Q3 2021 Glacier Bancorp Inc Earnings Call
[music].
Thank you for standing by and welcome to the Glacier Bancorp third quarter earnings Conference. At this time, all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded she didn't require any further assistance. Please press star zero I would now like to hand, the conference over to your host CEO of Glacier Bancorp.
After that Randy Chesler. Please go ahead, alright, Thank you Latif and good morning, and thank you for joining us today.
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.
Corp, and Tom Dolan, our chief credit administrator.
We closed out the third quarter encouraged by our loan growth, which came on strong in the later part of the year.
We think our company footprint covers some of the best growth markets in the country and it's great to see those markets showing.
<unk> continued signs of increasing activity.
Our people and our unique business model. Once again produced very strong results in all of our divisions across the west.
So I'll touch on some business highlights first and then provide some additional thoughts on the quarter.
The loan portfolio, excluding payroll protection program loans had strong growth of $382 million or 14% annualized loan portfolio grew $711 million or 9% annualized from the beginning of the year.
Core deposits continue.
Going to the flow into our divisions growing $742 million or 18% during the quarter and growing two 7 billion or 25% annualized from the beginning of the year.
Net income for the first nine months of the year was 234.
Yes.
An increase of $50 million or 27% from $185 million in the first nine months of the prior year.
Pretax pre provision income was $285 million for the first nine months of the current year and an increase of 18.
$4 million or 7% compared to the $266 million in the prior year first nine months.
Net interest income excluding triple P loans in the current quarter was $154 million, an increase of $4 6 million or three.
<unk> from the prior quarter.
Net interest income excluding triple P loans for the first nine months of the current year was $452 million in.
An increase.
$2 5 million or 5% over the same period in the prior year.
Our efficiency ratio for the current quarter was 51, 7% excluding triple P loans the efficiency ratio was 50, 359% compared to 50, 353% in the prior quarter.
Nonperformer.
Farming assets of $51 2 million as of current quarter and decreased $1 9 million or 4% from the prior quarter.
NBA to assets ended the quarter at 24 basis points.
Net charge offs to average loans was two basis.
<unk> points for the current year to date period compared to three basis points in the prior year same period.
And we declared a quarterly dividend of <unk> 32, a share. The company has declared 146 consecutive quarterly dividends and has increased the dividend 48 times.
We saw excellent loan growth in all markets with Wyoming, Arizona, and Idaho, leading the growth across our eight state footprint.
All markets growing a total of $382 million or 14% annualized excluding triple P loans.
I was pleased to see that almost all of the growth came from commercial real estate.
New loan production for the quarter was strong with over one 6 billion in new loans originated.
We continue to deepen the relationship with the 3000 new customer.
<unk>, we picked up as part of round, one triple P with over $400 million in loans made to this group so far.
We now have about $370 million of around one into triple P loans still on the books out of a total of over $2 billion that we originated.
Custom started in 2020.
As I noted last quarter, we still have some growth headwinds with borrowers using excess liquidity to pay down loans and the increasing level of competition for new business. We.
We continue to stick to our disciplined lending and risk management.
<unk> disease, and generally seen most of the players in our markets still avoiding a race to the bottom on credit.
We see price competition, continuing to heat up for the best loans.
That being said, we are very happy to enter the fourth quarter of the year with very good momentum and a very strong.
Strategy pipeline of new loans.
Considering all of this our original target of 4% to 6% full year growth for 2021, excluding triple P is more likely to be closer to 8% to 10% when we close out the year.
Core deposit growth continues to be surprised.
Strong between really strong across our footprint driven by excess customer liquidity due to the unprecedented government stimulus lack of spending due to the pandemic.
And our success in establishing new deposit relationships.
Core deposits increased 742 million.
Prior to the end of the quarter and totaled over 17 billion. Most importantly, the core deposits have a cost of six basis points down one basis point from the prior quarter and down seven basis points from the quarter a year ago.
Noninterest bearing deposits increased.
I think other than $25 million or 5% over the last quarter and increased $1 2 billion or 21% from the prior year third quarter.
Noninterest bearing deposits are now 38% of core deposits.
Total debt securities.
Teresa of eight 5 billion increased $1 3 billion or 19% from the prior quarter.
And are up $4 2 billion or <unk>, 97% from the prior year third quarter.
We continue to purchase debt securities with the excess liquidity from the increase.
<unk> core deposits and the SBA forgiveness of Triple P loans.
