Glacier Bancorp, Inc. Announces Results for the Quarter and Period Ended September 30, 2020

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3rd Quarter 2020 Highlights:

  • Net income of $77.8 million for the current quarter, an increase of $26.2 million, or 51 percent, over the prior year third quarter net income of $51.6 million. 

  • Current quarter diluted earnings per share of $0.81, an increase of 42 percent from the prior year third quarter diluted earnings per share of $0.57.

  • The loan portfolio organically increased $165 million, or 1 percent, in the current quarter and increased $1.626 billion, or 17 percent, from the prior year third quarter.

  • Core deposits increased $868 million, or 7 percent, during the current quarter, with non-interest bearing deposit growth of $436 million, or 9 percent.  Core deposits organically increased $2.8 billion, or 26 percent, compared to the prior year third quarter, with non-interest bearing deposit growth of $1.6 billion, or 41 percent.

  • Gain on sale of loans of $35.5 million, increased $9.7 million, or 37 percent, over the prior quarter and increased $25.1 million, or 243 percent, compared to the prior year third quarter.

  • Interest expense of $6.1 million decreased $1.1 million, or 15 percent, over the prior quarter and decreased $4.9 million, or 44 percent, compared to the prior year third quarter.

  • Bank loan modifications related to the coronavirus disease of 2019 (COVID-19) decreased $1.049 billion during the current quarter to $466 million, or 4.58 percent of loans excluding PPP loans. 

  • Non-performing assets as a percentage of subsidiary assets was 0.25 percent, which compared to 0.27 percent in the prior quarter and 0.40 percent in the prior year third quarter.

  • Early stage delinquencies (accruing 30-89 days past due) as a percentage of loans in the current quarter was 0.15 percent, which compared to 0.22 percent in the prior quarter and 0.31 percent in the prior year third quarter.

  • Declared a quarterly dividend of $0.30 per share, an increase of $0.01 per share or 3 percent over the prior quarter dividend.  The Company has declared 142 consecutive quarterly dividends and has increased the dividend 46 times.

Year-to-Date 2020 Highlights:

  • Net income of $185 million for the first nine months of 2020, an increase of $31.4 million, or 21 percent, over the first nine months of 2019 net income of $153 million. 

  • Diluted earnings per share of $1.95, an increase of 11 percent from the prior year first nine months diluted earnings per share of $1.76.

  • The Company originated U.S. Small Business Administration (SBA) Payroll Protection Program (PPP) loans for businesses in its communities.  The Company originated 16,090 PPP loans in the amount of $1.472 billion. 

  • The loan portfolio organically grew $1.654 billion, or 17 percent, during the first nine months of 2020.  Excluding PPP loans, the loan portfolio organically increased $206 million, or 2 percent during the first nine months of 2020.

  • Core deposits organically increased $2.9 billion, or 27 percent, during the first nine months of 2020, with non-interest bearings deposit growth of $1.6 billion, or 44 percent.

  • Gain on sale of loans of $73.2 million, increased $49.3 million, or 206 percent, compared to the prior year first nine months.

  • Dividends declared of $0.88 per share, an increase of $0.06 per share, or 7 percent, over the prior year first nine months dividends of $0.82.

  • On February 29, 2020, the Company completed the acquisition of State Bank Corp., the parent company of State Bank of Arizona, a community bank based in Lake Havasu City, Arizona with total assets of $744 million.

  • During the current year, S&P Dow Jones Indices selected the Company to transition from the S&P SmallCap 600® to the S&P MidCap 400®.

Financial Highlights  

 

At or for the Three Months ended

 

At or for the Nine Months ended

(Dollars in thousands, except per share and market data)

Sep 30,
2020

 

Jun 30,
2020

 

Mar 31,
2020

 

Sep 30,
2019

 

Sep 30,
2020

 

Sep 30,
2019

Operating results

 

 

 

 

 

 

 

 

 

 

 

Net income

$

77,757

 

 

63,444

 

 

43,339

 

 

51,610

 

 

184,540

 

 

153,134

 

Basic earnings per share

$

0.81

 

 

0.67

 

 

0.46

 

 

0.57

 

 

1.95

 

 

1.76

 

Diluted earnings per share

$

0.81

 

 

0.66

 

 

0.46

 

 

0.57

 

 

1.95

 

 

1.76

 

Dividends declared per share

$

0.30

 

 

0.29

 

 

0.29

 

 

0.29

 

 

0.88

 

 

0.82

 

Market value per share

 

 

 

 

 

 

 

 

 

 

 

Closing

$

32.05

 

 

35.29

 

 

34.01

 

 

40.46

 

 

32.05

 

 

40.46

 

High

$

38.13

 

 

46.54

 

 

46.10

 

 

42.61

 

 

46.54

 

 

45.47

 

Low

$

30.05

 

 

30.30

 

 

26.66

 

 

37.70

 

 

26.66

 

 

37.58

 

Selected ratios and other data

 

 

 

 

 

 

 

 

 

 

 

Number of common stock shares outstanding

95,413,743

 

95,409,061

 

95,408,274

 

92,180,618

 

95,413,743

 

92,180,618

Average outstanding shares - basic

95,411,656

 

95,405,493

 

93,287,670

 

90,294,811

 

94,704,198

 

86,911,402

Average outstanding shares - diluted

95,442,576

 

95,430,403

 

93,359,792

 

90,449,195

 

94,747,894

 

87,082,178

Return on average assets (annualized)

1.80

%

 

1.57

%

 

1.25

%

 

1.55

%

 

1.56

%

 

1.63

%

Return on average equity (annualized)

13.73

%

 

11.68

%

 

8.52

%

 

10.92

%

 

11.40

%

 

12.17

%

Efficiency ratio

49.16

%

 

49.29

%

 

52.55

%

 

65.95

%

 

50.21

%

 

58.82

%

Dividend payout ratio

37.04

%

 

43.28

%

 

63.04

%

 

50.88

%

 

45.13

%

 

46.59

%

Loan to deposit ratio

82.29

%

 

86.45

%

 

88.10

%

 

88.71

%

 

82.29

%

 

88.71

%

Number of full time equivalent employees

2,946

 

