Q2 2021 Glacier Bancorp Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by today's conference is scheduled to begin momentarily until that time. Your lines again will be placed on music hold thank you for your patience.
Okay.
[music].
Good morning, ladies and gentlemen, and welcome to the Glacier Bancorp second quarter earnings Conference call.
This time, all participants are in a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone phone as a reminder, this conference is being recorded I would now like to turn the conference over to Randy Chesler, President and CEO of Glacier Bancorp. Please go ahead Sir.
Thank you Sharon and good morning, and for the group and thank you for joining us today.
Here with me here in Kalispell. This morning is Ron Copher, our Chief Financial Officer, Don Chery, Our Chief administrative officer, Angela dose, our Chief Accounting Officer, Byron Pollan, our treasurer, and Tom Dolan, our chief credit administrator.
We finished the second quarter of 2021 pleased to see our divisions, showing strong loan and deposit growth on.
Markets are all beginning to show more strength as the national economy continues to recover and the summer season kicks into high gear.
I'll touch on the business highlights and then provide some additional observations on the quarter.
We generated net income of $77.6 million, an increase of $14.2 million or 22% over the prior year second quarter net income of $63.4 million.
Diluted earnings per share were <unk> 81.
An increase of 23% from the prior year second quarter diluted earnings per share of <unk> 66.
The loan portfolio, excluding payroll protection program loans increased $249 million or 10% annualized in the current quarter and increased $517 million or 5% from the prior year second quarter.
Core deposits increased $669 million or 17% annualized during the current quarter and increased $3.4 billion or 26% from the prior year second quarter.
Non performing assets as a percentage of subsidiary assets was 26 basis points, which compared to 19 basis points in the prior quarter and 27 basis points in the prior year second quarter.
Early stage delinquencies totaled $12.1 million for 11 basis points of loans and decreased $32.5 million from the prior quarter of 40 basis points of loans and decreased $13.1 million from the prior year second quarter of 22 basis.
Points of loans.
Our credit loss benefit of $5.7 million reflected the improvement in our loan portfolio and economic forecast.
Non interest expense was 100 million, which increased only $3.5 million or 4% compared to the prior quarter and increased $5.3 million or 6% from the prior year second quarter excluding.
Excluding deferred compensation from originating Triple P loans.
Total non interest expense was $102 million for the current and prior quarter compared to $103 million in the prior year second quarter.
We declared a quarterly dividend of <unk> 32 per share an increase of a penny per share or 3% over the prior quarter regular dividend and the company has declared 145 consecutive quarterly dividends and has increased the dividend 48 times.
Overall, the glacier team delivered a strong quarter and wasted no time getting back to business.
In migration of new residents into our 8 state footprint continued in the second quarter. In addition to summer season tourist season kicked off as well.
Signs of increased activity were visible everywhere.
Many hotels had no vacancy sign lit for weeks and are raising prices to control demand rental cars are tough to find.
Our restaurants are packed and many national parks are again experiencing record crowd.
<unk> real estate prices continue to increase in the inventory of available homes for sale is very low.
We saw solid loan growth on our Mark markets, with Montana, Wyoming, and Nevada, leaving the growth across our 8 state footprint with all markets growing $249 million or 10% annualized excluding triple P loans.
We were pleased to see that almost all of the loan growth came from commercial real estate and C&I loans.
We continue to build on the 3000, new customer relationships, we picked up as part of round 1 of Triple P with about $65 million of this quarter's commercial loan volume coming from this group.
All of this growth is even more impressive when you consider that the glacier team originated over 5500 regular loans on over 9500 Triple P loans, along with processing Triple P loan forgiveness.
We had a new loan production record in the second quarter with over $1.6 billion in new loans.
We still have some growth headwinds with borrowers using excess liquidity to pay down loans and the increasing level of competition for new business.
That being said, we entered the third quarter of the year with very good momentum on over $140 million of unfunded new construction loans considering all this we still believe our target of 4% to 6% growth for the full year is reasonable.
Core deposit growth was incredibly strong across our footprint driven by excess customer liquidity due to the unprecedented that unprecedented government stimulus.
Lack of spending due to the pandemic and our success in establishing new deposit relationships.
Core deposits increased $669 million and at the end of the quarter totaled $16.7 billion and most importantly at a cost of 7 basis points down 1 basis point from the prior quarter and down 7 basis points from the end of the quarter a year ago.
Non interest bearing deposits increased $267 million or 4% over the last quarter and increased $1.3 billion or 25% from the prior year second quarter.
We know that this substantial growth in low cost core deposits will continue to help our net interest income and position us extremely well to reinvest these stable sticky deposits into new loans as we grow.
Total debt securities of $7.2 billion increased $730 million or 11% from the prior quarter and are up $3.4 billion or 92% from the prior year second quarter.
We continue to purchase debt securities with the excess liquidity from the increase in core deposits and the SBA forgiveness of Triple P loans.
Net securities represented 35% of total assets at the end of the quarter compared to 33% last quarter and 30% at the end of 2020.
Okay.
We fully invested excess deposits, taking a cautious approach to new investments given current low rates and risk at some point of deposit outflows and as a result, our targeting a short average life with high quality and highly liquid investments.
The company's net interest margin as a percentage of earning assets on a tax equivalent basis for the current quarter was $3.4 4% compared to 374% in the prior quarter and for 1.2% in the prior year second quarter.
<unk>.
Our core net interest margin.
Was 333% compared to 356% in the prior quarter and for 2.1% in the prior year second quarter.
The core net interest margin decreased due to a decrease in earning asset yields.
Earning asset yields have decreased from the combined impact of the significant increase in the amount of lower yielding debt securities and a decrease in the yield on debt securities and loans.
