Glacier Bancorp, Inc.

Thank you for standing by and welcome to Glacier Bancorp's fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. Should you require any further assistance, please press star zero. I would now like to hand the conference over to your host, President and CEO of Glacier Bancorp, Randy Chesler. Sir, please go ahead.

All right. Thank you, Lateef. Good morning, and thank you for joining us today. With me here in Kalispell this morning is Ron Cofer, our Chief Financial Officer, Angela Dosey, our Chief Accounting Officer, Byron Pollin, our Treasurer, and Tom Dolan, our Chief Credit Administrator. We closed out the fourth quarter and full year of 2021 encouraged by our extremely strong loan and net interest income growth. Results were better than what we expected and clearly shows that we are in some of the best long-term growth markets in the country. The Glacier team and our unique business model enable us to build solid customer relationships and produce very strong results in all of our divisions as we continue to build one of the premier regional banks in the West. I'll touch on some of the business highlights first and then provide some additional thoughts on the quarter and full year. The loan portfolio, excluding payroll protection program loans, had strong organic growth of $448 million or 16% annualized. The loan portfolio organically grew $1.2 billion or 11% annualized from the beginning of the year. This was a record level of growth, quarterly growth for the company. Net interest income in the quarter on a tax equivalent basis and excluding triple P loans was 184 million, an increase of 29.4 million or 19% from the prior quarter. On a full year basis, net interest income was 636 million an increase of $57.5 million or 10% over the prior year. Core deposits continued to flow into our divisions, organically growing $560 million or 13% during the quarter and growing $3.3 billion or 22% annualized for the year. Net income for the year was $285 million, an increase of $18.4 million, or 7% from $266 million in the prior year. Earnings per share for the year was a record $2.86, an increase of 2% from the prior year. Credit continued to demonstrate strength in all measures. We ended the year with no real estate owned by the bank, remarkable for a bank with a $13.5 billion loan portfolio. We declared dividends of $1.37 per share, an increase of $0.04 per share, or 3% over the prior year. The company has declared 147 consecutive quarterly regular dividends and has increased the regular dividend 48 times. We completed the acquisition of all the bank Corp with assets of 4.1 billion, the largest community bank in Utah and the number one rated growth market in the country and the largest acquisition in the company's history. In December, we transferred the listing of our common stock to the New York stock exchange consistent with our longer term growth plans and outlook. And finally, We're close to wrapping up the Triple P program that began in early 2020. During that time, we've made almost 24,000 loans for $2.1 billion, and at the end of 2021, only had $169 million of loans that have not been forgiven. We expect most of these remaining loans with $5 million of net deferred fees remaining to be forgiven in early 2022. We saw excellent loan growth in our markets with Utah, Arizona, and Colorado leading the growth across our eight state footprint. We're pleased to see the strong performance in commercial real estate lending growing organically 175 million in the quarter. New loan production for the quarter was robust, with a record $1.9 billion in new loans originated. We updated our full-year 2021 growth target last quarter to 8% to 10%, and we're very pleased, and we are topping that range, coming in at 11%. We're starting 2022 with excellent momentum and a strong pipeline of new loans. Core deposits continue, growth continues to be surprisingly strong across our footprint, driven by access to customer liquidity due to the unprecedented government stimulus, reduced spending due to the pandemic, and our success in establishing new deposit relationships. As a result, customers and businesses are beginning 2022 with very strong balance sheets. More importantly, The stable and sticky core deposits have a cost of seven basis points, down six basis points from a year ago. Non-interest bearing deposits increased 2.3 billion or 43% over the prior year and are now 37% of core deposits. Total debt securities of $10.4 billion increased almost $5 billion or 88% from the prior year. We continue to purchase debt securities with the excess liquidity from the increase in core deposits. Debt securities represented 40% of total assets at year end compared to 30% at the end of 2020. We fully invest excess deposits, buying highly liquid and high-quality investments with shorter duration, given low but increasing rates, with a plan of putting these deposits to work into loans as we continue to grow. The company's net interest margin as a percentage of earning assets on a tax-equivalent basis for the current quarter was 3.21%, compared to 3.39% percent in the prior quarter. The core net interest margin for the quarter, less Triple P, less discount accretion and non-accrual interest, was 3.04 percent compared to 3.17 percent in the prior quarter. Earning asset yields have decreased from the combined impact of the significant increase in the amount of debt securities and the decrease in yields on both debt securities and core loans. The yield on debt securities ended the quarter at 1.5% compared to 1.62% in the prior quarter. New investments in debt securities were added at 1.26% in quarter. It appears that we are close to a positive inflection point when the improving yields on new debt securities will exceed the portfolio yield. The yield on the loan portfolio ended the quarter at 4.7%, down 16 basis points from the prior quarter. We added $1.9 billion in new core loan production with yields around 4%, which drove the total loan portfolio yield down. Non-interest income of $34.4 million declined 453,000, or 1% from the prior quarter, It decreased 10.3 million or 23% from the same quarter last year due primarily to the reduced gain on sale of income from residential mortgage. The hot housing market and refinancing slowed down a bit across our footprint. Our biggest concern in the real estate business remains the supply of homes available for sale and the increasing cost of housing. Non-interest expense includes $17 million of expense from Altabank Division, $8.2 million of acquisition-related expenses, $806,000 of increased compensation and employee benefits due to incremental overtime given staffing shortages at several bank divisions, $1.1 million of expenses primarily due to branch upgrades, and $600,000 of increased loan expense due to strong loan growth. Excluding the Alta Bank Division and acquisition-related expenses, non-interest expense increased $5.3 million or 5% from the prior quarter and decreased $1.8 million or 2% from the prior year fourth quarter. While the Triple P program is in its final stages of winding down, with most of the remaining loans expected to be forgiven in early 2022, I would like to recognize all of the Glacier team for the exceptional work they did on the Triple P program over the last two years. I'm very proud of how the team responded so quickly in order to help our many customers who were frightened, and concern about their businesses at the outset of the pandemic. It's a great reminder of the responsiveness of our model and our focus and commitment to Main Street businesses across the West. Our combination with Alta Bancorp continues to proceed very well. We closed on that transaction October 1st, and we continue to work closely with the Alta team on the planning for our core processing conversion in mid-March of 2022. We are on track to achieve the targeted cost saves in 2022 that we identified when we announced the transaction in May of 2021. ALT has a very good technology platform, and we are studying many of the products that may be a good fit for our other divisions. Tangible book value per share for the company increased in the quarter from $19.11 to $19.33, or 1%. On a full year basis, tangible book value increased 6%. The Glacier team accomplished a lot in the fourth quarter. We had to deal with COVID in many markets and close AltaBank, the largest acquisition in our history. and the team still achieved record results. The loan growth we experienced in the quarter was great to see, and we think we are very well positioned to grow in 2022. And in December, we were pleased to be recognized as one of the best emerging regional banks by Bank Director Magazine as part of its 2022 ranking banking study which identifies the best banks in the United States based on quantitative metrics as well as a qualitative analysis of innovation and leadership. So, Lateef, that ends my formal remarks, and I'd now like to turn the call back over to you to open the line for any questions that our analysts may have.

Yes, sir. As a reminder, to ask a question, you will need to press star 1 on your touch-tone telephone. To withdraw your question, press the pound key. Again, that's star 1 on your touch-tone telephone to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Feaster of Raymond James. Please go ahead.