10-K 1 gbci-20231231.htm FORM 10-K gbci-20231231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
________________________________________________________________________________________________________________________
FORM 10-K
________________________________________________________________________________________________________________________

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________             
Commission file number 000-18911
________________________________________________________________________________________________________________________
GLACIER BANCORP, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________________________________________________________________________
Montana81-0519541
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
49 Commons LoopKalispell,Montana59901
(Address of principal executive offices)(Zip Code)
(406)756-4200
(Registrant’s telephone number, including area code)
________________________________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueGBCIThe New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   ☒  Yes    ☐  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ☐  Yes    ☒  No
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    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   ☐  Yes      No
The aggregate market value of the voting common equity held by non-affiliates at June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter), was $3,437,780,226 (based on the average bid and asked price as quoted on The New York Stock Exchange as of the close of business on that date).
The number of shares of registrant’s common stock outstanding on February 19, 2024 was 113,368,242. No preferred shares are issued or outstanding.
Document Incorporated by Reference
Portions of the Proxy Statement for the registrant’s 2024 Annual Meeting of shareholders are incorporated by reference into Parts I and III of this Form 10-K.
1


TABLE OF CONTENTS

 
  Page
PART I
Item 1
Item 1A
Item 1B
Item 1C
Item 2
Item 3
Item 4
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 9C
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Item 15
Item 16
SIGNATURES
2


ABBREVIATIONS/ACRONYMS

 
ACL – allowance for credit losses
GDP - Gross domestic product
ALCO – Asset Liability Committee
Ginnie Mae – Government National Mortgage Association
AMLA – Anti-Money Laundering Act of 2020
GLBA – Gramm-Leach-Bliley Financial Services
Alta – Altabancorp and its subsidiary, Altabank
Modernization Act of 1999
ASC – Accounting Standards CodificationTM
Heritage – Heritage Bancorp and its subsidiary, Heritage Bank of Nevada
ASU – Accounting Standards Update
HTM - Held-to-maturity
ATM – automated teller machine
Interest rate locks – residential real estate derivatives for commitments
Bank – Glacier Bank
Interstate Act – Riegle-Neal Interstate Banking and Branching
Basel III – third installment of the Basel Accords
Efficiency Act of 1994
BHCA – Bank Holding Company Act of 1956, as amended
IRS – Internal Revenue Service
Board – Glacier Bancorp, Inc.’s Board of Directors
KBW NASDAQ Regional Banking Index - KBW Regional
bp or bps – basis point(s)
Banking Index
BSA – Bank Secrecy Act
LIBOR – London Interbank Offered Rate
CDE – Certified Development Entity
LIHTC – Low-Income Housing Tax Credit
CDFI Fund – Community Development Financial Institutions Fund
MBFD - modifications to borrowers experiencing financial
CEO – Chief Executive Officer
difficulty
CECL – current expected credit losses
MT Division of Banking – Montana Department of Administration’s
CFO – Chief Financial Officer
Division of Banking and Financial Institutions
CFPB – Consumer Financial Protection Bureau
NII – net interest income
CIO - Chief Information Officer
NMTC – New Markets Tax Credits
CISO - Chief Information Security Officer
NOW – negotiable order of withdrawal
Company – Glacier Bancorp, Inc.
NRSRO – Nationally Recognized Statistical Rating Organizations
COSO – Committee of Sponsoring Organizations of the
NYSE - The New York Stock Exchange
Treadway Commission
OCI – other comprehensive income
COVID-19 – coronavirus disease of 2019
OREO – other real estate owned
CRA – Community Reinvestment Act of 1977
Patriot Act – Uniting and Strengthening America by Providing Appropriate
CRO - Chief Risk Officer
Tools Required to Intercept and Obstruct Terrorism Act of 2001
DDA – demand deposit account
PCAOB – Public Company Accounting Oversight Board (United States)
DIF – federal Deposit Insurance Fund
PCD – purchased credit-deteriorated
Dodd-Frank Act – Dodd-Frank Wall Street Reform and
Proxy Statement – the 2024 Annual Meeting Proxy Statement
Consumer Protection Act of 2010
Repurchase agreements – securities sold under agreements
EAP – Employee Assistance Program
to repurchase
EGRRC Act – Economic Growth, Regulatory Relief, and Consumer
ROU – right-of-use
Protection Act
S&P – Standard and Poor’s
ESG – Environmental, social and governance matters
SBA – United States Small Business Administration
Fannie Mae – Federal National Mortgage Association
SBAZ – State Bank Corp. and its subsidiary, State Bank of Arizona
FASB – Financial Accounting Standards Board
SEC – United States Securities and Exchange Commission
FDIC – Federal Deposit Insurance Corporation
SERP – Supplemental Executive Retirement Plan
FHLB – Federal Home Loan Bank
SOFR – Secured Overnight Financing Rate
Final Rules – final rules implemented by the federal banking
SOX Act – Sarbanes-Oxley Act of 2002
agencies that amended regulatory risk-based capital rules
Tax Act – The Tax Cuts and Jobs Act
FinCEN - Financial Crime Enforecment Network
TBA – to-be-announced
FNB – FNB Bancorp and its subsidiary, The First National Bank
TDR – troubled debt restructuring
of Layton
VIE – variable interest entity
FRB – Federal Reserve Bank
Wheatland - Community Financial Group, Inc. and its subsidiary,
Freddie Mac – Federal Home Loan Mortgage Corporation
Wheatland Bank
GAAP – accounting principles generally accepted in the
United States of America

3


PART I
 
Item 1. Business

General
Glacier Bancorp, Inc., headquartered in Kalispell, Montana, is a Montana corporation incorporated in 2004 as a successor corporation to the Delaware corporation originally incorporated in 1990. The terms “Company,” “we,” “us” and “our” mean Glacier Bancorp, Inc. and its subsidiaries, when appropriate. The Company is a publicly-traded company and its common stock trades on the New York Stock Exchange (“NYSE”) under the symbol: GBCI. We provide a full range of banking services to individuals and businesses from 221 locations in Montana, Idaho, Utah, Washington, Wyoming, Colorado, Arizona and Nevada through our wholly-owned bank subsidiary, Glacier Bank (“Bank”). We offer a wide range of banking products and services, including: 1) retail banking; 2) business banking; 3) real estate, commercial, agriculture and consumer loans; and 4) mortgage origination and loan servicing. We serve individuals, small to medium-sized businesses, community organizations and public entities. For information regarding our lending, investment and funding activities, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The Company includes the parent holding company and the Bank. As of December 31, 2023, the Bank consists of seventeen bank divisions and a corporate division. The bank divisions operate under separate names, management teams and advisory directors and include the following:
Glacier Bank (Kalispell, Montana) with operations in Montana;
First Security Bank of Missoula (Missoula, Montana) with operations in Montana;
Valley Bank of Helena (Helena, Montana) with operations in Montana;
First Security Bank (Bozeman, Montana) with operations in Montana;
Western Security Bank (Billings, Montana) with operations in Montana;
First Bank of Montana (Lewistown, Montana) with operations in Montana;
Mountain West Bank (Coeur d’Alene, Idaho) with operations in Idaho and Washington;
Citizens Community Bank (Pocatello, Idaho) with operations in Idaho;
First Bank (Powell, Wyoming) with operations in Wyoming;
First State Bank (Wheatland, Wyoming) with operations in Wyoming;
North Cascades Bank (Chelan, Washington) with operations in Washington;
First Community Bank Utah (Layton, Utah) with operations in Utah;
Altabank (American Fork, UT) with operations in Utah and Idaho;
Bank of the San Juans (Durango, Colorado) with operations in Colorado;
Collegiate Peaks Bank (Buena Vista, Colorado) with operations in Colorado;
The Foothills Bank (Yuma, Arizona) with operations in Arizona; and
Heritage Bank of Nevada (Reno, NV) with operations in Nevada.

Effective January 31, 2024, the Company completed its acquisition of Community Financial Group, Inc. and its subsidiary, Wheatland Bank. The Wheatland Bank operations will be combined with the North Cascades Bank division, and the combined operations will begin to operate under the name Wheatland Bank in the second quarter of 2024.

The corporate division includes the Bank’s investment portfolio and wholesale borrowings, and other centralized functions. We consider the Bank to be our sole operating segment.

The Bank has subsidiary interests in variable interest entities (“VIE”) for which the Bank has both the power to direct the VIE’s significant activities and the obligation to absorb losses or right to receive benefits of the VIE that could potentially be significant to the VIE. These subsidiary interests are included in the Company’s consolidated financial statements. The Bank also has subsidiary interests in VIEs for which the Bank does not have a controlling financial interest and is not the primary beneficiary. These subsidiary interests are not included in the Company’s consolidated financial statements.

The parent holding company owns non-bank subsidiaries that have issued trust preferred securities which qualify as Tier 2 regulatory capital instruments. The trust subsidiaries are not included in our consolidated financial statements. Our investments in the trust subsidiaries are included in other assets on our statements of financial condition.

As of December 31, 2023, the Company and its subsidiaries were not engaged in any operations in foreign countries.

4


Recent Acquisitions
Our strategy is to profitably grow our business through internal growth and selective acquisitions. We continue to look for profitable expansion opportunities primarily in existing and new markets in the Rocky Mountain and Western states. We have completed the following acquisitions during the last five fiscal years:
(Dollars in thousands)DateTotal
Assets
Gross
Loans
Total
Deposits
Altabancorp and its wholly-owned subsidiary, Altabank
  (collectively, "Alta")
October 1, 2021$4,131,662 1,902,321 3,273,819 
State Bank Corp. and its wholly-owned subsidiary, State Bank of
  Arizona (collectively, "SBAZ")
February 29, 2020745,420 451,702 603,289 
Heritage Bancorp and its wholly-owned subsidiary, Heritage Bank
  of Nevada (collectively, "Heritage")
July 31, 2019977,944 615,279 722,220 
FNB Bancorp and its wholly-owned subsidiary, The First National
  Bank of Layton (collectively, "FNB")
April 30, 2019379,155 245,485 274,646 

On January 31, 2024, the Company completed its acquisition of Community Financial Group, Inc., the parent company of Wheatland Bank, headquartered in Spokane, Washington. For additional information on the acquisition and subsequent event, see Note 23 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”

Market Area and Competition
We have 221 locations, which consists of 187 branches and 34 loan or administration offices, in 78 counties within eight states including Montana, Idaho, Utah, Washington, Wyoming, Colorado, Arizona and Nevada. The market area’s diversified economic base primarily focuses on tourism, construction, mining, energy, manufacturing, agriculture, service industries, and health care. The tourism industry is highly influenced by national parks, ski resorts, significant lakes and rural scenic areas.

Commercial banking is a highly competitive business and operates in a rapidly changing environment. There are a large number of depository institutions including commercial banks, savings and loans, and credit unions in the markets in which we have locations. Competition is also increasing for deposit and lending services from internet-based competitors. Non-depository financial service institutions, primarily in the securities, insurance and retail industries, have also become competitors for retail savings, investment funds and lending activities. In addition to offering competitive interest rates, the principal methods used by the Bank to attract deposits include the offering of a variety of services including online banking, mobile banking and convenient office locations and business hours. The primary factors in competing for loans are interest rates and rate adjustment provisions, loan maturities, loan fees, relationships with customers and the quality of service.

The following table summarizes our number of locations, the number of counties we serve and the percentage of Federal Deposit Insurance Corporation (“FDIC”) insured deposits we have in those counties for each of the eight states we operate in. Percent of deposits are based on the FDIC summary of deposits survey as of June 30, 2023 and does not include any bank division acquired after such date.
Number of LocationsNumber of Counties ServedPercent of Deposits
Montana70 18 27.1 %
Idaho30 11 8.5 %
Utah38 0.3 %
Washington13 5.7 %
Wyoming19 10 15.1 %
Colorado27 14 1.7 %
Arizona17 0.8 %
Nevada6.0 %
Total221 78 


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Human Capital
As of December 31, 2023, we employed 3,358 persons, 3,095 of whom were employed full time. No employees were represented by a collective bargaining group. We believe our employees are united by our commitment to serve our customers and communities and that our customers are best served by a staff of competent, caring employees who are customer oriented. Our employees are one of our most valuable assets. We consider our employee relations to be excellent.

We strive to provide a safe and gratifying workplace for our employees. We promote and support a work environment free from any form of harassment, discrimination, bullying, or retaliation, and we are committed to principles of equal employment opportunity and to taking affirmative steps to hire and advance qualified minorities, women, individuals with disabilities, and protected veterans. We also encourage employee growth and development in a variety of ways, including through formal and informal training, relationships with colleagues and internal mentors, and by making a variety of resources available.

