Glacier Bancorp, Inc.

Good day and thank you for standing by. Welcome to the Glacier Bank Corp first 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 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 of Glacier Bancorp. Please go ahead.

Well, good morning and thank you for joining us today. With me here in Kalispell is Ron Cofer, our Chief Financial Officer, Tom Dolan, our Chief Credit Administrator, Angela Dosey, our Chief Accounting Officer, Jeff Meredith, our chief investment officer, and joining us on the phone is Byron Pollin, our treasurer. I'd like to point out that the discussion today is subject to the same forward-looking considerations outlined starting on page nine of our press release, and we encourage you to review this section. The positive trend of margin expansion driven by lower deposit costs and higher loan yields continued in the first quarter. Expense control was solid and credit performance continued to be excellent. Diluted earnings per share for the current quarter was $0.48 per share, an increase of 66% from the prior year first quarter diluted earnings per share. Net income was $54.6 million for the current quarter, an increase of $21.9 million, or 67%, from the prior year first quarter net income. The net interest margin as a percentage of earning assets on a tax equivalent basis for the current quarter was 3.04%. an increase of seven basis points from the prior quarter net interest margin, and an increase of 45 basis points from the prior year first quarter net interest margin of 2.59%. The margin has increased five quarters in a row, and this is the first time the margin is north of 3% in the last two years. We expect this trend to continue throughout the year. The total cost of funding, including non-interest bearing deposits, of 1.68% in the current quarter decreased three basis points from the prior quarter. The total core deposit cost, including non-interest bearing deposits, of 1.25% in the current quarter decreased four basis points from the prior quarter. The loan yield of 5.77% in the current quarter increased five basis points from the prior quarter loan yield and increased 31 basis points from the prior year first quarter. Total deposits of 20.6 billion increased 87.1 million or 2% annualized during the current quarter. Total loans of $17 billion decreased $48 million from the prior quarter due to accelerated payoffs. We don't expect this trend to continue and still feel good about our loan growth outlook for the year. Our customers acknowledge a certain amount of uncertainty in the economy, but most have not indicated they're going to pull back on projects. We had solid expense control in the quarter with non-interest expense of $153 million, which is just about flat to the first quarter a year ago. Non-interest income ended the quarter at $33 million, which increased 9% versus the first quarter a year ago. While our credit portfolio continues to perform at near record levels, We increased our allowance for credit loss to 1.22% of total loans from 1.19% last quarter. Now we did this out of an abundance of caution given the current uncertain economic environment. We don't expect to see material credit deterioration in 2025 and remain optimistic about the future, but want to be prepared if conditions change. At this point, we don't expect to increase our allowance for credit loss above 1.22%. Tangible stockholders' equity of $2.2 billion at the end of the quarter increased $67 million or 3% compared to the prior quarter and increased $147 million or 7% compared to the prior year first quarter. Tangible book value per common share of $19.28 at the current quarter end increased 57 cents per share or 3% from the prior quarter and increased $1.28 per share or 7% from the prior year first quarter. And we declared a quarterly dividend of 33 cents per share. we have declared 160 consecutive quarterly dividends and increased the dividend 49 times. The Glacier team continues to do an excellent job taking care of our existing customers and welcoming our new customers and acquisitions. In 2024, we closed and converted two transactions during the year. are purchase of the Rocky Mountain Bank branches in Montana and the acquisition of Wheatland Bank in eastern Washington, totaling approximately $1.2 billion in assets. And in the beginning of this quarter, 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 acquisition for Glacier because it strategically expands our presence in several high growth markets where we already have a presence. We have now received all regulatory approvals and expect to close this acquisition at the end of this month, moving from announcement to closing in under four months. Over the last few years, we have demonstrated that we can find good banks and good markets to partner with regardless of the broader M&A environment and quickly get regulatory approvals and move to closing with certainty. We believe this will work to our advantage in times like the present where fewer buyers have a strong currency to offer a fair deal and the M&A experience to provide the confidence of getting to closing. So that ends my formal remarks, and now I would like to turn the call back over to the operator to open the line for any questions that our analysts may have.

Thank you. 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. One moment as we move to our first question. Our first question comes from the line of Jeff Rulis with DA Davis, and your line is open. Please go ahead.

