UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000
|_| Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _________________
COMMISSION FILE 0-18911
-------
GLACIER BANCORP, INC.
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE 81-0519541
--------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
49 Commons Loop, Kalispell, Montana 59901
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (406) 756-4200
--------------------------------------------------------------------------------
N/A
--------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The number of shares of Registrant's common stock outstanding on October 31,
2000 was 11,441,234. No preferred shares are issued or outstanding.
1
<PAGE>
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 - September
30, 2000, December 31, and September 30, 1999 (unaudited) ................. 3
Consolidated Condensed Statements of Operations -
Three months and nine months ended September 30, 2000 and 1999 (unaudited) 4
Consolidated Condensed Statements of Cash Flows -
Nine months ended September 30, 2000 and 1999 (unaudited) ................ 5
Notes to Consolidated Condensed Financial Statements ...................... 6
Item 2 - Management's Discussion and Analysis
Of Financial Condition and Results of Operations ......................... 12
Item 3 - Quantitative and Qualitative Disclosure about Market Risk .............. 15
Part II Other Information ............................................................ 16
Item 6 Exhibits and Reports on Form 8-K ......................................... 16
Signatures ...................................................................... 17
</TABLE>
2
<PAGE>
GLACIER BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
------------- ------------ -------------
(Unaudited - $ in thousands except per share and per share data) September 30, December 31, September 30,
2000 1999 1999
------------- ------------ -------------
<S> <C> <C> <C>
Assets:
Cash on hand and in banks ..................................... $ 33,700 50,590 33,435
Federal funds sold ............................................ -- 64 278
Interest bearing cash deposits ................................ 4,255 1,711 8,742
------------ ------------ ------------
Cash and cash equivalents ................................ 37,955 52,365 42,455
------------ ------------ ------------
Investments:
Investment securities, held-to-maturity .................. -- 500 500
Investment securities, available-for-sale ................ 65,419 61,560 61,351
Mortgage backed securities, held-to-maturity ............. -- 251 264
Mortgage backed securities, available-for-sale ........... 138,430 147,001 142,945
------------ ------------ ------------
Total Investments ................................... 203,849 209,312 205,060
------------ ------------ ------------
Net loans receivable:
Real estate loans ........................................ 236,071 225,041 220,443
Commercial Loans ......................................... 325,974 279,341 258,704
Installment and other loans .............................. 168,789 154,548 147,016
Allowance for losses ..................................... (7,808) (6,722) (6,549)
------------ ------------ ------------
Total Loans, net .................................... 723,026 652,208 619,614
------------ ------------ ------------
Premises and equipment, net ................................... 25,005 24,670 22,429
Real estate and other assets owned ............................ 97 550 183
Federal Home Loan Bank of Seattle stock, at cost .............. 16,146 15,134 14,624
Federal Reserve stock, at cost ................................ 1,639 1,467 1,431
Accrued interest receivable ................................... 6,233 5,611 4,871
Goodwill, net ................................................. 6,628 7,035 2,432
Deferred taxes ................................................ 1,512 2,895 125
Other assets .................................................. 3,951 2,754 4,916
------------ ------------ ------------
$ 1,026,041 974,001 918,140
============ ============ ============
Liabilities and stockholders' equity:
Deposits - non-interest bearing ............................... $ 152,022 126,927 134,824
Deposits - interest bearing ................................... 564,965 517,179 441,960
Advances from Federal Home Loan Bank of Seattle ............... 177,909 208,650 193,942
Securities sold under agreements to repurchase ................ 20,699 19,766 43,771
Other borrowed funds .......................................... 7,985 6,848 7,769
Accrued interest payable ...................................... 3,387 2,717 2,992
Current income taxes .......................................... 941 108 178
Other liabilities ............................................. 5,970 6,442 7,137
Minority Interest ............................................. 325 308 307
------------ ------------ ------------
Total liabilities ........................................ 934,203 888,945 832,880
------------ ------------ ------------
Common stock, $ 01 par value per share ........................ 114 104 104
Paid-in capital ............................................... 101,756 87,386 87,052
Retained earnings (deficit) - substantially restricted ........ (6,057) 2,997 1,884
Accumulated other comprehensive (loss) ........................ (3,975) (5,431) (3,780)
------------ ------------ ------------
Total stockholders' equity ............................... 91,838 85,056 85,260
------------ ------------ ------------
$ 1,026,041 974,001 918,140
============ ============ ============
Number of shares outstanding .................................. 11,441,234 10,394,701 10,385,246
</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 Sept. 30, Nine months ended Sept. 30,
-------------------------------- --------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Real estate loans ........................... $ 4,891 4,395 14,136 13,351
Commercial loans ............................ 7,638 5,583 20,943 15,594
Consumer and other loans .................... 4,002 3,200 11,259 8,963
Investment securities ....................... 3,869 3,671 11,601 8,815
------------ ------------ ------------ ------------
Total interest income ................. 20,400 16,849 57,939 46,723
------------ ------------ ------------ ------------
Interest expense:
Deposits .................................... 6,025 3,953 16,246 11,695