The Company has established a Training Committee charged with creating company-wide training expectations for employees to encourage adherence to internal policies and procedures and compliance with the variety of laws and regulations applicable to our operations. We also strive to offer multidisciplinary educational opportunities for employees to improve their knowledge and skills for their current positions, as well as to create opportunities to advance within the organization. Other targeted development opportunities are available for group leaders and promising employees, such as tuition support for employees seeking additional degrees or certifications through our Tuition Reimbursement program.

Our employee’s overall health and well-being is a top priority. It is our goal for all employees to work hard and experience a high quality work life, but we also encourage employees to be active participants in our communities, and to enjoy quality time with their families and cultivate their independent interests. We have developed several programs to encourage a safe and healthy workplace, including:

GBCI Injury and Illness Prevention Program
Work-life Balance Employee Assistance Program (“EAP”)
WellSteps program offering assessments, goal setting tools, activities, incentives, and rewards
The appointment of Safety & Wellness Ambassadors
Quarterly Wellness Campaign
Workstation Ergonomics Assessments

Through our Injury and Illness Prevention Program, we have established protocols for minimizing work place injuries and incidents. Instilling safety as a standard of practice is facilitated by a Safety Committee at each of our banking divisions and by Safety & Wellness Ambassadors at each location.

We also believe employee retention is critical to our success, and we are proud of our track record when it comes to retaining employees, including many employees at institutions we acquire. Retention strategies are woven into all our compensation and retirement programs, and even our efforts at expansion. We provide our qualifying employees with a comprehensive benefit program, including health, dental and vision insurance, life and accident insurance, short- and long-term disability coverage, and paid time off. In addition we offer a Profit Sharing and 401(k) Plan, stock-based compensation plan, deferred compensation plans, and a supplemental executive retirement plan for certain employees (“SERP”). For select management-level employees, we also offer our Short and Long-Term Incentive Plans, which are cash and equity-based compensation plans, respectively, that are designed to encourage achievement of short and long-term financial goals as our determined by the Company’s Board of Directors (the “Board”) from time to time, and to further retention through long-term vesting of certain awards earned. See Note 14 in the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” for detailed information regarding employee benefit plans and eligibility requirements.

Board of Directors and Committees
The Board has the ultimate authority and responsibility for overseeing risk management at the Company. Some aspects of risk oversight are fulfilled at the Board level, and the Board delegates other aspects of its risk oversight function to its committees. The Board has established, among others, an Audit Committee, a Compensation and Human Capital Committee, a Nominating/Corporate Governance Committee, a Compliance Committee, and a Risk Oversight Committee. Additional information regarding Board committees is set forth under the heading “Meetings and Committees of the Board of Directors - Committees and Committee Membership” in the Company’s 2024 Annual Meeting Proxy Statement (“Proxy Statement”) and is incorporated herein by reference.

Website Access
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our website (www.glacierbancorp.com) as soon as reasonably practicable after we have filed the material with, or furnished it to, the United States Securities and Exchange Commission (“SEC”). Copies can also be obtained by accessing the SEC’s website (www.sec.gov).

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Supervision and Regulation
We are subject to extensive regulation under federal and state laws. This section provides a general overview of the federal and state regulatory framework applicable to us. In general, this regulatory framework is designed to protect depositors, the federal Deposit Insurance Fund (“DIF”), and the federal and state banking system as a whole, rather than specifically for the protection of shareholders. Note that this section is not intended to summarize all laws and regulations applicable to us. Descriptions of statutory or regulatory provisions do not purport to be complete and are qualified by reference to those provisions.

These statutes and regulations, as well as related policies, continue to be subject to change by Congress, state legislatures, and federal and state regulators. Changes in statutes, regulations, or regulatory policies applicable to us (including their interpretation or implementation) cannot be predicted and could have a material effect on our business and operations. Numerous changes to the statutes, regulations, and regulatory policies applicable to us have been made or proposed in recent years. Continued efforts to monitor and comply with new regulatory requirements add to the complexity and cost of our business and operations.

The Company is subject to regulation and supervision by the Federal Reserve and the Montana Department of Administration’s Division of Banking and Financial Institutions (“MT Division of Banking”) and regulation generally by the State of Montana. The Company is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, which are both administered by the SEC. The Bank is subject to regulation and supervision by the FDIC, the MT Division of Banking, and, with respect to Bank branches outside of the State of Montana, the respective regulators in those states. In addition, we are also subject to regulation and direct supervision by the Consumer Financial Protection Bureau (“CFPB”) which is empowered to exercise broad rulemaking, supervision, and enforcement authority for a wide range of consumer protection laws.

Federal and State Bank Holding Company Regulation
General. The Company is a bank holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”), due to its ownership of and control over the Bank. As a bank holding company, the Company is subject to regulation, supervision, and examination by the Federal Reserve. Further, because the Bank is a “regional banking organization” under Montana law, the Company (as a bank holding company of the Bank) is also subject to regulation, supervision and examination by the MT Division of Banking. In general, the BHCA limits the business of a bank holding company to owning or controlling banks and engaging in, or retaining or acquiring shares in a company engaged in, other activities closely related to the business of banking. In addition, the Company must also file reports with and provide additional information to the Federal Reserve.

Holding Company Bank Ownership. The BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before: 1) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5 percent of such shares; 2) acquiring all or substantially all of the assets of another bank or bank holding company; or 3) merging or consolidating with another bank holding company.

Holding Company Control of Non-banks. With some exceptions, the BHCA prohibits a bank holding company from acquiring or retaining direct or indirect ownership or control of more than 5 percent of the voting shares of any company that is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities that, by federal statute, agency regulation, or order, have been identified as activities closely related to the business of banking or managing or controlling banks.

Transactions with Affiliates. Bank subsidiaries of a bank holding company are subject to restrictions imposed by the Federal Reserve Act on extensions of credit to the holding company or its subsidiaries, on investments in securities, and on the use of securities as collateral for loans to any borrower. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) further extends the definition of an “affiliate” and treats credit exposure arising from derivative transactions, securities lending, and borrowing transactions as covered transactions under the regulations. It also 1) expands the scope of covered transactions required to be collateralized; 2) requires collateral to be maintained at all times for covered transactions required to be collateralized; and 3) places limits on acceptable collateral. These regulations and restrictions may limit the Company’s ability to obtain funds from the Bank for its cash needs, including funds for payments of dividends, interest, and operational expenses.
Tying Arrangements. We are also prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, sale or lease of property, or furnishing of services. For example, with certain exceptions, we may not condition an extension of credit to a customer on either 1) a requirement that the customer obtain additional services provided by us; or 2) an agreement by the customer to refrain from obtaining other services from a competitor.

Support of Bank Subsidiaries. Under Federal Reserve policy and the Dodd-Frank Act, the Company is required to act as a source of financial and managerial strength to the Bank. This means that the Company is required to commit, as necessary, capital and resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources or
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when it may not be in the Company's or its shareholders' best interests to do so. Any capital loans a bank holding company makes to its bank subsidiaries are subordinate to deposits and to certain other indebtedness of the bank subsidiaries.
State Law Restrictions under Corporate Law. As a Montana corporation, the Company is subject to certain limitations and restrictions under applicable Montana corporate law. For example, Montana corporate law includes limitations and restrictions relating to indemnification of directors, distributions to shareholders, transactions involving directors, officers, or interested shareholders, maintenance of books, records, and minutes, and observance of certain corporate formalities.

Federal and State Regulation of the Bank
General. Deposits in the Bank are insured by the FDIC. The Bank is subject to primary supervision, periodic examination, and regulation of the FDIC and the MT Division of Banking. These agencies have the authority to prohibit the Bank from engaging in what they believe constitute unsafe or unsound banking practices. The federal laws that apply to the Bank regulate, among other things, the scope of its business, its investments, its reserves against deposits, the timing of the availability of deposited funds, and the nature, amount of, and collateral for loans. Federal laws also regulate community reinvestment and insider credit transactions and impose safety and soundness standards. In addition to federal law and the laws of the State of Montana, with respect to the Bank's branches in Idaho, Utah, Washington, Wyoming, Colorado, Arizona and Nevada, the Bank is also subject to the various laws and regulations governing its activities in those states.

Consumer Protection. The Bank is subject to a variety of federal and state consumer protection laws and regulations that govern its relationships and interactions with consumers, including laws and regulations that impose certain disclosure requirements and that govern the manner in which the Bank takes deposits, makes and collects loans, and provides other services. In recent years, examination and enforcement by federal and state banking agencies for compliance with consumer protection laws and regulations have increased and become more intense. Failure to comply with these laws and regulations may subject the Bank to various penalties, including but not limited to enforcement actions, injunctions, fines, civil monetary penalties, criminal penalties, punitive damages, and the loss of certain contractual rights. Recently, the CFPB has been focusing its enforcement efforts on certain types of fees commonly charged by financial institutions. These efforts have included requesting public input on fees charged for deposit accounts, credit cards, and other financial products, issuing advisory opinions, and various enforcement actions and penalties against a number of financial institutions for practices related to banking fees. For example, the CFPB issued an advisory opinion explaining how the CFPB may evaluate the premissibility of fees imposed on customers for making requests for information about their accounts. The Bank is closely monitoring changes to the rules related to banking fees and has established a comprehensive compliance system to ensure consumer protection.

Community Reinvestment. The Community Reinvestment Act of 1977 (“CRA”) requires that, in connection with examinations of financial institutions within their jurisdictions, federal bank regulators evaluate the record of financial institutions in meeting the credit needs of their local communities, including low and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. A bank’s community reinvestment record is also considered by the applicable banking agencies in evaluating mergers, acquisitions, and applications to open a branch or facility. In some cases, a bank's failure to comply with the CRA, or CRA protests filed by interested parties during applicable comment periods, can result in the denial or delay of such transactions. In October 2023, federal bank regulators issued a rule to strengthen and modernize the CRA in several ways (e.g., to encourage banks to expand access to banking services, adapt to internet and mobile banking usage, improve clarity and consistency in the application of the CRA regulations, and to tailor CRA evaluations to the size and type of the bank being evaluated. Most of these new requirements will be applicable beginning January 2026, and the remaining requirements, including data reporting requirements, will be applicable January 2027. These changes in the evaluation process and reporting requirements under the CRA could impact the Bank’s costs of compliance and rating during its next evaluation. The Bank received a “satisfactory” rating in its most recent CRA examination.

Insider Credit Transactions. Banks are subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders, and their related interests. These extensions of credit 1) must be made on substantially the same terms (including interest rates and collateral) and follow credit underwriting procedures that are at least as stringent as those prevailing at the time for comparable transactions with persons not related to the lending bank; and 2) must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to certain lending limits and restrictions on overdrafts to insiders. A violation of these restrictions may result in the assessment of substantial civil monetary penalties, regulatory enforcement actions, and other regulatory sanctions. The Dodd-Frank Act and federal regulations place additional restrictions on loans to insiders and generally prohibit loans to senior officers other than for certain specified purposes.

Regulation of Management. Federal law 1) sets forth circumstances under which officers or directors of a bank may be removed by the bank's federal supervisory agency; 2) as discussed above, places restraints on lending by a bank to its executive officers, directors, principal shareholders, and their related interests; and 3) generally prohibits management personnel of a bank from serving as directors or in other management positions of another financial institution whose assets exceed a specified amount or which has an office within a specified geographic area.

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Safety and Soundness Standards. Certain non-capital safety and soundness standards are also imposed upon banks. These standards cover, among other things, internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings, and stock valuation. In addition, each insured depository institution must implement a comprehensive written information security program that includes administrative, technical, and physical safeguards appropriate to the institution’s size and complexity and the nature and scope of its activities. The information security program must be designed to ensure the security and confidentiality of customer information, protect against any unanticipated threats or hazards to the security or integrity of such information, protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer, and ensure the proper disposal of customer and consumer information. An institution that fails to meet these standards may be required to submit a compliance plan, or be subject to regulatory sanctions, including restrictions on growth. The Bank has established comprehensive policies and risk management procedures to ensure the safety and soundness of the Bank.

Interstate Banking and Branching
The Dodd-Frank Act eliminated interstate branching restrictions that were implemented as part of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Interstate Act"), and removed many restrictions on de novo interstate branching by state and federally chartered banks.  Federal regulators have authority to approve applications by such banks to establish de novo branches in states other than the bank's home state if the host state's banks could establish a branch at the same location. The Interstate Act requires regulators to consult with community organizations before permitting an interstate institution to close a branch in a low-income area. Federal bank regulations also prohibit banks from using their interstate branches primarily for deposit production and federal bank regulatory agencies have implemented a loan-to-deposit ratio screen to ensure compliance with this prohibition.