Thanks. Good morning. Good morning, Jeff. Just want to reorient on the margin discussion. You guys have laid it out pretty well. I think you mentioned previously you had close to $2 billion in loans repricing this year, and... rolling off some higher cost funding and sort of just checking in on that structural margin progression. Randy caught your comments about momentum expected to continue, but a little more detail on the margin front would be great.

You bet. We have Byron on the phone. So, Byron, do you want to talk about the margin trajectory?

Sure, Jeff. This is Byron. I would say we do continue to see growth throughout the year. All of the structural drivers that you mentioned of our upward margin trajectory are still in place. We see elevated securities runoff in 2025. We'll have more low-yielding investments maturing this year. That will help margin. We see the potential to pay down high-cost FHLB borrowings. We did pay off $280 million that matured in March. We have a little over $1 billion more maturing before the end of this year, that will be very helpful. We have the loan repricing that you noted earlier. And we've got new loan production rates are fairly strong right now. I would say in addition to that, Bank of Idaho that's coming on will also provide some margin left. And so all of the structural drivers that we see are still in place. Those are very strong dynamics that will be improving our margin throughout the year. I do think it's important to point out here that our margin trajectory is not Fed dependent. All of the things that I just mentioned will drive margin expansion regardless of Fed activity. So that's I think an important thing to understand about the trajectory of our margin. We did talk on the last call about a full year guide in the area of 320 to 325. I still feel very comfortable with that guide. I think we'll end up in that range, all told, for the full year.

And, Byron, I appreciate that. That's great. When you referenced the Bank of Idaho deal, are you talking about both their core margin but also accretion? And I guess to clarify that, do you have the expected discount accretion? Have you released that number?

We don't have all the discount accretions yet, but just ballparking it, I do think Bank of Idaho, just with their kind of core margin plus the accretions, that will be helpful. Our estimate right now, and of course this could change once the discounts and everything come in and are finalized, but right now I could see Bank of Idaho contributing four basis points of margin left to the entire organization. So that will be very helpful.

Great.

Thank you.

I guess maybe check back in with Ron on the expense guide. Once again, kind of on the low side, I think you've mentioned there's some variable performance-based comp that maybe the loan growth, being modest, helped on that. But again, just an update on the expense guide.

Yeah, Jeff, Ron here, appreciate that. Just to put everybody in the same starting point, just want to reiterate our core non-interest expense guide for 2025. It's a range of 151 to 154 million per quarter. And as we said in the January call, skewing towards 154 million in the first quarter and then stepping down 151 to 152 for the remaining quarters. And for this first quarter, we did report $151.3 million, but that included, as we identified in the earnings release, $1.2 million favorable gain on the sale of a former branch, $600,000 of merger-related expenses. So when you reverse those two items out, it brings our core non-interest expense to about $152 million for the first quarter, and that's a difference of $2 million compared to the guide of 154. Two primary reasons for that, we slowed our hiring in the first quarter. We added only 17 FTE and we also had about $800,000 less expense than anticipated for third party consulting. We continue to be cautious in spending due to the market volatility, the economic uncertainty that was in that first quarter. Let me continue. So just to repeat, before we consider the impact of the Bank of Idaho, for the remainder of 2025, the three quarters, we are maintaining our core organic non-interest expense guide of 151 to 152 million per quarter. Now I'll layer on Bank of Idaho. We said back in January our Bank of Idaho would add 9 to 10 million dollars per quarter of non-interest expense. That is after the savings that we modeled in. Now we are going to close instead of June 30, we're going to close on April 30, that's when we'll complete the legal acquisition. So for the second quarter, 9 inches expense, you want to add for your model 6 million to that guide. So in combination, the guide would be 157 to 158 million for the second quarter. And then for the third and fourth quarters each, you would want to add 9 to 10 million per quarter to the guide And so combined, the guide then for Q3 and Q4 each would be a range of $160 to $162 million. And just as one more reminder, this is core non-interest expense. It would exclude merger-related expenses, other unique items, and if we had any additional gains on sale of former branch buildings.

Very thorough, Ron. Thank you. Sorry, if I could squeeze one more in there. Randy, you've added a more detailed kind of Southwest footprint in potential M&A interest in your deck. I guess any development on discussions in, say, Oklahoma or Texas on that end?