2,954

 

2,955

 

2,802

 

2,946

 

2,802

Number of locations

193

 

192

 

192

 

182

 

193

 

182

Number of ATMs

250

 

251

 

247

 

238

 

250

 

238

KALISPELL, Mont., Oct. 22, 2020 (GLOBE NEWSWIRE) -- Glacier Bancorp, Inc. (NASDAQ: GBCI ) reported net income of $77.8 million for the current quarter, an increase of $26.2 million, or 51 percent, from the $51.6 million of net income for the prior year third quarter.  Diluted earnings per share for the current quarter was $0.81 per share, an increase of 42 percent from the prior year third quarter diluted earnings per share of $0.57.  Included in the current quarter was $793 thousand of acquisition-related expenses.  The Glacier team continues to do an outstanding job managing through a constantly changing and uncertain operating landscape while taking care of employees, customers and communities, said Randy Chesler, President and Chief Executive Officer.  We are encouraged by the credit performance we see in our portfolio and believe that, in addition to our conservative credit culture, we are helped by the strong markets in which we operate as well as the increased movement into our markets as technology and business practices allow more people to consider different places to live.

Net income for the nine months ended September 30, 2020 was $185 million, an increase of $31.4 million, or 21 percent, from the $153 million net income from the first nine months of the prior year.  Diluted earnings per share for the first nine months of the current year was $1.95 per share, an increase of 11 percent, from the diluted earnings per share of $1.76 for the same period last year.

The Company continues to navigate through the coronavirus disease of 2019 (COVID-19) pandemic to ensure the safety of its employees and customers along with monitoring credit quality and protecting shareholder value.  The Companys geographic footprint has experienced varying levels of exposure and impact from COVID-19 and the Companys pandemic team remains flexible in responding to the changing conditions in all the markets that it serves. 

In order to meet the needs of customers impacted by the pandemic, during the second quarter of 2020 the Company modified 3,054 loans in the amount of $1.515 billion primarily with short-term payment deferrals under six months.  The majority of these modified loan deferral periods expired and the loans returned to regular payment status with only $466 million loans, or 5 percent, remaining deferred as of September 30, 2020.

In addition, the Company originated SBA PPP loans for businesses in its communities.  The Company originated 16,090 PPP loans in the amount of $1.472 billion during the current year.  During the current quarter, these loans provided an additional $9.3 million of interest income (including net deferred fees and costs) and $438 thousand of deferred compensation costs for a total increase in income of $9.8 million ($7.3 million net of tax).

On February 29, 2020, the Company completed the acquisition of State Bank Corp., the parent company of State Bank of Arizona, a community bank based in Lake Havasu City, Arizona (collectively, SBAZ).  SBAZ provides banking services to individuals and businesses in Arizona with ten banking offices located in Bullhead City, Cottonwood, Kingman, Lake Havasu City, Phoenix, Prescott Valley and Prescott.  Upon closing of the transaction, SBAZ merged into the Company's Foothills Bank division, which expanded the Company's footprint in Arizona to cover all major markets in the state and be a leading community bank in Arizona. 

The Companys results of operations and financial condition include the SBAZ acquisition and the following table discloses the preliminary fair value estimates of selected classifications of assets and liabilities acquired:

 

State Bank Corp.

(Dollars in thousands)

February 29,
2020

Total assets

$

745,420

 

Debt securities

142,174

 

Loans receivable

451,702

 

Non-interest bearing deposits

141,620

 

Interest bearing deposits

461,669

 

Borrowings

10,904

 


Asset Summary

 

 

 

 

 

 

 

 

 

$ Change from

(Dollars in thousands)

Sep 30,
2020

 

Jun 30,
2020

 

Dec 31,
2019

 

Sep 30,
2019

 

Jun 30,
2020

 

Dec 31,
2019

 

Sep 30,
2019

Cash and cash equivalents

$

769,879

 

 

547,610

 

 

330,961

 

 

406,384

 

 

222,269

 

 

438,918

 

 

363,495

 

Debt securities, available-for-sale

4,125,548

 

 

3,533,950

 

 

2,575,252

 

 

2,459,036

 

 

591,598

 

 

1,550,296

 

 

1,666,512

 

Debt securities, held-to-maturity

193,509

 

 

203,275

 

 

224,611

 

 

234,992

 

 

(9,766

)

 

(31,102

)

 

(41,483

)

Total debt securities

4,319,057

 

 

3,737,225

 

 

2,799,863

 

 

2,694,028

 

 

581,832

 

 

1,519,194

 

 

1,625,029

 

Loans receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

862,614

 

 

903,198

 

 

926,388

 

 

936,877

 

 

(40,584

)

 

(63,774

)

 

(74,263

)

Commercial real estate

6,201,817

 

 

6,047,692

 

 

5,579,307

 

 

5,548,174

 

 

154,125

 

 

622,510

 

 

653,643

 

Other commercial

3,593,322

 

 

3,547,249

 

 

2,094,254

 

 

2,145,257

 

 

46,073

 

 

1,499,068

 

 

1,448,065

 

Home equity

646,850

 

 

654,392

 

 

617,201

 

 

615,781

 

 

(7,542

)

 

29,649

 

 

31,069

 

Other consumer

314,128

 

 

300,847

 

 

295,660

 

 

294,999

 

 

13,281

 

 

18,468

 

 

19,129

 

Loans receivable

11,618,731

 

 

11,453,378

 

 

9,512,810

 

 

9,541,088

 

 

165,353

 

 

2,105,921

 

 

2,077,643

 

Allowance for credit losses

(164,552

)

 

(162,509

)

 

(124,490

)

 

(125,535

)

 

(2,043

)

 

(40,062

)

 

(39,017

)

Loans receivable, net

11,454,179

 

 

11,290,869

 

 

9,388,320

 

 

9,415,553

 

 

163,310

 

 

2,065,859

 

 

2,038,626

 

Other assets

1,382,952

 

 

1,330,944

 

 

1,164,855

 

 

1,202,827

 

 

52,008

 

 

218,097

 

 

180,125

 

Total assets

$

17,926,067

 

 

16,906,648

 

 

13,683,999

 

 

13,718,792

 

 

1,019,419

 

 

4,242,068

 

 

4,207,275

 

Total debt securities of $4.319 billion at September 30, 2020 increased $582 million, or 16 percent, during the current quarter and increased $1.625 billion, or 60 percent, from the prior year third quarter.  The Company continues to purchase debt securities with the excess liquidity produced from the increase in core deposits.  Debt securities represented 24 percent of total assets at September 30, 2020 compared to 20 percent at December 31, 2019 and 20 percent of total assets at September 30, 2019. 