Dividends
A principal source of the Company’s cash is from dividends received from the Bank, which are subject to regulation and limitation. As a general rule, regulatory authorities may prohibit banks and bank holding companies from paying dividends in a manner that would constitute an unsafe or unsound banking practice. For example, regulators have stated that paying dividends that deplete an institution's capital base to an inadequate level would be an unsafe and unsound banking practice and that an institution should generally pay dividends only out of current operating earnings. In addition, a bank may not pay cash dividends if that payment could reduce the amount of its capital below that necessary to meet minimum applicable regulatory capital requirements. Current guidance from the Federal Reserve provides, among other things, that dividends per share on the Company’s common stock generally should not exceed earnings per share, measured over the previous four fiscal quarters. In certain circumstances, Montana law also places limits or restrictions on a bank’s ability to declare and pay dividends.

Rules adopted in accordance with the third installment of the Basel Accords (“Basel III”) also impose limitations on the Bank's ability to pay dividends. In general, these rules limit the Bank's ability to pay dividends unless the Bank's common equity conservation buffer exceeds the minimum required capital ratio by at least 2.5 percent of risk-weighted assets.

The Federal Reserve has also issued a policy statement on the payment of cash dividends by bank holding companies. In general, the policy statement expresses the view that although no specific regulations restrict dividend payments by bank holding companies other than state corporate laws, a bank holding company should not pay cash dividends unless the bank holding company’s earnings for the past year are sufficient to cover both the cash dividends and a prospective rate of earnings retention that is consistent with the bank holding company’s capital needs, asset quality, and overall financial condition. A bank holding company's ability to pay dividends may also be restricted if a subsidiary bank becomes undercapitalized. The various laws and regulatory policies applicable to the Company and the Bank may limit our ability to pay dividends or otherwise engage in capital distributions.

The Dodd-Frank Act
General. The Dodd-Frank Act significantly changed the bank regulatory structure and has affected the lending, deposit, investment, trading, and operating activities of banks and bank holding companies. Some of the provisions of the Dodd-Frank Act that may impact our business and operations are summarized below.

Corporate Governance. The Dodd-Frank Act requires publicly traded companies to provide their shareholders with 1) a non-binding shareholder vote on executive compensation; 2) a non-binding shareholder vote on the frequency of such vote; 3) disclosure of “golden parachute” arrangements in connection with specified change in control transactions; and 4) a non-binding shareholder vote on golden parachute arrangements in connection with these change in control transactions. The SEC adopted a rule mandated by the Dodd-Frank Act that requires a public company to disclose the ratio of the compensation of its Chief Executive Officer (“CEO”) to the median compensation of its employees. This rule is intended to provide shareholders with information that they can use to evaluate a CEO’s compensation.


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Prohibition Against Charter Conversions of Financial Institutions. The Dodd-Frank Act generally prohibits a depository institution from converting from a state to a federal charter, or vice versa, while it is the subject to an enforcement action unless the depository institution seeks prior approval from its primary regulator and complies with specified procedures to ensure compliance with the enforcement action.

Repeal of Demand Deposit Interest Prohibition. The Dodd-Frank Act repealed the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts.

Consumer Financial Protection Bureau. The Dodd-Frank Act established the CFPB and empowered it to exercise broad rulemaking, supervision, and enforcement authority for a wide range of consumer protection laws. The CFPB has issued and continues to issue numerous regulations under which we will continue to incur additional expenses in connection with our ongoing compliance obligations. Significant recent CFPB developments that may affect operations and compliance costs include:
Positions taken by the CFPB on fair lending, including applying the disparate impact theory which could make it more difficult for lenders to charge different rates or to apply different terms to loans to different customers;
The CFPB's Final Rule amending Regulation C, which implements the Home Mortgage Disclosure Act, requiring most lenders to report expanded information in order for the CFPB to more effectively monitor fair lending concerns and other information shortcomings identified by the CFPB;
Positions taken by the CFPB regarding the Electronic Fund Transfer Act and Federal Reserve Regulation E, which require companies to obtain consumer authorizations before automatically debiting a consumer’s account for pre-authorized electronic funds transfers;
Focused efforts on enforcing certain compliance obligations the CFPB deems a priority, such as automobile and student loan servicing (including certain forbearance requirements related to the COVID-19 pandemic), debt collection, collateral repossession, mortgage origination and servicing, remittances, and fair lending, among others; and
Positions taken by the CFPB and continued focused efforts on enforcing compliance obligations related to deposit account fees including overdraft, non-sufficient funds, and returned deposit fees.
The CFPB’s Final Rule amending Regulation B, which implements changes to the Equal Credit Opportunity Act, requiring covered financial institutions to collect and report to the CFPB data on applications for small business, including those that are owned by women or minorities.

Interchange Fees. Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic transactions are "reasonable and proportional" to the costs incurred by issuers for processing such transactions. Notably, the Federal Reserve's rules set a maximum permissible interchange fee, among other requirements. We have been subject to the interchange fee cap since July 1, 2019. In October 2023, the Federal Reserve requested comments on a proposed rule that would lower the interchange fee cap and establish a regular process for updating the cap every other year going forward. Future changes to the interchange fee cap could have a negative effect on the Bank’s fee revenue.

Stress Testing
In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRC Act”) was signed into law, rolling back certain provisions of the Dodd-Frank Act to provide regulatory relief to financial institutions. In relevant part, the EGRRC Act raised the applicability threshold for company-run stress testing required under the Dodd-Frank Act by exempting bank holding companies under $100 billion in total assets and raising the asset threshold for covered banks from $10 billion to $250 billion. In November of 2019, the FDIC adopted a Final Rule to implement these changes. As a result, we are not currently subject to the Dodd-Frank Act stress testing requirements. However, federal banking regulators have recently issued updated guidance on liquidity risks and contingency planning even if stress testing is not required.

Capital Adequacy
Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal regulatory agencies, which involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory guidelines. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting, and other factors. The capital requirements are intended to ensure that institutions have adequate capital given the risk levels of assets and off-balance sheet financial instruments and are applied separately to the Company and the Bank.

Federal regulations require insured depository institutions and bank holding companies to meet several minimum capital standards, including: 1) a common equity Tier 1 capital to risk-based assets ratio of 4.5 percent; 2) a Tier 1 capital to risk-based assets ratio of 6 percent; 3) a total capital to risk-based assets ratio of 8 percent; and 4) a 4 percent Tier 1 capital to total assets leverage ratio. These minimum capital requirements became effective in January 2015 and were the result of Final Rules implementing regulatory changes based on the recommendation of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act ("Final Rules").
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The Final Rules also require a capital conservation buffer designed to absorb losses during periods of economic stress. Failure to comply with this buffer requirement may result in constraints on capital distributions (e.g., dividends, equity repurchases, and certain bonus compensation for executive officers). The Final Rules change the risk-weights of certain assets for purposes of the risk-based capital ratios and phase out certain instruments as qualifying capital. For additional information regarding trust preferred securities and their impact to regulatory capital, see Note 12 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”

The Final Rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on an insured depository institution if its capital levels begin to show signs of weakness. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following increased capital level requirements to qualify as “well capitalized”: 1) a Tier 1 common equity capital ratio of at least 6.5 percent; 2) a Tier 1 capital ratio of at least 8 percent; 3) a total capital ratio of at least 10 percent; 4) a Tier 1 leverage ratio of at least 5 percent; and 5) not be subject to any order or written directive requiring a specific capital level. The FDIC’s rules (as amended by the Final Rules) contain other capital classification categories, such as “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized,” each of which are based on differing capital ratios. Undercapitalized institutions are subject to certain mandatory restrictions, including on capital distributions and growth. Significantly undercapitalized and critically undercapitalized institutions are subject to additional restrictions. An institution may be downgraded to a category lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition, or if the institution receives an unsatisfactory examination rating.

The application of the Final Rules may result in lower returns on invested capital, require the raising of additional capital or require regulatory action if the Bank were unable to comply with such requirements. In addition, management may be required to modify its business strategy due to the changes to the asset risk-weights for risk-based capital calculations and the requirement to meet the capital conservation buffer. The imposition of liquidity requirements in connection with these rules could also cause the Bank to increase its holdings of liquid assets, change its business strategy, and make other changes to the terms of its funding.

Regulatory Oversight and Examination
Inspections. The Federal Reserve conducts periodic inspections of bank holding companies. In general, the objectives of the Federal Reserve's inspection program are to ascertain whether the financial strength of a bank holding company is maintained on an ongoing basis and to determine the effects or consequences of transactions between a bank holding company or its non-banking subsidiaries and its bank subsidiaries. The inspection type and frequency typically varies depending on asset size, complexity of the organization, and the bank holding company’s rating at its last inspection.

Examinations. Banks are subject to periodic examinations by their primary regulators. In assessing a bank's condition, bank examinations have evolved from reliance on transaction testing to a risk-focused approach. These examinations are extensive and cover the entire breadth of the operations of a bank. Generally, safety and soundness examinations occur on an 18-month cycle for banks under $3 billion in total assets that are well capitalized and without regulatory issues, and 12-months otherwise. Examinations alternate between the federal and state bank regulatory agencies, and in some cases they may occur on a combined schedule. The frequency of consumer compliance and CRA examinations is linked to the size of the institution and its compliance and CRA ratings at its most recent examinations. However, the examination authority of the Federal Reserve and the FDIC allows them to examine supervised institutions as frequently as deemed necessary based on the condition of the institution or as a result of certain triggering events. Because our total consolidated assets exceed $10 billion, we are also subject to the direct supervision of the CFPB.

Commercial Real Estate Ratios. The federal banking regulators have also issued guidance reminding financial institutions to reexamine the existing regulations regarding concentrations in commercial real estate lending. The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The banking regulators are directed to examine each bank’s exposure to commercial real estate loans that are dependent on cash flow from the real estate held as collateral and to focus their supervisory resources on institutions that may have significant commercial real estate loan concentration risk. In October 2023, the FDIC issued an advisory reemphasizing the importance of strong capital, appropriate credit loss allowance levels, and robust credit-risk management practices when managing commercial real estate concentrations.

Corporate Governance and Accounting
The Sarbanes-Oxley Act of 2002 (“SOX Act”) addresses, among other things, corporate governance, auditing and accounting, enhanced and timely disclosure of corporate information, and penalties for non-compliance. Among other matters, the SOX Act 1) requires chief executive officers and chief financial officers to certify to the accuracy and completeness of periodic reports filed with the SEC and to certain matters relating to disclosure and accounting controls at public companies; 2) imposes specific and enhanced corporate disclosure requirements; 3) accelerates the time frame for reporting insider transactions and periodic disclosures by public companies; and 4) requires companies to adopt and disclose information about corporate governance practices. As a publicly
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reporting company with the SEC, the Company is subject to the requirements of the SOX Act and related rules and regulations issued by the SEC and the NYSE.

Anti-Money Laundering and Anti-Terrorism
The Bank Secrecy Act (“BSA”) requires all financial institutions to establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. The BSA also sets forth various recordkeeping and reporting requirements (such as reporting suspicious activities that might signal criminal activity) and certain due diligence and "know your customer" documentation requirements.

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“Patriot Act”), intended to combat terrorism, was renewed with certain amendments in 2006. In relevant part, the Patriot Act 1) prohibits banks from providing correspondent accounts directly to foreign shell banks; 2) imposes due diligence requirements on banks opening or holding accounts for foreign financial institutions or wealthy foreign individuals; 3) requires financial institutions to establish an anti-money laundering compliance program; and 4) eliminates civil liability for persons who file suspicious activity reports. The Patriot Act also includes provisions providing the government with power to investigate terrorism, including expanded government access to bank account records. Regulators are directed to consider a bank holding company’s and a bank’s effectiveness in combating money laundering when reviewing and ruling on applications under the BHCA and the Bank Merger Act. We have established comprehensive compliance programs designed to comply with the requirements of the BSA and Patriot Act.

The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the U.S. Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy; requires the development of standards for testing technology and internal processes for BSA compliance; expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations; and expands BSA whistleblower incentives and protections. Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury, issued the priorities for anti-money laundering and countering the financing of terrorism policy required under the AMLA. The priorities include: corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing.

In December 2023, FinCEN issued a Final Rule implementing the access and safeguard provisions of the Corporate Transparency Act (the “Access Rule”). The Access Rule allows FinCEN to disclose beneficial ownership information to financial institutions to facilitate compliance with customer due diligence requirements and anti-money laundering obligations under the BSA.