Advances .................................... 3,540 2,678 10,237 6,788
Repurchase agreements ....................... 272 599 643 1,006
Other borrowed funds ........................ 44 30 234 214
------------ ------------ ------------ ------------
Total interest expense ................ 9,881 7,260 27,360 19,703
------------ ------------ ------------ ------------
Net interest income ............................... 10,519 9,589 30,579 27,020
Provision for loan losses ................... 491 478 1,483 1,246
------------ ------------ ------------ ------------
Net Interest Income after provision for loan losses 10,028 9,111 29,096 25,774
------------ ------------ ------------ ------------
Non-interest income:
Service charges and other fees .............. 1,997 1,724 5,911 5,006
Miscellaneous loan fees and charges ......... 508 364 1,344 1,244
Gain on sale of loans ....................... 545 708 1,512 2,607
Gains on sale of investments ................ (5) 1 (5) 21
Other income ................................ 536 402 1,335 874
------------ ------------ ------------ ------------
Total fees and other income ............ 3,581 3,199 10,097 9,752
------------ ------------ ------------ ------------
Non-interest expense:
Compensation, employee benefits
and related expenses ................. 3,992 3,627 12,078 10,663
Occupancy expense ........................... 1,221 997 3,568 3,056
Data processing expense ..................... 264 388 1,143 957
Other expenses .............................. 1,980 2,186 6,261 6,433
Minority interest ........................... 16 13 45 36
------------ ------------ ------------ ------------
Total non-interest expense ............. 7,473 7,211 23,095 21,145
------------ ------------ ------------ ------------
Earnings before income taxes ...................... 6,137 5,099 16,098 14,381
Federal and state income tax expense .............. 2,283 1,833 5,825 5,058
------------ ------------ ------------ ------------
Net earnings ...................................... $ 3,853 3,266 10,273 9,323
============ ============ ============ ============
Basic earnings per share (1) ...................... 0.34 0.29 0.90 0.82
Diluted earnings per share (1) .................... 0.33 0.28 0.89 0.81
Dividends declared per share (1) .................. 0.15 0.14 0.44 0.40
Return on average assets (annualized) ............. 1.50% 1.66% 1.37% 1.60%
Return on average equity (annualized) ............. 17.30% 15.14% 15.82% 14.46%
Average outstanding shares - basic (1) ............ 11,441,234 11,418,202 11,439,462 11,340,937
Average outstanding shares - diluted (1) .......... 11,536,174 11,607,113 11,547,895 11,554,851
</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) Nine months ended Sept 30,
---------------------------
2000 1999
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES :
Net earnings ...................................................... $ 10,273 9,323
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Mortgage loans held for sale originated or acquired ............. (69,791) (117,322)
Proceeds from sales of mortgage loans held for sale ............. 69,590 136,210
Proceeds from sales of commercial loans ......................... 8,270 7,538
Provision for loan losses ....................................... 1,483 1,246
Depreciation of premises and equipment .......................... 1,056 1,356
Amortization of goodwill ........................................ 407 169
Amortization of investment securities premiums and discounts, net 116 498
Net loss (gain) on investment sales ............................. 5 (21)
Net decrease in deferred income taxes ........................... 387 231
Net (increase) in accrued interest receivable ................... (622) (606)
Net increase in accrued interest payable ........................ 670 714
Net increase in current income taxes ............................ 833 451
Net (increase) in other assets .................................. (1,197) (874)
Net (decrease) in other liabilities and minority interest ....... (455) (95)
FHLB stock dividends ............................................ (745) (784)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES .................... 30,280 38,033
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sales, maturities and prepayments of
securities available-for-sale ................................. 31,007 23,352
Purchases of securities available-for-sale ........................ (23,213) (120,965)
Proceeds from maturities and prepayments of
securities held-to-maturity ................................... -- 828
Principal collected on installment and commercial loans ........... 181,586 157,799
Installment and commercial loans originated or acquired ........... (261,127) (235,303)
Principal collections on mortgage loans ........................... 98,727 75,018
Mortgage loans originated or acquired ............................. (109,556) (73,279)
Net proceeds from sales (acquisition) of real estate owned ........ 453 (36)
Net purchase of FHLB and FRB stock ................................ (439) (1,103)
Net addition of premises and equipment ............................ (1,391) (3,210)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES ........................ (83,953) (176,900)
--------- ---------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits ............................... 72,881 31,874
Net increase (decrease) in FHLB advances and other borrowed funds . (29,604) 74,184
Net increase in securities sold under repurchase agreements ....... 933 26,532
Cash dividends paid to stockholders ............................... (5,010) (4,510)
Proceeds from exercise of stock options and other stock issued .... 63 1,370
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ..................... 39,263 129,450
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS ..................... (14,410) (9,417)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................. 52,365 51,872
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................ $ 37,955 42,455
========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES (See Note 12)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for: Interest ......................... $ 26,690 19,036
Income taxes ..................... 4,992 5,333
</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 September 30,
2000, December 31, 1999, and September 30, 1999 and the results of
operations and cash flows for the nine months ended September 30, 2000 and
1999.