The loan portfolio of $11.619 billion increased $165 million, or 1 percent, during the current quarter with the largest increase in commercial real estate which increased $154 million, or 3 percent.  Excluding the PPP loans and the SBAZ acquisition, the loan portfolio increased $178 million, or 2 percent, since the prior year third quarter with the largest increase in commercial real estate loans which increased $318 million, or 6 percent.

Credit Quality Summary

 

At or for the Nine Months ended

 

At or for the Six Months ended

 

At or for the Year ended

 

At or for the Nine Months ended

(Dollars in thousands)

Sep 30,
2020

 

Jun 30,
2020

 

Dec 31,
2019

 

Sep 30,
2019

Allowance for credit losses

 

 

 

 

 

 

 

Balance at beginning of period

$

124,490

 

 

 

124,490

 

 

 

131,239

 

 

 

131,239

 

 

Impact of adopting CECL

3,720

 

 

 

3,720

 

 

 

 

 

 

 

 

Acquisitions

49

 

 

 

49

 

 

 

 

 

 

 

 

Credit loss expense

39,165

 

 

 

36,296

 

 

 

57

 

 

 

57

 

 

Charge-offs

(7,865

)

 

 

(5,235

)

 

 

(15,178

)

 

 

(12,090

)

 

Recoveries

4,993

 

 

 

3,189

 

 

 

8,372

 

 

 

6,329

 

 

Balance at end of period

$

164,552

 

 

 

162,509

 

 

 

124,490

 

 

 

125,535

 

 

Other real estate owned

$

5,361

 

 

 

4,743

 

 

 

5,142

 

 

 

7,148

 

 

Accruing loans 90 days or more past due

2,952

 

 

 

6,071

 

 

 

1,412

 

 

 

7,912

 

 

Non-accrual loans

36,350

 

 

 

35,157

 

 

 

30,883

 

 

 

40,017

 

 

Total non-performing assets

$

44,663

 

 

 

45,971

 

 

 

37,437

 

 

 

55,077

 

 

Non-performing assets as a percentage of subsidiary assets

0.25

 

%

 

0.27

 

%

 

0.27

 

%

 

0.40

 

%

Allowance for credit losses as a percentage of non-performing loans

419

 

%

 

394

 

%

 

385

 

%

 

262

 

%

Allowance for credit losses as a percentage of total loans

1.42

 

%

 

1.42

 

%

 

1.31

 

%

 

1.32

 

%

Net charge-offs as a percentage of total loans

0.03

 

%

 

0.02

 

%

 

0.07

 

%

 

0.06

 

%

Accruing loans 30-89 days past due

$

17,631

 

 

 

25,225

 

 

 

23,192

 

 

 

29,954

 

 

Accruing troubled debt restructurings

$

39,999

 

 

 

41,759

 

 

 

34,055

 

 

 

32,949

 

 

Non-accrual troubled debt restructurings

$

7,579

 

 

 

8,204

 

 

 

3,346

 

 

 

6,723

 

 

U.S. government guarantees included in non-performing assets

$

4,411

 

 

 

3,305

 

 

 

1,786

 

 

 

3,000

 

 

Non-performing assets of $44.7 million at September 30, 2020 decreased $1.3 million, or 3 percent, over the prior quarter and decreased $10.4 million, or 19 percent, over the prior year third quarter.  Non-performing assets as a percentage of subsidiary assets at September 30, 2020 was 0.25 percent.  Excluding the government guaranteed PPP loans, the non-performing assets as a percentage of subsidiary assets at September 30, 2020 was 0.27 percent, a decrease of 3 basis points from the prior quarter, and a decrease of 13 basis points from the prior year third quarter.  Early stage delinquencies (accruing loans 30-89 days past due) of $17.6 million at September 30, 2020 decreased $7.6 million from the prior quarter and decreased $12.3 million from the prior year third quarter.  Early stage delinquencies as a percentage of loans at September 30, 2020 was 0.15 percent, which was a decrease of 7 basis points from prior quarter and a 16 basis points decrease from prior year third quarter.  Excluding PPP loans, early stage delinquencies as a percentage of loans at September 30, 2020 was 0.17 percent, which was a decrease of 8 basis points from prior quarter and a 14 basis points decrease from prior year third quarter.

The current quarter credit loss expense was $2.9 million, a decrease of $10.7 million from the prior quarter credit loss expense of $13.6 million.  The current year-to-date credit loss expense was $39.2 million and primarily attributable to credit loss expense related to COVID-19 and an additional $4.8 million of credit loss expense related to the SBAZ acquisition.  The allowance for credit losses (ACL) as a percentage of total loans outstanding at September 30, 2020 was 1.42 percent which remained unchanged compared to the prior quarter.  Excluding the PPP loans, the ACL as percentage of loans was 1.62 percent which also remained unchanged compared to the prior quarter.  

Credit Quality Trends and Credit Loss Expense

(Dollars in thousands)

Credit Loss Expense

 

Net
Charge-Offs

 

ACL
as a Percent
of Loans

 

Accruing
Loans 30-89
Days Past Due
as a Percent of
Loans

 

Non-Performing
Assets to
Total Subsidiary
Assets

Third quarter 2020

$

2,869

 

 

$

826

 

 

1.42

%

 

0.15

%

 

0.25

%

Second quarter 2020

13,552

 

 

1,233

 

 

1.42

%

 

0.22

%

 

0.27

%

First quarter 2020

22,744

 

 

813

 

 

1.49

%

 

0.41

%

 

0.26

%

Fourth quarter 2019

 

 

1,045

 

 

1.31

%

 

0.24

%

 

0.27

%

Third quarter 2019

 

 

3,519

 

 

1.32

%

 

0.31

%

 

0.40

%

Second quarter 2019

 

 

732

 

 

1.46

%

 

0.43

%

 

0.41

%

First quarter 2019

57

 

 

1,510

 

 

1.56

%

 

0.44

%

 

0.42

%

Fourth quarter 2018

1,246

 

 

2,542

 

 

1.58

%

 

0.41

%

 

0.47

%

Net charge-offs for the current quarter were $826 thousand compared to $1.2 million for the prior quarter and $3.5 million from the same quarter last year.  Loan portfolio growth, composition, average loan size, credit quality considerations, economic forecasts and other environmental factors will continue to determine the level of the credit loss expense. 