Financial Services Modernization
The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (“GLBA”) brought about significant changes to the laws affecting banks and bank holding companies. Generally, the GLBA 1) repealed historical restrictions on preventing banks from affiliating with securities firms; 2) provided a uniform framework for the activities of banks, savings institutions, and their holding companies; 3) broadened the activities that may be conducted by national banks and banking subsidiaries of bank holding companies; 4) provided an enhanced framework for protecting the privacy of consumer information and requires notification to consumers of bank privacy policies; and 5) addressesed a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions. The Bank is subject to FDIC regulations implementing the privacy provisions of the GLBA. Amont other requireemnts, these regulations require the Bank to disclose its privacy policy, including informing consumers of the Bank's information sharing practices and their right to opt out of certain practices.

Deposit Insurance
FDIC Insured Deposits. The Bank's deposits are insured under the Federal Deposit Insurance Act, up to the maximum applicable limits and are subject to deposit insurance assessments by the FDIC, which are designed to tie what banks pay for deposit insurance to the risks they pose. The FDIC determines the amount of insurance premiums based on the financial institutions’ deposit base and the applicable assessment rate. The Dodd-Frank Act redefined the assessment base as the average consolidated total assets less average tangible equity capital of a financial institution. The FDIC determines the assessment rate for insured depository institutions with more than $10 billion in assets under a “scorecard” methodology that seeks to capture both the probability that such an institution will fail and the magnitude of the impact on the DIF if such a failure occurs. Assessment rates are applied to the depository intuition’s base to determine payments to the DIF. The FDIC has authority to increase assessment rates, and in October 2022 adopted a Final Rule increasing initial base deposit rate schedules uniformly by two basis points starting with the first quarterly assessment period of 2023. The FDIC also communicated that the new rate schedules will remain in effect unless and until the reserve ratio meets or exceeds two percent; progressively lower assessment rates can be expected when the reserve ratio goal is met.

Additionally, the FDIC has the authority to implement special assessments to recover losses to the DIF caused by systemic risks in the banking industry. The FDIC exercised this authority in connection with the systemic risk determination by federal bank regulators in March 2023 after the failures of Silicon Valley Bank and Signature Bank. In November 2023, the FDIC issued a Final Rule
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implementing a special assessment to recover the loss to the DIF arising from the FDIC’s protection of uninsured depositors associated with these banks. The special assessment will be proportional to each bank’s uninsured deposits as of December 2022, with an annual rate of approximately 13.4 basis points to be paid over eight quarterly assessment periods.

No institution may pay a dividend if it is in default on its federal deposit insurance assessment. The FDIC may also prohibit any insured institution from engaging in any activity determined by regulation or order to pose a serious risk to the DIF.

Safety and Soundness. The FDIC may terminate the deposit insurance of any insured depository institution if the FDIC determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order, or any condition imposed by an agreement with the FDIC. Management is not aware of any existing circumstances that would result in termination of the Bank's deposit insurance.

Insurance of Deposit Accounts. The Dodd-Frank Act permanently increased FDIC deposit insurance from $100,000 to $250,000 per depositor. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category. In light of the failures of Silicon Valley Bank and Signature Bank in early 2023, the FDIC recently published a report outlining a number of options to reform the nation’s deposit insurance system. These options include so-called “limited coverage,” “unlimited coverage,” and “targeted coverage,” each of which, if pursued, could result in increased assessments on the banking system.

Recent and Proposed Legislation
The economic and political environment of the past several years has led to a number of proposed legislative, governmental, and regulatory initiatives that may significantly impact the banking industry. Other regulatory initiatives by federal and state government agencies may also significantly impact our business, including, as an example, the Biden administration’s July 2021 executive order encouraging more robust scrutiny of mergers and acquisitions and the related efforts of banking regulators to increase scrutiny of transactions. In March 2022, the FDIC published a Request for Information (“RFI”) seeking information and comments
regarding the application of the laws, practices, rules, regulations, guidance, and statements of policy that apply to merger transactions
of one or more depository institutions. The FDIC highlighted that significant changes over the past several decades in the banking industry and financial system necessitate a review of the regulatory framework. The FDIC expressed interest in receiving comments regarding the effectiveness of the existing frameworks and requirements under the Bank Merger Act. While the FDIC has not yet made changes to the existing frameworks and requirements under the Bank Merger Act, the U.S. Department of Justice and the Federal Trade Commission issued updated Horizontal Merger Guidelines in December 2023 that may impact merger activity for many financial institutions.

We cannot predict the ultimate impact of any such initiatives on our operations, competitive situation, financial conditions, or results of operations, or whether any other proposals will emerge. Recent history has demonstrated that new legislation or changes to existing laws or regulations typically result in a greater compliance burden (and therefore increase the general costs of doing business), and the administration under President Biden has demonstrated a general intent to regulate the financial services industry more strictly than the administration of his predecessor, including with respect to its review of proposed change in control transactions.

Effects of Federal Government Monetary Policy
The Company’s earnings and growth are affected not only by general economic conditions, but also by the fiscal and monetary policies of the federal government, particularly the Federal Reserve. The Federal Reserve implements national monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates. Through its open market operations in U.S. government securities, control of the discount rate applicable to borrowings, establishment of reserve requirements against certain deposits, and control of the interest rate applicable to excess reserve balances and reverse repurchase agreements, the Federal Reserve influences the availability and cost of money and credit and, ultimately, a range of economic variables including employment, output, and the prices of goods and services. Recently, the Federal Reserve has reaffirmed that its strategy for monetary policy is focused on long-run goals and addressing continued concerns with inflation. After increasing the federal funds rate by 425 basis points in 2022, the Federal Reserve continued the trend, albeit at a slower pace, for a total increase in 2023 of 100 basis points. The last rate increase was in July 2023, and the Federal Reserve has communicated that the economic outlook continues to be uncertain and inflation risks are present. Changes in monetary policy, including increases in the federal funds rate, can affect net interest income and margin, overall profitability, and shareholders’ equity. The nature and impact of future changes in monetary policies and their impact on us cannot be predicted with certainty.

Heightened Requirements for Large Bank Holding Companies and Banks
As mentioned above, the Dodd-Frank Act imposed heightened requirements on large bank holding companies and banks, and the EGRRC Act has rolled back certain provisions of the Dodd-Frank Act. In particular, the EGRRC Act increased the asset threshold for certain rules that previously applied to bank holding companies and banks with at least $10 billion in total consolidated assets. As a result of the EGRRC Act and follow-up rules, we are not currently subject to several of those heightened requirements (e.g., stress testing and a dedicated risk committee), but we will remain subject to other requirements of the Dodd-Frank Act left unaffected by the EGRRC Act, such as the requirement that we be examined, primarily by the CFPB, for compliance with federal consumer protection
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laws. We have established a comprehensive compliance system to ensure compliance with these rules.

Cybersecurity
The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, intended to enhance cyber risk management among financial institutions. Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes. If we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial penalties.

In November 2021, the federal banking agencies adopted a Final Rule, with compliance required by May 1, 2022, establishing new notification requirements for banking organizations. The rule requires banks to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” rising to the level of a “notification incident,” has occurred. Among other types of computer-security incidents, a “notification incident” includes one that has materially disrupted or degraded the banking organization’s ability to carry out banking operations to a material portion of its customer base in the ordinary course of business.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Several states have regulations requiring certain financial institutions to implement cybersecurity programs and many states, including Montana, have also implemented or recently modified their data breach notification, information security and data privacy requirements. We expect this trend of state-level activity in those areas to continue, and are continually monitoring developments in the states in which our customers are located.

Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of internet banking, mobile banking and other technology-based products and services by us and our customers.

In addition to guidance and standards implemented by banking regulators, in July 2023, the SEC adopted final rules requiring an annual disclosure of registrants’ cybersecurity risk management, strategy, and governance. Additionally, registrants are required to disclose material cybersecurity incidents, including the nature, scope, timing, and impact, within four business days of the incident. The disclosure requirements went into effect in December of 2023.

Environmental, Social and Governance
Bank regulatory agencies and the SEC have shown increased interest in environmental, social and governance matters (“ESG”) and expressed an intent to increase related regulatory oversight of companies efforts to address how ESG issues may affect their businesses. In 2022, multiple federal regulatory agencies formalized their intent by issuing proposed policy statements and rules, and by establishing a pilot climate scenario analysis exercise for large banks. We believe that continued focus on environmental and social issues is consistent with our community banking model. We are continually seeking ways to improve our stewardship of the environment through recycling programs, resource conservation, empowered employees, construction evaluation, and more. Our Nominating/Corporate Governance Committee oversees the Company’s efforts in setting and maintaining high standards for corporate social responsibility and reviewing our performance in ESG matters. The Nominating/Corporate Governance Committee’s environmental and social duties include monitoring and assessing developments, trends and issues related to ESG, monitoring risks and overseeing Company solutions related to ESG, overseeing our reporting and disclosures related to ESG, overseeing and reviewing at least annually policies and programs related to ESG, overseeing our human capital management strategy, and evaluating our overall ESG performance and identifying areas for improvement. The Company’s Community and Social Responsibility Report describes our ESG performance and is located on the Company’s website (www.glacierbancorp.com) under the Governance Documents section.

Item 1A. Risk Factors

The following is a discussion of what we believe are the most significant risks and uncertainties that may affect our business, financial condition and future results of operations. These risks are not the only ones that we face. Other risks and uncertainties not currently known to us or currently believed to be material may harm our future business, financial condition, results of operations and prospects.

Economy and Our Markets

Economic conditions in the market areas the Bank serves may adversely impact its earnings and could increase the credit risk associated with its loan portfolio and the value of its investment portfolio.
Substantially all of the Bank’s loans are to businesses and individuals in Montana, Idaho, Utah, Washington, Wyoming, Colorado, Arizona and Nevada, and adverse economic conditions in these market areas could have a material adverse effect on our business, financial condition, results of operations and prospects. Deterioration in the national economy may also have an adverse effect in these markets. Any future deterioration in economic conditions in the markets the Company serves could result in the following consequences, any of which could have an adverse impact, which could be material, on our business, financial condition, results of operations and prospects:

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Loan delinquencies may increase;
Problem assets and foreclosures may increase;
Collateral for loans made may decline in value, in turn reducing customers’ borrowing power and the Bank’s security;
Certain securities within the investment portfolio could become other-than-temporarily impaired, requiring a write-down through earnings to fair value, thereby reducing equity;
Low cost or non-interest bearing deposits may decrease; and
Demand for loan and other products and services may decrease.

Competition in the Bank’s market areas may limit future success.
Commercial banking is a highly competitive business and a consolidating industry. The Bank competes with other commercial banks, credit unions, finance, insurance and other non-depository companies operating in its market areas. The Bank is subject to substantial competition for loans and deposits from other financial institutions. Some of its competitors are not subject to the same degree of regulation and restriction as the Bank while others have greater financial resources than the Bank. If the Bank is unable to effectively compete in its market areas, the Bank’s business, financial condition, results of operations, and prospects could be adversely affected.

We may not be able to continue to grow organically or through acquisitions.
Historically, we have expanded through a combination of organic growth and acquisitions. If market and regulatory conditions change, we may be unable to grow organically or successfully compete for, complete, and integrate potential future acquisitions at the same pace as we have achieved in recent years, or at all. We have historically used our strong stock currency and capital resources to complete acquisitions. Downturns in the stock market and the market price of our stock, changes in our capital position, heightened regulatory scrutiny, and changes in our regulatory standing could each have a negative impact on our ability to complete future acquisitions.

Growth through future acquisitions could, in some circumstances, adversely affect profitability or other performance measures.
In the past, we have been active in acquiring banks and bank holding companies, and we may in the future engage in selected acquisitions of additional financial institutions. There are risks associated with any such acquisitions that could adversely affect profitability and other performance measures. These risks include, among other things, incorrectly assessing the asset quality of a financial institution being acquired, discovering compliance or regulatory issues after the acquisition, encountering greater than anticipated cost and use of management time associated with integrating acquired businesses into our operations, and being unable to profitably deploy funds acquired in an acquisition. We may not be able to continue to grow through acquisitions, and if we do, there is a risk of negative impacts of such acquisitions on our operating results and financial condition, which could be material.

Acquisitions may also cause business disruptions that cause the Bank to lose customers or cause customers to remove their accounts from the Bank and move to competing financial institutions. Further, acquisitions may also disrupt the Bank's ongoing businesses or create inconsistencies in standards, controls, procedures, and policies that adversely affect relationships with employees, clients, customers, and depositors. The loss of key employees during acquisitions may also adversely affect our business.

We anticipate that we might issue capital stock in connection with future acquisitions. Acquisitions and related issuances of stock may have a dilutive effect on earnings per share, book value per share, and the percentage ownership of current shareholders. In acquisitions involving the use of cash as consideration, there will be an impact on our capital position.