The accompanying consolidated condensed financial statements do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in
the Company's Annual Report on Form 10-K for the year ended December 31,
1999. Operating results for the three months ended September 30, 2000 are
not necessarily indicative of the results anticipated for the year ending
December 31, 2000. Certain reclassifications have been made to the 1999
financial statements to conform to the 2000 presentation.
2) Organizational Structure:
The Company is the parent company for eight subsidiaries: Glacier Bank
("Glacier"); Glacier Bank of Whitefish ("Whitefish"); Glacier Bank of
Eureka ("Eureka"); First Security Bank of Missoula ("Missoula"); Valley
Bank of Helena ("Helena"), Big Sky Western Bank ("Big Sky"), and Community
First, Inc. ("CFI"), all located in Montana, and Mountain West Bank
(Mountain West) which is located in Idaho. CFI provides full service
brokerage services through Raymond James Financial Services, Inc. Big Sky
Western Bank became a subsidiary of the Company on January 20, 1999 and
Mountain West became a subsidiary on February 4, 2000. The pooling of
interests accounting method was used for both acquisitions. Under this
method, financial information for each of the periods presented includes
the combined companies as though the mergers had occurred prior to the
earliest date presented. At September 30, 2000, the Company owned 100% of
Glacier, Missoula, Helena, Big Sky, Mountain West and CFI; 94% of
Whitefish, and 98% of Eureka.
The following abbreviated organizational chart illustrates the various
relationships:
<TABLE>
------------------------
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 of Coeur d'Alene, Idaho (Brokerage services)
(Commercial bank) (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
6
<PAGE>
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)
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept. 30, 1999 Sept. 30, 1999
------------------ -----------------
<S> <C> <C>
Net earnings of:
Glacier Bancorp, Inc ................... $3,163 9,060
Mountain West Bank ..................... 103 263
------ ------
Combined ............................... $3,266 9,323
====== ======
</TABLE>
3) Stock Dividend:
On April, 26, 2000, a 10% stock dividend was approved by the Board of
Directors. As a result all per share amounts from time periods preceding
this date have been restated to illustrate the effect of the stock
dividend. The current deficit in retained earnings is a result of the
stock dividend. Any fractional shares were paid in cash.
4) Ratios:
Returns on average assets and average equity were calculated based on
daily averages.
5) Cash Dividend Declared:
On September 27, 2000, the Board of Directors declared of $.15 per share
quarterly cash dividend to stockholders of record on October 10, 2000,
payable on October 19, 2000.
6) Computation of Earnings Per Share:
Basic earnings per common share is computed by dividing net earnings by
the weighted average number of shares of common stock outstanding during
the period presented. Diluted earnings per share is computed by including
the net increase in shares if dilutive outstanding stock options were
exercised, using the treasury stock method. Previous period amounts are
restated for the effect of the 2000 stock dividend. The following schedule
contains the data used in the calculation of basic and diluted earnings
per share.