Debt Securities increased 11% for a $730 million from the prior quarter to 39% of earning assets from 36% in the prior quarter and 32% at the start of the year.
The yield on debt securities ended the quarter at $1, 74% down 21 basis points from the prior quarter.
Fueling the decline in the investment portfolio yield was the addition of over $1 billion of new debt securities in the quarter at a rate of 1%.
The yield on the loan portfolio ended the quarter at 4.7% down 19 basis points from the prior quarter.
We added $1.6 billion in new core loan production with yields around for 1, 5%, which drove down the portfolio yield.
Although our net interest margin continued to experience downward pressure because of adding a substantial amount of new debt securities and loans.
Our net interest income for the quarter less triple P increased $1.9 million in the quarter, while the net interest margin fell.
Our focus continues to be on growing net interest income and for most of this year on our margin will continue to be impacted by the incoming flow of new deposits loan growth Triple P forgiveness in the yield curve.
Non interest expense for the quarter was $100 million, which was an increase of only $3.5 million from the prior quarter.
Noninterest expense less of deferred compensation from originating new Triple P loans was $102 million, which was flat to the last quarter and down and down $1 million from the prior year second quarter.
The minimal expense growth was driven by good expense management by our divisions as they are making do with less as increased hiring takes longer than we expected as the markets get back to normal.
Noninterest income declined to 36 million from $40 million or 11% in the prior quarter.
Due primarily to the reduced gain on sale of residential mortgages, which decreased $5.5 million or 26% from the prior quarter.
Housing market, and refinancings slowed down or better across our footprint gain.
Gain on sale margins were relatively steady in the quarter on our biggest concern in the real estate business remains for supply of homes available for sale.
Core fees, including service charges, and miscellaneous loan fees and charges increased $1.1 million to $17 million or 7% from the prior quarter.
The efficiency ratio was 49, 92% in the current quarter.
<unk> 46, 75% in the prior quarter and 47, 5% for in the prior year second quarter, excluding Triple P. The ratio would've been 50.353 in the current quarter compared to $52.89 in the prior quarter and 53.
92 from.
From the second quarter a year ago.
Our combination with Ulta Bancorp is ex.
Proceeding very well.
We are working closely together on planning for a closing at the end of October and a conversion sometime in the first part of 2022.
I've been very impressed with all for his focus on continuing to serve customers and growing the business.
All of the bank was honored with the Utah Best of State Bank Award for the second consecutive year.
And Glacier Bank was also honored by Bank Director magazine with a top 5 finish in their 2021 ranking of the top performing banks between $5.50 billion.
This is the second consecutive year that glacier at a top 5 finish.
And the Glacier team once again did an outstanding job taking care of our customers, while working hard to get back to normal and grow the business. Their performance continues to set them up far apart from other bankers in their communities and in the industry.
So that ends my formal remarks, and I'd now like Chelan to open the line for any questions that our analysts may have.
Thank you ladies and gentlemen, we have a question at this time please press the star.
On the number 1 on your Touchtone phone. If your question has been answered or you wish to remove yourself from the queue. Please question.
<unk>.
For your first question.
Your first question comes from the line of Jeff <unk> from D. A Davidson.
Thanks, Good morning.
Good morning, Jeff.
Randy maybe I'd just start with just kind of some line item detail. Thank.
Thank you walk through that the.
Our strategy on on liquidity deployment for a while back there.
I guess im kind of looking at expenses.
And the dip in gain on sale I guess, it's kind of 2 part question.
Focused on where you think that expense run rate heads and then.
For the second part is is.
Is there a is there a.
Kind of a tie with the mortgage unit in terms of the variability of that gain on sale down.
$5.5 million expenses being flat granted there's some.
Some other components, there, but just trying to see if I can.
Mortgage wanes.
How that adjusts on the expense side.
Yes no.
We had a lot of discussion about expenses I'm going to ask Ron to cover that.
We were very pleasantly surprised to see on a run rate.
Coming in a little bit less than we expected and.
I think a lot of that is again people doing.
More with less.
Given some of the difficulties in hiring but Ron do you want to touch on expenses.
Scott.
Brian.
Jeff We think the run rate.
No it will be closer to 103.
Can you share granting talk about hiring.
Looking to ramp that up for will have some.
Additional head count net of higher salary, but equally will have more business development center.
<unk> continue on top of the Biz Center.
Continuing on to get back out on the road, we think that that will increase as well, but we think the $130 million.
Appropriate run rate.
Okay.
Could I add.
That's kind of the mortgage expectations for for your group and <unk>.
<unk> kind of mirroring what you think the MBA forecast is.
It's showing.
Yes, Jeff we're still book.
Still think thats a good.
Estimate.
So I think we said down about 25%.
Consistent 20% to 25% consistent with the MBA.
Again, our we have such a short small supply of homes, that's our biggest concern.
So the market continues to do well.
We continue to do well, but.
With this in migration.
There are houses just don't stay on the market very long.
And.
We've I think also.
Kept the builders.
They are building but.
I'd say a much more responsible rate than we saw on the last boom. So thats also contributing to that of a housing shortage.
Okay, and maybe 1 last 1.
This debt non performing asset relationship the 1 big 1 you brought on any any color you could provide us.
What that is how it came on in the position there.
I am going to Tom can cover that we have obviously.
<unk> spent a lot of time on that but Tom can give you a little more detail, yes, Jeff good morning.
It's predominantly 1 relationship it's on AG relationship issues kind of 1 off it's not market driven.
And what were what were showing right now is.
It's adequately secured we're on the process of liquidation so I think over the next.
2 to 3 quarters will be we'll be continuing to monitor it closely but I'm not seeing a significant.
