Glacier Bancorp, Inc. (NYSE:GBCI) Q1 2025 Earnings Call Transcript

Glacier Bancorp, Inc. (NYSE:GBCI) Q1 2025 Earnings Call Transcript April 25, 2025

Operator: Good day, and thank you for standing by. Welcome to the Glacier Bancorp first Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. You will then hear an automated message advising you 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 of Glacier Bancorp. Please go ahead.

Randy Chesler: Well, good morning, and thank you for joining us today. With me here in Kalispell is Ron Copher, our Chief Financial Officer, Tom Dolan, our Chief Credit Administrator, Angela Dossi, our Chief Accounting Officer, Jeff Meredith, our Chief Investment Officer, and joining us on the phone is Byron Pollan, 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 cost 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 noninterest-bearing deposits of 1.68% in the current quarter, decreased three basis points from the prior quarter.

The total core deposit cost, including noninterest-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. And we do not 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 are going to pull back on projects.

We had solid expense control in the quarter, with noninterest expense of $153 million, which is just about flat to the first quarter a year ago. Noninterest 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 do not 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 do not expect to increase our allowance for credit losses 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¢ 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¢ per share. We have declared 60 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 during the year. Our 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 the 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.

Q&A Session

Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment as we move to our first question. Our first question comes from the line of Jeff Rulis with D.A. Davidson. Your line is open. Please go ahead.

Jeff Rulis: Just want to reorient on 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.

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

Byron Pollan: 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 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 a billion more maturing before the end of this year, which will be very helpful. We have the loan repricing that you noted earlier. We’ve got new loan production rates that are fairly strong right now. I would say in addition to that, Bank of Idaho that’s coming on will also provide some margin lift.

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 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 3.20 to 3.25, I still feel very comfortable with that guide. I think we’ll end up in that range, all told, for the full year.

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

Byron Pollan: We don’t have all the accretions yet, but just ballparking it. I do think Bank of Idaho, just with their core margin plus the accretions, 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 lift to the entire organization. So that will be very helpful.

Jeff Rulis: 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.

Ron Copher: Yeah, Jeff. Ron here. Appreciate that. Just to put everybody in the same starting point, just want to reiterate our core noninterest 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 the first quarter and then stepping down $151 million to $152 million 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, a $1.2 million favorable gain on the sale of a former branch and $600,000 of merger-related expenses. So when you reverse those two items out, it brings our core noninterest expense to about $152 million for the first quarter, and that’s a difference of $2 million compared to the guide of $154 million.

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 and the economic uncertainties within 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 to three quarters, we are maintaining our core organic noninterest expense guide of $151 to $152 million per quarter.

Ron Copher: Now I’ll layer on Bank of Idaho. We said back in January, our Bank of Idaho would add $9 to $10 million per quarter of noninterest 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, noninterest expense, add you’re going 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 noninterest expense that would exclude merger-related expenses, other unique items, and if we had any additional gains on sale of former branch building.

Jeff Rulis: 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?

Randy Chesler: 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 deck. So we have our Mountain West region as well as Southwest. Within the Southwest, 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.

Jeff Rulis: Thanks, Randy.

Operator: 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.

Matthew Clark: Hey, good morning, everyone.

Randy Chesler: Morning.

Matthew Clark: Couple more questions on maybe more of the near term. Just the spot rate on deposits at the March and the average margin in the month of March if you had it.

Byron Pollan: Sure, Matthew. The spot rate at the March, March 31 was 1.24%. And the margin for the month of March was 3.05%.

Matthew Clark: Got it. And then the uptick in nonaccruals this quarter, it looked like it was a C&I credit. Can you just provide some color there?

Tom Dolan: 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.

Matthew Clark: 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?

Randy Chesler: Yeah. Let me I’ll start on that, and we’ll have Tom give you some color. We’ve, you know, the best way to get to what we see happening is talking to our customers, and we’ve been doing a lot of that. And, 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 areas. 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.

And so they’ve yet to really report that those have hit them. They may they’re anticipating. They’re very, 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. So 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?

Tom Dolan: Mary, the only thing I’d add is, you know, 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 contingency line items on constructions as well to be able to offset any fluctuations of prices. And ultimately, that’s led to just additional cash equity into the deal. So upfront.

Matthew Clark: Okay. Great. Thanks again.