If goodwill recorded in connection with acquisitions becomes impaired, it could have an adverse impact on earnings and capital.
Accounting standards require us to account for acquisitions using the acquisition method of accounting. Under acquisition accounting, if the purchase price of an acquired company exceeds the fair value of its net assets, the excess is carried on the acquirer’s balance sheet as goodwill. In accordance with accounting principles generally accepted in the United States of America (“GAAP”), goodwill is not amortized but rather is evaluated for impairment on an annual basis or more frequently if events or circumstances indicate that a potential impairment exists. Our goodwill was not considered impaired as of December 31, 2023 and 2022; however, there can be no assurance that future evaluations of goodwill will not result in findings of impairment and write-downs, which could be material. Since we have $985 million in goodwill, representing 33 percent of our shareholders' equity, impairment of goodwill could have a material adverse effect on our business, financial condition and results of operations. Furthermore, even though it is a non-cash item, significant impairment of goodwill could subject us to regulatory limitations, including the ability to pay dividends on our common stock.

There can be no assurance we will be able to continue paying dividends on our common stock at recent levels.
We may not be able to continue paying quarterly dividends commensurate with recent levels given that our ability to pay dividends on our common stock depends on a variety of factors. The payment of dividends is subject to government regulation in that regulatory authorities may prohibit banks and bank holding companies from paying dividends that would constitute an unsafe or unsound banking practice. Our ability to pay dividends is heavily based on our earnings and capital levels which currently are strong. Current guidance from the Federal Reserve provides, among other things, that dividends per share should not exceed earnings per share
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measured over the previous four fiscal quarters. In certain circumstances, Montana law also places limits or restrictions on a bank’s ability to declare and pay dividends. As a result, our future dividends will generally depend on the level of earnings at the Bank.

Credit and Asset Quality

The allowance for credit losses may not be adequate to cover actual loan losses, which could adversely affect earnings.
The Bank maintains an allowance for credit losses (“ACL” or “allowance”) in an amount that it believes is adequate to provide for losses in the loan portfolio. While the Bank strives to carefully manage and monitor credit quality and to identify loans that may become non-performing, at any time there are loans included in the portfolio that will result in losses, but that have not been identified as non-performing or potential problem loans. With respect to real estate loans and property taken in satisfaction of such loans (“other real estate owned” or “OREO”), the Bank can be required to recognize significant declines in the value of the underlying real estate collateral quite suddenly as values are updated through appraisals and evaluations (new or updated) performed in the normal course of monitoring the credit quality of the loans. There are many factors that can cause the value of real estate to decline, including declines in the general real estate market, changes in methodology applied by appraisers, and/or using a different appraiser than was used for the prior appraisal or evaluation. The Bank’s ability to recover on real estate loans by selling or disposing of the underlying real estate collateral is adversely impacted by declining values, which increases the likelihood the Bank will suffer losses on defaulted loans beyond the amounts provided for in the ACL. This, in turn, could require material increases in the Bank’s provision for credit losses and ACL. By closely monitoring credit quality, the Bank attempts to identify deteriorating loans before they become non-performing assets and adjust the ACL accordingly. However, because future events are uncertain, and if difficult economic conditions occur, there may be loans that deteriorate to a non-performing status in an accelerated time frame. As a result, future additions to the ACL may be necessary beyond the levels commensurate with any loan growth. Because the loan portfolio contains a number of loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in non-performing loans, requiring an increase to the ACL. Additionally, future significant additions to the ACL may be required based on changes in the mix of loans comprising the portfolio, and changes in the financial condition of borrowers, which may result from changes in economic conditions, or changes in the assumptions used in determining the ACL. Additionally, federal and state banking regulators, as an integral part of their supervisory function, periodically review the Bank’s loan portfolio and the adequacy of the ACL. These regulatory authorities may require the Bank to recognize further provision for credit losses or charge-offs based upon their judgments, which may be different from the Bank’s judgments. Any increase in the ACL could have an adverse effect, which could be material, on our business, financial condition, and results of operations.

The Bank’s loan portfolio mix increases the exposure to credit risks tied to deteriorating conditions.
The loan portfolio contains a high percentage of commercial, commercial real estate, real estate acquisition and development loans in relation to the total loans and total assets. These types of loans have historically been viewed as having more risk of default than residential real estate loans or certain other types of loans or investments. In fact, the FDIC has issued pronouncements alerting banks of its concern about banks with a heavy concentration of commercial real estate loans. Moreover, federal bank regulators have highlighted the increased risk associated with commercial real estate loans, including with respect to the higher vulnerability of these credits to pressure as interest rates remain elevated and market conditions in many large metropolitan areas continue to show signs of stress. These types of loans also typically are larger than residential real estate loans and other commercial loans. Because the Bank’s loan portfolio contains a significant number of commercial and commercial real estate loans with relatively large balances, the deterioration of one or more of these loans may cause a significant increase in non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for credit losses, or an increase in charge-offs, which could have a material adverse impact on our business, results of operations, and financial condition.

The Bank has a high concentration of loans secured by real estate, so any future deterioration in the real estate markets could require material increases in the ACL and adversely affect our business, financial condition, and results of operations.
The Bank has a high degree of concentration in loans secured by real estate. Any future deterioration in the real estate markets could adversely impact borrowers’ ability to repay loans secured by real estate and the value of real estate collateral, thereby increasing the credit risk associated with the loan portfolio. The Bank’s ability to recover on these loans by selling or disposing of the underlying real estate collateral would be adversely impacted by any decline in real estate values, which increases the likelihood that the Bank will suffer losses on defaulted loans secured by real estate beyond the amounts provided for in the ACL. This, in turn, could require material increases in the ACL which would adversely affect our business, financial condition, and results of operations.

Non-performing assets could increase, which could adversely affect our business, financial condition, and results of operations.
The Bank may experience increases in non-performing assets in the future. Non-performing assets (which includes OREO) adversely affect our business, financial condition, and results of operations in various ways. The Bank does not record interest income on non-accrual loans or OREO, thereby adversely affecting its earnings. When the Bank takes collateral in foreclosures and similar proceedings, it is required to mark the related asset to the then fair value of the collateral, less estimated cost to sell, which may result in a charge-off of the value of the asset and lead the Bank to increase the provision for credit losses. An increase in the level of non-performing assets also increases the Bank’s risk profile and may impact the capital levels its regulators believe are appropriate in light of such risks. Further decreases in the value of these assets, or the underlying collateral, or in these borrowers’ performance or
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financial condition, whether or not due to economic and market conditions beyond the Bank’s control, could adversely affect our business, results of operations and financial condition, perhaps materially. In addition to the carrying costs to maintain OREO, the resolution of non-performing assets increases the Bank’s loan administration costs generally, and requires significant commitments of time from management and our directors, which reduces the time they have to focus on profitably growing our business.

A decline in the fair value of the Bank’s investment portfolio could adversely affect earnings and capital.
The fair value of the Bank’s debt securities could decline as a result of factors including changes in market interest rates, tax reform, credit quality and credit ratings, lack of market liquidity and other economic conditions. For debt securities in an unrealized loss position, the Company may be required to record an allowance for credit losses or write down the security depending on the type of security and the circumstances. Any such impairment charge would have an adverse effect, which could be material, on our business, results of operations and financial condition, including capital and shareholders’ equity.

While we believe that the terms of our debt securities have been kept relatively short, we are subject to elevated interest rate risk exposure in the current elevated rate environment as compared to recent years. Further, debt securities present a different type of asset quality risk than the loan portfolio. While we believe a relatively conservative management approach has been applied to the investment portfolio, there is always potential loss exposure under changing economic conditions.

The Bank is subject to environmental liability risk associated with our lending activities.
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Although we have policies and procedures to perform an environmental review before initiating any foreclosure on nonresidential real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.

We face competition from technologies used to support and enable banking and financial services.
Emerging technologies and advances and the growth of e-commerce have lowered geographic and monetary barriers of other financial institutions, made it easier for non-depository institutions to offer products and services that traditionally were banking products and allowed non-traditional financial service providers and technology companies to compete with traditional financial service companies in providing electronic and internet-based financial solutions and services, including electronic securities trading, marketplace lending, financial data aggregation and payment processing, including real-time payment platforms. Further, clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies, non-fungible tokens, and other digital assets. Increased competition may negatively affect our earnings by creating pressure to lower prices or credit standards on our products and services requiring additional investment to improve the quality and delivery of our technology and/or reducing our market share, or affecting the willingness of our clients to do business with us.

Interest Rates, Operations and Risk Management

Fluctuating interest rates can adversely affect profitability and shareholders’ equity.
The Bank’s profitability is dependent to a large extent upon net interest income, which is the difference (or “spread”) between the interest earned on loans, investment securities and other interest earning assets and interest paid on deposits, borrowings, and other interest-bearing liabilities. Because of the differences in maturities and repricing characteristics of interest earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest earning assets and interest paid on interest bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect the Bank’s interest rate spread, and, in turn, profitability. The Bank seeks to manage its interest rate risk within well-established policies and guidelines. Generally, the Bank seeks an asset and liability structure that insulates net interest income from large deviations attributable to changes in market rates. However, the Bank’s structures and practices to manage interest rate risk may not be effective in a highly volatile rate environment. The Federal Reserve slowed its increases to the federal funds target rate in 2023, with the most recent increase occurring in July 2023. The Federal Reserve has communicated that the economic outlook continues to be uncertain, and while it has stated that rates may decrease later in 2024, there can be no assurance of the timing or amount of any future rate adjustments. Further, there can be no assurance regarding any forecasts or predictions about the effect that any future rate adjustments may have on our results of operations. Elevated interest rates could negatively impact deposit growth, the value of our investments, shareholders’ equity, and the Bank’s profitability.


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We may be impacted by the retirement of London Interbank Offered Rate (“LIBOR”) as a reference rate.
In July 2017, the United Kingdom Financial Conduct Authority announced that LIBOR may no longer be published after 2021. LIBOR is used extensively in the U.S and globally as a “benchmark” or “reference rate” for various commercial and financial contracts.

In March 2022, the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) was enacted providing that LIBOR-based contracts that lack fallback language specifying practicable replacement “benchmarks” will automatically transition to the applicable reference rates recommended by the Federal Reserve. Subsequently in December 2022, the Federal Reserve issued a Final Rule establishing “benchmark” replacements based on the Secured Overnight Financing Rate (“SOFR”). The ICE Benchmark Administration (“IBA”), the authorized and regulated administrator of LIBOR, is being compelled by the Financial Conduct Authority (the “FCA”) to continue publishing some LIBOR tenors under a synthetic methodology. The FCA intends to no longer require the publication of these synthetic tenors by September 2024, but may extend the timeline if needed.

Despite the progress made through the LIBOR Act and the Federal Reserve’s Final Rule, it is impossible to predict the effect of any alternatives rates on the value of LIBOR-based securities and variable rate loans, subordinated debentures or other securities or financial arrangements. The replacement of LIBOR with one or more alternative rates may impact the availability and cost of hedging instruments and borrowings, including the rates we pay on our subordinated debentures and derivative financial instruments. When LIBOR rates are no longer available, and we are required to implement substitute indices for the calculation of interest rates under contracts or financial instruments to which we are a party, we may incur significant expenses in effecting the transition.

The transition to a new reference rate requires changes to contracts, risk and pricing models, valuation tools, systems, product design and hedging strategies.

Our business is subject to the risks of earthquakes, floods, fires, and other natural catastrophes.
With Bank branches located in Montana, Idaho, Utah, Washington, Wyoming, Colorado, Arizona and Nevada, our business could be affected by a major natural catastrophe, such as a drought, fire, flood, earthquake, or other natural disaster. The occurrence of any of these events may result in a prolonged interruption of our business, which could have a material adverse effect on our business, financial condition, and operations.

Our future performance will depend on our ability to respond timely to technological change.
The financial services industry is experiencing rapid technological changes with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success will depend upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as create additional efficiencies in our operations. We may not be able to effectively implement new technology-driven products or services, or be successful in marketing these products and services. Additionally, the implementation of technological changes and upgrades to maintain current systems and integrate new ones may cause services interruptions, transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws. There can be no assurance that we will be able to successfully manage the risks associated with increased dependency on technology.

A failure in or breach of the Bank’s operational or security systems, or those of the Bank’s third-party service providers, including as a result of cyber attacks, could disrupt business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase costs and cause losses.
In the normal course of its business, the Bank collects, processes and retains sensitive and confidential customer and consumer information. Despite the security measures we have in place, our facilities may be vulnerable to cyber-attacks, security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors, and other similar events.

Information security risks for financial institutions such as the Bank have increased recently in part because of new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. In addition to cyber attacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against financial institutions designed to disrupt key business services such as customer-facing web sites. National and international economic and geopolitical conditions may also have a negative impact in the number of cyber security threats the Bank may face. We are not able to anticipate or implement effective preventative measures against all security breaches of these types. Although the Bank employs detection and response mechanisms designed to contain and mitigate security incidents, early detection may be thwarted by sophisticated attacks and malware designed to avoid detection, which continue to evolve.

