Glacier Bancorp, Inc.

Good day, and thank you for standing by. Welcome to the Glacier Bancorp fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Randy Chesler, President and CEO. Please go ahead.

Good morning and thank you for joining us today. With me here in Kalispell is Ron Cofer, our Chief Financial Officer, Byron Pollin, our Treasurer, and Tom Dolan, our Chief Credit Administrator. I'd like to point out that the discussion today is subject to the same forward-looking considerations outlined starting on page 14 of our press release, and we encourage you to review this section. Overall, the Glacier team delivered a very strong fourth quarter and full year performance. The positive trend of margin expansion driven by increasing interest income and lower deposit costs continued in the fourth quarter. Credit performance remains very good, and we believe we are very well positioned for a strong 2025. Diluted earnings per share for the current quarter was 54 cents per share, an increase of 20% from the prior quarter diluted earnings per share of 45 cents and an increase of 10% from the prior year fourth quarter diluted earnings per share. Net income was $61.8 million for the current quarter, an increase of $10.7 million or 21% from the prior quarter net income of $51.1 million, and an increase of $7.4 million or 14% from the prior year fourth quarter net income. The net interest margin as a percentage of earning assets on a tax equivalent basis for the current quarter was 2.97%, an increase of 14 basis points from the prior quarter net interest margin of 2.83%, and an increase of 41 basis points from the prior year fourth quarter net interest margin. net interest income was 191 million for the current quarter an increase of 11.2 million or 6% from the prior quarter net interest income of 180 million and an increase of 25 million or 15% from the prior year fourth quarter net interest income. The loan portfolio. of $17.3 billion increased $81 million or 2% annualized during the current quarter. The loan yield of 5.72% in the current quarter increased three basis points from the prior quarter loan yield of 5.69% and increased 38 basis points from the prior year fourth quarter loan yield. Total deposits of $20.5 billion at the end of the year 2024 decreased $168 million or 1% from the prior quarter and increased $618 million or 3% from the prior year end. Non-interest bearing deposits represented 30% of total deposits which remains unchanged from the prior year end. The total core deposit cost, including non-interest bearing deposits, of 1.29% in the current quarter decreased eight basis points from the prior quarter total core deposit cost of 1.37%. The total cost of funding also including non-interest-bearing deposits, of 1.71% in the current quarter, decreased eight basis points from the prior quarter, total cost of funding of 1.79%. Non-interest expense was $141 million for the current quarter, a decrease of 3.7 million, or 3% from the prior quarter. Non-interest income for the current quarter totaled $31.5 million, which was a decrease of $3.2 million or 9% over the prior quarter and an increase of $684,000 or 2% over the prior year fourth quarter. Gain on sale of residential loans of $3.9 million for the current quarter decreased 970 2000 or 20% compared to the prior quarter and increased 1.7 million or 76% from the prior year fourth quarter. Our credit portfolio continues to perform at near record levels with no material negative trends emerging. Tangible stockholders equity of 2.1 billion at December 31, 2024 decreased 17.4 million or 1% compared to the prior quarter and increased 118 million or 6% compared to the prior year. On November 20, 2024, the company's board of directors declared a quarterly cash dividend of 33 cents per share paid in December. The dividend was the company's 159th consecutive regular dividend. The Glacier team has done an excellent job taking care of our customers while growing the business organically and welcoming our new acquisitions. In 2024, we closed and converted two transactions during the year. Our purchase of the Rocky Mountain branches in Montana and the acquisition of Wheatland Bank in eastern Washington, totaling approximately $1.2 billion in assets. And last week, we announced the proposed acquisition of Bank of Idaho, a $1.3 billion bank with locations in eastern Idaho, Boise, and eastern Washington. This is a great transaction for Glacier because it strategically expands our presence in several high growth markets where we already have a presence. Financially, the transaction is very attractive, reflective of our disciplined approach to M&A with minimal tangible book value dilution, immediate accretion, conservative cost savings assumptions, and a pay-to-trade ratio of only 76%. Bank of Idaho has a solid record of high performance, and this was a negotiated transaction between Glacier and Bank of Idaho. So that ends my formal remarks, and I'd now like to open the line for any questions that our analysts may have.