Significant or material loss and the relationship between physical day.
Okay. Thanks, I'll step back.
Your next question comes from the line of Matthew Clark from Piper Sandler.
Hey, good morning, good morning.
Hey, Matthew.
Maybe first just on the core loan growth.
Nice step up here this quarter I think in prior calls you talked about 4% to 6% ex PPP ex <unk>.
Ex alter obviously too.
How do you feel about that range.
For the year.
Yes.
So on a full year basis, we had a very strong quarter.
Like I said, we're very very happy with that we're pretty much right on that 6% on a 2021 basis first and second quarter.
We are sticking to that.
The headwind is excess liquidity, we just keep getting a lot of companies have a lot of cash on the balance sheet, we keep seeing a lot of pay offs, because they're just looking at their liquidity and saying Gee I can keep it in the bank at very low interest rates or I can pay off this.
Alone.
And there we're seeing a fair amount of that so.
We're probably at the higher end of that range, Matthew just given the strength that we see this quarter and given.
Very positive trends.
Go on into the next quarter, but still it's still a little bit of caution just.
With.
The tail end of the pandemic and also this excess liquidity.
The government provides more liquidity the businesses, it's probably going to accelerate that pay off trend.
Okay.
Then the incremental growth that you put on this quarter it looked like <unk>.
Real estate kind of led the way and I think C&I might've been right behind that ex.
PPP can.
Can you give us a sense for the types of projects you're financing have you gotten back into.
A couple of the.
Higher risk.
Segments like hotels and.
Uh huh.
Strong or is it.
More warehouse type of stock industrial type of project.
I'll ask Tom to.
To answer that but.
We are yes, that's a good question.
I think it's to the whole balance sheet strategy and Tom can give you the details on our loans, but bolt on debt securities.
We are on.
Going way out and taking more risk to get yields nor on loans are we stretching to get higher yields were taken the yields we're keeping the quality on bulk duration quality and duration on debt securities and quality on loans, but Tom maybe you can give us some color on the type of business here on that.
<unk>.
We're not we're not seeing any growth in the high risk COVID-19 sensitive industries like hotels and restaurants, not really at all the production and the more the growth predominantly been it's been more on the industrial warehouse.
And kind of mirrors with the in migration that we're seeing we're also seeing some more demand on the on the multifamily side as well, especially on some of our markets where average home prices are quite high while multifamily has become quite popular and.
Absorption rates of existing projects.
Favorable and allowing us to participate on that as well so I would say this last quarter.
Mostly industrial certainly from C&I, we've had some business with an expansion buying some equipment.
That has helped us there and then.
Looking forward I think that will continue in addition, we'll see some multifamily growth as well.
Okay, Great and then just on the reserve I think in prior calls you talked about stabilizing income around 130, what are your updated thoughts on that.
That coverage ratio and whether or not you might be able to dip below it.
Knowing that the.
Underlying assumptions might be better than they were on January 1.2.
<unk> 'twenty.
Yes.
<unk>.
While we don't anticipate really any change from where we are today I mean, we said we set the reserve level this quarter given on what we know on the current economic conditions on our portfolio quality, so barring any.
Any material change in either going forward I think.
That will probably probably stay where were at from a reserve level.
Okay, and then just last 1 for me on.
The amount of loans sold that generated the mortgage gain on sale can you just give us that number so we can back into a gain on sale margin.
Yes so.
Depending on how you measure it.
So I'll give you a number.
Based on loans sold people look at it differently.
Whether it's lock loans to gain but just on loans sold were just about at 4%.
For the quarter.
Okay.
On the volume that you sold I'm just curious.
About $400 million.
Okay. Thank you.
Your next.
Comes from Jackie Bohlen from K B W.
Hey, everyone. Good morning.
And Jackie.
Hey, Dan for some of it open for questions. Thank you.
Index.
Couple questions on China gives them all for you with 1.
But the first 1 being where you sit today.
My first day.
We'd expect to be full employment ahead of that the all cash transaction.
Yes, we have a lot of open positions.
And <unk>.
<unk>.
Been difficult across.
Most of our markets.
Phil fill new positions so.
We're on.
On.
Somewhere around 15% or so.
Maybe a little bit more just.
Lagging, bringing those folks on.
And it's we have 1 market 6 positions open and we've received 6.6 resumes so there.
It's just slow.
Sure you've heard it just getting people to come back into the work force is difficult.
Okay.
And then when I think about the open for the question kind of a 2 part question here on <unk>.
For 1.
What types of physicians or a day and I'm trying to get whether they're more entry level or middle management type business and also.
Obviously, a great deal of expansion for you, but well, bringing on those new folks into the organization and potentially be able to fill open positions for how this might be the place.
Yes.
Openings are spread out across the organization.
And Alta.
Believe has really got some very very strong people, we've been really impressed with the quality of the team and yes, we expect and we're still on the process of having discussions with them, but we expect that many.
Of the folks certainly most of the folks there as you know with our model there won't be any change we buy good banks in good markets with good people and we just want to have them continue to keep doing what they're doing.
At the staff level at all does probably maybe more where your question is the operating folks in the branches. There is really no no change the staff people.
Most of those continue to keep doing what they're doing but there are some of the leadership positions. There that would be we think will be a great fit for our organization. So we're we're very excited about that aspect of the transaction.
Okay.
And then 100 million.
Million number that you spoke about Ron just wondering.
Hi on.
The challenge is that it is bringing people over to hire is it fair to assume that you wouldn't see that immediate bump up between <unk> and <unk> that it could take some time to layer on as you work to fill positions.
Well Jackie will take time, but we.
We have hired some people in the second quarter that will start to show up in the third for that's where I'm coming from what I would say that additional hiring.