Randy Chesler: You’re welcome. One moment as we move on to the next question.

Operator: Our next question comes from the line of Andrew Terrell with Stephens. Your line is open. Please go ahead.

Andrew Terrell: Hey, good morning.

Randy Chesler: Good morning.

Andrew Terrell: Apologies. I missed the number in the remarks earlier. But, Byron, can you remind us the FHLB borrowings that matured throughout the remainder of this year? And then just balance sheet kind of size question. I understand you got a lot of kind of securities cash flow picking up in 2025, but also into ’26. I guess, should the expectation barring a material step up in loan growth be that the cash flow from that goes to pay down the borrowing position or just how should we think about the size of the balance sheet?

Byron Pollan: 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. We’ll remain flexible 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 to 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 growth coming from Bank of Idaho acquisition.

Andrew Terrell: 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?

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

Andrew Terrell: Understood. You know, just back to one of the questions around, you know, more kind of Southwest markets. You know, 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 that do you feel like that alters, you know, the size of the acquisition you would look to do just to 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?

Randy Chesler: Yeah. Our targeting, you know, our wheelhouse, we always talk about, you know, a billion to three to five, somewhere in that range. Really 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. But that’s dependent on the quality of the bank and the opportunity that we see there. So I would not really see it changing our strategy other than to say, you know, if we had our preference, we’d probably need to a little higher end of that range. But all that being said, it’s still driven by finding a great bank and a great market with great people.

Andrew Terrell: Understood. Okay. Thank you very much for the questions.

Randy Chesler: You’re welcome.

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

Kelly Motta: Hey. Good morning. Thanks for the question.

Randy Chesler: Good morning.

Kelly Motta: I would love to circle back to the margin. I believe in the past, you’ve talked about an exit 4Q 25 margin. Appreciate the dynamics, Byron, but wondering the tickets at 3.20, 3.25 range implies a pretty meaningful step up from the 3 to 3.05 in March. So wondering if you have any thoughts on where margin could exit for this year ex the four basis points lift you up from Bank of Idaho? Thanks.

Byron Pollan: Sure, Kelly. I do see four quarter margin exiting somewhere in the neighborhood of 3.40. If we can include Bank of Idaho in there, I’d might move it closer to 3.45. But 3.40, I think, is a good exit number for us coming out of the year.

Kelly Motta: 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 solid ahead, and you expect some nice growth here. Wondering the factors, 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.

Tom Dolan: Yeah. Sure, Kelly. This is Tom. 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. You know, 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, and they April.

And we’re also coming into seasonally stronger months, which should provide some tailwinds. 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.

Kelly Motta: Great. Thank you for the color. I will step back.

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

Tim Coffey: Thank you, and good morning, gentlemen.

Randy Chesler: Morning.

Tim Coffey: 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 and uncertain 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 not bringing applications that might not fit reality?

Tom Dolan: 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 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 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.

Tim Coffey: 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, you know, optimistic given that, you know, we’re starting to see some prints. Do you share that optimism as well?

Randy Chesler: 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 a general uncertainty.

Tim Coffey: Alright. Great. Those are my questions. Thank you very much.

Randy Chesler: You’re welcome. Thank you.

Operator: And again, if you would like to ask a question at this time, please press 11 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.

David Feaster: Good morning, everybody.

Randy Chesler: Morning.

David Feaster: I just wanted to follow-up maybe along the same lines around broader uncertainty. You know, the trade wars, Doge, immigration, reform. You had 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 y’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?

Tom Dolan: Yeah. Dave, 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 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 impact, especially to domestic prices, is going to be. You know, when we talk to our customers and our commercial lenders, you know, certainly, there’s overall uncertainty of the economic impact of trade policy, but optimism is still there. And a consistent theme in our discussion 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.

Randy Chesler: You know, 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 good revenue trends.

David Feaster: 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 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.

Tom Dolan: 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, you know, 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.

David Feaster: Where are you seeing new spreads today, and maybe how are newer rates origination yields trending?

Tom Dolan: Yeah. New they’re so we’re still getting about 300 basis points spreads over the five-year part of the curve. So, you know, for the first quarter, we are about 7.40. 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.

David Feaster: That’s great.

Randy Chesler: That’s great. Thanks, everybody.

David Feaster: You’re welcome.

Operator: 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.

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

Operator: This concludes today’s conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.