As a reminder, To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Jeff Rulis with DA Davidson. Your line is open.

Thanks. Good morning, Randy and team. Morning, Jeff. Maybe just to check in on the margin and maybe loan growth, but first margin, you guys really gave pretty good transparency in 24 as you approached 3%. And I guess the question is kind of the initial look at the path this year. I'm assuming maybe the December average was north of 3%, but wanted to check in on the guardrails of how you frame up 25 relative to 24.

Yeah, I appreciate that. And we've had a lot of discussions about it. So Byron is ready to talk about margin.

Sure, Jeff. One of the things that we see going forward is we do see continued growth. So one of the things that we're looking at is when we look at Q1, we do expect to see a continued growth, but at a slower pace. If you look back at kind of where we have been recently, Q3 of last year, that margin growth was supported by a Rocky Mountain branch acquisition. If you look at Q4, the growth there, the 14 basis points that Randy noted in his remarks, That was supported by Fed rate cuts leading to lower deposit costs. I think in Q1, as we look ahead, we're going to lean a little bit more on asset repricing. So we do expect growth in Q1, but at a slower pace. I would say our margin does have the potential, the growth does have the potential to accelerate through the rest of the year. What we'll see in 2025 is we'll see increased security runoff from our investment securities portfolio. I think that will be helpful to margin. We have some high-cost FHLB borrowings that will be maturing through the year, so that will be an opportunity for us to lift margin as well. And then, of course, we have the Bank of Idaho transaction that will provide a little bit of a boost as well. So when I look at the full year 2025, I think our margin will land somewhere in the range of 3.20 to 3.25%.

Really good color. Thanks, Byron. And then I'm going to chase down the growth side. I believe a little seasonally slower, but also giving what the market's given you, I guess. Any thoughts on the big picture growth? Maybe any commentary about any shifts in customer demand that you're seeing? Trying to get a sense for what you guys are budgeting in 25 on the growth front organically.

Good morning, Jeff. This is Tom. Looking forward, we're looking at low to mid single digit loan growth. Overall pipelines over the last quarter were stable. but we did see growth in early stage opportunities, you know, and there's growing optimism among the customer base, but we've yet to see it translate to actual deal flow yet. So, you know, with what we see today, we're looking at low to mid single digits for 25.

Okay. Thanks. I'll step back.

Thank you. Our next question comes from Matthew Clark. With Piper Sandler, your line is open.

Hey, good morning. Good morning. Just a few more around the margin. The spot rate on deposits at the end of the year and the average margin in the month of December.

Sure, Matthew. This is Byron. Spot rate on deposits. This is total deposits at the end of December was 1.26%. And our December margin, we did have some noise within the quarter. And when you smooth out that noise, our December spot margin was 2.99%.

Okay. And then the guide of 320 to 325 for the year, that seems like it implies like a 340, 345 exit rate in 4Q. Is that fair? 335 to 345?

Yeah, you're spot on there.

Okay. And then on the loan yields, they were up, excluding accretion, they were up 4 bps to 565. You just give us a sense for, you're able to mitigate the rate cuts with the floating portion of your portfolio, which is relatively small. But give us a sense for your outlook on core loan yields, or if you want to include accretion, that's fine too. Just trying to get a sense for whether or not loan yields can continue to expand if we get another rate cut given the back book.

Yeah, I do think we'll continue to see expanding loan yields. One of the things that you noted, we have a relatively small percentage of our loans are floating rate. But one of the things that we are looking at is we'll have about $2 billion of loans repricing in 2025. And they'll be repricing, you know, based on, you know, today's market environment, they'll be repricing up 100 to 125 basis points. And so, you know, I think that repricing dynamic is going to be very helpful. Plus, you know, new production rates, I think, are going to be healthy as well. So that is... you know, our outlook for the – those are the drivers behind our outlook for increasing lending.