It's not.
We're always looking for talent.
We have been able to hire Randy reported.
The open positions that we have been able to fill some of those certainly during the second quarter.
That will ramp up more on the third quarter net.
Okay.
Okay, great. Thank you very much.
Yes, Jackie just on that.
Back to the open positions.
Actually closer to 5% not 10% so we're.
Take the total across all 16 divisions.
Right now closer to about 5% opening.
Okay.
Thank you for clarifying yes, you bet.
Your next question comes from the line of Brandon <unk> from <unk> Securities.
Hey, good morning, good morning, Brandon.
So Randy I know on your prepared remarks, you mentioned in migration trends in your footprint and I wanted to know are you seeing any slowing on the immigration or even an acceleration and also just wanted to.
Get your sense of how long you think that dynamic could play out with a sustainable over.
Next year or years to come.
Yeah.
We've.
Talking to all of the divisions, we have not seen a letup in the in migration.
It continues.
Bolton buying buying.
Buying current homes.
And also.
A fair amount of our construction lending is to people outside the market. So there.
Getting.
Planning afoot in the market and building.
So thats.
It's really hasnt changed at all in terms of sustainability.
We.
We expect it to wane a bit as more of our markets normalize, but we just don't know for sure actually we actually thought we would see a little bit above.
A tailing off of that trend in the second quarter, but it just continued really unabated in unchanged. So.
We would just expect as people Dan migration.
Things normalize across all the markets in the country, maybe it will tail off a little bit, but it's still it's still unknown at this point.
Okay.
And kind of on that trade on our core deposit growth was strong and I was wondering is that coming from existing customers or is it also coming from some of this in migration in new customer acquisition.
Yeah really coming from both.
And I should just point out before the pandemic we were experiencing.
Experiencing good in migration pandemic, just accelerated significantly so even if it tailed off a little it's still going to be above the U S. Average, it's just a matter of degree.
In terms of the new deposits, yes, that's both existing customers.
With the excess liquidity on.
New customers, so I talked about the the.
3000, new customers that we picked up.
Part of the Triple P for getting new loan business with them and with that is coming more deposits and then also this in migration, so and a lot of our markets, where the bigger bank in the market with a great reputation rated as the best bank in the market in many of our <unk>.
<unk> and so we're naturally then attracting new people come into the market and ask what we should I bank with many times are our name comes up and so we're we're picking up a good amount of that business.
Okay.
And just lastly, I know gain on sale margins have compressed over the last couple of quarters.
The plan still to hold more residential loans on the balance sheet going forward.
Yeah.
Well.
That's a dynamic on the demand.
On the first quarter.
A bit of.
Run off their second quarter a lot less.
Probably going to see the portfolio remains stable for the most part.
For this year.
Although possibly possibly grow a bit but.
Most of our activity will be on.
On creating saleable loans on selling those.
Okay and are you seeing any less compression on gain on sale margins or is that still.
Starting to see a little bit of pressure there.
So, we'll just see how that pans out on the quarter we ended.
We ended the quarter around 4%.
Probably going to be.
Theres, a little more price competition, starting to occur in some markets and so that could we could see a little pressure there.
Okay. Thanks for it.
The assets.
Youre welcome.
Ladies and gentlemen, once again for you for a question. Please press star 1 on your telephone keypad once again that is star 1.
Your next question comes from the line of Tim Coffey from Janney.
Great. Thanks, Good morning, Randy.
Warmington, Hey, this kind of a follow up on the migration on the housing trends do you have info on <unk>.
Mortgage lock quarter to date, and how that relates to the previous quarter at this point in time.
Yes.
Locks are.
Still pretty strong.
So for the quarter.
Let's see I think we locked in.
$350 million this quarter.
Was down.
From last quarter and Thats part of what you saw on the reduced gains because as you know the accounting we locked for game and when we book the gain when we locked for loan.
Right.
Does the pace of the locks looking this quarter so far.
They're down.
So we're we're still above pre pandemic levels.
But.
We're.
We're seeing a little little reduction there, but still.
Still stronger than we expected coming into this quarter.
We're coming into the next quarter.
Sure Okay.
Were you surprised that mortgage was down as much as it was in the quarter I know youre tracking it was in line with the MBA survey.
In migration has sandy your footprint.
Al.
No because like I said, it's really supply.
A fair or we see more and more of our locks TBD, so theyre locking in getting a pre qual.
<unk>.
They are want to move quickly about house does.
Presented itself.
<unk>.
So yes, the in migration continues but properties they're reasonably priced.
To the market are lasting a couple of weeks in there and they are being purchased so there is.
On the inventory of homes is is down very low so that's.
Thats, our biggest pressure point right now.
Okay.
And then just on the on balance sheet liquidity per se. It stays on there longer than you expect in <unk>.
Turning to grow given how good you guys are growing deposits.
And you don't stretch for credit what other levers do you have to pull to absorb some of that liquidity.
Yes.
Sure.
Go into the loan portfolio I'll, just reiterate obviously strongly prefer loans.
But in the meantime gross.
For a very stable sticky deposits as Randy had mentioned.
We'll continue to focus on.
Growing our net interest income.
Yes.
Said differently, we're very poised for higher rate.
Especially with the non interest bearing debt.
Great way to mitigate.
Interest rate risk as the yield curve start to steepen again.
So we're.
Don't fight the fed don't fight for market share.
That would take the relationship and continue to build on that.
Okay, great. Thanks, Brian those are all my questions I appreciate your time.
Youre welcome.
Yes.
At this time there are no further questions I would like to turn it back to the speakers for any further comments.
Alright.
Well again, we appreciate everybody dialing in and are in the middle of the summer. We know you've got a lot of activities on a Friday. So we really appreciate you dialing in.