<TABLE>
<CAPTION>
Three Three Nine Nine
months ended months ended months ended months ended
(Dollars in thousands except per share amounts) Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income available to common
stockholders, basic and diluted $ 3,853 3,266 10,273 9,323
=========== =========== =========== ===========
Average outstanding shares - basic 11,441,234 11,418,202 11,439,462 11,340,937
Add: dilutive stock options 94,940 188,911 108,433 213,914
----------- ----------- ----------- -----------
Average outstanding shares - diluted 11,536,174 11,607,113 11,547,895 11,554,851
=========== =========== =========== ===========
Basic earnings per share $ .34 .29 .90 .82
=========== =========== =========== ===========
Diluted earnings per share $ .33 .28 .89 .81
=========== =========== =========== ===========
</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 SEPT 30, 2000
<TABLE>
<CAPTION>
Dollars in thousands
Available for Sale Estimated
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 .................... 5.21% 700 0 (7) 693
maturing one year through five years ........ 6.30% 4,975 -- (106) 4,869
maturing five years though ten years ........ 6.66% 3,049 -- (65) 2,984
maturing after ten years .................... 8.11% 1,098 1 (11) 1,088
---- ------- ------- ------- -------
6.54% 9,822 1 (189) 9,634
---- ------- ------- ------- -------
State and Local Governments and other issues:
maturing within one year .................... 5.61% 500 0 (34) 466
maturing one year through five years ........ 5.91% 1,822 30 (3) 1,849
maturing five years through ten years ....... 7.61% 4,020 23 (57) 3,986
maturing after ten years .................... 5.56% 50,499 485 (1,500) 49,484
---- ------- ------- ------- -------
5.72% 56,841 538 (1,594) 55,785
---- ------- ------- ------- -------
Mortgage-Backed Securities .................... 6.84% 40,682 57 (854) 39,885
Real Estate Mortgage Investment Conduits ...... 7.12% 103,005 117 (4,577) 98,545
---- ------- ------- ------- -------
Total Available-for-Sale Securities .... 6.66% 210,350 713 (7,214) 203,849
==== ======= ======= ======= =======
</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 -- (5) 495
Mortgage-Backed Securities ........................... 6.50% 251 -- (6) 245
---- -------- --- ------ -------
Total Held-to-Maturity Securities ............. 6.42% 751 -- (11) 740
==== ======== === ====== =======
Available for Sale
U.S. Government and Federal Agencies
maturing within one year ............................ 5.98% 1,998 3 (4) 1,997
maturing one year through five years ................ 6.37% 4,480 15 (105) 4,391
maturing five years though ten years ................ 6.76% 4,546 -- (221) 4,325
maturing after ten years ............................ 5.20% 1,322 2 (13) 1,310
---- -------- --- ------ -------
6.33% 12,346 20 (343) 12,023
---- -------- --- ------ -------
State and Local Governments and other issues:
maturing within one year ............................ 6.50% 397 1 (49) 349
maturing one year through five years ................ 4.92% 1,302 14 (5) 1,311
maturing five years through ten years ............... 6.88% 4,120 25 (20) 4,125
maturing after ten years ............................ 5.21% 46,698 39 (2,985) 43,752
---- -------- --- ------ -------
5.34% 52,517 79 (3,059) 49,537
---- -------- --- ------ -------
Mortgage-Backed Securities ............................ 6.96% 44,277 164 (1,310) 43,131
Real Estate Mortgage Investment Conduits .............. 6.94% 108,374 126 (4,630) 103,870
---- -------- --- ------ -------
Total Available for Sale Securities ................... 6.52% $217,514 389 (9,342) 208,561
==== ======== === ====== =======
</TABLE>
8) Stockholders' Equity:
The Federal Reserve Board has adopted capital adequacy guidelines that are
used to assess the adequacy of capital in supervising a bank holding
company. The following table illustrates the Federal Reserve Board's
capital adequacy guidelines and the Company's compliance with those
guidelines as of Sept. 30, 2000
8
<PAGE>
<TABLE>
<CAPTION>
Tier 1 (Core) Tier 2 (Total) Leverage
(dollars in thousands) Capital Capital Capital
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Capital ............................. $ 91,838 91,838 91,838
Less: Goodwill .......................... (6,628) (6,628) (6,628)
Plus: Accumulated other comprehensive
loss on AFS securities .............. 3,975 3,975 3,975
Minority Interest ........................ 325 325 325
Allowance for loan losses ................ -- 7,808 --
Other regulatory adjustments ............. (169) (169) (169)
----------- ----------- -----------
Regulatory capital computed .............. $ 89,341 97,149 89,341
=========== =========== ===========
Risk weighted assets ..................... $ 737,468 737,468
=========== ===========
Total average assets ..................... 1,037,097
===========
Capital as % of defined assets ........... 12.11% 13.17% 8.61%
Regulatory "well capitalized" requirement 6.00% 10.00% 5.00%
----------- ----------- -----------
Excess over "well capitalized" requirement 6.11% 3.17% 3.93%
=========== =========== ===========
</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 nine months
ended Sept 30, ended Sept 30,
Dollars in thousands 2000 1999 2000 1999
------- ----- ------ -----
<S> <C> <C> <C> <C>
Net earnings .............................................. $ 3,853 3,266 10,273 9,323
Unrealized holding gains (losses) arising during the period 2,598 (2,888) 2,460 (8,256)
Transfer from held-to-maturity ............................ -- -- (11) 288
Tax expense ............................................... (1,020) 916 (996) 2,977
------- ----- ------ -----
Net after tax ................................. 1,578 (1,972) 1,453 (4,991)
Less: reclassification adjustment for amounts
included in net income ................................. (5) 1 (5) 21
Tax expense ............................................... 2 -- 2 (7)
------- ----- ------ -----
Net after tax ................................. (3) 1 (3) 14
Net unrealized gain (loss) on securities ..... 1,581 (1,973) 1,456 (5,005)
------- ----- ------ -----
Total comprehensive earnings .............. $ 5,434 1,293 11,729 4,318
======= ===== ====== =====
</TABLE>
10) Subsequent Events
None
11) Segment Information
The Company evaluates segment performance internally based on individual
bank charter, and thus the operating segments are so defined. The
following schedule provides selected financial data for the Company's
operating segments. Centrally provided services to the Banks are allocated
based on
9
<PAGE>
estimated usage of those services. The operating segment identified as
"Other" includes the Parent, Community First, Inc., and inter-company
eliminations.