Debt Securities represented 40% of total assets at the end of the quarter compared to 35% last quarter and 30% at the end of 'twenty.
24% a year ago.
Kris and we will continue to fully invest excess deposits buying highly liquid and high quality investments with shorter duration, given current low but increasing rates with a plan of putting these deposits to work as we continue to grow.
The company's net interest margin.
<unk> as a percentage of earning assets on a tax equivalent basis for the current quarter was $3 three 9% compared to 344% in the prior quarter and $3 92 in the prior year third quarter.
The core net interest margin was three.
One 7%.
Compared to 333 in the prior quarter and 4.02 in the prior year third quarter.
Earning asset yields have decreased from the combined impact of the significant increase in the amount of debt securities and the decrease in yields.
On bolt securities and core loans.
The yield on debt securities ended the quarter at 162%.
Thats down 12 basis points from the prior quarter.
Fueling the <unk>.
Klein and <unk>.
In the investment portfolio yield was the addition.
<unk> of over $1 billion of new debt securities in the quarter at a rate of around 1%.
The yield on the loan portfolio ended the quarter at 486% down 16 basis points from the prior quarter, we added $1 6 billion in new core loan production.
<unk> with yields around four 1%, which drove the total loan portfolio yield down.
Given the interest rate environment, our focus continues to be on growing net interest income, which for the quarter increased $4 6 million less triple P.
Non interest income of $34 $8 million declined about 700000 or 2% from the prior quarter due primarily to the reduced gain on sale from residential mortgages, which decreased $2 2 million or 14% from the prior quarter.
Order, the hot housing market and refinancings slowed down a bit across our footprint. Our biggest concern in the real estate business remains the supply of homes available for sale.
The efficiency ratio was 51, 7% in the current quarter.
<unk> 49, 92% in the prior quarter and 48 five in the prior year third quarter.
Excluding triple P. The ratio would've been 50, 359% in the current quarter compared to 50 353 in the prior quarter.
And 50 points.
Five one in the third quarter a year ago.
And tangible book value per share increased in the quarter from $18 74 to $19 11.
Or 2%.
Our combination with all to Bangkok.
<unk> Corp is proceeding very well.
We closed the transaction October one a.
Four months earlier than planned as we received all regulatory approvals sooner than expected.
I've been very impressed with the <unk> with the <unk> teams focus.
Continuing to serve customers and growing the business.
We continue to work closely with all of <unk>.
Planning for our core processing conversion in March of 2022.
Alta is a very good technology platform and we are studying many products that may be a good.
Fit for our other divisions.
I've received a lot of questions about M&A since a number of the recent <unk> were announced.
And while we see the MLR banks embracing a new strategy, we intend to stick to our disciplined disciplined approach on M&A that has proven.
And to be successful for us.
Our focus today is on all of them and we want to make sure. We fully completed our immigration before we look for another transaction given the strong EPS accretion that also will produce for glacier remember this transaction produces almost the same EPS as our last.
Five transactions combined.
The glacier team accomplished a lot in the third quarter, while we are still dealing with COVID-19 in many markets. The team achieved great results.
The loan growth, we experienced in the quarter was great to see and we.
We think we're very well positioned to close out to 2021 strong and be well positioned to continue to grow in 2022.
So that ends my formal remarks, I'd now like Latif to open the line.
And for any questions our analysts may have.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of.
Jeff.
D. A davidson your question please.
Yes, good morning.
And Jeff.
Just a few questions on on also focused on that.
And maybe the first one for Tom just.
Trying to get a sense for as you get under the Hood a bit more.
Kind of the health of the portfolio given the bank had.
<unk> done some sort of pre pandemic pruning and just get a sense for as you get your arms around that portfolio in detail.
The.
Other credit profile.
Meshes with with Glacier.
Sure Jeff.
The portfolio, we're very pleased with.
The pruning they did pre pandemic proved to be a successful strategy for them and they are continuing to show that through their asset quality metrics, which as of today.
At the end of the quarter were 15 basis points NPA and continues to show positive trends. So.
While we are seeing so far.
We're very pleased with and I think that was accomplished largely because our two are two critical cultures were very similar.
So.
Thus far they have been able to fold in quite easy with deflation.
Great and.
Off that base Randy.
I think the idea at Alta was had done that pruning and then they were turning to growth in St.
Same question I guess as you.
As you engage with that team a bit more kind of the growth potential of <unk>.
The debt.