PPP Loans

 

September 30, 2020

(Dollars in thousands)

Number of
PPP Loans

 

Amount of
PPP Loans

 

Total Loans Receivable, Net of PPP Loans

 

PPP Loans (Amount) as a Percent of Total Loans Receivable, Net of PPP Loans

Residential real estate

 

 

$

 

 

862,614

 

 

%

Commercial real estate and other commercial

 

 

 

 

 

 

 

Real estate rental and leasing

1,221

 

 

64,647

 

 

3,361,074

 

 

1.92

%

Accommodation and food services

1,502

 

 

160,295

 

 

644,627

 

 

24.87

%

Healthcare

1,928

 

 

288,612

 

 

826,809

 

 

34.91

%

Manufacturing

830

 

 

80,483

 

 

193,216

 

 

41.65

%

Retail and wholesale trade

1,672

 

 

168,837

 

 

471,115

 

 

35.84

%

Construction

2,297

 

 

214,652

 

 

774,069

 

 

27.73

%

Other

6,640

 

 

470,891

 

 

2,075,812

 

 

22.68

%

Home equity and other consumer

 

 

 

 

960,978

 

 

%

Total

16,090

 

 

$

1,448,417

 

 

10,170,314

 

 

14.24

%

The PPP loan originations generated $55.2 million of SBA processing fees, or an average of 3.75 percent, and $8.9 million of deferred compensation costs for total net deferred fees of $46.3 million.  Net deferred fees remaining on the PPP loans at September 30, 2020 were $36.1 million, which will be recognized into interest income over the life of the loans, generally two years, or when the loans are forgiven in whole or part by the SBA.  The Company has actively been working with its customers to submit applications to the SBA for forgiveness of the loans and the Company started receiving forgiveness payments in the fourth quarter of 2020.

COVID-19 Bank Loan Modifications

 

September 30, 2020

 

June 30, 2020

(Dollars in thousands)

Total Loans Receivable, Net of PPP Loans

 

Amount of Unexpired Original  Loan Modifications

 

Amount of
Re-deferral Loan Modifications

 

Amount of
Remaining Loan
Modifications

 

Loan Modifications (Amount) as a Percent of Total Loans Receivable, Net of PPP Loans

 

Amount of
Remaining Loan
Modifications

 

Loan Modifications (Amount) as a Percent of Total Loans Receivable, Net of PPP Loans

Residential real estate

$

862,614

 

 

28,571

 

 

 

 

28,571

 

 

3.31

%

 

$

66,395

 

 

7.35

%

Commercial real estate
  and other commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate rental
  and leasing

3,361,074

 

 

163,103

 

 

43,735

 

 

206,838

 

 

6.15

%

 

587,609

 

 

18.11

%

Accommodation and
  food services

644,627

 

 

69,328

 

 

12,854

 

 

82,182

 

 

12.75

%

 

395,882

 

 

61.41

%

Healthcare

826,809

 

 

29,136

 

 

14,117

 

 

43,253

 

 

5.23

%

 

126,808

 

 

16.01

%

Manufacturing

193,216

 

 

15,263

 

 

3,296

 

 

18,559

 

 

9.61

%

 

49,338

 

 

24.41

%

Retail and wholesale
  trade

471,115

 

 

13,299

 

 

2,554

 

 

15,853

 

 

3.36

%

 

46,623

 

 

9.78

%

Construction

774,069

 

 

13,337

 

 

1,188

 

 

14,525

 

 

1.88

%

 

38,751

 

 

5.06

%

Other

2,075,812

 

 

23,146

 

 

27,442

 

 

50,588

 

 

2.44

%

 

192,060

 

 

9.40

%

Home equity and other
  consumer

960,978

 

 

5,767

 

 

 

 

5,767

 

 

0.60

%

 

11,326

 

 

1.19

%

Total

$

10,170,314

 

 

 

360,950

 

 

105,186

 

 

466,136

 

 

4.58

%

 

$

1,514,792

 

 

15.11

%

In response to COVID-19, the Company modified 3,054 loans in the amount of $1.515 billion during the second quarter of 2020.  These modifications were primarily short-term payment deferrals under six months.  During the third quarter of 2020, the majority of the modified loan deferral periods expired, and the loans returned to regular payment status.  During the current quarter, the re-deferral rate was 9.12 percent for modified loans whose original deferral period had expired, with no industry category exceeding 20 percent.  As of September 30, 2020, $466 million of the modifications, or 4.58 percent of the $10.170 billion of loans, net of the PPP loans, remain in the deferral period, a reduction of $1.049 billion from the $1.515 billion of loan modifications at the end of the prior quarter. 

In addition to the Bank loan modifications presented above, the state of Montana created the Montana Loan Deferment Program for only Montana-based businesses and was implemented only in the third quarter.  Cares Act Funds were used to provide interest payments upfront and directly to lenders on behalf of participating borrowers to convert existing commercial loans to interest only status, resulting in the deferral of principal and interest for a period of six to twelve months.  None of the interest payments are required to be repaid by the borrowers, thus providing a grant to the borrowers.  This program was unique to Montana, had minimal qualification requirements, and required that participating lenders modify eligible loans to conform to the program in order for borrowers to qualify for the grant.  As of September 30, 2020, the Company had $237 million in eligible loans benefiting from this grant program, which was 2.33 percent of total loans receivable, net of PPP loans. Given the unique nature of the Montana only grant program, the $237 million was not included in the Bank loan modifications presented above.