<TABLE>
<CAPTION>
Nine months ended and as of Sept. 30, 2000
-----------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
------- --------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Revenues from external customers 29,340 3,665 1,985 14,190 6,230
Intersegment revenues 866 6 2 -- 75
Expenses 25,244 2,980 1,605 11,326 5,458
Intercompany eliminations -- -- -- -- --
------- ------- ------- ------- -------
Net income 4,962 691 382 2,864 847
======= ======= ======= ======= =======
Total Assets 459,096 55,206 30,907 202,782 86,678
======= ======= ======= ======= =======
<CAPTION>
Mountain Total
Big Sky West Other Consolidated
------- --------- ----- ------------
<S> <C> <C> <C> <C>
Revenues from external customers 4,648 7,634 344 68,036
Intersegment revenues -- -- 12,513 13,462
Expenses 4,259 6,943 (52) 57,763
Intercompany eliminations -- -- (13,462) (13,462)
------ ------- ------ ---------
Net income 389 691 (553) 10,273
====== ======= ====== =========
Total Assets 72,806 116,477 2,089 1,026,041
====== ======= ====== =========
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Nine months ended and as of Sept. 30, 1999
-----------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
------- --------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Revenues from external customers 24,732 2,816 1,687 12,371 5,395
Intersegment revenues 461 50 2 51 75
Expenses 20,638 2,297 1,410 9,578 4,560
Intercompany eliminations -- -- -- -- --
------- ------- ------- ------- -------
Net income 4,555 569 279 2,844 910
======= ======= ======= ======= =======
Total Assets 433,910 48,518 27,487 183,410 78,836
======= ======= ======= ======= =======
<CAPTION>
Mountain Total
Big Sky West Other Consolidated
------- --------- ----- ------------
<S> <C> <C> <C> <C>
Revenues from external customers 3,400 5,675 399 56,475
Intersegment revenues 33 -- 9,667 10,339
Expenses 3,111 5,412 146 47,152
Intercompany eliminations -- -- (10,339) (10,339)
------ ------ ------ -------
Net income 322 263 (419) 9,323
====== ====== ====== =======
Total Assets 58,356 82,884 4,739 918,140
====== ====== ====== =======
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Three months ended and as of Sept. 30, 2000
-----------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
------- --------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Revenues from external customers 10,246 1,276 714 4,924 2,231
Intersegment revenues 236 1 1 -- 25
Expenses 8,722 1,043 581 3,881 1,885
Intercompany eliminations -- -- -- -- --
------- ------- ------- ------- -------
Net income 1,760 234 133 1,044 371
======= ======= ======= ======= =======
Total Assets 459,096 55,206 30,907 202,782 86,678
======= ======= ======= ======= =======
<CAPTION>
Mountain Total
Big Sky West Other Consolidated
------- --------- ----- ------------
<S> <C> <C> <C> <C>
Revenues from external customers 1,687 2,715 188 23,981
Intersegment revenues -- -- 4,523 4,786
Expenses 1,528 2,434 53 20,128
Intercompany eliminations -- -- (4,786) (4,786)
------ ------- ----- ---------
Net income 159 281 (128) 3,853
====== ======= ===== =========
Total Assets 72,806 116,477 2,089 1,026,041
====== ======= ===== =========
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Three months ended and as of Sept. 30, 1999
-----------------------------------------------------------
(Dollars in thousands) Glacier Whitefish Eureka Missoula Helena
------- --------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Revenues from external customers 8,789 1,048 608 4,250 1,855
Intersegment revenues 315 3 (3) 30 52
Expenses 7,455 837 482 3,296 1,622
Intercompany eliminations -- -- -- -- --
------- ------- ------- ------- -------
Net income 1,670 209 112 1,005 308
======= ======= ======= ======= =======
Total Assets 433,910 48,518 27,487 183,410 78,836
======= ======= ======= ======= =======
<CAPTION>
Mountain Total
Big Sky West Other Consolidated
------- --------- ----- ------------
<S> <C> <C> <C> <C>
Revenues from external customers 1,682 1,903 (87) 20,048
Intersegment revenues 33 -- 2,659 3,089
Expenses 1,560 1,800 (256) 16,782
Intercompany eliminations -- -- (3,089) (3,089)
------ ------ ----- -------
Net income 120 103 (261) 3,266
====== ====== ===== =======
Total Assets 58,356 82,884 4,739 918,140
====== ====== ===== =======
</TABLE>
12) Non-Cash Investing and Financing Activities
Non-cash investing and financing activities consist of the following
(dollars in thousands):
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
2000 1999
----------- ------------
<S> <C> <C>
Transfer from held-to-maturity to available-for-sale securities $ 751 8,272
10% stock dividend, transferred from retained earnings to
capital stock and additional paid in capital $ 14,317 19,886
</TABLE>
11
<PAGE>
13) Pending Acquisitions
On September 14, 2000, the Company entered into agreements to purchase
seven Wells Fargo & Company and First Security Corporation branches
located in Boise, Nampa, Hailey, and Ketchum, Idaho and Brigham City and
Park City, Utah to be operated by its wholly owned subsidiary, Mountain
West Bank of Coeur d'Alene, Idaho. The purchase includes approximately
$185 million in deposits, $50 million in loans, and real estate and
equipment of the branches. The acquisition is expected to be completed by
March 31, 2000, pending regulatory approvals.
