SEC Company Response from GLACIER BANCORP, INC. (GBCI) (CIK 0000868671) (GBCI) — Feb 5, 2013
GLACIER BANCORP, INC. (GBCI) (CIK 0000868671)
Date: Feb. 5, 2013 · CIK: 0000868671 · Accession: 0000868671-13-000010
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-18911
Letter
Via EDGAR United States Securities and Exchange Commission Division of Corporation Finance Filed February 28, 2012 Form 10-Q for Fiscal Quarter ended September 30, 2012 Filed November 8, 2012 File No. 000-18911
Dear Mr. Pande:
Consistent with the telephone conversations with Mr. John A. Spitz, Staff Accountant, and you, we have prepared the following response by Glacier Bancorp, Inc. (the “Company”) to your December 21, 2012 comment letter regarding the Form 10-K filed by the Company for the fiscal year ended December 31, 2011, and the Form 10-Q filed by the Company for the fiscal quarter ended September 30, 2012. The time for responding to the comment letter was extended to February 5, 2013 in order to provide the Staff with a complete and comprehensive response to each of the comments.
For convenience and ease of review, we have reprinted below the text of the comment in your correspondence, followed by the Company's response.
Form 10-Q for Fiscal Quarter Ended September 30, 2012
Unaudited Condensed Consolidated Statement of Cash Flows, page 7
1.
We note that you have not provided a detail of the net cash provided by your operating activities for any period for which you have filed a Form 10-Q during fiscal 2012. Please tell us how your current disclosure is in accordance with ASC 230-10-45-28 through 32 and revise your future filings to present this information in your interim filings (i.e. Form 10-Qs) consistent with the cash flow statement provided on page 72 of your Form 10-K for the fiscal year ended December 31, 2011.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 2 of 15
Response:
The Company prepares a reconciliation of net income and net cash flow from operating activities in its annual Form 10-K as required by the Accounting Standards Codification ("ASC") 230-10-45-28 through 32. The Company did not prepare a reconciliation of net income and net cash flow from operating activities during interim periods of fiscal year 2012 which is permissible under SEC Regulation S-X Rule 10-01 (a)(4) which states: The statement of cash flows may be abbreviated starting with a single figure of net cash flows from operating activities and showing cash changes from investing and financing activities individually only when they exceed 10% of the average of net cash flows from operating activities for the most recent three years.
Though encouraging publicly traded companies to provide cash flow information during interim periods, ASC 270-10-50-4 also permits the information to be in a condensed format. In recognition that users of the Company's financial statements may gain a better understanding of the cash flow and income data presented, the Company will provide in its future interim filings a reconciliation of net income and net cash flow from operating activities on an interim basis.
Note 3. Loans Receivable, Net, page 17
2.
You disclose on page 18 that your home equity loans totaled $406.9 million at September 30, 2012, which represents approximately 12% of your total loan portfolio. We also note that the total allowance as a percentage of your home equity portfolio was 2.45% compared to a total allowance as a percentage of your residential real estate portfolio of 3.27% as of September 30, 2012. Please respond to the following regarding your home equity loan portfolio:
•
Tell us whether you are able to track the first lien position is in default regardless of whether you hold the first lien loan. If so, please tell us the results of that data and consider providing disclosure of this information in future filings;
•
If you do not have detailed information with respect to the performance of the first lien loan:
◦
Please tell us in detail and revise future filings to discuss how you consider this in the determination of your allowance for loan losses for your home equity loan portfolio;
◦
Consider revising future filings to include a risk factor or other disclosure addressing the risks in this portfolio, including how the lack of available information on the performance of first lien loans could impact the accuracy of your loan loss estimates, and the steps you are taking to address the risks;
◦
Tell us and disclose in future filings the percentage of your home equity loan portfolio where you also hold the first lien loan;
◦
Tell us whether the default and delinquency statistics for your home equity loan where you also hold the first lien loan show a different trend than situations where you do not hold the first lien loan; and
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 3 of 15
◦
Tell us and revise future filings to explain the nature of the loans in your home equity loan portfolio. For example, detail the percentage that are open-end lines of credit, the percentage that are close-ended, the percentage that were originated at the same time the first mortgage was originated, describe how long the draw period is for open-ended line of credit, etc.