COVID-19 Higher Risk Industries - Enhanced Monitoring

 

September 30, 2020

 

June 30, 2020

(Dollars in thousands)

Enhanced Monitoring Loans Receivable, Net of PPP Loans

 

Percent of Total Loans Receivable, Net of PPP Loans

 

Amount of Unexpired Original
Loan Modifications

 

Amount of
Re-deferral Loan Modifications

 

Amount of
Remaining Loan
Modifications

 

Loan Modifications (Amount) as a Percent of Enhanced Monitoring Loans Receivable, Net of PPP Loans

 

Amount of
Remaining Loan
Modifications

 

Percent of Loans Receivable, Net of PPP Loans

 

Loan Modifications (Amount) as a Percent of Enhanced Monitoring Loans Receivable, Net of PPP Loans

Hotel and motel

$

422,500

 

 

4.15

%

 

44,091

 

 

6,679

 

 

50,770

 

 

12.02

%

 

$

300,747

 

 

4.20

%

 

71.34

%

Restaurant

138,944

 

 

1.37

%

 

12,977

 

 

6,175

 

 

19,152

 

 

13.78

%

 

76,632

 

 

1.50

%

 

50.91

%

Travel and tourism

19,726

 

 

0.19

%

 

4,605

 

 

397

 

 

5,002

 

 

25.36

%

 

7,845

 

 

0.21

%

 

37.79

%

Gaming

14,500

 

 

0.14

%

 

1,101

 

 

 

 

1,101

 

 

7.59

%

 

9,214

 

 

0.15

%

 

60.95

%

Oil and gas

22,178

 

 

0.22

%

 

1,474

 

 

 

 

1,474

 

 

6.65

%

 

6,013

 

 

0.23

%

 

26.43

%

Total

$

617,848

 

 

6.08

%

 

64,248

 

 

13,251

 

 

77,499

 

 

12.54

%

 

$

400,451

 

 

6.29

%

 

63.49

%


Excluding the PPP loans, the Company has $618 million, or 6 percent, of its total loan portfolio with direct exposure to industries for which it has identified as higher risk, requiring enhanced monitoring.  As of September 30, 2020, $77.5 million have modifications, which was a reduction of $323 million, or 81 percent,  from the $400 million of modifications at the end of the prior quarter.   During the current quarter the re-deferral rate was 3.94 percent for modified loans whose original deferral period had expired, with no industry category exceeding 15 percent.  The Company continues to conduct enhanced portfolio reviews and monitoring for potential credit deterioration.

Supplemental information regarding credit quality and identification of the Companys loan portfolio based on regulatory classification is provided in the exhibits at the end of this press release.  The regulatory classification of loans is based primarily on collateral type while the Companys loan segments presented herein are based on the purpose of the loan.

Liability Summary

 

 

 

 

 

 

 

 

 

$ Change from

(Dollars in thousands)

Sep 30,
2020

 

Jun 30,
2020

 

Dec 31,
2019

 

Sep 30,
2019

 

Jun 30,
2020

 

Dec 31,
2019

 

Sep 30,
2019

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing deposits

$

5,479,311

 

 

5,043,704

 

 

3,696,627

 

 

3,772,766

 

 

435,607

 

 

 

1,782,684

 

 

 

1,706,545

 

 

NOW and DDA accounts

3,300,152

 

 

3,113,863

 

 

2,645,404

 

 

2,592,483

 

 

186,289

 

 

 

654,748

 

 

 

707,669

 

 

Savings accounts

1,864,143

 

 

1,756,503

 

 

1,485,487

 

 

1,472,465

 

 

107,640

 

 

 

378,656

 

 

 

391,678

 

 

Money market deposit accounts

2,557,294

 

 

2,403,641

 

 

1,937,141

 

 

1,940,517

 

 

153,653

 

 

 

620,153

 

 

 

616,777

 

 

Certificate accounts

979,857

 

 

995,536

 

 

958,501

 

 

955,765

 

 

(15,679

)

 

 

21,356

 

 

 

24,092

 

 

Core deposits, total

14,180,757

 

 

13,313,247

 

 

10,723,160

 

 

10,733,996

 

 

867,510

 

 

 

3,457,597

 

 

 

3,446,761

 

 

Wholesale deposits

119,131

 

 

68,285

 

 

53,297

 

 

134,629

 

 

50,846

 

 

 

65,834

 

 

 

(15,498

)

 

Deposits, total

14,299,888

 

 

13,381,532

 

 

10,776,457

 

 

10,868,625

 

 

918,356

 

 

 

3,523,431

 

 

 

3,431,263

 

 

Repurchase agreements

965,668

 

 

881,227

 

 

569,824

 

 

558,752

 

 

84,441

 

 

 

395,844

 

 

 

406,916

 

 

Federal Home Loan Bank advances

7,318

 

 

37,963

 

 

38,611

 

 

8,707

 

 

(30,645

)

 

 

(31,293

)

 

 

(1,389

)

 

Other borrowed funds

32,967

 

 

32,546

 

 

28,820

 

 

14,808

 

 

421

 

 

 

4,147

 

 

 

18,159

 

 

Subordinated debentures

139,918

 

 

139,917

 

 

139,914

 

 

139,913

 

 

1

 

 

 

4

 

 

 

5

 

 

Other liabilities

225,219

 

 

229,748

 

 

169,640

 

 

174,586

 

 

(4,529

)

 

 

55,579

 

 

 

50,633

 

 

Total liabilities

$

15,670,978

 

 

14,702,933

 

 

11,723,266

 

 

11,765,391

 

 

968,045

 

 

 

3,947,712

 

 

 

3,905,587

 

 

Core deposits of $14.181 billion as of September 30, 2020 increased $868 million, or 7 percent, from the prior quarter.  Excluding the SBAZ acquisition, core deposits increased $2.843 billion, or 26 percent, from the prior year third quarter, with non-interest bearing deposits increasing $1.565 billion, or 41 percent.  The current year significant increase in deposits was attributable to a number of factors including the PPP loan proceeds deposited by customers and the increase in customer savings rate.  Non-interest bearing deposits were 39 percent of total core deposits at September 30, 2020 compared to 35 percent of total core deposits at September 30, 2019.