Yeah, no, I appreciate you kind of referencing the clarification that we put in the investor deck. We've been in the Southwest since 2017 with our acquisition of Foothills Bank, expanded it five years later with the State Bank of Arizona. We're now one of the largest community banks in the market. So very, very happy with our experience down there. But Given all the questions we had at the beginning of the year around M&A and the expectations, we clarified that in our investor deck. So we have our Mountain West region as well as Southwest. Within the Southwest, and we have conversations going in both of those areas right now. And so we've looked in the Southwest and some of those other states over the years have not found the right partner for us, but we do have ongoing conversations. There's a lot of really good banks and really good markets in the Southwest and Mountain West. So, Jeff, as you know, Wheatland was a negotiated transaction. Bank of Idaho was a negotiated transaction as a result of building relationships over a period of time, and we continue to do that in both those areas.

Thanks, Randy.

Thank you. One moment as we move on to our next question. And our next question is going to come from the line of Matthew Clark with Piper Sandler. Your line is open. Please go ahead.

Hey, good morning, everyone. Morning. A couple more questions on maybe more the near-term margin. Just the spot rate on deposits at the end of March and the average margin in the month of March, if you had it?

Sure, Matthew. The spot rate at the end of March 31 was 1.24 percent, and the margin for the month of March was 3.05 percent.

Okay.

Got it. And then the uptick in non-accruals this quarter, it looked like it was a C&I credit. Can you just provide some color there?

Yeah, Matthew, this is Tom. It was centered in one relationship. You know, the issue with the credit was not market or economic-based. It was a management issue. And, you know, it's well-secured, including real estate. There's no loss expected, and we should be out of the deal by the end of the year.

Okay, thank you. And then... Final one for me, just around tariffs. Any thoughts on tariffs going up on Canadian lumber and what that might do for your construction activity that you tend to help out with on the resi and commercial side?

Yeah. I'll start on that and then we'll have Tom give you some color. The best way to get to what we see happening is talking to our customers, and we've been doing a lot of that. It's been very interesting that the impact seems to be much more manageable with our customers. We're just not hearing a lot of distress over pricing moving way outside of what they can handle. And so, you know, so far, all the discussions, the plans are still in place. People are moving forward. They recognize that costs are going to go up in some area. But when we talk to the most, to specifically answer your question, kind of wood, you know, dependent industries, home building, construction, you know, they feel like they can manage those costs within reason on the projects. They've yet to really report that those have hit them. They're anticipating. The very good thing about our customer base is we tend to bank smaller operators. They're very nimble, very reactive, and they're looking for alternatives as well. It's obviously on everybody's mind, but they're just not seeing material impact that would disrupt plans at this point. Tom, do you want to add anything to that?

The only thing I'd add is when we're seeing budgets come in on construction requests, we're seeing more conservatism in certain line items, which certainly would be expected, and we're also adding some conservatism in our contingency line items on construction as well to be able to offset any any fluctuation in prices. And ultimately what that's led to is just additional cash equity into the deals up front.

Okay, great. Thanks again. You're welcome.

Thank you. And one moment as we move on to the next question. Our next question comes from the line of Andrew Terrell with Stevens. Your line is open. Please go ahead.

Hey, good morning. Good morning. Apologies, I missed the number in the chat. in the remarks earlier, but Byron, can you remind us the FHLB borrowings that matured throughout the remainder of this year? And then just, you know, balance sheet kind of size question. I understand you got, you know, a lot of kind of securities cashflow picking up in 25, but also into 2026, I guess, should the expectation, um, barring a, you know, material step up in loan growth be that, you know, the, the cashflow from that goes to, you know, pay down the borrowing position or, Just ask me to think about the size of the balance sheet.

Sure. I'll circle back to the FHLB advances. So we have quarterly maturities throughout the rest of the year. We have $300 million maturing in Q2. We have $360 million maturing in Q3 and $420 million maturing in Q4. In terms of our expectations around... Paydowns, you know, we do, as I mentioned, expect to see some accelerating investment security cash flow. We do anticipate, for the most part, we'll be using that cash flow to pay down or pay off. Those FHLB advances will remain flexible with, you know, with what the market opportunities reflect at the time. But that, I would say, is our base case expectation. Overall, in terms of how I think about the balance sheet, Let's separate Bank of Idaho for a second and then just talk about the organic balance sheet going forward. I think of it as stable and flat through the rest of the year. We might see a little bit of a downtick in Q4 with some accelerated investment securities maturities. But for the most part, I would think about the balance sheet as stable, organic, and growth coming from Bank of Idaho acquisition.

