Q4 2023 Glacier Bancorp Inc Earnings Call
Okay.
Good day, and thank you for standing by welcome to the Glacier Bancorp fourth quarter.
Earnings Conference call at this time, all participants are in a listen only mode.
The speaker's presentation there'll be a question and answer session.
A question during the session you will need to press star one on your telephone you will then hear an automated message advising Johannes race.
Your question. Please press Star one again, please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, Mr. Randy Chesler, President and Chief Executive Officer of Glacier Bancorp Mr. Chesler. Please begin.
Ladies and gentlemen, please standby.
Yeah.
Okay.
Mr. Chesler, you may begin.
Ladies and gentlemen, please standby.
Again, ladies and gentlemen, please standby we are experiencing technical difficulties.
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Your conference will resume momentarily.
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Again, ladies and gentlemen, we are experiencing technical difficulties. Please standby.
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Again, ladies and gentlemen, please remain on your line your conference will resume shortly.
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Again, ladies and gentlemen, please remain on your line your conference will resume shortly.
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Yeah.
Mr. Chesler, you may begin.
Alright.
We thank.
Thank you very much sorry for the technical difficulties I think we're ready to go.
Good morning, and thank you for joining us today.
With me here in Kalispell. This morning is Ron Copher, our Chief Financial Officer, Angela dose, our Chief Accounting Officer, Byron Pollan, our treasurer.
Tom Dolan, our chief credit administrator, and Don Chery, our chief administrative officer.
I'd like to point out that the discussion today is subject to the same forward looking considerations.
On page 14 of our press release.
And we encourage you to take a careful review of this section.
We released our fourth quarter and full year 2023 earnings after the close of the market yesterday, English and the Glacier Bancorp team wrapped up a challenging year with a very strong quarter.
We achieved earnings per share of <unk>, 49 cents, which increased <unk> <unk> per share from the prior quarter.
Net income was $54 3 million for the current quarter, an increase of $1 9 million or 4% from the prior quarter.
Interest income of $273 million in the current quarter increased $8 6 million or 3% over the prior quarter.
Net interest margin on a tax equivalent equivalent basis.
Was to five 6% versus 2.58% in the prior quarter, our smallest quarterly decrease this year.
Total noninterest expense of $132 million for the current quarter included a one time $6 million FDIC special assessment increased only $2 6 million or 2% over the prior quarter.
The portfolio loan yield of 534% increased 70 basis points from the prior quarter.
New loan production yields were $8 two 4%.
32 basis points from the last quarter.
Nonperforming assets to bank assets decreased $16 7 million or 39% from the prior quarter to 9% or nine basis points of assets net charge offs to total loans ended the year with only six basis points provision expense for the quarter was three.
Which was stable compared to the prior quarter provision expense of $3 5 million.
The allowance for credit losses, as a percentage of total loans outstanding at year end was $1, 109% flat to the prior quarter and relatively unchanged compared to the one 2% in the prior fourth quarter prior.
Prior year fourth quarter.
While the industry saw a significant outflow of deposits during the year, the company's core deposits and retail purchase agreements only decreased 108 million or 50 basis points from the prior year end.
The company ended the year with $1 3 billion in cash, which was an increase of 952 million over the prior year end.
Stockholders equity of 3 billion increased $146 million for the quarter, or 5% and increased $177 million or 6% over the prior year end.
The company declared a quarterly dividend of 33 a share in.
The company has declared 155 consecutive quarterly dividends and has increased the dividend 49 times.
And we.
We received all regulatory approvals for the acquisition of Wheatland Bank, a leading eastern Washington Community Bank headquartered in Spokane with total assets of $728 million as of the end of the year.
This will be our 25 acquisitions since 2000, and we will close the transaction on January 31.
We welcome the Wieland team took laser bancorp.
Despite the significant volatility in the banking industry in 2023 with two of the largest bank failures in history depositors fear of bank safety and historic interest rate increases.
The Asia team did an excellent job taking care of customers and communities across the west and ended 2023, well positioned for a strong 2024.
So that ends my formal remarks, and I would now like Norma to open the line for any questions that our analysts may have.
Yes.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press star one again, please wait for your name to be announced please standby, while we compile the Q&A roster one moment for your first question. Please.
Okay.
Our first question comes from the line of Matthew Clark with Piper Sandler Your line is now open.
Hey, good morning, guys.
Good morning, Matthew.
Starting on expenses, our run rate well below.
The prior guidance of $1 32 to 134.
Can you speak to.
Not only the run rate that you expect going forward ex excluding wieland.
But also.
Maybe provide some color behind the staffing efficiencies that you gain just maybe.
Speak to what exactly was done there.
Yes, Matthew Ron here so yes.
What you are recognized for our profit.
Be recognized for that but in terms of the staffing, especially but so.
The guide was $1 32 to $1 34 and <unk>.
If you remove the FDIC and $6 million in some M&A have a 500000 to get down to that roughly 126000, but our compensation.
It was down.
Down by about $6 million and I want to normalize for that.
Does that included the performance related performance based pay that totals about $6 million. So when you bring it all back.
$132 million is basically what we.