Additionally, the Bank faces the risk of operational disruption, failure, termination or capacity constraints of any of the third parties that facilitate its business activities, including third-party service providers, exchanges, clearing agents, clearing houses or other financial intermediaries. Such parties could also be the source of an attack on, or breach of, the Bank’s operational systems.

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Any failures, interruptions or security breaches in our information systems could damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, or expose us to civil litigation, regulatory fines or losses not covered by insurance.

See “Item 1C. Cybersecurity” for additional information regarding our efforts to detect, identify, assess, manage, and respond to
material risks from cybersecurity threats.

We have various anti-takeover measures that could impede a takeover.
Our articles of incorporation include certain provisions that could make it more difficult to acquire us by means of a tender offer, a proxy contest, merger or otherwise. These provisions include a requirement that any “Business Combination” (as defined in the articles of incorporation) be approved by at least 80 percent of the voting power of the then outstanding shares, unless it is either approved by our Board or certain price and procedural requirements are satisfied. In addition, the authorization of preferred stock, which is intended primarily as a financing tool and not as a defensive measure against takeovers, may potentially be used by management to make more difficult uninvited attempts to acquire control of us. These provisions may have the effect of lengthening the time required to acquire control of us through a tender offer, proxy contest or otherwise, and may deter any potentially unfriendly offers or other efforts to obtain control of us. This could deprive our shareholders of opportunities to realize a premium for their common stock in the Company, even in circumstances where such action is favored by a majority of our shareholders.

Regulatory Matters

We operate in a highly regulated environment and changes or increases in, or supervisory enforcement of, banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us.
We are subject to extensive regulation, supervision and examination by federal and state banking regulators. In addition, as a publicly-traded company, we are subject to regulation by the SEC. Any change in applicable regulations or federal, state or local legislation or in policies or interpretations or regulatory approaches to compliance and enforcement, income tax laws and accounting principles could have a substantial impact on us and our operations. Changes in laws and regulations may also increase expenses by imposing additional fees or taxes or restrictions on operations. Additional legislation and regulations that could significantly affect powers, authority and operations may be enacted or adopted in the future, which could have a material adverse effect on our business, financial condition, and results of operations. Failure to appropriately comply with any such laws, regulations or principles could result in sanctions by regulatory agencies or damage to our reputation, all of which could adversely affect our business, financial condition or results of operations.

Regulators have significant discretion and authority to prevent or remedy unsafe or unsound practices or violations of laws or regulations by financial institutions and bank holding companies in the performance of their supervisory and enforcement duties. Existing and proposed federal and state laws and regulations restrict, limit, and govern all aspects of our activities and may affect our ability to expand our business over time, may result in an increase in our compliance costs, and may affect our ability to attract and retain qualified executive officers and employees. The exercise of regulatory authority may have a negative impact on our business, financial condition and results of operations, including limiting the types of financial services and products we may offer or increasing the ability of non-banks to offer competing financial services and products at lower cost. Additionally, our business is affected significantly by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve.

We cannot accurately predict the full effects of recent legislation or the various other governmental, regulatory, monetary and fiscal initiatives which have been and may be enacted. The terms and costs of these activities, or the failure of these actions to help stabilize the financial markets, asset prices, market liquidity and a continuation or worsening of current financial market and economic conditions could materially and adversely affect our business, financial condition, results of operations, and the trading price of our common stock.

General Risk Factors

National and international economic and geopolitical conditions could adversely affect our future results of operations or market price of our stock.
Our business is impacted by factors such as economic, political and market conditions, broad trends in industry and finance, changes in government monetary and fiscal policies, inflation, and financial market volatility, all of which are beyond our control. National and global economies are constantly in flux, as evidenced by recent market volatility resulting from, among other things, the bank failures involving Silicon Valley Bank and Signature Bank, the effects of inflation, and the ever-changing landscape of the energy and medical industries. Future economic conditions cannot be predicted, and any renewed deterioration in the economies of the nation as a whole or in our markets could have an adverse effect, which could be material, on our business, financial condition, results of operations and prospects, and could cause the market price of our stock to decline.


19


Our business is heavily dependent on the services of members of the senior management team.
We believe our success to date has been substantially dependent on our executive management team. In addition, our unique model relies upon the Presidents of our separate Bank divisions, particularly in light of our decentralized management structure in which such Bank divisions have significant local decision-making authority. The unexpected loss of any of these persons could have an adverse effect on our business, financial condition, results of operations, and future growth prospects.

We could suffer operational, reputational and financial harm if we fail to properly anticipate and manage risk.
We use models and strategies to forecast losses, project revenue, and measure and assess capital requirements for various credit, market, operational and strategic risks. These models require oversight, ongoing monitoring, and periodic reassessment. Models are subject to inherent limitations due to the use of historical trends and simplifying assumptions, uncertainty regarding economic and financial outcomes, and emerging risks from the use of applications that may rely on artificial intelligence. Our models and strategies may not be adequate due to limited historical data and shocks caused by extreme or unanticipated market changes, especially during severe market downturns or stress events. Regardless of the steps we take to ensure effective controls, governance, monitoring and testing, and implement new risk management tools, we could suffer operational, reputational and financial harm if our models and strategies and other risk management tools fail to properly anticipate and manage the current and evolving risks we face.

Changes in accounting standards could materially impact our financial statements.
Periodically, the Financial Accounting Standards Board (“FASB”) and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can materially impact how we record and report our financial condition and results of operations. For information regarding the impact of recently issued accounting standards, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Climate change may materially adversely affect the Company's business, financial condition, and results of operations.
Concerns over the long-term effects of climate change have led to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may voluntarily change their behavior as a result of these concerns. Both the Bank and its customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. The Bank and its customers may face cost increases, asset value reductions and operating process changes. The impact on our customers will likely vary depending on their specific attributes, including reliance on or role in carbon-intensive activities. Among the impacts to the Bank could be a drop in demand for our products and services, particularly in certain sectors. In addition, we could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. The Bank attemps to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, but the bank’s efforts may not be effective in protecting the Bank from the negative impact of new laws and regulations or changes in consumer or business behavior.

Item 1B. Unresolved Staff Comments

None

Item 1C. Cybersecurity

Cybersecurity has become a significant issue for financial institutions around the globe, and the Company is no exception. The Company’s management has integrated cybersecurity issues into the Company’s overall risk management system by making cybersecurity risk a key focus of its internal Strategic Technology Committee, Enterprise Risk Management Committee, and Board Risk Oversight Committee. These committees are provided regular updates on the Bank’s cybersecurity risk management program.

The Company has implemented a variety of mechanisms that are designed to detect, identify, assess, manage, and respond to material risks from cybersecurity threats. The Company’s processes for identifying, assessing, and managing cybersecurity risks include:

a rigorous internal audit process to evaluate the Company’s cybersecurity strategies, with the Audit Committee apprised of risks or control failures that are identified during the audit;
participation in multiple peer-sharing networks to obtain industry-wide intelligence regarding specific cybersecurity threats and industry best practices to minimize cybersecurity risks;
participation in simulated cyber-event tabletop exercises designed to test the Company’s incident response capabilities and the robustness of its cybersecurity program;
an information security program that is regularly reviewed, tested, and updated, and includes vulnerability and patch management programs, incident response planning, security monitoring, employee training, and security awareness testing;
cybersecurity insurance to mitigate the financial impact of a cybersecurity incident on the Company’s business and financial condition; and
periodic regulatory examinations that include an assessment of the Company’s cybersecurity management, processes, and controls.
20


In addition to the internal programs outlined above, the Company engages with external cybersecurity experts to conduct thorough evaluations of the Company’s cybersecurity processes and controls. These third-party consultants conduct periodic comprehensive vulnerability and penetration testing, alongside audits of high-risk technology systems designed to evaluate the efficacy of the Company’s cybersecurity measures. The Company has also retained a third-party cybersecurity firm to assist with the Company’s response to any future cybersecurity breaches.

In order to identify material risks from cybersecurity threats associated with the use of third-party service providers, such as bank operations technology, payroll and benefits administrators, and professional service providers, the Company has established a dedicated department within its Enterprise Risk Management division. This department manages risks of third-parties and evaluates cybersecurity risks associated with the Company’s third-party service providers with the Bank’s Information Technology Department.

The Board's Risk Oversight Committee is responsible for oversight and monitoring of the Company’s cyber risk management profile and related programs. In an effort to ensure transparency and provide appropriate oversight and monitoring, the Chief Risk Officer and Chief Information Security Officer present detailed reports to the Risk Oversight Committee on a quarterly basis. These reports address the current landscape of cybersecurity threats, any notable recent incidents, and a summary of emerging cybersecurity trends. The Board is also regularly furnished with key risk indicators and defined risk parameters with respect to the Company’s cybersecurity program. The Board reviews and approves the Company’s cybersecurity policies at least annually.

Management's role in assessing and managing material risks from cybersecurity threats is an important and multifaceted component of the Company’s cybersecurity. Appropriate members of the Company’s senior management, including the Chief Information Security Officer (“CISO”), Chief Risk Officer (“CRO”) and Chief Information Officer (“CIO”), are responsible for assessing and managing cybersecurity risks, which involves an ongoing process of identifying, analyzing, evaluating, and addressing the Company's cybersecurity threats.

The Company employs management and staff members who hold top cybersecurity certifications and have acquired the expertise needed to manage the Company’s cybersecurity program, including a range of technical skills such as intrusion detection, network security control, security incident management, and risk assessment. These management and staff members also participate in structured ongoing training to keep current with industry trends and cybersecurity threats.

The CISO has a degree in Business Administration, Finance, and Risk Management from Washington State University. The CISO has over 23 years of experience in cybersecurity and information security. The CISO has maintained a Certified Information Systems Security Professional (CISSP) certification for over 18 years.

The CRO has a degree in Business Administration and Finance from the University of Montana. The CRO has over 20 years of combined experience with financial institution risk management, including prior experience as a bank regulator and a credit risk management consultant.

The CIO has dual degrees in Accounting and Computer Science from the University of Montana. The CIO has over 30 years of experience managing information technology at the Company.

The processes by which the relevant members of management are informed about and manage the prevention, detection, mitigation, and remediation of cybersecurity incidents include conducting cybersecurity risk assessments, establishing network access controls, creating a vulnerability management program, and continuous monitoring for threats.

The Company is not aware of any current cybersecurity threats that are reasonably likely to materially affect the Company’s business strategy, results of operations or financial condition.


See “Item 1A. Risk Factors” for additional information regarding the risks we face from cybersecurity threats.
21


Item 2. Properties

The following schedule provides information on the Company’s 221 properties as of December 31, 2023:
 
(Dollars in thousands)Properties
Leased
Properties
Owned
Net Book
Value
Montana61 $121,504 
Utah33 65,414 
Idaho23 37,206 
Colorado21 29,135 
Wyoming16 22,205 
Arizona16,357 
Nevada10,464 
Washington11 15,486 
Total41 180 $317,771 

We believe that all of our facilities are well maintained, generally adequate and suitable for the current operations of our business, as well as fully utilized. In the normal course of business, new locations and facility upgrades occur as needed.

For additional information regarding the Company’s premises and equipment and lease obligations, see Note 4 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”

Item 3. Legal Proceedings

The Company is involved in various claims, legal actions and complaints which arise in the ordinary course of business. In our opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on our financial condition or results of operations.

Item 4. Mine Safety Disclosures

Not Applicable
22


PART II
 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities

The Company’s stock trades on the NYSE under the symbol GBCI. As of December 31, 2023, there were approximately 1,732 stockholders of record of the Company’s common stock. The closing price per share of common stock on December 31, 2023, was $41.32.

In 2023, the Company declared total regular dividends in cash of $1.32 per share. Future cash dividends will depend on a variety of factors, including earnings, capital, asset quality, general economic conditions and regulatory considerations. Information regarding the regulatory considerations is set forth under the heading “Supervision and Regulation” in “Item 1. Business.”

Issuer Stock Purchases
The Company made no stock repurchases during 2023.

Stock Performance Graph
The following graph compares the yearly cumulative total return of the Company’s common stock over a five-year measurement period with the yearly cumulative total return on the stocks included in 1) the Russell 2000 Index; and 2) the KBW NASDAQ Regional Banking Index (“KBW Regional Banking Index”). Total return includes appreciation in market value of the stock as well as the actual cash and stock dividends paid to stockholders. The graph assumes that the value of the each investment was $100 on December 31, 2018 and that all dividends were reinvested.