On September 20, 2000, the Company announced that it had entered into a
definitive agreement for the acquisition of Missoula, Montana based
WesterFed Financial Corporation with June 30, 2000 assets of $946 million,
loans of $619 million, and deposits of $607 million. WesterFed is the
holding company for Western Security Bank, Montana's largest savings bank
with twenty-seven offices in fourteen Montana communities. Shareholders of
WesterFed will be allowed to elect to receive shares of Glacier common
stock or cash, within certain limitations. The acquisition is expected to
be completed in the first quarter of 2001, pending regulatory approval and
approval by both company's shareholders.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition - This section discusses the changes in Statement of
Financial Condition items from December 31, 1999 to September 30, 2000.
From December 31, 1999, total assets have grown $52.040 million, or 5.3 percent,
to $1.026 billion. This increase was primarily the net result of an increase in
loans of $70.818 million, or 10.9 percent, a decrease in investments of $5.463
million, or 2.6 percent, and cash and cash equivalents of $14.410 million, or
27.5 percent.
Loan growth has occurred in all categories with commercial loans increasing
$46.633 million, or 16.7 percent, consumer loans increasing $14.241 million, or
9.2 percent, and residential real estate loans increasing $11,030 million, or
4.9 percent, which is consistent with management's plan to retain fewer real
estate loans that generally have lower interest rates than other types of loans.
Loans sold to the secondary market amounted to $87.860 million and $143.748
million during the first nine months of 2000 and 1999, respectively.
The amount of loans serviced for others on September 30, 2000 was approximately
$207 million.
Total deposits increased $72.881 million, or 11.3 percent. $25.095 million of
the increase was in non-interest bearing deposits, an increase of 19.8 percent..
Interest bearing deposits increased $47.786 million, or 9.2 percent. Included in
interest bearing deposits are brokered certificates of deposit of approximately
$16 million. Increased deposits reduced the demand for FHLB advances, which
decreased $30.741 million, or 14.7 percent.
All seven institutions are members of the FHLB. Accordingly, management of the
Company has a wide range of versatility in managing the liquidity and
asset/liability mix for each individual institution as well as the Company as a
whole. The following table demonstrates the available FHLB lines of credit and
the extent of utilization as of September 30, 2000 (in thousands): Community
investment program advances not counted against the available line of credit
were $1.974 million.
12
<PAGE>
Available line Amount Used Available
-------------- ----------- ---------
Glacier Bank $183,638 103,618 80,020
Glacier Bank of Whitefish 13,802 5,415 8,387
Glacier Bank of Eureka 9,272 6,587 2,685
First Security Bank Missoula 40,556 29,165 11,391
Valley Bank of Helena 17,336 1,650 15,686
Big Sky Western Bank 21,871 12,500 9,371
Mountain West Bank 34,943 17,000 17,943
-------- -------- --------
Totals $321,418 175,935 145,483
======== ======== ========
Classified Assets and Reserves
Non-performing assets consist of non-accrual loans, accruing loans that are 90
days or more overdue, and real estate and other assets acquired by foreclosure
or deed-in-lieu thereof, net of related reserves. Non-performing assets at
September 30, 2000 were $1.870 million, a decrease of $408 thousand or 17.9
percent from December 31, 1999, while the allowance for losses increased $1.086
million or 16.2 percent during the same period. Changes in the information
related to the allowance for loan loss account are shown in the following table:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
<S> <C> <C>
Total Allowance for Loan and Real Estate Owned Losses: $7.808 million $6.722 million
Allowance as a percentage of Total Loans: 1.07% 1.02%
Allowance as a percentage of Non-performing Assets: 418% 295%
</TABLE>
Impaired Loans
As of September 30, 2000, there were no loans considered impaired. Interest
income on impaired loans and interest recoveries on loans that have been charged
off, is recognized on a cash basis after principal has been fully paid, or at
the time a loan becomes fully performing based on the terms of the loan.