Kind of warm.
Just to kind of give us an update on your latest thoughts.
Yeah, No. We've spent a lot of time in Utah, we all have with the team.
They're doing a great job focusing on their customers.
Taking some of the products and services and bigger balance.
<unk> sheet that we offer and getting out to their customers.
And we've seen against the backdrop of a market that's very strong.
Still believe a lot of those long term growth trends that make.
Utah, the number one growth market in the country.
<unk> number one economic.
Our economy on a lot of fronts.
They are incredibly well positioned to take advantage of that they've got a very good team in place in all the right markets. So.
We've seen that.
We've seen the results of that.
As we've.
Brought them onboard and I think they are very well positioned for 'twenty two.
Great and maybe a last one a little more mechanical.
For Ron just on the.
Expense.
Brian if you've got a general idea.
Kind of.
The core base this quarter if we.
Get out the merger cost, but then as you kind of where do you think it settle in.
Run rate on a quarterly basis without I.
I guess pre and post conversion.
Yes.
Yes, it's Brian you're still on a building.
Merger related.
Our best estimate for the fourth quarter.
$122 million to $125 million.
And.
That run rate will stay probably true for the.
First quarter and then in the next year.
And then the second quarter as we begin to really get into the cost savings that we modeled.
<unk>.
Could come down.
Just depends on how fast we're going to realize that in the merger model.
Published we said, we could say 17, 5% of their <unk>.
Noninterest expense in.
That would be.
Over 2022.
So.
All of that.
Great.
Thanks, I'll step back.
Thank you. Our next question comes from David Feaster of Raymond James. Please go ahead.
Yes.
Hey, good morning, everybody good morning, David.
I just wanted to start maybe on the fee income side was nice to see another strong quarter mortgage continued to outperform I just wanted to get a sense of the.
The trends that youre seeing in mortgage and maybe whether you expect to kind of track NBA.
Okay, and then just any updates on the mortgage outlook just you know.
Given the inclusion of Volta and some of the opportunities and capabilities that they bring to the table.
Yeah.
So the one of the very very nice things about Alt.
They are very.
High quality mortgage business led by a very capable team and leader.
So we think that coupled with what I mentioned before on the strength of those markets. It's a great great opportunity too.
To do well.
In terms of the for the future.
Okay.
NBA right now is forecasting about a third.
35% drop in origination volumes next year, we don't we think will be maybe off closer to 25% versus this year and a good part of that is the lift we'll get from from.
Bringing from adding alter.
Onto onto our platform and again in a lot of our markets.
We should benefit because we do well in.
Purchase environments, we have strong market share.
If theres any limiting factor as I noted in my comments.
The supply of houses for sale. So we're.
We think it will be another really good year for the mortgage business.
Thank you again to ask a question. Please press star one on your Touchtone telephone again Thats Star one.
Touchtone telephone to ask a question.
Our next question comes from the line of Brandon King of True Securities. Your line is open.
Hey, good morning, good morning, Brandon.
Yes, I wanted to touch on the CRE growth there was pretty strong in the quarter and it seems like you're gaining momentum.
And there you could just discuss what you're seeing there and the outlook going forward and you also mentioned.
The intense pricing competition.
Competition.
Letters and.
Are you competing on price a little bit there to get some of that growth just wanted more color on that.
Sure Brian This is.
Tom.
The pipeline remains.
Very solid.
Obviously, given our market, it's going to be centered in theory. So we were happy to see that growth in the third quarter we.
We definitely are seeing continued pressure on pricing.
<unk>.
And even more so than some of the larger metro markets.
The some of the smaller markets, where we have a controlling market share we're able to hold pricing a little bit better which is why I think on average we're still seeing new production just slightly north of four.
4%.
But.
For a paper which is.
Obviously our focus.
Once deals are north of seven figures were continuing to see some pretty strong pricing pressure there.
We're certainly willing to compete there on that side.
For the right opportunity and the right relationship rather than compromising credit quality. We have we have not done that we will.
We do that so.
I would say the outlook for the for the fourth quarter, given our pipeline and some of the tailwind that we have with some of the unfunded construction projects that we booked I think gives us a lot of momentum going into the into the fourth quarter.
Okay.
Thanks.
And then on <unk>.
Excess liquidity management.
Deposit growth remains strong.
And I know youre deploying most of that excess liquidity into securities book, but is there a certain level of cash to earning assets that you are trying to manage too.