Federal Home Loan Bank (FHLB) advances of $7.3 million at September 30, 2020 decreased $31 million from the prior quarter and decreased $1.4 million from the prior year third quarter.  The low level of FHLB advances was the result of the significant increase in core deposits which funded loans and debt security growth.  FHLB advances will continue to fluctuate as necessary for balance sheet growth and to supple...

ment liquidity needs of the Company.

Stockholders’ Equity Summary

$ Change from

(Dollars in thousands, except per share data)

Sep 30,
2020

Jun 30,
2020

Dec 31,
2019

Sep 30,
2019

Jun 30,
2020

Dec 31,
2019

Sep 30,
2019

Common equity

$

2,123,991

2,073,806

1,920,507

1,905,306

50,185

203,484

218,685

Accumulated other comprehensive income

131,098

129,909

40,226

48,095

1,189

90,872

83,003

Total stockholders’ equity

2,255,089

2,203,715

1,960,733

1,953,401

51,374

294,356

301,688

Goodwill and core deposit intangible, net

(572,134

)

(574,088

)

(519,704

)

(522,274

)

1,954

(52,430

)

(49,860

)

Tangible stockholders’ equity

$

1,682,955

1,629,627

1,441,029

1,431,127

53,328

241,926

251,828


Stockholders’ equity to total assets

12.58

%

13.03

%

14.33

%

14.24

%

Tangible stockholders’ equity to total tangible assets

9.70

%

9.98

%

10.95

%

10.84

%

Book value per common share

$

23.63

23.10

21.25

21.19

0.53

2.38

2.44

Tangible book value per common share

$

17.64

17.08

15.61

15.53

0.56

2.03

2.11

Tangible stockholders’ equity of $1.683 billion at September 30, 2020 increased $53 million, or 3 percent, from the prior quarter and was primarily the result of earnings retention. Tangible stockholders’ equity increased $252 million over the prior year third quarter, which was the result of $112 million of Company stock issued for the acquisitions of SBAZ and an increase in other comprehensive income and earnings retention. These increases more than offset the increase in goodwill and core deposit intangible associated with the acquisition. The current year decrease in both the stockholder’s equity to total assets ratio and the tangible stockholders’ equity to total tangible assets ratio was primarily the result of adding $1.448 billion of PPP loans. Tangible book value per common share of $17.64 at the current quarter end increased $0.56 per share from the prior quarter and increased $2.11 per share from a year ago.

Cash Dividends
On September 30, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.30 per share. The dividend was payable October 22, 2020 to shareholders of record on October 13, 2020. The dividend was the 142nd consecutive dividend. Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations.

S&P MidMidCap 400® Index

During the second quarter of 2020, S&P Dow Jones Indices selected the Company to transition from the S&P SmallCap 600® to the S&P MidCap 400®. S&P MidCap 400® index consists of 400 companies that are chosen with regard to market capitalization, liquidity and industry representations.


Operating Results for Three Months Ended September 30, 2020
Compared to June 30, 2020 and March 31, 2020

Income Summary

Three Months ended

$ Change from

(Dollars in thousands)

Sep 30,
2020

Jun 30,
2020

Mar 31,
2020

Sep 30,
2019

Jun 30,
2020

Mar 31,
2020

Sep 30,
2019

Net interest income

Interest income

$

157,487

155,404

142,865

142,395

2,083

14,622

15,092

Interest expense

6,084

7,185

8,496

10,947

(1,101

)

(2,412

)

(4,863

)

Total net interest income

151,403

148,219

134,369

131,448

3,184

17,034

19,955

Non-interest income

Service charges and other fees

13,404

11,366

14,020

15,138

2,038

(616

)

(1,734

)

Miscellaneous loan fees and charges

2,084

1,682

1,285

1,775

402

799

309

Gain on sale of loans

35,516

25,858

11,862

10,369

9,658

23,654

25,147

Gain on sale of investments

24

128

863

13,811

(104

)

(839

)

(13,787

)

Other income

2,639

2,190

5,242

1,956

449

(2,603

)

683

Total non-interest income

53,667

41,224

33,272

43,049

12,443

20,395

10,618

Total income

205,070

189,443

167,641

174,497

15,627

37,429

30,573

Net interest margin (tax-equivalent)

3.92

%

4.12

%

4.36

%

4.42

%

Net Interest Income
The current quarter net interest income of $151 million increased $3.2 million, or 2 percent, over the prior quarter and increased $20.0 million, or 15 percent, from the prior year third quarter. The current quarter interest income of $157 million increased $2.1 million, or 1 percent, compared to the prior quarter which was driven by an increase in income from commercial loans primarily from the PPP loans. The current quarter interest income increased $15.1 million, or 11 percent, over prior year third quarter and was due to an increase in income from commercial loans and an increase in income on debt securities. Included in interest income was interest from the PPP loans of $9.3 million in the current quarter and $7.3 million in the prior quarter.

The current quarter interest expense of $6.1 million decreased $1.1 million, or 15 percent, over the prior quarter primarily as result of a decrease in deposit rates and borrowing interest rates. Current quarter interest expense decreased $4.9 million, or 44 percent, over prior year third quarter which was due to the decrease in higher cost borrowings and a decrease in deposit rates. During the current quarter, the total cost of funding (including non-interest bearing deposits) declined 5 basis points to 16 basis points compared to 21 basis points for the prior quarter primarily as a result of a decrease in rates on both deposits and borrowings. The total cost of funding decreased 23 basis points from the prior year third quarter and was attributable to a decrease in rates and a shift from higher cost borrowings to low cost deposits.

The Company’s net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the current quarter was 3.92 percent compared to 4.12 percent in the prior quarter. The core net interest margin, excluding 2 basis points of discount accretion, 1 basis point of non-accrual interest, and 13 basis points of income from the PPP loans, was 4.02 percent compared to 4.21 in the prior quarter and 4.35 percent in the prior year third quarter. The Company experienced a 19 basis points decrease in the core net interest margin during the current quarter from decreased yields on loans and debt securities which were partially offset by the decrease in the cost of funding. The core net interest margin decreased 33 basis points from the prior year third quarter primarily from a decrease in earning asset yields, primarily loan yields, that outpaced the decrease in the total cost of funding. “The Bank divisions’ reduction in the cost of interest bearing deposits and repurchase agreements while increasing non-interest bearing deposits enabled the total cost of funding to decline by 5 basis points in the current quarter,” said Ron Copher, Chief Financial Officer.