Minority Interest
The minority interest on the consolidated statement of financial condition
represents the minority stockholders' share in the retained earnings of the
Company. These are shares of Eureka and Whitefish that are still outstanding. As
of September 30, 2000, the Company owns 47,280 shares of Whitefish and 49,084
shares of Eureka. The Company's ownership of Whitefish and Eureka is 94% and
98%, respectively.
Stockholders' Equity
Total stockholders' equity increased $6.782 million, or 8.0 percent, primarily
the result of earnings retention.
Results of Operations - The three months ended September 30, 2000 compared to
the three months ended September 30, 1999.
The Company reported quarterly earnings of $3.853 million, or fully diluted
earnings per share of $.33 compared to $3.266 million, and diluted earnings of
$.28 last year, an increase of 17.9 percent. Return on average assets and return
on average equity, were 1.50 percent and 17.30 compared to 1.66 percent and
15.14 percent for the same quarter last year.
13
<PAGE>
Net Interest Income
Net interest income for the quarter was $10.519 million, an increase of $930
thousand, or 9.7 percent, over the same period in 1999. The Federal Reserve
Board has raised interest rates 175 basis points since June 30, 1999, which
created a larger percentage increase in interest expense than in interest
income. However, the growth in earning assets and the increase in non-interest
bearing deposits resulted in a significant increase in net interest income. Net
interest margin as a percentage of earning assets, on a tax equivalent basis,
has declined from 4.67 percent in 1999 to 4.46 percent in 2000. Funding costs
continue to put pressure on the net interest margin.
Non-interest Income
Fee income from loans was lower in 2000 with less activity due to higher
mortgage rates. Loan fees declined $19 thousand, or 1.8 percent, from the 1999
amount. Offsetting this decline was an increase in service charge and other fee
income of $273 thousand, and other income of $128 thousand for a net increase of
$382 thousand, or 11.9 percent, in non-interest income.
Non-interest Expense
Non-interest expense increased by $262 thousand, or 3.6 percent, over the third
quarter of 1999. Compensation and employee benefits increased $365 thousand, or
10.1 percent. The addition of the two Butte, Montana offices, staffing additions
at Boise, Sun Valley, Bozeman and the data center were the primary reasons for
the compensation increase. Occupancy and equipment expense was up $224 thousand,
or 22.5 percent, for the same reasons as the increased compensation. All other
expenses were down $327 thousand, or 4.4 percent, the result of general cost
savings and the conversion of the Helena and Big Sky banks to the Company's data
processing system.
Operating results for the nine months ended September 30, 2000 compared to the
nine months ended September 30, 1999
Earnings were $10.273 million, or fully diluted earnings per share of $.89
compared to $.81 last year, an increase of 9.9 percent. Return on average assets
and return on average equity, were 1.37 percent and 15.82. percent,
respectively. The 1999 return on average assets was 1.60 percent and the return
on average equity was 14.46 percent.
Net interest income
Net interest income for the nine months was $30.579 million, an increase of
$3.559 million, or 13.2 percent over the same 1999 period. Growth in earning
assets combined with the increased percentage of higher yielding commercial and
consumer loans was the primary reason for the increase in net interest income.
The net interest margin as a percentage of average earning assets on a tax
equivalent basis, was 4.46 percent, a decline from 4.67 percent in 1999.
Interest income increased $11.216 million, or 24.0 percent over the same period
last year. Interest expense increased $7.657 million, or 38.9 percent due to the
175 basis point increase in short term interest rates since June 1999, and the
increase in the amount of interest-bearing deposits.
Loan loss provision
The provision for loan losses was $1.483 million, an increase of $237 thousand
or 19.0 percent from the nine-month period in 1999, exceeding the 11 percent
growth in loans. The level of non-performing loans remains at a relatively low
level compared to the Company's peer group and has declined from a year ago.
Non-interest income
Loan fee income declined by $995 thousand, or 25.8 percent, the result of lower
volume of mortgage loan activity due to increased interest rates. Increases in
service charges and other fee income of $905 thousand, or
14
<PAGE>
18.1 percent, and other income of $461 thousand offset the decline in loan fee
income and resulted in an increase in total non-interest income of $345
thousand, or 3.5 percent.