Response:
As stated in the Company's response herein to comment 5, the loan classes for financial statement purposes are based on the purpose of the loan and not the type of collateral reported for bank regulatory classification purposes on Page 44 of the Company's Form 10-Q for the fiscal quarter ended September 30, 2012.
At December 31, 2012, the Company's home equity loans totaled $403.9 million or 11.89% of the Company's total loans of $3.397 billion, compared to $406.9 million or 11.94% of the Company's total loans of $3.408 billion at September 30, 2012.
At December 31, 2012, the total allowance as a percentage of the Company's home equity loan portfolio was 2.64% compared to 2.45% as of September 30, 2012.
At December 31, 2012, the total allowance as a percentage of the Company's residential real estate loan portfolio class was 3.00% compared to 3.27% as of September 30, 2012. The Company does not believe that the Company's total allowance for its residential real estate portfolio loan class is indicative, i.e., predictive of the probable credit losses in the Company's home equity loan portfolio class.
In originating home equity loans, the Company has not engaged in programmatic subprime home equity lending or originated higher risk home equity products.
As of September 30, 2012, the Company's $406.9 million of home equity loans consist of 1-4 family junior lien mortgages and first and junior lien lines of credit ("HELOC") secured by residential real estate. Approximately 20% of the home equity loans are closed-end, amortizing loans and 80% are open-end, revolving HELOCs. The home equity loan portfolio consists of 64% variable interest rate and 36% fixed interest rate loans. Approximately 50%, or $203.5 million of the home equity loans, are in a first lien status with the remaining 50%, or $203.5 million, in junior lien status.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 4 of 15
HELOCs are generally originated with maturity terms from 10 to 15 years. At origination, borrowers can choose a variable interest rate or fixed interest rate for the full term of the line of credit, or a fixed interest rate for the first 3 or 5 years from origination which then converts to a variable interest rate for the remaining term of the HELOC. The draw period usually exists from origination to the maturity of the HELOC. During the draw period, a borrower with a variable interest rate term has the option of converting to a fixed interest rate for all or a portion of the remaining term to maturity. During the draw period, the Company has home equity lines of credit where the borrowers pay interest only and home equity lines of credit where borrowers pay principal and interest.
For home equity loans originated by the Company in a subordinated lien position where the Company does not also hold the first lien, the Company is not typically notified about the status of the first lien position subsequent to origination. Information about the first lien status is limited to that which can be obtained from external sources. The Company has not contracted with a third-party service provider to provide updated loan, lien, and collateral data in recognition that the Company's volume of junior lien loans and HELOCs, i.e., $203.5 million at September 30, 2012 is (1) insignificant compared to the Company's entire loan portfolio of $3.4 billion, and (2) is expected to continue to decline in terms of both the outstanding balance and as a percentage of the Company's total loan portfolio (as noted later in this response).
Therefore, the Company does not track whether the default and delinquency statistics for its home equity loan class where it holds the first lien position shows a different trend than situations where the Company does not hold the first lien position. The Company monitors the delinquency and default status of the first lien position when a foreclosure or bankruptcy notice is filed with respect to the first lien loan or the Company obtains a credit report (e.g., due to the delinquency status of the Company's junior lien loan or HELOC) that details the status of the first lien position.