Great. And last one, just on expenses. Ron, you want to take a stab at the run rate, even though you beat it again for the year?

Sure. Thank you for the acknowledgement. Always appreciate that. Yeah. Just to put that into perspective, you know, the report is $141 million, and we – and the earnings release set forth a couple of adjustments. When you add that back, you get to 143. We're just below that low end. And when we gave that guide, you know, we were aware that we would probably need to true up performance-related compensation, and that was $5 million rounded. So, if you put it all into perspective, it's $148 million if we had not had that expected. performance-related reduction. So that's that. But the guide, I'm excluding Bank of Idaho. So the guide for 2025 per quarter will range from $151 million to $154 million. And as you would expect, the first quarter is typically higher. And then we'll call that towards $154 million. And then as we go through each of the quarters, it becomes less as we grow into our extend space. And the numbers that I just gave include the cost savings that remain from Wheatland Bank, which I would tell you is about $2.1 million roughly, and then the Rocky Mountain Bank acquisition, the majority of that to come in 2025, and that's about $2.8 million. All total about $5 million of cost savings that we've built in and very much are achievable in 2025.

Great, thank you.

Thank you. Our next question comes from David Feaster with Raymond James. Your line is open.

Hey, good morning, everybody. Good morning. Maybe touching on the deposit side, you guys have been active reducing deposit costs, working with your clients. You're coming off an already low level, but I just wanted to touch on how client reception has been to that and additional opportunities to reduce core deposit costs and then just You know, also hoping you could touch on some of the NIB and DDA trends, you know, how much of that was seasonal versus migration between accounts and just thoughts on deposit growth broadly.

Sure, David. This is Byron. I can touch on that. Yeah, we're very pleased with the deposit cost reduction that we saw in the fourth quarter. In terms of customer reception, I think they've been understanding of, you know, the rate reduction. I think our customers are aware of the rain environment, and they see the headlines with what the Fed is doing, and they also see what other banks are doing as well. That, I think, has gone very well for us. I think in terms of ongoing opportunities, one of the places where I think we could see a little bit more progress is in our CD portfolio. Our CD portfolio remains fairly short, over 60% of our CDs will roll over again in Q1. And those renewal rates are coming in around 10 to 20 basis points lower than the maturing rates. And so by the end of Q1, we'll be mostly repriced into the current rate environment. But I think that's a little bit of an opportunity for us as well. When I think about, you know, the non-interest bearing flows, I do think that those were, you know, seasonally influenced. So we typically do see some outflow in the fourth quarter. And so, you know, and potentially what we saw was a little bit of an unwind of the inflow that we saw in Q3. But definitely it was directionally consistent with what we typically see in the fourth quarter.

Okay. that's helpful. And, and just back to the margin, I just want to be clear. So that 320 to 325, that is exclusive of Bank of Idaho. And, you know, that, that would be additive to that margin guidance, correct?

That guide does include Bank of Idaho.

Okay. That is with Bank of Idaho. Got it. Got it. Okay. And then, you know, just touching on, on credit, I mean, Obviously, credit's still benign in your book. I'm curious what you're watching closely, what you're seeing. Is there anything that's concerning? We've seen some pressure in some other banks on the small business side, but just kind of curious what you're seeing on the credit front.

Yeah, David, I don't think we've seen the same pressures that others have. You know, I can't point to any one specific geography or industry, but You know, and even rewinding back a couple of quarters, you know, certain commodities for our ag growers, you know, suffered a little bit in 2024. But quite frankly, I think the end result of the 24 growing season was stronger than we had anticipated. So that's encouraging. So, you know, again, no specific industry, no specific geography that stands out.

The only thing I'd add there, David, is weak operators continues to you know, be the one thing that we see develop. We weeded a lot of those folks out over the last couple of years, but we still see people struggling in an environment where they shouldn't be. So more individually focused, not trend related, but operators that struggle in an environment where they really shouldn't, that's business. You got good business men and then you have men and women. You have some weaker ones. The only thing we're really seeing and watching are operators we think are struggling when they shouldn't be. There's a few, but not many.