We came in at.
And then when you look forward for the guidance for Q1.
Excluding wheatland, we would be at 138% to $140 million.
And then when you add in $6 million per Wheatland. The guide for the full first quarter $144 million to $146 million.
That should be the highest.
Sure.
Each of the quarters in 2024 as is typical of the first quarter run pie to get the full impact of the merit pay increases the FICA taxes the employer portion.
Kicks in and so that.
How that how that reconciles there.
Operator: Good day, and thank you for standing by. Welcome to the Glacier Bank Corp. fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star-one-one on your telephone.
So the FTE count has continued to migrate down, particularly in the second and third quarter.
Division the team the corporate departments all data.
Operator: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-one-one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Randy Chesler, President and Chief Executive Officer of Glacier Bank. Mr. Chesler, please begin. Ladies and gentlemen, please stand by. Mr. Chesler, you may begin.
Standing job continuing into the fourth quarter, we had another 20 FTE reduction.
So overall for the full year with a 96 FTE reduction and a lot of that is attributable to the technology that we've talked about I think on each of the call as we continue to implement.
Operator: Ladies and gentlemen, please stand by. Again, ladies and gentlemen, please stand by. We are experiencing technical difficulties.
Operator: Ladies and gentlemen, please stand by. Your conference will resume momentarily. Again, please stand by. Again, ladies and gentlemen, we are experiencing technical difficulties.
So think of the account opening process cut that in half even doing better now.
Operator: Please stand by. Again, ladies and gentlemen, please remain on your line. Your conference will resume shortly. Mr. Chesler, you may begin. All right, I think we... Thank you very much. Sorry for the technical difficulties.
The better the way it ended up closing we've gone through real time.
Just meant that greatly set up of that process.
The construction program, we added built been very very good.
Treasury management, making great strides.
It's all very positive we do continue that.
Believe that we will have some additional.
Reductions in staffing probably not to that same degree remember we're bringing on.
Randall M. Chesler: I think we're ready to go. So, good morning, and thank you for joining us today. With me here in Kalispell this morning is Ron Coffer, our Chief Financial Officer, Angela Dosey, our Chief Accounting Officer, Byron Pollin, our Treasurer, Tom Dolan, our Chief Credit Administrator, and Don Sherry, our Chief Administrative Officer. I'd like to point out that the discussion today is subject to the same forward-looking considerations found on page 14 of our press release, and we encourage you to take a careful review We released our fourth quarter and full year 2023 earnings after the close of the market yesterday, and the Glacier Bank Corp team wrapped up a challenging year with a very strong quarter. We achieved earnings per share of $0.49, which increased $0.02 per share from the prior quarter.
Wheatland and they've got 14 branches so.
Will we felt pretty good about what we're able to achieve certainly for the year, but in particularly the fourth quarter.
Okay. That's great. Thank you.
And shifting gears to the margin.
Yeah.
A three part question there.
She had the spot rate on deposits at the end of the year. The average NIM in the month of December and then.
What's your.
Deposit beta assumption on the way down with rate cuts.
At this stage.
Hi, Matthew this is Byron I can I can address that so spot rate for total deposit in in December. This as of December 31, total deposits by one 3%.
You asked for the margin the December margin that was $2 five 9%.
Beta on the way.
Way down.
I think what we'll likely see as the fed begins to cut rates I think what we'll likely season adjusted to it may be a lag.
Customer expectations as well as then the competitive deposit environment I think for the first few cut we're expecting a lower beta on the way down maybe less than 10%.
I think we will see some some opportunities for near term opportunities to reduce rate are first rate reduction opportunity will be really with a higher cost CD.
We've ramped up in recent quarters I'm thinking of our CD specials.
That we have in place we kept our CD specials intentionally short almost 60% of our Cds mature in the first quarter and so that will that will afford us an opportunity to reprice the Cds as they mature and as market rates are falling and Phil.
Randall M. Chesler: Net income was $54.3 million for the current quarter, an increase of $1.9 million or 4% from the prior quarter. Interest income of $273 million in the current quarter increased $8.6 million or 3% over the prior quarter. The net interest margin on a tax equivalent basis was 2.56% versus 2.58% in the prior quarter, our smallest quarterly decrease this year. Total non-interest expense of $132 million for the current quarter, including a one-time $6 million FDIC special assessment, increased only $2.6 million, or 2 percent, over the prior quarter.
That's our expectation I think I think it will take a little bit of time.
For the down rate base to gain some traction and for the first few cut we're thinking less than 10%.
On the way down.
Okay, Great and then.
On the loan portfolio, particularly within residential construction and land lots in other construction has come down the last couple of quarters I assume those are just projects being completed but maybe speak to the trend. There is it is it maybe being a little more.
Cautious on that front or is it just tough to get things.
Find workers and get things done.
Yes, Matthew this is Tom.
Yes, the reduction in our construction segments that youre absolutely right.
It's a function of projects getting completed the mervyn's moving into the Permian functions, which is why you saw one to four family multifamily. Some other CRE segments lift in the quarter in terms of volume and the construction segments were definitely seen a reduction there.