The allowance methodology and analysis applied to each of the Company's loan classes, including the home equity loan class, consists of a specific allocation for loans identified as impaired and a general allocation component for probable credit losses inherent in the balance of each loan class. When available information confirms that specific junior lien mortgages and junior lien HELOCs or portions thereof are uncollectible, such amounts are promptly charged-off against the allowance. The Company places junior lien mortgages and junior lien HELOCs on non-accrual status when it has evidence that the associated senior lien is 90 days past due or in the process of foreclosure, regardless of the junior lien delinquency status.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 5 of 15
Where the Company is in the junior lien position, the Company addresses the lack of available information about the performance of the first lien loans through the general allocation component of the allowance for the home equity loan class. The adequacy of the general component of the allowance for home equity lending is evaluated by the Company based on the home equity loan class' previous 12 consecutive calendar quarters, i.e., a rolling 3 year historical loss experience adjusted for trends and changes in 9 environmental factors applicable to the Company's unimpaired home equity lending portfolio. More specifically, the adequacy of the general component of the allowance for home equity lending is determined by the Company based on the historical loss experience adjusted by the combination of the 9 environmental factors rather than isolation of any one environmental factor. The 9 environmental factors are identified in the Allowance for Loan and Lease Losses discussion in Footnote 1 to the Company's audited financial statements included in the Company's Form 10-K for fiscal year ended December 31, 2012.
On a quarterly basis, the Company updates the environmental factors considering the economic and housing market conditions that affect the Company's home equity loan class. Provided below are the more significant economic and housing market conditions that were specifically considered for the September 30, 2012 allowance for the Company's home equity loan class. A similar analysis was also performed as of December 31, 2012 the results of which were not materially different than the analysis as of September 31, 2012.
As of September 30, 2012, the Company's home equity loan portfolio had experienced a 0.89% loss percentage over the previous 12 consecutive calendar quarters, such loss experience the lowest among the Company's 5 loan classes each of which are evaluated for allowance purposes. The Company has determined that such low loss experience is attributable to the fact that approximately 50% of the home equity loan class is in the first lien position. Additionally, the Company attributes the historical 0.89% loss experience for home equity lending to the Company's strong underwriting criteria at origination whereby the first and junior lien positions, with isolated exceptions, did not exceed 80% of the then current appraised value of the residential property.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 6 of 15
With respect to the Economic and Business Conditions qualitative environmental factor applied to the home equity loan class, the Company took into account the economic and housing market conditions, including the increased strains in the economy (and related consumer impact) attributable to the European sovereign debt crisis, highly polarized and divisive November 2012 U.S. Congressional and Presidential elections, and the higher unemployment statistic for the US nationally (8.1%) in relation to the lower Montana (6.3%), Idaho (7.3%) and Wyoming (5.6%) unemployment statistics. (Over 90% of the Company's home equity loans are in Montana, Idaho and Wyoming). The Company also evaluated the Total Housing Permit Growth, Housing Starts, and Housing Completions for new privately owned units, taking note that in the first nine months of 2012, Montana, Idaho, Colorado and Utah have each fared positively in relation to the US national statistic. Further, the Company took note of the improvement in single family residential real estate building and sales reports for all of the Company's market areas. Collectively, these considerations bode well to limit the probable credit losses within the Company's home equity loan class.
With respect to the Loan Volume qualitative environmental factor and the Loan Concentrations qualitative environmental factor each applied to the home equity loan class, the Company took into account the trend where the home equity loan class has decreased steadily in balances outstanding as a percentage of the total loan portfolio year over year since December 2010 and for each quarter-end in the first nine months of 2012. At year end 2010, the home equity loan class was 12.88% of the Company's total loan portfolio, declining to 12.71% at year end 2011, and declining further to 12.49%, 12.26% and 11.94% at the end of the first, second and third calendar quarters of 2012, respectively. The decline is due to payments, including outstanding balances paid-off as borrowers with home equity loans have included such balances in refinancing their first lien loans. Lower outstanding balances bode well to limit the probable credit losses within the Company's home equity loan class.
With respect to the Past Due, Non-Performing, and Problem Loans qualitative environmental factor applied to the home equity loan class, the Company took into account the improvement in the past due and non-accrual home equity loans which improved from 3.59% of total home equity loans at year end 2011 to 3.42%, 3.19%, and 3.01% of total home equity loans at the end of the first, second and third calendar quarters of 2012, respectively. In addition, the Company evaluated the steady decline since 2009 in both the Personal Bankruptcy Filings Rate as well as the number of Foreclosures Started in Montana, Idaho, and Wyoming. Such improvements bode well to limit the probable credit losses within the Company's home equity loan class.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 7 of 15
With respect to the Value of
Show Raw Text
CORRESP
1
filename1.htm
CORR 02.05.13
Via EDGAR
February 5, 2013
Mr. Amit Pande
Accounting Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
100 F. Street N.E.
Washington, D.C. 20549
RE: Glacier Bancorp, Inc.