Based off the level of the <unk>.
The growth that you are getting.
Is there a certain level that you're managing to.
No I think that we have a certain we have a.
<unk> cash range that we maintain on the balance sheet too for certain liquidity measures we have.
But that's what we would.
Consider our baseline.
And thats to meet obligations and more for just business management.
But other than that it's a function of.
The ability to reinvest it and how quickly we want to.
Our read of the market and how quickly we want to reinvest that.
The cash that we are seeing come in.
Okay and then also on that note based off what <unk> seen recently are you more confident in the strong growth in deposits, so excess cash balances staying on the books for customers.
Yes.
We.
We continue to see the deposits come in all is a little more than we expect.
Every quarter, we think its going to slowdown and.
At this point, we don't see a big catalyst thats going to drive those deposits out.
Okay. Thanks for answering my questions.
Thank you at this time I would like to turn the call back over to Randy Chesler for closing remarks, actually I am sorry, Sir one moment.
I think we do have another question in queue.
Tim Coffey of Janney Your line is open.
Thank you got it under the wire.
No.
Randy can you kind of talk about the trends in business formation that you're seeing within your footprint I mean, theres been a lot of growth in the population and your states and I'm wondering kind of what youre seeing in terms of business formation, and what youre doing to attract some of those new businesses to the bank.
Sure.
Yes, I think we are just really starting to see that we always knew that that would follow the in migration. So the people.
It really started to come in first.
And so we see two things developing now.
More clearly one is businesses are.
Coming relocating in.
Talk about that in a second and also.
We have people, we have businesses looking to expand to meet the.
The bigger population base. So we have two things really starting to happen and where we see the stress in the service.
Around the footprint in terms of.
With more people added just.
Not enough service providers, so that's unfolding.
We're starting to see we're beginning to see that more with warehouse storage building.
As the first prong of that.
I'd say the most active.
Our state and our eight state footprint for new business relocating in as Arizona, they're getting a very good flow of business into.
Interested in going to Arizona from California, So that's probably.
Our most active market where we're.
Really starting to see those trends develop.
And as you start to see these trends.
Progress further do you think that.
Could increase your annualized loan growth rate or just resulted in better credits in the portfolio or mix.
Well, we're always looking for good quality, so I think thats pretty consistent.
It will certainly help with the growth rate and we're just.
We're starting the budgeting process. So it's a little early to tell what that growth rate will look like I think you're already seeing.
<unk>.
Real strong growth start to break out in this quarter, we are going to enter the or in the third quarter, we're going to enter the fourth quarter with a lot of momentum.
And we'll see.
Still a bit early through the budgeting process, though we will know more at the end of this quarter just what.
22 looks like but at this point I would say the.
We're very optimistic about 'twenty two.
Okay, great. Thank you.
All my questions.
Youre welcome.
So anyone else in the queue.
So actually we have a follow up question from Jeff <unk>.
<unk> D. A Davidson your line is open Sir.
Thanks, Hey, Hey, Randy just had a couple of housekeeping.
On the looking at the other expense line item, we exclude merger expenses that was up linked quarter by a couple million dollars.
Any detail on what was in.
So.
It really is a sundry.
Amount of different account Theres nothing nothing particular.
Got you and then.
Then Ron the tax rate.
Ticked down a bit any thoughts about how you close the year and maybe outlook for 'twenty, two with with alpine onboard.
Just on the <unk>.
Tax expense I think we will end the year just a.
Somewhere between 19% 19, 5%.
It ticked down in the third quarter because of the pandemic were pretty significant investor in low income housing.
Tax credit.
Particular in so when you have to amortize the equity we were using projections from all of the different indicators.
Worked with.
And then schedule K ones came in we had to true it up.
That's the one time reduction, but clearly it's clearly a benefit that show that so $19. One is where we are right now.
Now and I think we'll finish it a bit.
You could even use 19.
Antena three somewhere in that range.
And then for.
For 2022, I would take that too.
Hi is the 20.
25% no higher than 21, the reason I have to give that range, we're looking to put on more.
Tax credit.
We were in.
In the.
Pat.
LOI in the merger agreement I've been talking to syndicators about putting on more fat.
Federal tax credits.
Low income housing certainly, but we're also looking at the increase in our new market tax credits.
And the reduced.
Produce credits faster so dependent upon when I can close those when they are available.
The reason for the fluctuation in the tax rate.
Thank you.
And Mr. Chesler, the queue is clear.
