in
1999 to 4.4 percent in 2000. Higher interest rates in the first part of 2000
have resulted in 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 the significant increase in net
interest income.
Loan Loss Provision and Non-Performing Assets
The first quarter provision for loan losses was $487 thousand, up from $358
thousand during the same quarter in 1999. Non-performing assets as a percentage
of loans at March 31, 2000 were .36 percent, well below the average of the peer
group which was .64 percent at December 31, 1999, the most recent information
available. The reserve for loan losses was 310 percent of non-performing assets
as of March 31, 2000, compared to 295 percent at year end 1999. With the growth
in loan balances, and the change in loan mix from residential real estate to
commercial and consumer loans, which historically have greater credit risk, both
the provision expense for loan loss and the balance in the reserve account
continue to increase. The reserve balance increased $380 thousand, or 6 percent,
to $7.102 million during the first quarter of 2000, to 1.06 percent of total
loans outstanding, up from 1.03 percent of loans at December 31, 1999.
Non-interest Income
Non-interest income declined $174 thousand, from the first quarter of 1999.
Income from sales of mortgage loans was $557 thousand lower in 2000 with less
activity due to higher mortgage rates. Other fee income increased $304 thousand,
offsetting some of the mortgage fee income decline. Other miscellaneous income,
somewhat offset by losses on investment sales of $30 thousand, comprised the
remaining increase in non-interest income.
12
<PAGE> 13
Non-interest Expense
Non-interest expense increased by $734 thousand, or 11 percent, over the first
quarter of 1999. Compensation and employee benefits increased $613 thousand, or
18 percent. Occupancy and equipment expense was up $47 thousand, or 4 percent.
Other expenses were up $75 thousand, or 3 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, staffing
increases in the Boise, and Sun Valley Idaho branches, and normal compensation
adjustments that occur at the beginning of the year.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/prices such as interest rates, foreign currency exchange
rates, commodity prices, and equity prices. The Company's primary market risk
exposure is interest rate risk. The ongoing monitoring and management of this
risk is an important component of the Company's asset/liability management
process which is governed by policies established by its Board of Directors that
are reviewed and approved annually. The Board of Directors delegates
responsibility for carrying out the asset/liability management policies to the
Asset/Liability committee (ALCO). In this capacity ALCO develops guidelines and
strategies impacting the Company's asset/liability management related activities
based upon estimated market risk sensitivity, policy limits and overall market
interest rate levels/trends.
Interest Rate Risk:
Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. As interest rates change the interest income and expense streams
associated with the Company's financial instruments also change thereby
impacting net interest income (NII), the primary component of the Company's
earnings. ALCO utilizes the results of a detailed and dynamic simulation model
to quantify the estimated exposure of NII to sustained interest rate changes.
While ALCO routinely monitors simulated NII sensitivity over a rolling two-year
horizon, it also utilizes additional tools to monitor potential longer-term
interest rate risk.
The simulation model captures the impact of changing interest rates on the
interest income received and interest expense paid on all assets and liabilities
reflected on the Company's balance sheet. This sensitivity analysis is compared
to ALCO policy limits which specify a maximum tolerance level for NII exposure
over a one year horizon, assuming no balance sheet growth, given a 200 basis
point (bp) upward and downward shift in interest rates. A parallel and pro rata
shift in rates over a 12 month period is assumed. The following reflects the
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 March 31, 2000.
<TABLE>
<CAPTION>
+200 bp -200 bp
------- -------
<S> <C> <C>
Estimated sensitivity -3.66% 2.68%
Estimated increase (decrease) in net interest income (1,220) 893
</TABLE>
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
13
<PAGE> 14
loans and securities, deposit decay rates, pricing decisions on loans and
deposits, reinvestment/replacement of assets and liability cashflows, and
others. While assumptions are developed based upon current economic and local
market conditions, the Company cannot make any assurances as to the predictive
nature of these assumptions including how customer preferences or competitor
influences might change.
Also, as market conditions vary from those assumed in the sensitivity analysis,
actual results will also differ due to: prepayment/refinancing levels likely
deviating from those assumed, the varying impact of interest rate change caps or
floors on adjustable rate assets, the potential effect of changing debt service
levels on customers with adjustable rate loans, depositor early withdrawals and
product preference changes, and other internal/external variables. Furthermore,
the sensitivity analysis does not reflect actions that ALCO might take in
responding to or anticipating changes in interest rates.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the registrant
or its subsidiaries are a party.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibit 27 - Financial data schedule
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLACIER BANCORP, INC.
May 8, 2000 /s/ Michael J. Blodnick
President/CEO
May 8, 2000 /s/ James H. Strosahl
Executive Vice President/CFO
15
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION MARCH 31, 2000, CONSOLIDATED
STATEMENTS OF OPERATIONS MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT FORM 10-Q MARCH 31, 2000
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 40,161
<INT-BEARING-DEPOSITS> 12,150
<FED-FUNDS-SOLD> 1,450
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 207,125
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 679,467
<ALLOWANCE> 7,102
<TOTAL-ASSETS> 992,895
<DEPOSITS> 672,708
<SHORT-TERM> 223,440
<LIABILITIES-OTHER> 8,597
<LONG-TERM> 350
0
0
<COMMON> 104
<OTHER-SE> 87,391
<TOTAL-LIABILITIES-AND-EQUITY> 992,895
<INTEREST-LOAN> 14,389
<INTEREST-INVEST> 3,857
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 18,246
<INTEREST-DEPOSIT> 4,947
<INTEREST-EXPENSE> 8,345
<INTEREST-INCOME-NET> 9,901
<LOAN-LOSSES> 487
<SECURITIES-GAINS> (30)
<EXPENSE-OTHER> 7,650
<INCOME-PRETAX> 4,979
<INCOME-PRE-EXTRAORDINARY> 3,228
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,228
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.31
<YIELD-ACTUAL> 4.43
<LOANS-NON> 1,698
<LOANS-PAST> 135
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,722
<CHARGE-OFFS> 140
<RECOVERIES> 33
<ALLOWANCE-CLOSE> 7,102
<ALLOWANCE-DOMESTIC> 7,102
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