Form 10-K for Fiscal Year ended December 31, 2011
Filed February 28, 2012
Form 10-Q for Fiscal Quarter ended September 30, 2012
Filed November 8, 2012
File No. 000-18911
Dear Mr. Pande:
Consistent with the telephone conversations with Mr. John A. Spitz, Staff Accountant, and you, we have prepared the following response by Glacier Bancorp, Inc. (the “Company”) to your December 21, 2012 comment letter regarding the Form 10-K filed by the Company for the fiscal year ended December 31, 2011, and the Form 10-Q filed by the Company for the fiscal quarter ended September 30, 2012. The time for responding to the comment letter was extended to February 5, 2013 in order to provide the Staff with a complete and comprehensive response to each of the comments.
For convenience and ease of review, we have reprinted below the text of the comment in your correspondence, followed by the Company's response.
Form 10-Q for Fiscal Quarter Ended September 30, 2012
Unaudited Condensed Consolidated Statement of Cash Flows, page 7
1.
We note that you have not provided a detail of the net cash provided by your operating activities for any period for which you have filed a Form 10-Q during fiscal 2012. Please tell us how your current disclosure is in accordance with ASC 230-10-45-28 through 32 and revise your future filings to present this information in your interim filings (i.e. Form 10-Qs) consistent with the cash flow statement provided on page 72 of your Form 10-K for the fiscal year ended December 31, 2011.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 2 of 15
Response:
The Company prepares a reconciliation of net income and net cash flow from operating activities in its annual Form 10-K as required by the Accounting Standards Codification ("ASC") 230-10-45-28 through 32. The Company did not prepare a reconciliation of net income and net cash flow from operating activities during interim periods of fiscal year 2012 which is permissible under SEC Regulation S-X Rule 10-01 (a)(4) which states: The statement of cash flows may be abbreviated starting with a single figure of net cash flows from operating activities and showing cash changes from investing and financing activities individually only when they exceed 10% of the average of net cash flows from operating activities for the most recent three years.
Though encouraging publicly traded companies to provide cash flow information during interim periods, ASC 270-10-50-4 also permits the information to be in a condensed format. In recognition that users of the Company's financial statements may gain a better understanding of the cash flow and income data presented, the Company will provide in its future interim filings a reconciliation of net income and net cash flow from operating activities on an interim basis.
Note 3. Loans Receivable, Net, page 17
2.
You disclose on page 18 that your home equity loans totaled $406.9 million at September 30, 2012, which represents approximately 12% of your total loan portfolio. We also note that the total allowance as a percentage of your home equity portfolio was 2.45% compared to a total allowance as a percentage of your residential real estate portfolio of 3.27% as of September 30, 2012. Please respond to the following regarding your home equity loan portfolio:
•
Tell us whether you are able to track the first lien position is in default regardless of whether you hold the first lien loan. If so, please tell us the results of that data and consider providing disclosure of this information in future filings;
•
If you do not have detailed information with respect to the performance of the first lien loan:
◦
Please tell us in detail and revise future filings to discuss how you consider this in the determination of your allowance for loan losses for your home equity loan portfolio;
◦
Consider revising future filings to include a risk factor or other disclosure addressing the risks in this portfolio, including how the lack of available information on the performance of first lien loans could impact the accuracy of your loan loss estimates, and the steps you are taking to address the risks;
◦
Tell us and disclose in future filings the percentage of your home equity loan portfolio where you also hold the first lien loan;
◦
Tell us whether the default and delinquency statistics for your home equity loan where you also hold the first lien loan show a different trend than situations where you do not hold the first lien loan; and
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 3 of 15
◦
Tell us and revise future filings to explain the nature of the loans in your home equity loan portfolio. For example, detail the percentage that are open-end lines of credit, the percentage that are close-ended, the percentage that were originated at the same time the first mortgage was originated, describe how long the draw period is for open-ended line of credit, etc.