We hope everybody has a terrific weekend. Thank you again.
Thank you. This concludes today's call for US you may now disconnect.
[music].
[music].
Good morning, ladies and gentlemen, and welcome to the Glacier Bancorp second quarter earnings Conference call. At this time, all participants are in a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone phone as a reminder, this conference is being recorded I would now like to turn the conference over to Randy Chesler, President and CEO of Glacier Bancorp. Please go ahead, Sir alright.
Thank you so on and good morning, and for the group and thank you for joining us today.
Here with me here in Kalispell. This morning is Ron Copher, our Chief Financial Officer, Don Chery, Our Chief administrative officer, Angela dose, our Chief Accounting Officer, Byron Pollan, our treasurer, and Tom Dolan, our chief credit administrator.
We finished the second quarter of 2021 pleased to see our divisions, showing strong loan and deposit growth.
Our markets are all beginning to show more strength as the national economy continues to recover and the summer season kicks into high gear.
I'll touch on the business highlights and then provide some additional observations on the quarter.
We generated net income of $77.6 million, an increase of $14.2 million or 22% over the prior year second quarter net income up $63.4 million.
Diluted earnings per share were <unk> 81.
An increase of 23% from the prior year second quarter diluted earnings per share of <unk> 66.
On the loan portfolio, excluding payroll protection program loans increased $249 million or 10% annualized in the current quarter and increased $517 million or 5% from the prior year second quarter.
Core deposits increased $669 million or 17% annualized during the current quarter and increased $3.4 billion or 26% from the prior year second quarter.
Nonperforming assets as a percentage of subsidiary assets was 26 basis points, which compared to 19 basis points in the prior quarter and 27 basis points in the prior year second quarter.
Early stage delinquencies totaled $12.1 million or 11 basis points of loans and decreased $32.5 million from the prior quarter of 40 basis points of loans and decreased $13.1 million from the prior year second quarter of 22 basis.
Points of loans.
Our credit loss benefit of $5.7 million reflected the improvement in our loan portfolio and economic forecast.
Non interest expense was 100 million, which.
Creased, only $3.5 million or 4% compared to the prior quarter and increased $5.3 million or 6% from the prior year second quarter <unk>.
Excluding deferred compensation from originating Triple P loans.
Total non interest expense was $102 million for the current and prior quarter compared to $103 million in the prior year second quarter.
We declared a quarterly dividend of <unk> 32 per share an increase of a penny per share or 3% over the prior quarter regular dividend and the company has declared 145 consecutive quarterly dividends and has increased the dividend 48 times.
Overall, the glacier team delivered a strong quarter and wasted no time getting back to business.
In migration of new residents into our 8 state footprint continued in the second quarter. In addition for summer season tourist season kicked off as well.
<unk> have increased activity were visible everywhere.
Many hotels had no vacancy sign lift for weeks and are raising prices to control demand rental cars are tough defined rare.
The restaurants are packed and many national parks are again experiencing record crowd.
Residential real estate prices continue to increase in the inventory of available homes for sale is very low.
We saw solid loan growth on our Mark markets, with Montana, Wyoming, and Nevada, leaving the growth across our 8 state footprint with all markets growing $249 million or 10% annualized excluding triple P loans.
We were pleased to see that almost all of the loan growth came from commercial real estate and C&I loans.
We continue to build on the 3000, new customer relationships, we picked up as part of round 1 of Triple P with about $65 million of this quarter's commercial loan volume coming from this group.
All of this growth is even more impressive when you consider that the glacier team originated over 5500 regular loans and over 900 Triple P loans, along with processing Triple P loan forgiveness.
We had a new loan production record in the second quarter with over $1.6 billion in new loans.
We still have some growth headwinds with borrowers using excess liquidity to pay down loans and the increasing level of competition for new business.
That being said, we entered the third quarter of the year with very good momentum and over $140 million of unfunded new construction loans.
During all of this we still believe our target of 4% to 6% growth for the full year is reasonable.
Core deposit growth was incredibly strong across our footprint driven by excess customer liquidity due to the unprecedented unprecedented government stimulus lack of spending due to the pandemic and our success in establishing new deposit relationships.
Core deposits increased $669 million and at the end of the quarter totaled $16.7 billion and most importantly at a cost of 7 basis points down 1 basis point from the prior quarter and down 7 basis points from the end of the quarter a year ago.
Non interest bearing deposits increased $267 million or 4% over the last quarter and increased $1.3 billion or 25% from the prior year second quarter.
We know that this substantial growth in low cost core deposits will continue to help our net interest income and position us extremely well to reinvest these stable sticky deposits into new loans as we grow.
Total debt securities of $7.2 billion increased $730 million or 11% from the prior quarter and are up $3.4 billion or 92% from the prior year second quarter.
We continue to purchase debt securities with the excess liquidity for me, increasing core deposits and the SBA forgiveness of Triple P loans.
Net securities represented 35% of total assets at the end of the quarter compared to 33% last quarter and 30% at the end of 2020.
We fully invested excess deposits, taking a cautious approach to new investments given current low rates and risk at some point of deposit outflows and as a result, our targeting a short average life with high quality and highly liquid investments.
The company's net interest margin as a percentage of earning assets on a tax equivalent basis for the current quarter was 344% compared to 374% in the prior quarter and for 1.2% in the prior year.
<unk> quarter.
Our core net interest margin.
Was 333% compared to 356% in the prior quarter and for 2.1% in the prior year second quarter.
The core net interest margin decreased due to a decrease in earning asset yields.
Earning asset yields have decreased from the combined impact of the significant increase in the amount of lower yielding debt securities and a decrease in the yield on debt securities and loans.