Understood. Okay. And on the Bank of Idaho deal, I guess great work by you guys on accelerating some of the closing date there. Do you have an integration date or conversion date set for that yet?

Yeah. At this point, we're targeting early September to do the conversion. So that's on That's on track and starting to move towards that once we get this closing at the end of the month.

Understood. Just back to one of the questions around more kind of southwest markets. As you guys think about M&A and what would complement your franchise going forward, and maybe specifically if you're looking to extend into more kind of contiguous markets, do you feel like that alters things? you know, the size of the acquisition you would look to do just to, you know, achieve critical mass in a newer market? Or is it, should we think that it's really no change to the typical kind of size of acquisition you would look to do? Thanks.

Yeah, our targeting, you know, our wheelhouse, we always talk about, you know, a billion to, Three to five somewhere in that range really hasn't changed. I think if we enter a new market, our preference would be to lean into a little bit larger to really enter the market with some scale. Uh, but that's, you know, that's dependent on the quality of the bank and, and the opportunity that we see there. So I would, um, I don't really see it changing our strategy other than to say, you know, if we had our preference, we'd probably lead to the little higher end of that range. Uh, but all that being said, it's still driven by finding a great bank and a great market with great people.

Understood. Okay. Uh, thank you very much for the questions. You're welcome.

Thank you. And one moment for our next question. Our next question is going to come from the line of Kelly Moda with KBW. Your line is open. Please go ahead.

Hey, good morning. Thanks for the question. I would love to circle back to the margin. I believe in the past you've talked about an exit 4Q25 margin. Appreciate the dynamic siren, but wondering the... To get to that 320, 325 range implies a pretty meaningful step up from the 305 in March. So I'm wondering if you have any thoughts on where margin could exit for this year X the four basis points lift you up from Bank of Idaho. Thanks.

Sure, Kelly. I do see four-quarter margin, you know, exiting somewhere in the neighborhood of 340. If we can include Bank of Idaho in there, I might move it closer to 345. But 340, I think, is a good exit number for us coming out of the year.

Got it. That's helpful. And then a question on loan growth. Appreciate the color that some uncertainty weighed on growth this quarter. But it sounds like the pipeline is changing. solid ahead and you expect some nice growth here. Wondering the factors, you know, puts and takes that you guys are seeing in the conversations you're having with your customers that give you some optimism that net growth can resume here. Thank you.

Sure, Kelly. This is Tom. You know, generally first quarter is seasonally slower for overall production, but we actually saw comparatively strong top line production, especially in the last half of the quarter, in March in particular. A larger component of the first quarter production was in the construction segment, and that's something we really haven't seen over the past several quarters, and of course those loans do not fully advance at origination. We continue to see elevated payoffs in the first quarter as well, with multiple commercial real estate and multifamily projects achieving stabilization in either refinancing into the secondary market as originally planned or opportunistically selling. And, you know, I think the change that we've seen is those headwinds we saw in the first quarter appear to be abating somewhat in April. And we're also coming into seasonally stronger months, which should provide some tailwinds. We've seen construction draws materially increase and also agriculture production is entering a more seasonally positive period. So And then, you know, the comment on the pipeline, it does remain strong. We're seeing early stage pipeline growth after some good pull through in February and March. So we're still confident in our low to mid single digit guide for the year.

Great. Thank you for the caller. I will step back.

Thank you. One moment for our next question. Our next question is going to come from the line of Tim Coffey with Jamie. Your line is open. Please go ahead.

Thank you. Good morning, gentlemen. Good morning. Tom, if we can kind of circle back on the underwriting questions from a little while ago. Can you kind of describe how the process and the thought process changes in certain economic times like we're in, as well as can you kind of talk about what message you're sending to the lending team right now so that they're not bringing applications that might not fit reality?