Response:
As stated in the Company's response herein to comment 5, the loan classes for financial statement purposes are based on the purpose of the loan and not the type of collateral reported for bank regulatory classification purposes on Page 44 of the Company's Form 10-Q for the fiscal quarter ended September 30, 2012.
At December 31, 2012, the Company's home equity loans totaled $403.9 million or 11.89% of the Company's total loans of $3.397 billion, compared to $406.9 million or 11.94% of the Company's total loans of $3.408 billion at September 30, 2012.
At December 31, 2012, the total allowance as a percentage of the Company's home equity loan portfolio was 2.64% compared to 2.45% as of September 30, 2012.
At December 31, 2012, the total allowance as a percentage of the Company's residential real estate loan portfolio class was 3.00% compared to 3.27% as of September 30, 2012. The Company does not believe that the Company's total allowance for its residential real estate portfolio loan class is indicative, i.e., predictive of the probable credit losses in the Company's home equity loan portfolio class.
In originating home equity loans, the Company has not engaged in programmatic subprime home equity lending or originated higher risk home equity products.
As of September 30, 2012, the Company's $406.9 million of home equity loans consist of 1-4 family junior lien mortgages and first and junior lien lines of credit ("HELOC") secured by residential real estate. Approximately 20% of the home equity loans are closed-end, amortizing loans and 80% are open-end, revolving HELOCs. The home equity loan portfolio consists of 64% variable interest rate and 36% fixed interest rate loans. Approximately 50%, or $203.5 million of the home equity loans, are in a first lien status with the remaining 50%, or $203.5 million, in junior lien status.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 4 of 15
HELOCs are generally originated with maturity terms from 10 to 15 years. At origination, borrowers can choose a variable interest rate or fixed interest rate for the full term of the line of credit, or a fixed interest rate for the first 3 or 5 years from origination which then converts to a variable interest rate for the remaining term of the HELOC. The draw period usually exists from origination to the maturity of the HELOC. During the draw period, a borrower with a variable interest rate term has the option of converting to a fixed interest rate for all or a portion of the remaining term to maturity. During the draw period, the Company has home equity lines of credit where the borrowers pay interest only and home equity lines of credit where borrowers pay principal and interest.
For home equity loans originated by the Company in a subordinated lien position where the Company does not also hold the first lien, the Company is not typically notified about the status of the first lien position subsequent to origination. Information about the first lien status is limited to that which can be obtained from external sources. The Company has not contracted with a third-party service provider to provide updated loan, lien, and collateral data in recognition that the Company's volume of junior lien loans and HELOCs, i.e., $203.5 million at September 30, 2012 is (1) insignificant compared to the Company's entire loan portfolio of $3.4 billion, and (2) is expected to continue to decline in terms of both the outstanding balance and as a percentage of the Company's total loan portfolio (as noted later in this response).
Therefore, the Company does not track whether the default and delinquency statistics for its home equity loan class where it holds the first lien position shows a different trend than situations where the Company does not hold the first lien position. The Company monitors the delinquency and default status of the first lien position when a foreclosure or bankruptcy notice is filed with respect to the first lien loan or the Company obtains a credit report (e.g., due to the delinquency status of the Company's junior lien loan or HELOC) that details the status of the first lien position.
The allowance methodology and analysis applied to each of the Company's loan classes, including the home equity loan class, consists of a specific allocation for loans identified as impaired and a general allocation component for probable credit losses inherent in the balance of each loan class. When available information confirms that specific junior lien mortgages and junior lien HELOCs or portions thereof are uncollectible, such amounts are promptly charged-off against the allowance. The Company places junior lien mortgages and junior lien HELOCs on non-accrual status when it has evidence that the associated senior lien is 90 days past due or in the process of foreclosure, regardless of the junior lien delinquency status.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 5 of 15
Where the Company is in the junior lien position, the Company addresses the lack of available information about the performance of the first lien loans through the general allocation component of the allowance for the home equity loan class. The adequacy of the general component of the allowance for home equity lending is evaluated by the Company based on the home equity loan class' previous 12 consecutive calendar quarters, i.e., a rolling 3 year historical loss experience adjusted for trends and changes in 9 environmental factors applicable to the Company's unimpaired home equity lending portfolio. More specifically, the adequacy of the general component of the allowance for home equity lending is determined by the Company based on the historical loss experience adjusted by the combination of the 9 environmental factors rather than isolation of any one environmental factor. The 9 environmental factors are identified in the Allowance for Loan and Lease Losses discussion in Footnote 1 to the Company's audited financial statements included in the Company's Form 10-K for fiscal year ended December 31, 2012.