Non-interest Income
Non-interest income for the current quarter totaled $53.7 million which was an increase of $12.4 million, or 30 percent, over the prior quarter and an increase of $10.6 million, or 25 percent, over the same quarter last year. Service charges and other fees of $13.4 million for the current quarter increased $2.0 million, or 18 percent, from the prior quarter. Service charges and other fees decreased $1.7 million from the prior year third quarter due to the decreased overdraft activity. Gain on the sale of loans of $35.5 million for the current quarter increased $9.7 million, or 37 percent, compared to the prior quarter and increased $25.1 million, or 242 percent, from the prior year third quarter due to the significant increase in refinance activity driven by the decrease in interest rates.

During the prior year third quarter, the Company terminated $260 million notional pay-fixed interest rate swaps and corresponding debt along with the sale of $308 million of available-for-sale debt securities. Sale of the investment securities resulted in a gain of $13.8 million in the prior year third quarter. Offsetting the gain was a $10 million loss recognized on the early termination of the interest swaps and a $3.5 million write-off of deferred prepayment penalties on FHLB borrowings.

Non-interest Expense Summary

Three Months ended

$ Change from

(Dollars in thousands)

Sep 30,
2020

Jun 30,
2020

Mar 31,
2020

Sep 30,
2019

Jun 30,
2020

Mar 31,
2020

Sep 30,
2019

Compensation and employee benefits

$

64,866

57,981

59,660

62,509

6,885

5,206

2,357

Occupancy and equipment

9,369

9,357

9,219

8,731

12

150

638

Advertising and promotions

2,779

2,138

2,487

2,719

641

292

60

Data processing

5,597

5,042

5,282

4,466

555

315

1,131

Other real estate owned

186

75

112

166

111

74

20

Regulatory assessments and insurance

1,495

1,037

1,090

593

458

405

902

Loss on termination of hedging activities

13,528

(13,528

)

Core deposit intangibles amortization

2,612

2,613

2,533

2,360

(1

)

79

252

Other expenses

18,786

19,898

11,545

15,603

(1,112

)

7,241

3,183

Total non-interest expense

$

105,690

98,141

91,928

110,675

7,549

13,762

(4,985

)

Total non-interest expense of $106 million for the current quarter increased $7.5 million, or 8 percent, over the prior quarter and decreased $5.0 million, or 5 percent, over the prior year third quarter. Compensation and employee benefits increased by $6.9 million, or 12 percent, from the prior quarter which was primarily driven by the decrease in deferring compensation on originating the PPP loans which was $438 thousand in the current quarter compared to $8.4 million in the prior quarter. Compensation and employee benefits increased $2.4 million, or 4 percent, from the prior year third quarter primarily due to an increased number of employees driven by acquisitions and organic growth which more than offset the decrease from the $5.4 million of stock compensation expense in the prior year third quarter related to the Heritage Bancorp acquisition. Occupancy and equipment expense increased $638 thousand, or 7 percent, over the prior year third quarter primarily as a result of increased costs from acquisitions. Data processing expense increased $555 thousand, or 11 percent, over the prior quarter and increased $1.1 million, or 25 percent over the prior year third quarter as a result of the increased cost from acquisitions along with increased investment in technology infrastructure. Regulatory assessment and insurance increased $458 thousand from the prior quarter primarily due to an accrual adjustment in the prior quarter for waiver of the State of Montana regulatory semi-annual assessment for the first half of 2020. Regulatory assessment and insurance increased $902 thousand from the prior year third quarter quarter primarily due to $1.3 million in Small Bank Assessment credits applied in the prior year third quarter. The prior year loss on termination of hedging activities included $3.5 million write-off of the remaining unamortized deferred prepayment penalties on FHLB debt and a $10 million loss on the termination of pay-fixed interest rate swaps with notional amount of $260 million in the prior year third quarter.

Other expenses of $18.8 million, decreased $1.1 million, or 6 percent, from the prior quarter primarily due to a decrease in acquisition-related expenses. Other expenses increased $3.2 million, or 20 percent, over the prior year third quarter and was driven primarily from an increase in expense related to unfunded loan commitments. Current quarter other expenses included acquisition-related expenses of $793 thousand compared to $3.7 million in the prior quarter and $2.1 million in the prior year third quarter. Expense related to unfunded loan commitments was $2.3 million in the current quarter compared to $3.4 million in the prior quarter and no expense in the prior year third quarter. Also included in the current quarter other expenses was $1.9 million for third party consulting regarding improvements in technology, product and service offerings.

Federal and State Income Tax Expense
Tax expense during the third quarter of 2020 was $18.8 million, an increase of $4.5 million, or 31 percent, compared to the prior quarter and an increase of $6.5 million, or 54 percent, from the prior year third quarter. The effective tax rate in the current quarter was 19 percent compared to 18 percent in the prior quarter and 19 percent prior year third quarter.

Efficiency Ratio
The efficiency ratio was 49.16 percent in the current quarter and 49.29 percent in the prior quarter. Excluding the impact from the PPP loans, the efficiency ratio would have been 51.67 percent in the current quarter, which was a 406 basis points decrease from the prior quarter efficiency ratio of 55.73 percent and was primarily due to the increase in gain on sale of loans. The prior year third quarter efficiency was 65.95 and excluding the impact from the termination of the cash flow hedges and the accelerated stock compensation expense, the efficiency ratio would have been 54.41 percent. Excluding these adjustments, the current quarter efficiency ratio decreased 274 basis points from the prior year third quarter efficiency ratio which was also driven by the increased gain on sale of loans.


