(EDGAR Online via COMTEX) -- Item 2. 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 Unaudited Consolidated Financial Statements alone. The discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in "Part I. Item 1. Financial Statements."
This Quarterly Report on Form 10-Q may contain certain forward-looking statements within the meaning of Section 27A the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements reflect the Company's current views and are not historical facts. These statements can generally be identified by use of phrases such as "believe," "expect," "will," "seek," "should," "anticipate," "estimate," "intend," "plan," "target," "project," "commit" or other words of similar import. Similarly, statements that describe the Company's future financial condition, results of operations, objectives, strategies, plans, goals or future performance and business are also forward-looking statements. Statements that project future financial conditions, results of operations, and shareholder value are not guarantees of performance and many of the factors that will determine these results and values are beyond the Company's ability to control or predict. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including, but not limited to, those described in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections in this report and the Company's Annual Report on Form 10-K for the year ended December 31, 2020 ("Form 10-K"), and other parts of this report that could cause actual results to differ materially from those anticipated in these forward-looking statements. The following is a non-exclusive list of factors which could cause actual results to differ materially from forward-looking statements in this Form 10-Q:
the magnitude and duration of the COVID-19 pandemic and its impact on the global economy and financial market conditions and the business, results of operations, and financial condition of the Company and GBCI;
changes in general economic conditions, either nationally or in the Company's local market;
inflation, changes in interest rates, securities market volatility and monetary fluctuations;
increases in competitive pressures among financial institutions and businesses offering similar products and services;
higher defaults on the Company's loan portfolio than expected;
risks associated with the Company's growth and expansion strategy and related costs;
ability to raise liquidity, either with deposits or other funding sources, to support growth in assets;
risks associated with the integration of current and future acquisitions;
increased lending risks associated with high concentration of real estate loans;
ability to successfully grow business in Utah and neighboring states;
legislative or regulatory changes or changes in accounting principles, policies or guidelines;
risks associated with cyber security;
regulatory or judicial proceedings;
changes in general economic, political, or industry conditions;
uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve Board;
volatility and disruptions in global capital and credit markets; (v) movements in interest rates; (vi) reform of LIBOR;
impacts of existing and increasing governmental regulation and related costs and liabilities;
the potential existence of significant deficiencies or material weakness in the Company's internal control over financial reporting;
increased competition in the markets of the Company and GBCI;
the success, impact, and timing of business strategies of the Company and GBCI;
the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations;
the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company following the proposed Holding Company Merger or the expected benefits of the proposed Holding Company Merger);
the failure to obtain shareholder approvals or to satisfy any of the other conditions to the proposed Holding Company Merger on a timely basis or at all or other delays in completing the proposed Holding Company Merger;
the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the Merger Agreement;
the outcome of any legal proceedings that may be instituted against the Company or GBCI;
the possibility that the proposed Holding Company Merger may be less accretive than expected, or may be dilutive, and the anticipated benefits of the proposed Holding Company Merger are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company and GBCI do business;
the possibility that the proposed Holding Company Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
diversion of management's attention from ongoing business operations and opportunities as a result of the proposed Holding Company Merger; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed Holding Company Merger;
the dilution caused by GBCI's issuance of additional shares of its capital stock in connection with the proposed Holding Company Merger;
the existence of unforeseen liabilities of the Company or GBCI; and
other factors and the risks that are described from time to time in the Company's and GBCI's respective reports filed with the SEC.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed.
Please take into account that forward-looking statements speak only as of the date of this Form 10-Q. The Company does not undertake any obligation to release publicly revisions to such forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, except as required by law.
ALTA is a Utah registered bank holding company organized in 1998. As a Utah registered bank holding company, the Company is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System and by the Utah Department of Financial Institutions ("UDFI"). ALTA operates all business activities through the Bank, its wholly owned banking subsidiary, which was organized in 1913. The Bank is a Utah state-chartered bank subject to primary regulation, supervision and examination by the Federal Deposit Insurance Corporation ("FDIC") and by the UDFI.