What about on the competitive landscape? I know you talked about an increased optimism. It hasn't necessarily shown up into the pipeline yet. Hopefully, that's on the come. I'm just curious. What are you seeing from the competitive landscape from

know other banks across your footprint uh you know and you know kind of where where are new origination yields today yeah i'll start at the end there new origination yields for the quarter was uh 7.34 um and you know the the trend with that um i i think a lot of the competitors are seeing the same thing that we are growing optimism but not seeing a lot translated to actual deal flow. And so, you know, what that means is those that do, there's increased pricing competition. And that's what we're seeing. So, you know, we're having to sharpen the pencil on stronger deals. But we're really not seeing any, you know, concerning competition from a structure perspective. It tends to still be more around the pricing element.

Okay. All right. That's helpful. Thanks, everybody. Welcome.

Thank you. Our next question comes from Andrew Turrell with Stevens. Your line is open.

Hey, good morning. Morning. I wanted to go back to some of the margin just quickly. Byron, I think you made a comment earlier about experiencing some pickup in securities, cash flow, and repricing ability in 2025. Can you just rehash that a little bit and maybe If you could talk about just the cash flow you'd expect on a quarterly basis out of the bond book.

Sure. We have been seeing about $250 million per quarter of cash flow that's principal and interest from the securities portfolio. I do see a little bit of a bump in Q1. I'm going to increase that guy to $275 million in Q1. And then we start to kind of come into some Treasury maturities. We'll have a $50 million Treasury maturity in the second quarter. And then really, where we will start to see these Treasury maturities will be in the fourth quarter. We have $270 million maturing of Treasuries. In Q4, that would be incremental to the typical $250 million of cash flow that we typically see. And then we will have meaningful quarterly treasury maturities throughout 26 and into 27.

Got it. Okay. So I guess fair to say it kind of segues into what I was going to ask next. Just, you know, you've got what looks like a really nice margin progression throughout 2025 on this fixed asset repricing dynamic. It seems like that's, you know, even though it's really good in 2025, kind of set to accelerate in 2026, at least from a fixed asset perspective, correct?

I think that's fair to say. We really haven't done much in terms of looking at 2026. We're focused on 2025 for now. But those trends, at least from the securities runoff, definitely go into 2026.

Got it. Okay. And not to get maybe too technical, but you did mention a minute ago the $2 billion of loans kind of repricing throughout the year. I think you mentioned 100 or 125 basis point pickup. And I'm just curious, when you said 100 to 125 basis points, do you mean that's where new origination yields are above current average book yields? Or I would assume that the pickup, just given the move in the five-year, is more than... like the back book, front book is more than 100 basis points on some of those loans?

Yeah, what we're looking at there is we're looking at the yield that those loans are where they currently sit in the portfolio and where they will reprice. We expect the repricing to lift those yields 100 to 125 basis points.

Okay. Got it. And then I wanted to ask around just some of the non-interest bearing deposit flows. If I just look at the end of period versus the average, it looks like a lot of the NIB compression was late in the quarter. I'm just curious if you could speak to trends you're seeing so far in January.

You are right. A lot of the outflow was late in the quarter. And typically, we are starting to see some of the seasonality come back into the deposit portfolio. I wouldn't say we're normal yet, but we're normalizing. We're kind of getting back to some of those normal seasonal trends. Q1 can be somewhat of a mixed bag. What we typically see is we typically see a little bit of runoff into January, recovery in February, March. And so far, I would say the flows that we've seen in December and so far in January have been consistent with those historical numbers.

Understood. Okay. Thank you for taking the questions.

Welcome. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone. Again, that is star 1-1 to ask a question. Our next question comes from Kelly Motta with KBW. Your line is open.

Hi. Good morning. Thanks for the question. Morning. I wanted to get a circle back. To your outlook for growth ahead, I believe you said low to mid single-digit loan growth. And just a couple points of clarification, does that include the acquisition Bank of Idaho in it? Would that be additive to that?