1518

Period Ending
12/31/1812/31/1912/31/2012/31/2112/31/2212/31/23
Glacier Bancorp, Inc.100.00 120.08 124.68 157.66 141.25 122.87 
Russell 2000 Index100.00 125.53 150.58 172.90 137.56 160.85 
KBW Regional Banking Index100.00 123.81 113.03 154.45 143.75 143.17 
23


Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to provide a more comprehensive review of the Company’s operating results and financial condition than can be obtained from reading the Consolidated Financial Statements alone. The discussion is expected to provide investors an enhanced view of the Company from management’s perspective. The information includes material information relevant to the Company’s financial condition and results of operations, material events and uncertainties that are reasonably likely to cause reported information not to be indicative of future operating results or future financial condition, and material financial and statistical information that the Company believes will enhance the investors’ understanding of the Company and its financial results. The discussion should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in “Item 8. Financial Statements and Supplementary Data.”

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains 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 the Company’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 the negative version of those words or other comparable words or phrases of a future or forward-looking nature. 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 the anticipated results (express or implied) or other expectations in the forward-looking statements, including those factors set forth under “Risk Factors” and in other sections in this Annual Report on Form 10-K, or the documents incorporated by reference:
risks associated with lending and potential adverse changes in the credit quality of the Company’s loan portfolio;
changes in monetary and fiscal policies, including interest rate policies of the Federal Reserve Board, which may continue to adversely affect the Company’s net interest income and margin, the fair value of its financial instruments, profitability, and stockholders’ equity;
legislative or regulatory changes, including increased insurance rates and assessments or increased banking and consumer protection regulations, that may adversely affect the Company’s business;
risks related to overall economic conditions, including the impact on the economy of an elevated interest rate environment, inflationary pressures, and geopolitical instability, including the wars in Ukraine and the Middle East;
risks, costs and other difficulties associated with the Company’s ability to negotiate, complete, and successfully integrate any pending or future acquisitions;
costs or difficulties related to the completion and integration of pending or future acquisitions;
impairment of the goodwill recorded by the Company in connection with acquisitions, which may have an adverse impact on earnings and capital;
reduction in demand for banking products and services, whether as a result of changes in customer behavior, economic conditions, banking environment, or competition;
deterioration of the reputation of banks and the financial services industry, which could adversely affect the Company's ability to obtain and maintain customers;
changes in the competitive landscape, including as may result from new market entrants or further consolidation in the financial services industry, resulting in the creation of larger competitors with greater financial resources;
risks presented by public stock market volatility, which could adversely affect the market price of the Company’s common stock and the ability to raise additional capital or grow through acquisitions;
risks associated with dependence on the Chief Executive Officer (“CEO”), the senior management team and the Presidents of Glacier Bank (the “Bank”) divisions;
material failure, potential interruption or breach in security of the Company’s systems or changes in technologies which could expose the Company to cybersecurity risks, fraud, system failures, or direct liabilities;
risks related to natural disasters, including droughts, fires, floods, earthquakes, pandemics, and other unexpected events;
success in managing risks involved in the foregoing; and
effects of any reputational damage to the Company resulting from any of the foregoing.
Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in “Item 1A. Risk Factors.” Please take into account that forward-looking statements speak only as of the date of this Annual Report on Form 10-K (or documents incorporated by reference, if applicable). Given the described uncertainties and risks, the Company cannot guarantee its future performance or results of operations and you should not place undue reliance on these forward-looking statements. The Company does not undertake any obligation to publicly correct, revise, or update any forward-looking
24


statement if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statement, except as may be required under federal securities laws.


FIVE YEAR SELECTED FINANCIAL DATA

Selected Financial Data
The selected financial data of the Company is derived from the Company’s historical audited financial statements and related notes. The information set forth below should be read in conjunction with “Item 8. Financial Statements and Supplementary Data” contained elsewhere in this Annual Report on Form 10-K.
 December 31,Compounded Annual
Growth Rate
(Dollars in thousands, except per share data)202320222021202020191-Year5-Year
Selected Statements of Financial Condition Information
Total assets$27,742,629 $26,635,375 $25,940,645 $18,504,206 $13,683,999 4.2 %15.2 %
Debt securities8,288,1309,022,35910,370,0135,527,6502,799,863(8.1)%24.2 %
Loans receivable, net16,005,32515,064,52913,259,36610,964,4539,388,3206.2 %11.3 %
Allowance for credit losses(192,757)(182,283)(172,665)(158,243)(124,490)5.7 %9.1 %
Goodwill and intangibles1,017,2631,026,9941,037,652569,522519,704(0.9)%14.4 %
Deposits19,929,16720,606,55521,337,24914,797,52910,776,457(3.3)%13.1 %
Federal Home Loan Bank advances— 1,800,000— — 38,611(100.0)%(100.0)%
 FRB Bank Term Funding2,740,000— — — — n/mn/m
Securities sold under agreements to repurchase and other borrowed funds
1,568,5451,023,2091,064,8881,037,651598,64453.3 %21.2 %
Stockholders’ equity3,020,2812,843,3053,177,6222,307,0411,960,7336.2 %9.0 %
Equity per share27.2425.6728.7124.1821.256.1 %5.1 %
Equity as a percentage of total assets10.9 %10.7 %12.3 %12.5 %14.3 %2.1 %(5.3)%
________________________
n/m - not measurable

 Years ended December 31,Compounded Annual
Growth Rate
(Dollars in thousands, except per share data)202320222021202020191-Year5-Year
Summary Statements of Operations
Interest income$1,017,655 $829,640 $681,074 $627,064 $546,177 22.7 %13.3 %
Interest expense325,973 41,261 18,558 27,315 42,773 690.0 %50.1 %
Net interest income691,682 788,379 662,516 599,749 503,404 (12.3)%6.6 %
Provision for credit losses14,795 19,963 23,076 39,765 57 (25.9)%204.0 %
Non-interest income118,079 120,732 144,820 172,867 130,774 (2.2)%(2.0)%
Non-interest expense527,358 518,868 434,822 404,811 374,927 1.6 %7.1 %
Income before income taxes267,608 370,280 349,438 328,040 259,194 (27.7)%0.6 %
Federal and state income tax expense
44,681 67,078 64,681 61,640 48,650 (33.4)%(1.7)%
Net income
$222,927 $303,202 $284,757 $266,400 $210,544 (26.5)%1.1 %
Basic earnings per share
$2.01 $2.74 $2.87 $2.81 $2.39 (26.6)%(3.4)%
Diluted earnings per share
$2.01 $2.74 $2.86 $2.81 $2.38 (26.6)%(3.3)%
Dividends declared per share$1.32 $1.32 $1.37 $1.33 $1.31 — %0.2 %
25


 At or for the Years ended December 31,
(Dollars in thousands)20232022202120202019
Selected Ratios and Other Data
Return on average assets
0.81 %1.15 %1.33 %1.62 %1.64 %
Return on average equity
7.64 %10.43 %11.08 %12.15 %12.01 %
Dividend payout ratio
65.67 %48.18 %47.74 %47.33 %54.81 %
Average equity to average asset ratio10.65 %11.01 %11.99 %13.35 %13.69 %
Total capital (to risk-weighted assets)
14.61 %14.02 %14.21 %14.63 %14.95 %
Tier 1 capital (to risk-weighted assets)
12.85 %12.34 %12.49 %12.42 %13.76 %
Common Equity Tier 1 (to risk-weighted assets)
12.85 %12.34 %12.49 %12.42 %12.58 %
Tier 1 capital (to average assets)
8.71 %8.79 %8.64 %9.12 %11.65 %
Net interest margin on average earning assets (tax-equivalent)
2.73 %3.27 %3.42 %4.09 %4.39 %
Efficiency ratio 1
62.85 %54.64 %51.35 %49.97 %57.78 %
Allowance for credit losses as a percent of loans
1.19 %1.20 %1.29 %1.42 %1.31 %
Allowance for credit losses as a percent of nonperforming loans
799 %557 %255 %470 %385 %
Non-performing assets as a percentage of subsidiary assets
0.09 %0.12 %0.26 %0.19 %0.27 %
Non-performing assets$25,631 32,742 67,691 35,433 37,437 
Loans originated and acquired$4,449,350 8,039,623 8,551,419 7,934,881 4,607,536 
Number of full time equivalent employees
3,294 3,390 3,436 2,970 2,826 
Number of locations221 221 224 193 181 
______________________________
1 Non-interest expense before OREO expenses, core deposit intangibles amortization, goodwill impairment charges, and non-recurring expense items as a percentage of tax-equivalent net interest income and non-interest income, excluding gains or losses on sale of investments, OREO income, and non-recurring income items.


26


MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2023 COMPARED TO DECEMBER 31, 2022

Highlights and Overview
The banking industry experienced significant pressures during the current year with historic increases in interest rates during the last eighteen months and three notable bank failures in 2023. These events led to higher cost deposits and customers’ prioritizing the safety of their deposits. The Company was not immune to the impact of these events during 2023 and had the greatest pressure on its deposit costs and the resulting net interest margin. While the Company experienced an overall decline in net income during the year, the Company strategically navigated through the current year, which the Company believes will contribute to its long-term success.

The Company ended the year at $27.743 billion in assets, which was a $1.107 billion, or 4 percent, increase over the prior year end and was driven by the increase in the loan portfolio and cash liquidity that more than offset the decrease in debt securities. Loan growth was $951 million, or 6 percent, during 2023 with increases in all loan categories. During the year, the Company focused on its diversified deposit and repurchase agreement product offerings resulting in a slight decline of $108 million, or 50 basis points, during the year. The Company also focused on maintaining a strong liquidity position and ended the current year with available liquidity of $15.0 billion including cash, borrowing capacity, and unpledged securities. Stockholders’ equity increased $177 million, or $1.57 per share, which was the combined result of earnings retention and the decrease in the unrealized loss on AFS debt securities in 2023. The Company declared quarterly dividends totaling $1.32 per share during 2023 and 2022.

The Company had net income for the current year of $223 million, which was a decrease of $80.3 million, or 26 percent, over the prior year net income of $303 million, which was driven by the increase in cost of funds outpacing the increase in interest income. Diluted earnings per share for the year was $2.01, a decrease of 27 percent, from the 2022 diluted earnings per share of $2.74. The Company's net interest margin for 2023 was 2.73 percent, a 54 basis points decrease from the net interest margin of 3.27 percent from 2022, which was primarily driven by the volatile interest rate environment and the higher cost of funds. The Company was successful in controlling costs during the current year with an $8.5 million, or 2 percent, increase in non-interest expense which was primarily driven by a $6.0 million FDIC special assessment and the FDIC uniformly increasing all depository institutions premiums during 2023. Excluding the increase in regulatory assessment and insurance, non-interest expense decreased $7.3 million, or 2 percent, during the current year which was driven by increased operating efficiencies, a decrease in performance related compensation and a decrease in staffing levels.

The Company’s credit quality remains strong, ending the current year with $26 million in non-performing assets compared to $33 million at prior year end. Net charge-offs for 2023 remained low at 0.06 percent of loans compared to 0.05 percent of loans during the prior year. The Company also continues to maintain adequate reserves at 1.19 percent of loans at year end 2023 compared to 1.20 percent at the prior year end.

During 2023, the Company announced an agreement to acquire Community Financial Group, Inc., the parent company of Wheatland Bank, a leading eastern Washington community bank headquartered in Spokane with total assets of $728 million, total loans of $469 million and total deposits of $623 million as of December 31, 2023. The acquisition was completed on January 31, 2024. For additional information on the acquisition and subsequent event, see Note 23 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”

Looking forward, the Company believes its future performance will depend on many factors including economic conditions in the markets the Company serves, interest rate changes, the level of competition for deposits and loans, loan quality and the ability to increase loans, the impact and successful integration of acquisitions, and managing regulatory requirements and expenses.