Operating Results for Nine Months Ended September 30, 2020
Compared to September 30, 2019

Income Summary

Nine Months ended

(Dollars in thousands)

Sep 30,
2020

Sep 30,
2019

$ Change

% Change

Net interest income

Interest income

$

455,756

$

400,896

$

54,860

14

%

Interest expense

21,765

33,940

(12,175

)

(36

)

%

Total net interest income

433,991

366,956

67,035

18

%

Non-interest income

Service charges and other fees

38,790

53,178

(14,388

)

(27

)

%

Miscellaneous loan fees and charges

5,051

3,934

1,117

28

%

Gain on sale of loans

73,236

23,929

49,307

206

%

Gain on sale of investments

1,015

14,158

(13,143

)

(93

)

%

Other income

10,071

7,158

2,913

41

%

Total non-interest income

128,163

102,357

25,806

25

%

$

562,154

$

469,313

$

92,841

20

%

Net interest margin (tax-equivalent)

4.12

%

4.36

%

Net Interest Income
Net-interest income of $434 million for the first nine months of 2020 increased $67.0 million, or 18 percent, over the first nine months of 2019. Interest income of $456 million for the first nine months of 2020 increased $54.9 million, or 14 percent, from the first nine months of 2019 and was primarily attributable to a $45.7 million increase in income from commercial loans, including $16.6 million from the PPP loans. Interest expense of $21.8 million for the first nine months of 2020 decreased $12.2 million, or 36 percent over the prior year same period primarily as a result of decreased higher cost FHLB advances and the decrease in the cost of deposits and borrowings. The total funding cost (including non-interest bearing deposits) for the first nine months of 2020 was 22 basis points, which decreased 20 basis points, or 48 percent, compared to 42 basis points for the first nine months of 2019.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, for the first nine months of 2020 was 4.12 percent, a 24 basis points decrease from the net interest margin of 4.36 percent for the first nine months of 2019. The core net interest margin, excluding 3 basis points of discount accretion, 1 basis point of non-accrual interest, and 9 basis points of income from the PPP loans was 4.17 compared to a core margin of 4.29 percent in the prior year first nine months. Although the Company was successful in reducing the cost of funding, it was not enough to outpace the decrease in yields on loans and debt securities driven by the current interest rate environment.

Non-interest Income
Non-interest income of $128 million for the first nine months of 2020 increased $25.8 million, or 25 percent, over the same period last year. Service charges and other fees of $38.8 million for 2020 year-to-date decreased $14.4 million, or 27 percent, from the same period prior year as a result of a decrease in overdraft activity and the impact of the Durbin Amendment. As of July 1, 2019, the Company became subject to the Durbin Amendment which established limits on the amount of interchange fees that can be charged to merchants for debit card processing. Gain on the sale of loans of $73.2 million for the first nine months of 2020, increased $49.3 million, or 206 percent, compared to the prior year as a result significant increase in refinance activity driven by the decrease in interest rates. Other income increased $2.9 million from the prior year and was primarily the result of a gain of $2.4 million on the sale of a former branch building in the first quarter of 2020.

Non-interest Expense Summary

Nine Months ended

(Dollars in thousands)

Sep 30,
2020

Sep 30,
2019

$ Change

% Change

Compensation and employee benefits

$

182,507

$

167,210

$

15,297

9

%

Occupancy and equipment

27,945

25,348

2,597

10

%

Advertising and promotions

7,404

7,874

(470

)

(6

)

%

Data processing

15,921

12,420

3,501

28

%

Other real estate owned

373

496

(123

)

(25

)

%

Regulatory assessments and insurance

3,622

3,726

(104

)

(3

)

%

Loss on termination of hedging activities

13,528

(13,528

)

(100

)

%

Core deposit intangibles amortization

7,758

5,919

1,839

31

%

Other expenses

50,229

43,154

7,075

16

%

Total non-interest expense

$

295,759

$

279,675

$

16,084

6

%

Total non-interest expense of $296 million for the first nine months of 2020 increased $16.1 million, or 6 percent, over the prior year same period. Compensation and employee benefits for the first nine months of 2020 increased $15.3 million, or 9 percent, from the same period last year due to the increased number of employees from acquisitions and organic growth and annual salary increases which more than offset the $8.9 million deferral of compensation cost from the PPP loans in the current year and the $5.4 million of stock compensation expense in the prior year from the Heritage Bancorp acquisition. Occupancy and equipment expense for the first nine months of 2020 increased $2.6 million, or 10 percent from the prior year primarily from increased cost from acquisitions. Data processing expense for the first nine months of 2020 increased $3.5 million, or 28 percent, from the prior year as a result of the increased costs from acquisitions along with increased investment in technology infrastructure. Other expenses of $50.2 million, increased $7.1 million, or 16 percent, from the prior year and was primarily driven by an increase in expense related to unfunded loan commitments and an increase in acquisition-related expenses. Acquisition-related expenses were $7.3 million in the current year first nine months compared to $4.1 million in the prior year first nine months. In the current year-to-date period, there was $2.1 million of expense related to unfunded loan commitments which was primarily attributable to the economic forecast related to COVID-19.

Credit Loss Expense
The credit loss expense was $39.2 million for the first nine months of 2020, an increase of $39.1 million from the same period in the prior year, this increase was primarily attributable to changes in the economic forecast related to COVID-19. Net charge-offs during the first nine months of 2020 were $2.9 million compared to $5.8 million during the same period in 2019.

Federal and State Income Tax Expense
Tax expense of $42.7 million in the first nine months of 2020 increased $6.2 million, or 17 percent, over the prior year same period. The effective tax rate year-to-date in 2020 and 2019 was 19 percent.

Efficiency Ratio
The efficiency ratio was 50.21 percent for the first nine months of 2020. Excluding the impact from the PPP loans, the efficiency ratio would have been 53.30 percent. The prior year first nine months efficiency ratio was 58.82 and excluding the impact from the termination of the cash flow hedges and the accelerated stock compensation expense, the efficiency ratio would have been 54.74 percent. Excluding these adjustments, the current year efficiency ratio decreased 144 basis points from the prior year efficiency ratio which was driven by the increased gain on sale of loans and increase in net interest income that more than offset the decrease in service fee income from the Durbin Amendment and increases in compensation expense.

Forward-Looking Statements
This news release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about management’s plans, objectives, expectations and intentions that are not historical facts, and other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “should,” “projects,” “seeks,” “estimates” or words of similar meaning. These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from th