Standing by one of your remarks alright.
Alright, Thank you Latif and.
Well, we want to thank everybody for dialing into the call today and wish you a great Friday and a great weekend. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Thank you for standing by and welcome to the Glacier Bancorp third quarter earnings Conference. At this time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded she didn't require any further assistance. Please press star zero I would now like to hand, the conference over to your host CEO of Glacier Bancorp Randy Chesler. Please go ahead alright.
Alright, Thank you Latif and good morning, and thank you for joining us today.
Allophone 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 closed out the third quarter encouraged.
With me are loan growth, which came on strong in the later part of the year.
We think our company footprint cover some of the best growth markets in the country and it's great to see those markets showing continued signs of increasing activity.
Our people and our unique business model once again produced very.
Strong results in all of our divisions across the west.
So I'll touch on some business highlights first and then provide some additional thoughts on the quarter.
The loan portfolio, excluding payroll protection program loans had strong growth of $382 million.
<unk> <unk> <unk> thousand 14% annualized.
Loan portfolio grew $711 million or 9% annualized from the beginning of the year.
Core deposits continue to flow into our divisions growing $742 million or 18% during the quarter.
And growing two 7 billion or 25% annualized from the beginning of the year.
Net income for the first nine months of the year was $234 million on.
An increase of $50 million or 27% from the $185 million in the first nine months.
The prior year.
Pre tax pre provision income was $285 million for the first nine months of the current year, an increase of $18 million or 7% compared to the $266 million in the prior year first nine months.
Net interest income excluding triple P loans in the current quarter was $154 million, an increase of $4 6 million or 3% from the prior quarter.
Net interest income excluding triple P loans for the first nine months of the current year was.
Was $452 million and.
An increase to $22 5 million or 5% over the same period in the prior year.
Our efficiency ratio for the current quarter was 51, 7% excluding triple P loans.
Efficiency ratio was $53 five 9% compared to 50, 353% in the prior quarter.
Nonperforming assets of $51 2 million as of current quarter and decreased $1 9 million or 4%.
<unk> from the prior quarter end.
NBA to assets ended the quarter at 24 basis points.
Net charge offs to average loans was two basis points for the current year to date period compared to three basis points in the prior year same period.
And we.
We declared a quarterly dividend of <unk> 32, a share the company has declared 146 consecutive quarterly dividends and has increased the dividend 48 times.
We saw excellent loan growth in our markets with Wyoming, Arizona, and Idaho, leading the growth.
Both across our eight state footprint with all markets growing a total of $382 million or 14% annualized excluding triple P loans.
We are pleased to see that almost all of the growth came from commercial real estate.
New.
Production for the quarter was strong with over one 6 billion in new loans originated.
We continue to deepen the relationship with the 3000, new customers, we picked up as part of round, one triple P with over $400 million in loans made to this group.
New loan far.
We now have about $370 million of around one into triple P loans still on the books out of a total of over $2 billion that we originated starting in 2020.
As I noted last quarter, we still have some growth.
<unk> <unk> with borrowers using excess liquidity to pay down loans and the increasing level of competition for new business.
We continue to stick to our disciplined lending and risk management strategies and generally seen most of the players in our markets still avoiding a race to the bottom.
<unk> <unk>.
While we see price competition, continuing to heat up for the best loans.
That being said, we are very happy to enter the fourth quarter of the year with very good momentum and a very strong pipeline of new loans.
Considering all of this our original target of 4% to 6% full.
<unk> growth for 2021, excluding triple P is more likely to be closer to 8% to 10% when we close out the year.
Core deposit growth continues to be surprisingly strong across our footprint driven by excess customer liquidity due to the unprecedented government.
Full year Mueller is lack of spending due to the pandemic and our success in establishing new deposit relationships.
Core deposits increased $742 million at the end of the quarter and totaled over 17 billion. Most importantly, the core deposits have caused.
Cost of six basis points down.
One one basis point from the prior quarter and down seven basis points from the quarter a year ago.
Noninterest bearing deposits increased $325 million or 5% over the last quarter and increased $1 2 billion.
In dollars or 21% from the prior year third quarter.
Noninterest bearing deposits are now 38% of core deposits.
Total debt securities of $8 5 billion increased $1 3 billion or 19% from the prior.
Our quarter.
<unk> are up $4 2 billion or 97% from the prior year third 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.
Debt Securities reps.