27


Financial Highlights
 At or for the Years ended
(Dollars in thousands, except per share and market data)December 31,
2023
December 31,
2022
Operating results
Net income
$222,927 303,202 
Basic earnings per share
$2.01 2.74 
Diluted earnings per share
$2.01 2.74 
Dividends declared per share$1.32 1.32 
Market value per share
Closing$41.32 49.42 
High$50.03 60.69 
Low$26.77 44.43 
Selected ratios and other data
Number of common stock shares outstanding110,888,942110,777,780
Average outstanding shares - basic110,864,501110,757,473
Average outstanding shares - diluted110,890,447110,827,933
Return on average assets
0.81 %1.15 %
Return on average equity
7.64 %10.43 %
Efficiency ratio62.85 %54.64 %
Dividend payout ratio
65.67 %48.18 %
Loan to deposit ratio81.36 %74.05 %
Number of full time equivalent employees3,294 3,390 
Number of locations221 221 
Number of ATMs275 265 


28


Financial Condition Analysis

Assets
The following table summarizes the Company’s assets as of the dates indicated: 
(Dollars in thousands)December 31, 2023December 31, 2022$ Change% Change
Cash and cash equivalents$1,354,342 $401,995 $952,347 237 %
Debt securities, available-for-sale4,785,719 5,307,307 (521,588)(10 %)
Debt securities, held-to-maturity3,502,411 3,715,052 (212,641)(6 %)
Total debt securities8,288,130 9,022,359 (734,229)(8 %)
Loans receivable
Residential real estate1,704,544 1,446,008 258,536 18 %
Commercial real estate10,303,306 9,797,047 506,259 %
Other commercial2,901,863 2,799,668 102,195 %
Home equity888,013 822,232 65,781 %
Other consumer400,356 381,857 18,499 %
Loans receivable16,198,082 15,246,812 951,270 %
Allowance for credit losses(192,757)(182,283)(10,474)%
Loans receivable, net16,005,325 15,064,529 940,796 %
Other assets2,094,832 2,146,492 (51,660)(2 %)
Total assets$27,742,629 $26,635,375 $1,107,254 %

Total debt securities of $8.288 billion at December 31, 2023 decreased $734 million, or 8 percent, from the prior year end. The Company utilized the cash flow from its securities portfolio to primarily fund loan growth and maintain a strong cash position during the year. The Company ended the current year with a strong cash position of $1.354 billion at December 31, 2023, which was an increase of $952 million over the prior year end. Debt securities represented 30 percent of total assets at December 31, 2023, compared to 34 percent at December 31, 2022. The loan portfolio of $16.198 billion increased $951 million, or 6 percent, from the prior year end with the largest dollar increase in commercial real estate loans, which increased $506 million, or 5 percent.


29


Liabilities
The following table summarizes the Company’s liabilities as of the dates indicated:
(Dollars in thousands)December 31, 2023December 31, 2022$ Change% Change
Deposits
Non-interest bearing deposits$6,022,980 $7,690,751 $(1,667,771)(22 %)
NOW and DDA accounts5,321,257 5,330,614 (9,357)— %
Savings accounts2,833,887 3,200,321 (366,434)(11 %)
Money market deposit accounts2,831,624 3,472,281 (640,657)(18 %)
Certificate accounts2,915,393 880,589 2,034,804 231 %
Core deposits, total19,925,141 20,574,556 (649,415)(3 %)
Wholesale deposits4,026 31,999 (27,973)(87 %)
Deposits, total19,929,167 20,606,555 (677,388)(3 %)
Securities sold under agreements to repurchase1,486,850 945,916 540,934 57 %
Federal Home Loan Bank advances— 1,800,000 (1,800,000)(100 %)
FRB Bank Term Funding2,740,000 — 2,740,000 n/m
Other borrowed funds81,695 77,293 4,402 %
Subordinated debentures132,943 132,782 161 — %
Other liabilities351,693 229,524 122,169 53 %
Total liabilities$24,722,348 $23,792,070 $930,278 %
________________________
n/m - not measurable

During the current year, the Company experienced unprecedented fluctuations in deposit balances and higher deposit rates, primarily due to the volatile and increasing interest rate environment. As a result of the Company’s focus on diversified deposit and repurchase agreements, core deposits and retail repurchase agreements decreased $108 million, or 50 basis points, from the prior year end. Non-interest bearing deposits represented 30 percent of total core deposits at December 31, 2023 compared to 37 percent at December 31, 2022.

The Company’s liquidity position remains strong with solid core deposit customer relationships, excess cash, debt securities, and access to diversified borrowing sources. At December, 31, 2023, the Company had available liquidity of $15.0 billion including cash, borrowing capacity from the FHLB and Federal Reserve facilities, unpledged securities, brokered deposits, and other sources.

Stockholders’ Equity
The following table summarizes the stockholders’ equity balances as of the dates indicated: 
(Dollars in thousands, except per share data)December 31, 2023December 31, 2022$ Change% Change
Common equity$3,394,394 $3,312,097 $82,297 %
Accumulated other comprehensive loss
(374,113)(468,792)94,679 (20 %)
Total stockholders’ equity3,020,281 2,843,305 176,976 %
Goodwill and core deposit intangible, net
(1,017,263)(1,026,994)9,731 (1 %)
Tangible stockholders’ equity$2,003,018 $1,816,311 $186,707 10 %
Stockholders’ equity to total assets10.89 %10.67 %%
Tangible stockholders’ equity to total tangible assets
7.49 %7.09 %%
Book value per common share$27.24 $25.67 $1.57 %
Tangible book value per common share$18.06 $16.40 $1.66 10 %

Tangible stockholders’ equity of $2.003 billion at December 31, 2023 increased $187 million, or 10 percent, from December 31, 2022, which was primarily due to earnings retention and a decrease in net unrealized losses (after-tax) on AFS debt securities. Tangible book value per common share of $18.06 at the current year end increased $1.66 per share, or 10 percent, from the prior year end.
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Results of Operations
In this section, the Company’s results of operations are discussed for the year ended December 31, 2023 compared to the year ended December 31, 2022. For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Income Summary
The following table summarizes income for the time periods indicated:
 Years ended$ Change% Change
(Dollars in thousands)December 31,
2023
December 31,
2022
Net interest income
Interest income$1,017,655 $829,640 $188,015 23 %
Interest expense325,973 41,261 284,712 690 %
Total net interest income691,682 788,379 (96,697)(12 %)
Non-interest income
Service charges and other fees
75,157 72,124 3,033 %
Miscellaneous loan fees and charges16,935 15,350 1,585 10 %
Gain on sale of loans12,202 20,032 (7,830)(39 %)
Gain on sale of investments1,510 620 890 144 %
Other income12,275 12,606 (331)(3 %)
Total non-interest income118,079 120,732 (2,653)(2 %)
Total income$809,761 $909,111 $(99,350)(11 %)
Net interest margin (tax-equivalent)2.73 %3.27 %

Net Interest Income
Net-interest income of $692 million for 2023 decreased $96.7 million, or 12 percent, over 2022 and was primarily driven by increased interest expense. Interest income of $1.018 billion for 2023 increased $188 million, or 23 percent, from the prior year and was primarily attributable to the increase in the loan portfolio and an increase in loan yields. The loan yield was 5.19 percent for 2023, an increase of 53 basis points from the prior year loan yield of 4.66 percent.

Interest expense of $326 million for 2023 increased $285 million, or 690 percent, over the same period in the prior year and was the result of increased borrowings and higher interest rates on borrowings and deposits. Core deposit cost (including non-interest bearing deposits) was 0.77 percent for 2023 compared to 0.07 percent for the prior year. The total funding cost (including non-interest bearing deposits) for 2023 was 1.35 percent, which was an increase of 117 basis points over the prior year funding cost of 0.18 percent.

The net interest margin as a percentage of earning assets, on a tax-equivalent basis, during 2023 was 2.73 percent, a 54 basis points decrease from the net interest margin of 3.27 percent for the prior year. The core net interest margin, excluding discount accretion, the impact from non-accrual interest and the impact from the Paycheck Protection Program loans, was 2.71 percent for 2023, which was a 49 basis points decrease from the core margin of 3.20 percent in the same period of the prior year. The decline in the margin from the prior year occurred steadily during the current year, before slowing in the fourth quarter, and the Company ended the year with a fourth quarter net interest margin of 2.56 percent.

Non-interest Income
Non-interest income of $118 million for 2023 decreased $2.7 million, or 2 percent, over the same period last year and was primarily due to the decrease in gain on sale of residential loans, which was partially offset by the increase in service charges and other fees. Miscellaneous loan fees of $16.9 million, increased $1.6 million for 2023, or 10 percent, which was primarily driven by increased credit card interchange fees due to increased activity. Gain on sale of residential loans of $12.2 million in 2023 decreased by $7.8 million, or 39 percent, over the prior year, primarily as result of a reduction in residential purchase and refinance activities as mortgage rates significantly increased during 2023. Included in the 2023 gain on sale of securities was $1.7 million of gain on the sale of all of the Company’s Visa class B shares.


31


Non-interest Expense
The following table summarizes non-interest expense for the periods indicated:
 Years ended$ Change% Change
(Dollars in thousands)December 31,
2023
December 31,
2022
Compensation and employee benefits$309,048 $319,303 $(10,255)(3 %)
Occupancy and equipment43,578 43,261 317 %
Advertising and promotions15,430 14,324 1,106 %
Data processing33,752 30,823 2,929 10 %
Other real estate owned and foreclosed assets119 77 42 55 %
Regulatory assessments and insurance
28,712 12,904 15,808 123 %
Core deposit intangibles amortization9,731 10,658 (927)(9 %)
Other expenses86,988 87,518 (530)(1 %)
Total non-interest expense$527,358 $518,868 $8,490 %

Total non-interest expense of $527 million for 2023 increased $8.5 million, or 2 percent, over the same period in the prior year. Compensation and employee benefits expense of $309 million in 2023 decreased $10.3 million, or 3 percent, over the prior year and was driven by a decrease in performance-related compensation including real estate loan commissions. Regulatory assessments and insurance of $28.7 million for 2023 increased $15.8 million, or 123 percent, over the prior year and was primarily due to the $6.0 million FDIC special assessment pursuant to a systemic risk determination and the FDIC uniformly increasing all depository institutions premiums during 2023. Other expenses of $87.0 million for 2023 decreased $530 thousand, or 1 percent, from the prior year and included changes in several miscellaneous categories. Acquisition-related expenses included in other expenses were $1.3 million in 2023 compared to $10.0 million in 2022.

Provision for Credit Losses
The following table summarizes the provision for credit losses on the loan portfolio, net charge-offs and select ratios relating to the provision for credit losses on loans for the previous eight quarters:
(Dollars in thousands)Provision
for Credit Losses on Loans
Net Charge-Offs
(Recoveries)
ACL
as a Percent
of Loans
Accruing
Loans 30-89
Days Past Due
as a Percent of
Loans
Non-Performing
Assets to
Total Sub-sidiary Assets
Fourth quarter 2023$4,181 $3,695 1.19 %0.31 %0.09 %
Third quarter 20235,095 2,209 1.19 %0.09 %0.15 %
Second quarter 20235,254 2,473 1.19 %0.16 %0.12 %
First quarter 20236,260 1,939 1.20 %0.16 %0.12 %
Fourth quarter 20226,060 1,968 1.20 %0.14 %0.12 %
Third quarter 20228,382 3,154 1.20 %0.07 %0.13 %
Second quarter 2022(1,353)1,843 1.20 %0.12 %0.16 %
First quarter 20224,344 850 1.28 %0.12 %0.24 %

The provision for credit loss expense was $14.8 million for 2023, a decrease of $5.2 million, or 26 percent, over the same period in the prior year. The provision for credit loss expense for 2023 included provision for credit loss expense of $20.8 million on the loan portfolio and credit loss benefit of $6.0 million on the unfunded loan commitments. Net charge-offs during 2023 were $10.3 million compared to $7.8 million during 2022.

Efficiency Ratio
The efficiency ratio was 62.85 percent for 2023 compared to 54.64 percent for 2022. The increase from the prior year was primarily attributable to the increase in interest expense in the current year that outpaced the increase in interest income.

32



ADDITIONAL MANAGEMENT’S DISCUSSION AND ANALYSIS

Investment Activity
The Company’s investment securities primarily consist of debt securities classified as either available-for-sale or held-to-maturity. Non-marketable equity securities consist of capital stock issued by the FHLB of Des Moines.

Debt Securities
Debt securities classified as available-for-sale are carried at estimated fair value and debt securities classified as held-to-maturity are carried at amortized cost. During the first quarter of 2022, the Company transferred $2.2 billion of available-for-sale securities with an unrealized net loss of $55.7 million into the held-to-maturity portfolio after determining it had the intent and ability to hold such securities until maturity. Unrealized gains or losses, net of tax, on available-for-sale debt securities are reflected as an adjustment to other comprehensive income. The Company’s debt securities are summarized below:
December 31, 2023December 31, 2022
(Dollars in thousands)Carrying AmountPercentCarrying AmountPercent
Available-for-sale
U.S. government and federal agency
$455,347 %$444,727 %
U.S. government sponsored enterprises
299,219 %287,364 %
State and local governments
98,932 %132,993 %
Corporate bonds26,253 %26,109 %
Residential mortgage-backed securities
2,811,263 34 %3,267,341 36 %
Commercial mortgage-backed securities
1,094,705 13 %1,148,773 13 %
Total available-for-sale
4,785,719 58 %5,307,307 59 %
Held-to-maturity
U.S. government and federal agency
853,273 10 %846,046 %
State and local governments
1,650,000 20 %1,