The Bank is the largest community bank in Utah. The Bank, a full-service bank, provides loans, deposit and cash management services to businesses and individuals through 25 branch locations from Preston, Idaho to St. George, Utah. The Bank's clients have direct access to bankers and decision-makers who work with clients to understand their specific needs and offer customized financial solutions. The Bank has been serving communities in Utah and southern Idaho for more than 100 years. Loan growth historically has been the result of mergers and acquisitions as well as organic growth that the Bank believes was generated by seasoned relationship managers and supporting associates who provide outstanding service and quick responsiveness to its clients. The primary source of funding for the Company's asset growth has been the generation of core deposits, which the Company raised from its existing branch system as well as through acquisitions.
Results of operations are largely dependent on net interest income. Net interest income is the difference between interest income earned on interest earning assets, which are comprised of loans, investment securities and short-term investments and the interest paid on interest bearing liabilities, which are primarily deposits, and, to a lesser extent, other borrowings. Management strives to match the re-pricing characteristics of the interest earning assets and interest bearing liabilities to protect net interest income from changes in market interest rates and changes in the shape of the yield curve.
The Company measures performance by calculating net interest margin, return on average assets, and return on average equity. Net interest margin is calculated by dividing net interest income, which is the difference between interest income on interest earning assets and interest expense on interest bearing liabilities, by average interest earning assets. Net interest income is the Company's largest source of revenue. Interest rate fluctuations, as well as changes in the amount and type of earning assets and liabilities, combine to affect net interest income. The Company also measures performance by its efficiency ratio, which is calculated by dividing non-interest expense by the sum of net interest income and non-interest income.
Holding Company Merger
On May 18, 2021, the Company and the Bank entered into the Merger Agreement with GBCI and its wholly owned subsidiary Glacier Bank, a Montana state-chartered bank. Under the terms of the Merger Agreement, the Company will merge with and into GBCI, with GBCI as the surviving entity. Immediately thereafter, the Bank will merge with and into Glacier Bank, with Glacier Bank surviving as a wholly owned subsidiary of GBCI.
Consummation of the Holding Company Merger is subject to the receipt of required regulatory approvals, and certain other customary conditions of closing, including, among others (a) approval of the Merger Agreement and the Holding Company Merger by the Company's shareholders, (b) the absence of any actual or threatened action or proceeding to restrain, prohibit or invalidate the Holding Company Merger, (c) subject to certain exceptions, the accuracy of the representations and warranties of the Company, in the case of GBCI, and GBCI, in the case of the Company, (d) performance in all material respects by the Company, in the case of GBCI, and GBCI, in the case of the Company, of its respective obligations under the Merger Agreement, (e) the absence of an event that has had or would reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement), on the Company, in the case of GBCI, and GBCI, in the case of the Company, (f) in the case of GBCI's obligation to complete the Holding Company Merger, receipt by GBCI of an opinion from its counsel to the effect that the Holding Company Merger will be a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and (g) in the case of the Company's obligation to complete the Holding Company Merger, the receipt of a similar opinion from its counsel.
The Company expects to complete the Holding Company Merger in the fourth quarter of 2021. However, the transaction could close earlier, following and subject to the satisfaction or waiver of customary closing conditions, including, among others, receipt of regulatory approvals and approval of the Company's shareholders, in each case as further described in the Merger Agreement.
On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic. Local and national governments and regulatory authorities systematically implemented remedial measures to try to slow and curb the spread of COVID-19, including business closures and operating restrictions, travel bans, and shelter in place, stay home, and similar directives and orders. In response to the COVID-19 pandemic and in adherence with state and local guidelines, the Company implemented its business continuity plan and other measures and activities to protect employees and, at the same time, to assist clients and the communities of which it is a part, including remote working for the majority of its employees, increased mobile banking and electronic transaction options for clients, payment deferral assistance to commercial and consumer borrowers, and participation in the SBA's Paycheck Protection Program for loans to qualifying small businesses. The Company has begun to resume some normal business operations as COVID-related restrictions have been eased, such as reopening branch lobbies and bringing some employees back to its operational facilities. The Company's return to full normal business operations depends on, in part, widespread vaccinations and applicable state and local transmission indices and reopening guidelines, the timing and extent of which are not yet known.
Aug 09, 2021
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