And at 40% of total assets at the end of the quarter compared to 35% last quarter and 30% at the end of 'twenty.
24% a year ago.
We will continue to fully invest excess deposits buying highly liquid and.
<unk> quality investments with shorter duration, given current loeb on increasing rates with the plan of putting these deposits to work as we continue to grow.
The company's net interest margin as a percentage of earning assets on a tax equivalent basis for the current quarter was three.
Hi, three 9% compared to 344% in the prior quarter and $3 92 in the prior year third quarter.
The core net interest margin was three 7%.
Compared to 333 in the prior quarter and four point.
Oh, two in the prior year third quarter.
Earning asset yields have decreased from the combined impact of the significant increase in the amount of debt securities and the decrease in yields on both securities and core loans.
The yield on debt Securities ended.
The quarter at 162%.
Thats down 12 basis points from the prior quarter.
Fueling the decline in the ASP.
The investment portfolio yield was the addition of over $1 billion of new debt securities in the quarter at a rate of around one <unk>.
Yeah.
The yield on our loan portfolio ended the quarter at 486% down 16 basis points from the prior quarter. We added one 6 billion in new core loan production with yields around four 1%, which drove the total loan portfolio yield.
<unk> down.
Given the interest rate environment, our focus continues to be on growing net interest income, which for the quarter increased $4 6 million less triple Pete.
Non interest income up $34 8 million.
Yield declined about 700000 or 2% from the prior quarter due primarily to the reduced gain on sale from residential mortgages, which decreased $2 2 million or 14% from the prior quarter.
The hot housing market and refinancings.
Slowed down a bit across our footprint our biggest concern in the real estate business remains the supply of homes available for sale.
The efficiency ratio was 51, 7% in the current quarter.
49, 92% in the prior quarter.
And 48 five in the prior year third quarter.
Excluding triple P. The ratio would have been 50, 359% in the current quarter compared to 50 353 in the prior quarter.
55, one in the third quarter a year ago.
Order intangible book value per share increased in the quarter from $18 74 to $19 11.
Or 2%.
Our combination with Alta Bank Corp is proceeding very well.
We closed the transaction.
October one a.
Full months earlier than planned as we received all regulatory approvals sooner than expected.
I've been very impressed with the <unk> with the <unk> teams focus on continuing to serve customers and growing the business.
We continue to work closely with all the planning for our core processing conversion in March of 2022.
Alta is a very good technology platform and we are studying many products that may be a good fit for our other divisions.
I've received.
<unk> questions about M&A since a number of the recent <unk> were announced and why we see the MLR banks embracing a new strategy, we intend to stick to our discipline disciplined approach on M&A that has proven to be successful for us.
Our focus today is on <unk>.
And we want to make sure we fully completed our immigration before we look for another transaction given the strong EPS accretion that ultra will produce for glacier.
Remember this transaction produces almost the same EPS as our last five transactions combined.
The glacier team accomplished a lot in the third quarter, while we are still dealing with COVID-19 in many markets. The team achieved great results.
The loan growth, we experienced in the quarter was great to see.
We think we're very well positioned to close out to 2000.
On the strong <unk>.
And be well positioned to continue to grow in 2022.
So that ends my formal remarks, I'd now like Latif to open the line for any questions. Our analysts may have.
Thank.
<unk> 21, a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Jeff <unk> of.
D. A davidson your question please.
Good morning, Good morning, Jeff.
Just a few questions on on also focused on that.
And maybe the first one for Tom just.
Trying to get a sense for as you get under the Hood a bit more.
Kind of the health of the portfolio given the bank had.
Duncan.
Pre pandemic pruning in and just get a sense for as you get your arms around that portfolio in detail.
Although.
How the credit profile.
Meshes with with Glacier.
Sure Jeff.
The portfolio, we're very pleased with.
The pruning they did.
Sort of pandemic proved to be a successful strategy for them and their continued to show that through their asset quality metrics, which as of today.
At the end of the quarter were 15 basis points NPA and continued to show positive trends. So while we are seeing so far.
We're very pleased with them.
Pre think that was accomplished largely because our two are two critical at the cultures were very similar.
So.
Thus far they have been able to fold in quite easy with deflation.
Great and kind of off that base Randy.
I think.
The idea at Alto was had done that pruning and then they were turning to growth.
Same question I guess as you.
As you engage with that team a bit more kind of the growth potential.
That platform is <unk>.
Give us an update on your latest thoughts.