Non-interest expense
Total non-interest expense increased 9.2 percent, or $1.950 million, and was
primarily the result of increased compensation expense of $1.415 million and
increased occupancy and equipment expense of $512 thousand. The compensation
increases are primarily the result of the addition of two offices in Butte,
Montana, staffing increases in Boise, Sun Valley, and Bozeman offices, and the
Company's data center. Occupancy and equipment expense increases resulted from
those same locations.
Forward-Looking Statements
When used in this report, the words or phrases `will likely result in', `are
expected to', `will continue', `is anticipated', `estimate', or `project' or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected including general economic conditions,
business conditions in the banking industry, the regulatory environment, new
legislation, vendor quality and efficiency, employee retention factors, rapidly
changing technology and evolving banking industry standards, competitive factors
including increased competition among financial institutions and fluctuating
interest rate environments. Readers are cautioned not to place undue reliance on
any such forward-looking statements, which speak only as of the date made.
Readers should also carefully review the risk factors described in the Company's
most recent quarterly report on Form 10-Q for the period ending September 30,
2000, its Annual Report on Form 10-K for the period ending December 31, 1999 and
other documents the company files from time to time with the Securities Exchange
Commission.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/prices such as interest rates, foreign currency exchange
rates, commodity prices, and equity prices. The Company's primary market risk
exposure is interest rate risk. The ongoing monitoring and management of this
risk is an important component of the Company's asset/liability management
process which is governed by policies established by its Board of Directors that
are reviewed and approved annually. The Board of Directors delegates
responsibility for carrying out the asset/liability management policies to the
Asset/Liability committee (ALCO). In this capacity ALCO develops guidelines and
strategies impacting the Company's asset/liability management related activities
based upon estimated market risk sensitivity, policy limits and overall market
interest rate levels/trends.
Interest Rate Risk:
Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. As interest rates change the interest income and expense streams
associated with the Company's financial instruments also change thereby
impacting net interest income (NII), the primary component of the Company's
earnings. ALCO utilizes the results of a detailed and dynamic simulation model
to quantify the estimated exposure of NII to sustained interest rate changes.
While ALCO routinely monitors simulated NII sensitivity over a rolling two-year
horizon, it also utilizes additional tools to monitor potential longer-term
interest rate risk.
The simulation model captures the impact of changing interest rates on the
interest income received and interest expense paid on all assets and liabilities
reflected on the Company's balance sheet. This sensitivity analysis is compared
to ALCO policy limits which specify a maximum tolerance level for NII exposure
over a one year horizon, assuming no balance sheet growth, given a 200 basis
point (bp) upward and downward shift in interest rates. A parallel and pro rata
shift in rates over a 12 month period is assumed. The following reflects the
15
<PAGE>
Company's NII sensitivity analysis as of June 30, 2000, the most recent
information available, as compared to the 10% Board approved policy limit
(dollars in thousands). There have been no material changes in the analysis from
June 30, 2000 to September 30, 2000.
Interest Rate Sensitivity
+200 bp -200 bp
------- -------
Estimated sensitivity -3.66% 2.68%
Estimated increase (decrease) in net interest income (1,916) 1,521
The preceding sensitivity analysis does not represent a Company forecast and
should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions including: the
nature and timing of interest rate levels including yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, reinvestment/replacement of assets and liability cashflows,
and others. While assumptions are developed based upon current economic and
local market conditions, the Company cannot make any assurances as to the
predictive nature of these assumptions including how customer preferences or
competitor influences might change.
Also, as market conditions vary from those assumed in the sensitivity analysis,
actual results will also differ due to: prepayment/refinancing levels likely
deviating from those assumed, the varying impact of interest rate change caps or
floors on adjustable rate assets, the potential effect of changing debt service
levels on customers with adjustable rate loans, depositor early withdrawals and
product preference changes, and other internal/external variables. Furthermore,
the sensitivity analysis does not reflect actions that ALCO might take in
responding to or anticipating changes in interest rates.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending material legal proceedings to which the registrant or
its subsidiaries are a party.
Item 2. Changes in Securities and use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Securities Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
16
<PAGE>
3.1 Amendment to Certificate of Incorporation dated May 3, 2000.
3.2. Amended and Restated Certificate of Incorporation
27 - Financial data schedule
(b) Current Report on Form 8-K
On September 27, 2000, a Form 8-K was filed disclosing that Glacier
Bancorp, Inc. had entered into a definitive agreement with WesterFed
Financial Corporation. Under the terms of the Merger Agreement, WesterFed
Financial corporation will become a separate, wholly-owned subsidiary of
Glacier. The transaction is subject to regulatory and shareholder approval
and is expected to close in early 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLACIER BANCORP, INC.
November 1, 2000 By: /s/ Michael J. Blodnick
----------------------------
Michael J. Blodnick
President/CEO
November 1, 2000 By: /s/ James H. Strosahl
----------------------------
James H. Strosahl
Executive Vice President/CFO
17