Debt securities increased 11% or $730 million from the prior quarter to 39% of earning assets from 36% in the prior quarter and 32% at the start of the year.
The yield on debt securities ended the quarter at 174% down 21 basis points from the prior quarter.
Fueling the decline in the investment portfolio yield was the addition of over $1 billion of new debt securities in the quarter at a rate of 1%.
The yield on the loan portfolio ended the quarter at 4.7% down 19 basis points from the prior quarter.
We added $1.6 billion in new core loan production with yields around for 1, 5%, which drove down the portfolio yield.
Although our net interest margin continued to experience downward pressure because of adding a substantial amount of new net securities and loans.
Our net interest income for the quarter less triple P increased $1.9 million in the quarter, while the net interest margin fell.
Our focus continues to be on growing net interest income and for most of this year on our margin will continue to be impacted by the incoming flow of new deposits loan growth Triple P forgiveness in the yield curve.
Non interest expense for the quarter was $100 million.
Which was an increase of only $3.5 million from the prior quarter.
Noninterest expense less of deferred compensation from originating new Triple P loans was $102 million, which was flat for the last quarter and down and down $1 million from the prior year second quarter.
The minimal expense growth was driven by good expense management by our divisions as they are making do with less as increased hiring takes longer than we expected as the markets get back to normal.
Non interest income declined to 36 million from $40 million or 11% in the prior quarter.
Due primarily to the reduced gain on sale of residential mortgages, which decreased $5.5 million or 26% from the prior quarter.
Housing market and refinancings slowed down a bit across our footprint gain.
Gain on sale margins were relatively steady in the quarter on our biggest concern in the real estate business remains for supply of homes available for sale.
Core fees, including service charges, and miscellaneous loan fees and charges increased $1.1 million to $17 million or 7% from the prior quarter.
The efficiency ratio was 49, 92% in the current quarter.
<unk> 46, 75% in the prior quarter and 47.5 for in the prior year second quarter, excluding Triple P. The ratio would have been 50.353 in the current quarter compared to $52.89 in the prior quarter and 53.
92.
From the second quarter a year ago.
Our combination with all of the Bancorp is ex <unk>.
Proceeding very well.
We are working closely together on planning for a closing at the end of October and a conversion sometime in the first part of 2022.
I've been very impressed with all of his focus on continuing to serve customers and growing the business.
All of the bank was honored with the Utah Best of State Bank Award for the second consecutive year.
And Glacier Bank was also honored by Bank Director magazine with a top 5 finish in their 2021 ranking of the top performing banks between 5% and 50 billion.
This is the second consecutive year that glacier at a top 5 finish.
On the Glacier team once again did an outstanding job taking care of our customers, while working hard to get back to normal and grow the business. Their performance continues to set them on far apart from other bankers in their communities and in the industry.
So that ends my formal remarks and I'd.
Now like Chelan to open the line for any questions that our analysts may have.
Thank you ladies and gentlemen, if you have a question at this time please press the star.
Then the number 1 on your Touchtone phone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound.
1 moment for your first question.
Your first question comes from the line of Jeff <unk> from D. A Davidson.
Thanks, Good morning.
Good morning, Jeff.
Randy maybe I'd start with just kind of some line item detail. Thank.
Thank you walk through that strategy.
Our strategy on on.
Liquidity deployment very well there.
I guess im kind of looking at expenses.
And the dip in gain on sale I guess, it's kind of 2 part question.
Focused on where you think that expense run rate heads and then.
For the second part is is.
Is there a is there a.
Kind of a tie with the mortgage unit in terms of the variability of the gain on sale down.
$5.5 million expenses being flat granted there's some some other components there, but just trying to see if I can if that.
Mortgage wanes.
How that adjusts on the expense side.
Yes no.
We had a lot of discussion about expenses I'm going to ask Ron to cover that.
We were very pleasantly surprised to see on a run rate.
Coming in a little bit less than we expected and I.
I think a lot of that is again people doing.
More with less.
Given some of the difficulties in hiring but Ron do you want to touch on expenses.
Pat.
Brian.
We think the run rate.
No it will be closer to 103.
You heard Randy talk about hiring.
Looking to ramp that up that will have some.
Additional head count that have higher salaries, but equally will have more business.
<unk> Center.
Team continuing to talk to the business.
Continuing on and get back out on the road, we think that that will increase as well, but we think the $130 million.
Appropriate run rate.
Okay.
Could I add.
That's kind of the mortgage expectations for for your group and is that kind of nearing what you think for NBA forecast is.
It's showing.
Yes, Jeff we're still we still think Thats a good.
Estimate.
So I think we said down about 25% consistent.
Consistent 20% to 25% consistent with the MBA.
Again.
We have such a short small supply of homes, that's our biggest concern.
So the market continues to do well.
We continue to do well, but.
With this in migration there the houses just don't stay on the market very long and.
I think also.
Kept the builders.
They are building but.
I would say much more responsible rate than we saw on the last boom. So that's also contributing to that of a housing shortage.
Okay, and maybe 1 last 1.
This fall that nonperforming assets relationship for 1 big 1 you brought on any any color you could provide us too.
What that is how it came on in and our position there.
Yes, I'm going to Tom can cover that we've obviously.
<unk> spent a lot of time on that but Tom can give you a little more detail, yes, Jeff good morning.
It's predominantly 1 relationship it's on AG relationship issues kind of 1 off it's not market driven.
And what were showing right now is.
It's adequately secured where on the profit for liquidation so I think over the next.
2 to 3 quarters will be we'll be continuing to monitor it closely but im not saying on that.
A significant or material loss and the relationship already doesn't fulfill day.
Okay. Thanks, I'll step back.