Yeah, No. We've spent a lot of time in Utah, we all have with the team.
They're doing a great job focusing on their customers.
Taking some of the products and services and bigger balance sheet that we offer and getting out to their customers.
And.
We've seen against the backdrop of a market that's very strong.
Still believe a lot of those long term growth trends that make.
Utah, the number one growth market in the country and number one economic.
Economy.
On a lot of fronts.
We're incredibly well positioned to take advantage of that they've got a very good team in place in all the right markets. So we've.
We've seen that.
We've seen the results of that.
We've.
Brought them onboard and I think they're very well.
Awesome for 'twenty two.
Great and maybe a last one a little more mechanical.
Maybe for Ron just on the <unk>.
Expense.
Brian if you've got a general idea of.
Kind of the core base this quarter if we.
Get out the merger.
Positions, but then as you kind of where do you think is settle in.
Run rate on a quarterly basis without I.
I guess pre and post conversion.
Yes.
Yes, Brian you're still on a excluding the merger related.
Our best estimate for the fourth quarter.
Merger is $122 million to $125 million.
That.
That run rate will stay probably true for the.
First quarter and then in the next year and then the second quarter as we begin to really get into the cost savings that.
Hello.
<unk>.
Could come down.
It just depends on how fast we're going to realize that in the merger model.
We published we said, we could say 17, 5% over there.
Noninterest expense.
That would be.
Over 2022.
So.
We modeled all of that.
Great.
Ill step back.
Thank you. Our next question comes from David Feaster, Raymond James. Please go ahead.
Hey, good morning, everybody.
Morning, David.
I just wanted to.
To start maybe on the fee income side was nice to see another strong quarter mortgage continued to outperform I just wanted to get a sense of the.
The trends that youre seeing in mortgage and maybe whether you expect to kind of track MBA forecast and then just any updates on the mortgage outlook just.
And the inclusion of Volta and some of the opportunities and capabilities that they bring to the table.
Yeah.
So yes, one of the very very nice things about <unk> is they have a very high quality mortgage business led by a very capable team and.
Given.
So we think that coupled with what I mentioned before on the strength of those markets. It's a great great opportunity to.
To do well.
In terms of the for the future.
NBA right now is forecasting.
Leader by a 35% drop in origination volumes next year, we don't we think will be maybe off closer to 25% versus this year and a good part of that is the lift we'll get from from bringing from adding alter onto onto our platform.
And then a lot of our markets.
We should benefit because we do well in.
Purchase environments, we have strong market share.
If theres any limiting factor as I noted in my comments, it's just the supply of houses for sale. So we're.
And again it will be another really good year for the mortgage business.
Okay.
Thank you again to ask a question. Please press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone to ask a question.
Our next question comes.
We think in line Brandon King of <unk> Securities. Your line is open.
Hey, good morning, good morning.
Brandon.
Yes, I wanted to touch on the CRE growth that was pretty strong in the quarter and it seems like you're gaining momentum there. If you could just discuss what you're seeing there and the outlook going forward and.
<unk> mentioned.
Then case pricing tension.
Competition from competitors in our.
Are you competing on price a little bit there to give some of that growth.
One of the more color on that.
Sure Brandon This is Tom.
The pipeline remains very solid.
Obviously, given our markets its going to be centered in theory. So we're happy to see that growth in the third quarter.
We definitely are seeing continued pressure on pricing.
<unk>.
And even more so than some of the larger metro markets.
Smaller markets, where we have a <unk>.
Controlling market share, we're able to hold.
Pricing, a little bit better, which is why I think on average we're still seeing new production just slightly north of 4%.
But for a paper which is.
See our focus.
Once deals are north of seven figures were continuing to see some.
Pretty strong pricing pressure, there and we're certainly willing to compete there on that side for the right opportunity and the right relationship rather than compromise on credit quality. We have we have not done that we will we do that so.
I would say the outlook for the for the fourth quarter.
Given our pipeline and some of the tailwind we have with some of the unfunded construction projects that we booked I think gives us a lot of momentum going into the into the fourth quarter.
Okay.
Thanks.
And then on to.
Excess liquidity management.
Growth remains strong.
And I know youre deploying most of that excess liquidity into securities book, but is there a certain level of cash to earning assets that you are trying to manage too.
First off the level of.
Deposit growth that you are getting is there a certain level that you're managing to.
No I think we have a certain we have a ballpark cash range that we maintain on the balance sheet too for certain liquidity measures we have.