On a quarterly basis, the Company updates the environmental factors considering the economic and housing market conditions that affect the Company's home equity loan class. Provided below are the more significant economic and housing market conditions that were specifically considered for the September 30, 2012 allowance for the Company's home equity loan class. A similar analysis was also performed as of December 31, 2012 the results of which were not materially different than the analysis as of September 31, 2012.
As of September 30, 2012, the Company's home equity loan portfolio had experienced a 0.89% loss percentage over the previous 12 consecutive calendar quarters, such loss experience the lowest among the Company's 5 loan classes each of which are evaluated for allowance purposes. The Company has determined that such low loss experience is attributable to the fact that approximately 50% of the home equity loan class is in the first lien position. Additionally, the Company attributes the historical 0.89% loss experience for home equity lending to the Company's strong underwriting criteria at origination whereby the first and junior lien positions, with isolated exceptions, did not exceed 80% of the then current appraised value of the residential property.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 6 of 15
With respect to the Economic and Business Conditions qualitative environmental factor applied to the home equity loan class, the Company took into account the economic and housing market conditions, including the increased strains in the economy (and related consumer impact) attributable to the European sovereign debt crisis, highly polarized and divisive November 2012 U.S. Congressional and Presidential elections, and the higher unemployment statistic for the US nationally (8.1%) in relation to the lower Montana (6.3%), Idaho (7.3%) and Wyoming (5.6%) unemployment statistics. (Over 90% of the Company's home equity loans are in Montana, Idaho and Wyoming). The Company also evaluated the Total Housing Permit Growth, Housing Starts, and Housing Completions for new privately owned units, taking note that in the first nine months of 2012, Montana, Idaho, Colorado and Utah have each fared positively in relation to the US national statistic. Further, the Company took note of the improvement in single family residential real estate building and sales reports for all of the Company's market areas. Collectively, these considerations bode well to limit the probable credit losses within the Company's home equity loan class.
With respect to the Loan Volume qualitative environmental factor and the Loan Concentrations qualitative environmental factor each applied to the home equity loan class, the Company took into account the trend where the home equity loan class has decreased steadily in balances outstanding as a percentage of the total loan portfolio year over year since December 2010 and for each quarter-end in the first nine months of 2012. At year end 2010, the home equity loan class was 12.88% of the Company's total loan portfolio, declining to 12.71% at year end 2011, and declining further to 12.49%, 12.26% and 11.94% at the end of the first, second and third calendar quarters of 2012, respectively. The decline is due to payments, including outstanding balances paid-off as borrowers with home equity loans have included such balances in refinancing their first lien loans. Lower outstanding balances bode well to limit the probable credit losses within the Company's home equity loan class.
With respect to the Past Due, Non-Performing, and Problem Loans qualitative environmental factor applied to the home equity loan class, the Company took into account the improvement in the past due and non-accrual home equity loans which improved from 3.59% of total home equity loans at year end 2011 to 3.42%, 3.19%, and 3.01% of total home equity loans at the end of the first, second and third calendar quarters of 2012, respectively. In addition, the Company evaluated the steady decline since 2009 in both the Personal Bankruptcy Filings Rate as well as the number of Foreclosures Started in Montana, Idaho, and Wyoming. Such improvements bode well to limit the probable credit losses within the Company's home equity loan class.
Mr. Amit Pande, Accounting Branch Chief
United States Securities and Exchange Commission
Page 7 of 15
With respect to the Value of