Your next question comes from the line of Matthew Clark from Piper Sandler.
Hey, good morning good.
Good morning, Matthew.
Maybe first just on the core loan growth.
Nice step up here this quarter I think in prior calls you talked about 4% to 6% ex PPP ex <unk> ex Alta obviously too.
How do you feel about that range.
For the year.
Yes.
So on a full year basis, we had a very strong quarter.
Like I said, we're very very happy with that.
We're pretty much right on that 6% on a 2021 basis first and second quarter.
We are sticking to that.
On the headwind is excess liquidity and we just keep getting a lot of companies have a lot of cash on the balance sheet, we keep seeing a lot of pay offs, because they're just looking at their liquidity and saying Gee I can keep it in the bank at very low interest rates or I can pay.
Off this loan.
And there we're seeing a fair amount of that so.
We're probably at the higher end of that range, Matthew just given the strength that we see this quarter and given.
Very positive trends.
Going into the next quarter, but still still a little bit of caution just.
With.
The tail end of the pandemic and also this excess liquidity.
The government provides more liquidity businesses, it's probably going to accelerate that pay off trend.
Okay, and then the incremental growth that you put on this quarter. It looked like commercial real estate kind of led the way and I think C&I might've been right behind that ex PPP can you give us a sense for the types of projects you're financing have you gotten back into.
A couple of the.
Higher risk.
<unk> like hotels and and.
Restaurants or is it.
More warehouse type of staff industrial type of project I'm going to ask Tom.
To answer that but.
We are yes, that's a good question.
And I think it's to the whole balance sheet strategy and Tom can give you the details on our loans, but bolt on the debt securities.
We are on.
Going way out and taking more risk to get yields nor on loans are we stretching to get a higher yield were taken the yields we're keeping the quality on bulk duration quality and duration on debt securities and quality loans, but Tom maybe you can give me some color on the type of business here.
<unk>.
We're not we're not seeing any growth in the high risk COVID-19 sensitive industries like hotels and restaurants, not really at all the production and the more on the growth predominantly been it's been more on the industrial warehouse.
It kind of mirrors the end migration that we're seeing we're also seeing some more demand on the on the multifamily side as well, especially on some of our markets where average home prices are quite high while multifamily has become quite popular and.
Short term rates of existing projects.
Favorable and allowing us to participate on that as well so I would say this last quarter.
Mostly industrial certainly some C&I or we've had some business with an expansion buying some equipment.
And that has helped US there and then looking forward I think that will continue in addition, we'll see some multifamily growth as well.
Okay great.
And then just on the reserve I think in prior calls you talked about stabilizing income around 131.
Of your updated thoughts on that.
Coverage ratio and whether or not you might be able to dip below it.
Knowing that the.
Underlying assumptions might be better than they were on January 1.2.
<unk> 'twenty.
Yes.
<unk>.
While we don't anticipate really any change from where we are today I mean, we said we set the reserve level. This quarter again on what we know on that.
Currently economic conditions on our portfolio quality, so barring any any material change in either going forward I think.
We'll probably probably stay where were at from a reserve level.
Okay, and then just last 1 for me on.
The amount of loans sold that generated the mortgage gain on sale can you just give us that number so we can back into a gain on sale margin.
Yeah. So.
Depending on how you measure it.
So I'll give you a number.
Based on loans sold people look at it differently.
Whether it's lock loans to gain but just on loans sold.
We're just about at 4%.
For the quarter.
Okay.
And do you have to handle the volume that you sold I'm, just curious about $400 million.
Okay. Thank you.
Your next question comes from Jackie Bohlen from K B W.
Hey, everyone. Good morning, good morning, Jackie.
For some of it open for questions.
Index.
On a couple of questions I'll try not to give them all for you at once.
First 1 being where you sit today first day.
You would expect to be full employment ahead of that the altra transaction.
Yes, we have a lot of open positions.
And.
Hiring is.
It's been difficult across.
Most of our markets.
Phil Phil New position so.
We're on.
On.
Somewhere around 15% or so.
Maybe a little bit more just.
Lagging, bringing those folks on.
And it's we have 1 market 6 positions open and we've received 6.6 resumes so there.
It's just slow.
Sure you've heard it just getting people to come back into the work force is difficult.
Okay.
And then when I think about the open for questions kind of a 2 part question here.
For 1.
What type of physicians are a day and I'm trying to get whether they're more entry level or middle management type business and also.
The net I'll go up obviously, a great deal of expansion for you, but well, bringing on those new folks to the organization and potentially be able to fill some positions for how this might be the place.
Yes.
Openings are spread out across the organization.
And Alta.
Believe has really got some very very strong people, we've been really impressed with the quality of the team.
We expect and we're still on the process of having discussions with them, but we expect that many.
Of the folks certainly most of the folks there as you know with our model there won't be any change we buy good banks in good markets with good people and we just want to have them continue to keep doing what they're doing.
At the staff level at all does probably maybe more where your question is the operating folks in the branches. There is really no no change the staff people.
Most of those continue to keep doing what they're doing but there is some of the leadership positions. There that would be we think will be a great fit for our organization. So we're we're very excited about that aspect of the transaction.
Okay.
And then 100 million.
Million number that you spoke about.
On just wondering.
Hi on.
The challenges and it is bringing people over to hire is it fair to assume that you wouldn't see that immediate bump up between QQ and <unk> that it could take some time to layer on as you look to fill positions.
Well Jackie will take time, but we.
<unk> hired some people in the second quarter net Darko.
Dr for sure.
So that's where I'm coming from what I would say that additional hiring.
It's not.
We're always looking for talent.
We have been able to hire Randy reported.
For the open position. So we have been able to fill some of those certainly during the second quarter.