But thats, what we would consider our baseline.
And thats to meet obligations.
And more for just business management.
But other than that it's a function of.
The ability to reinvest it and how quickly we want to.
Our read of the markets and how quickly we want to reinvest the cash that's that we are seeing come in.
Okay.
And then also on that note based on what you've seen recently are you more confident in the strong growth in deposits if those excess cash balances staying on the books for customers.
Yes.
We continue to see the deposits come in all is a little more than we expect.
Every quarter, we think its going to slowdown and.
At this point, we don't see a big catalyst thats going to drive those deposits out.
Okay. Thanks for answering my questions.
Thank you. Thank you at this time I would like to turn.
Turn the call back over to Randy Chesler for closing remarks, actually Im sorry, Sir one moment.
I believe we do have another question in queue.
Tim Coffey of Janney Your line is open.
Thank you got it under the wire.
Randy can you kind of talk about the trends.
In business formation that you're seeing within your footprint I mean, theres been a lot of growth in the population and your states and I'm wondering kind of what youre seeing in terms of business formation, and what youre doing to attract some of those new businesses to the bank.
Sure.
Yes, I think we are just really starting to see.
See that we always knew that that would follow the in migration. So the people.
Really started to come in first.
And so we see two things developing now.
More clearly one is businesses are coming relocating in.
I'm talking.
About that in a second and also.
We have people, we have businesses looking to expand to meet the.
The bigger population base. So we have two things really starting to happen and where we see the stress in the service.
Around the footprint in terms.
Terms of.
With more people added just.
Not enough service providers, so that's unfolding.
We're starting to see we're beginning to see that more with warehouse storage building.
The first prong of that.
I would say.
Hey, the most active.
State.
Our eight state footprint for new business relocating in as Arizona, they're getting a very good flow of business.
Interested in going to Arizona from California, So that's probably our most active market, where we really.
Really starting to see those.
These trends develop.
And as you start to see these trends.
Progress further do you think that.
Could increase your annualized loan growth rate or just resulted in better credits in the portfolio or mix.
Well, we're always looking for good quality.
<unk>, so I think thats pretty consistent.
It will certainly help with the growth rate and we're just.
We're starting the budgeting process. So it's a little early to tell what that growth rate will look like I think you're already seeing.
Real strong growth start to.
Breakout in this quarter, we are going to enter the ore in the third quarter, we're going into the fourth quarter with a lot of momentum.
And we will see.
Still a bit early through the budgeting process, though we will know more at the end of this quarter, just what 22 looks like but at this point I.
I'd say the.
We're very optimistic about 'twenty two.
Okay great.
Those are my questions.
Youre welcome.
So can you again what else in the queue.
So we have a follow up question from Geoff Rowley South D. A davidson.
Your line is open Sir.
Thanks, Hey, Randy just had a couple housekeeping maybe for Ron.
Looking at the other expense line item, if we exclude merger expenses that was up linked quarter by a couple million dollars.
Any detail on what was in that line.
It really is a sundry.
The amount of different account theres nothing nothing particular.
Got you.
Then run the tax rate.
Ticked down a bit any thoughts about how you close the year and maybe outlook for 'twenty two with alpine onboard.
So just on the.
Tax expense.
I think we will end the year.
Hey.
Somewhere between 19% 19, 5%.
Ticked down in the third quarter because of the pandemic.
Pretty significant investor in low income housing.
Tax credits in particular, and so when you have to amortize the.
Equity, we were using protection from all of the different syndicator.
Worked with.
Schedule K ones came in we had to true it up.
That's the one time reduction, but clearly it's clearly a benefit that show that so $19. One is where we are right now and I think we will finish with a bit higher you could even use.
1919, three somewhere in that range.
And then for.
For 2022, I would take that to as high as.
25% no higher than 21, the reason I have to give that range. We're looking to put on more tax credit we were.
In.
<unk>.
Pat.
LOI in the merger agreement I've been talking to syndicate or it's about putting on more.
Federal tax credits.
Low income housing certainly, but we're also looking at the increase in our new market tax credits.
Reduced credit faster so dependent.
Upon when I can close when they are available.
The reason for the fluctuation in the tax rate.
Thank you.
And Mr. Chesler, the queue is clear standing by one of your remarks alright.
Alright. Thank.
Thank you Latif and.
Well, we want to thank everybody for dialing into the call today and wish you a great Friday and a great weekend. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.