Yeah, you know, I wouldn't say we've necessarily changed our underwriting. We always underwrite with a through-the-cycle lens that really can, you know, best protect the bank in really any economic cycle. I think if I was going to say one difference that we've changed is, you know, especially when we're working with borrowers, we're looking at projections, you know, on the construction side when we're looking at construction budgets. Let's just make sure there's some conservatism built in there to withstand, you know, maybe any uncertainty or any fluctuations that they may see. But, you know, there haven't been any material policy changes to discourage underwriting.

Great. And then, Randy, last 24, 48 hours, we're starting to see some M&A deals. And the other executives I've spoken to are somewhat optimistic given that we're starting to see some prints. Do you share that optimism as well?

I think we'll see more. I'm not sure we'll see the level of activity that people were looking for at the beginning of the year. So I do think it is picking up. I think, you know, for us conversations continue. And I think, you know, as far as we're concerned, we've demonstrated that really regardless of the general environment, we can get a deal done with the right partner. So, yeah, I think it's picking up a little bit, but I still think it's a bit muted due to stock prices and kind of general uncertainty.

All right, great. Those are my questions. Thank you very much. You're welcome.

Thank you. And again, if you would like to ask a question at this time, please press star 1-1 on your telephone. Our next question is going to come from the line of David Feaster with Raymond James. Your line is open. Please go ahead.

Hey, good morning, everybody. Morning. I just wanted to follow up maybe along the same lines around broader uncertainty, you know, the trade wars, Doge, immigration reform. You know, we touched on lumber and construction. You know, I'm curious, are there any other segments that you're watching closely? You know, obviously, ag is a smaller segment for you all, but something folks are watching. I'm just kind of curious, you know, is there anything that you're watching more closely or, you know, cautious on?

Yeah, David, this is Tom. You know, our portfolio is not comprised of multinational companies. So, you know, really what we're keeping a close eye on is what happens to domestic prices and how that's going to affect our borrowers. And even in the ag segment, you know, when we talk to our growers, there's a very limited export component to their revenue stream. So, you know, it's, I think, you know, ultimately it's too early to really assess what the ultimate impact, especially to domestic prices, is going to be. But, you know, when we talk to our customers and our commercial lenders, Certainly, there's overall uncertainty of the economic impact of trade policy, but optimism is still there. A consistent theme in our discussions is that the uncertainty they're experiencing, it's not stopping borrowers from moving forward. They may reassess. They may inject additional cash equity. They may add conservatism to projections, but ultimately, they're moving forward. One of the things we've been talking with our bank divisions a lot is that they're seeing a lot of evidence of projects or any type of significant capital expansion just completely being canceled. And we're just not seeing that. It's very isolated. It's not widespread. And our borrowers are still seeing demand and still seeing, you know, good revenue trends.

Okay. That's great. And then maybe just last one for me, you know, maybe touch on the competitive landscape, appreciate the commentary about the loan growth outlook and the pipelines. I'm curious, what are you seeing on the competition side and kind of how, new loan yields have been trending. You've always done a great job getting paid for the risks that you're taking and maintaining spreads, but just kind of curious what you're seeing on that front.

Yeah, we're still maintaining very good spreads on production. You know, one of the benefits of our footprint is when we tend to have a leading market share in a given market, we can generally set the pricing. Where we run into some pretty significant competition is usually in the larger markets where there's more competition. So we definitely have been seeing some competition on pricing, and as you would expect, especially for stronger deals. And I think that mix of production between more of the larger markets and the smaller rural markets, we're still able to compete everywhere and maintain our spreads from an overall perspective. We still haven't seen any type of irrational structure or underwriting. We haven't seen that yet, which is encouraging. That's not somewhere we would really be willing to compete. But certainly it's something we keep an eye on.

Where are you seeing new spreads today and maybe how are new origination yields trending?

Yeah, so we're still getting about 300 basis point spreads over the five-year part of the curve. So, you know, for the first quarter, we were about 740. That's a little north of 300. And as we've seen that middle part of the curve kind of fluctuate, we've seen our production yields fluctuate with it.

That's great. That's great. Thanks, everybody. Welcome.

Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to Randy Chesler for closing remarks.

All right. Thank you, Michelle. I want to thank everyone for dialing in to our call today. I want to wish everyone a great Friday and a great weekend. Thank you.

this concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day.