That will ramp up more in the third quarter then.
Okay.
Okay, great. Thank you very much.
Yes, Jackie just on that.
Back to the open positions.
Actually closer to 5% not 10% so we're.
Take the total across all 16 divisions.
Right now closer to about 5% opening.
Okay.
Thank you for clarifying yes, you bet.
Your next question comes from the line of Brandon <unk> from <unk> Securities.
Hey, good morning, good morning, Brandon.
Hey, So Randy I know on your prepared remarks, you mentioned in migration trends in your footprint.
I wanted to know are you seeing any slowing on the immigration or even an acceleration and also just wanted to.
Good share thing so how long do you think that dynamic play out for sustainable over.
Next year, you're going to come.
Yes.
We've talking to all of the divisions, we have not seen a let up in the in migration.
It continues.
Bolton buying buying.
Buying current homes.
And also.
A fair amount of our construction lending is to people outside the market. So they're.
Getting up.
Planning a foot in the market and building.
So thats.
Thats really hasnt changed at all in terms of sustainability.
We.
We expected to wane a bit as more of our markets normalize, but we just don't know for sure actually we actually thought we'd see a little bit about.
A tailing off of that trend in the second quarter, but it just continued really unabated in unchanged. So.
We would just expect as people day in migration.
If things normalize across all the markets in the country, maybe it will tail off a little bit, but it's still it's still unknown at this point.
Okay.
And kind of on that trade on our core deposit growth was strong again and I was wondering is that coming from existing customers or is it also coming from some of this in migration in new customer acquisition.
Yeah really coming from both.
And I should just point out before the pandemic we were experiencing.
Experiencing good in migration pandemic, just accelerated significantly so even if it tails off a little it's still going to be above the U S. Average, it's just a matter of degree.
Of the new deposits, yes, that's both existing customers.
With the excess liquidity.
New customers, so I talked about the.
3000, new customers that we picked up.
Part of the Triple P. We're getting new loan business with them and with that is coming more deposits and then also others in migrations, so and a lot of our markets, where the bigger bank in the market with a great reputation rated as the best bank in the market in many of our <unk>.
And so we're naturally then attracting new people come into the market and ask what we should a bank with many times are our name comes up and so we're we're picking up a good amount of that business.
Okay.
And just lastly, I know gain on sale margins have compressed over the last couple of quarters and is the plan still to hold more residential loans on the balance sheet going forward.
Well.
That's a dynamic on the demand.
The first quarter.
We had quite a bit of.
We're on off their second quarter a lot less.
Probably going to see the portfolio remains stable for the most part for.
For this year.
Okay.
Oh, absolutely, yes, possibly grow a bit but.
Most of our activity will be on.
On creating saleable loans and selling those.
Okay and are you seeing any less compression on gain on sale margins or is that still.
Starting to see a little bit of pressure there.
So, we'll just see how that pans out on the quarter.
Ended.
We ended the quarter around 4%.
Probably going to be.
There is a little more price competition starting to occur in some markets and so that could we could see a little pressure there.
Okay.
For answers.
Youre welcome.
Ladies and gentlemen, once again for a question. Please press star 1 on your telephone keypad once again that is star 1.
Your next question comes from the line of Tim Coffey from Janney.
Great. Thanks, Good morning, Randy.
Warmington, Hey, this kind of a follow up on the migration on the housing trends do you have info on <unk>.
Mortgage lock quarter to date, and how that relates to the previous quarter at this point in time.
Yes.
Locks are.
Still pretty strong.
So for the quarter.
Let's see I think we locked in.
$350 million this quarter.
Was down from last quarter and Thats part of what you saw on the reduced gains because as you know the accounting we locked for gain and when we book the gain when we lock for alone.
And how does the pace of the locks looking this quarter so far.
They are down.
So we're we're still above pre pandemic levels.
But.
We're.
We're seeing a little little reduction there, but still.
Still stronger than we expected coming into this quarter on.
Coming into the next quarter share.
Okay.
Were you surprised that mortgage was down as much as it was in the quarter I know youre tracking it was in line with the MBA survey.
And migration has sandy or footprint.
No because like I said, it's really supply.
On.
On a fair or we see more and more of our locks TBD, so theyre locking in getting a pre qual.
On.
Because they are want to move quickly of our house does.
Present itself.
Yes, the in migration continues but properties.
Sure.
Reasonably priced.
For the market are lasting a couple of weeks in there and they are being purchased so there is.
On the inventory of homes is is down very low. So that's that's our biggest pressure point right now.
Sure Okay.
And then just on the on balance sheet liquidity per se it stays on there longer than you expect.
Continue to grow given how good you guys are growing deposits.
And you don't stretch for credit.
What other levers do you have to pull to absorb some of that liquidity.
Yes.
GAAP.
Go into the loan portfolio.
Right now obviously, we strongly prefer loans.
But in the meantime, those are very stable sticky deposits as Randy had mentioned.
We will continue to focus on growing.
Growing our net interest income.
Yeah.
Said differently, we're very poised for higher rate.
Especially with the noninterest bearing.
Great way to mitigate.
Interest rate risk as the yield curve start to steepen again.
So we're.
Don't fight the fed don't fight for market share.
Kind of take the relationship.
Continue to build on that.
Okay, great. Thanks, Ron those are all my questions I appreciate your time.
Youre welcome.
At this time there are no further questions I would like to turn it back to the speakers for any further comments.
Alright.
Well again, we appreciate everybody dialing in and are in the middle of the summer. We know you've got a lot of activities on a Friday. So we really appreciate you dialing in.
We hope everybody has a terrific weekend. Thank you again.
Thank you. This concludes today's call price you may now disconnect.