Yeah, Bank of Idaho would be additive. The low to mid single-digit is organic.

Got it. And then, you know, I think you mentioned that there's still some FHLB borrowings to be paid down. Putting together kind of your outlook there for the size of the balance sheet and kind of the potential payoff of borrowings and securities roll off, I'm wondering, How we should be thinking overall about the size of the balance sheet for the year kind of exiting 2025, given there's multiple moving parts in that?

There are multiple moving parts. And so, you know, big picture, some of the things that we see, accelerated security cash flow runoff. You know, we talked about that. We will have, of our $1.8 billion of FHLB advances, term advances that we currently have outstanding, 1.36 billion of those will mature in 25. And so I do expect that we'll make meaningful progress in paying down that debt. I don't know that we'll pay it all the way off, but I do think we'll make progress in paying some of that down. So between the securities runoff, that's going to give us the cash to pay down the wholesale borrowing. We could see some de-levering in the balance sheet. And so organically, we could see a little bit of decline in the size of the overall balance sheet. Once we add Bank of Idaho, then I see us exiting 25 with a larger balance sheet than we exited 24. So a little bit of runoff, a little bit of de-levering, then adding Bank of Idaho will get us back above that bar.

Got it. That's helpful. Thank you. And then I was hoping to clarify, I apologize, I was having trouble following. the expense commentary. That 151 to 154 million per quarter, just to clarify, does that include, is that standalone and then Bank of Idaho would be additive to that? And I think your commentary suggested some higher expenses, you know, to start out the year. So I'm hoping you could provide some clarity there.

Yeah. So Ron here. So the guide was 151 to 154 per quarter. And as typical, the first quarter would skew towards the high side, the 154. And those savings, as I said, would stair step down as we continue to achieve the savings that remain for the Wheatland Bank, about 2.1, Rocky Mountain, call it 2.8. It's about 5 million all in. And so Void, Bank of Idaho, pardon me, is not included in there. We do expect to close the deal in the second quarter of 25. And the fund rate for that would be, say, $9 to $10 million per quarter. And certainly, you know, the third quarter and fourth quarter, again, you know, are we going to close on June 30 or are we going to close on April 30? So I'll let you factor in. Yeah, per year, per quarter, excuse me, to $9 to $10 million per quarter.

Okay, thank you. I appreciate that.

Thank you. And our next question comes from Jeff Rulis with DA Davidson. Your line is open.

Thanks. Just to follow up on the, just wanted to check in on the credit side. You know, I I think the charge-offs came up a little bit, but certainly not a big number, given the non-performers' really comfortable level. The pickup in the provision, particularly with a little slower growth, wanted to just check in on the approach, a conservative view here, and anything kind of underfoot that I think maybe the charge-offs, there was a few in the construction bucket, just checking back in on the pulse of credit from your view.

Yeah, Jeff, this is Tom. The charge-off, yeah, you were right up a little bit in the fourth quarter. That was primarily end-of-year cleanup, something we go through on an annual basis. And, you know, to your point, nothing overly material there. The change in the provision expense was centered in the unfunded side. So, you know, in the third quarter, we had a release on the unfunded side. In the fourth quarter, we had a provision with some new unfunded commitments that were booked. So that's the driver of the provision expense. On the funded side, no material change in outlook or anything like that.

Got you, Tom. So maybe tying together, when we talked about some growth, you kind of said maybe some early stage relationships developing. Is that tying those two together on the unfunded or those separate entities?

Those are separate entities. Well, you know, the unfunded commitments booked in the fourth quarter primarily on the construction site were primarily deals that we had been working on for, you know, a few months prior to the fourth quarter. Those came through, went through underwriting approval, booking. So, you know, the increased optimism and kind of the growth in that sector of the pipeline is in addition to that.

Okay. Great. Thank you. You're welcome. Thank you. I'm showing no further questions at this time. I would now like to turn it back to Randy Chesler for closing remarks.

Thank you, Daniel. And we appreciate everybody dialing in today. Have a great Friday and a fantastic weekend. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.