Across the board with residential and commercial construction and I think it's I think it's really twofold.
Are being more selective and cautious than we normally are even more so than our.
Existing conservative underwriting standards.
We've also seen customers waiting on the sidelines to get little bit more clarity on what's going to happen. So there definitely are some pent up demand.
Out there.
With the current interest rate environment, especially on the commercial side it takes.
Certainly more cash equity to make a deal penciled to our underwriting standards.
I think all of those things combined are.
Has the construction production muted a bit.
Okay, and then last one for me.
Bit of a two part question around M&A.
Great to see you guys getting the regulatory approvals here because there's this long aided approval process change your appetite in wanting to do deals and if not.
Can you speak to.
The incremental change in conversations you've had over the last quarter.
Well, we're 30 days longer than what we expected.
So I think that.
We are very very happy too to get all the approvals and get it closed.
No I don't think this will change our appetite one bid I think it will change our expectations that we said at the beginning of these and allow more time for the regulatory approval.
Randall M. Chesler: The portfolio loan yield of 5.34% increased seven basis points from the prior quarter. New loan production yields were 8.24%, up 32 basis points from the last quarter. Non-performing assets to bank assets decreased $16.7 million or 39% from the prior quarter to 9% or 9 basis points of assets.
In terms of activity, yes. The market has picked up we are getting more inbound calls and a lot of very interesting opportunities. So.
I think coming out of 'twenty three there is just.
A little more of an increase.
In inquiries interest as well as different types of.
Opportunities be it whole banks or branches are just quite a bit of more activity picking up we'll see if it continues matthew but at the start here.
Randall M. Chesler: Net charge-offs to total loans ended the year at only 6 basis points. Provision expense for the quarter was $3 million, which was stable compared to the prior quarter provision expense of $3.5 million. The allowance for credit losses as a percentage of total loans outstanding at year-end was 1.19%, flat to the prior quarter and relatively unchanged compared to the 1.2% in the prior year fourth quarter.
Market increase.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: Our next question comes from the line of David Feaster with Raymond James Your line is now open.
David Feaster: Hey, good morning, everybody good morning, David.
Randall M. Chesler: While the industry saw a significant outflow of deposits during the year, the company's core deposits and retail purchase agreements only decreased $108 million, or 50 basis points from the prior year end. The company ended the year with $1.3 billion in cash, which was an increase of $952 million over the prior year end. Stockholders' equity of $3 billion increased $146 million for the quarter, or 5%, and increased $177 million, or 6%, over the prior year-end.
David Feaster: Maybe just just starting on the deposit front I'm curious some of the dynamics that youre seeing there and if you could help us think about like how much of the deposit flows that you saw in the quarter would you attribute to maybe client activation or perhaps some seasonality.
David Feaster: Hoping you could quantify that and then just kind of how you think about deposit growth going forward and really I guess, the overall balance sheet size, obviously, probably targeting core deposit growth or would you expect the balance sheet to remain relatively stable in gist.
David Feaster: Remixed the book.
David Feaster: Sure. David This is Byron I'll start with deposits.
Randall M. Chesler: The company declared a quarterly dividend of $0.33 a share. The company has declared 155 consecutive quarterly dividends and increased the dividend 49 times. And we received all regulatory approvals for the acquisition of Wheatland Bank, a leading eastern Washington community bank headquartered in Spokane, with total assets of $728 million as of the end of the year. This will be our 25th acquisition since 2000, and we will close the transaction on January 31st. We welcome the Wheatland team to Glacier Bancorp, despite the significant volatility in the banking industry in 2023, with two of the largest bank failures in history, depositors' fear of bank safety, and historic interest rate increases. The Glacier team did an excellent job taking care of customers and communities across the West and ended 2023 well positioned for a strong 2024. So that ends my formal remarks, and I would now like Norma to open the line for any questions that our analysts may have. Thank you. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone. To withdraw your question, please press star 1-1 again. Please wait for your name to be announced.
Byron: Our deposit growth in Q4 were primarily driven by our noninterest bearing decline. We also had some decline in our brokerage Cds, we just let those mature and runoff.
Byron: In terms of our outlook for total deposits for 24, we do think will be reverting back to typical seasonal patterns I think will be down in the first quarter, but on the year I think we'll be likely flat versus where we ended in 2003 and that's that is in terms of total deposit digging into.
Byron: The noninterest bearing a little bit the majority of our noninterest bearing decline came from from typical seasonal outflows.
Another driver that we've looked at though.
Byron: The bulk of the outflow of noninterest bearing kimco business accounts and so we looked at what type of businesses saw balanced decline. The top three categories were all related to the housing market to the title company balances were down.
Byron: Construction construction accounts contractor accounts with those kinds of things.
Byron: And so no surprise there given recent headlines that because that housing activity is at a very very.
Byron: Locate the low point I think that's a 30 30 year low.
Byron: And some headlines I would say on the other hand, when we're talking about noninterest bearing balances the rate motivated migration is slowing that trend has been slowing in recent quarters and in Q4. It was half of what it was in Q3.
Byron: There is still some rate seeking migration there, but it's much lower than it had been in previous quarters, and I think that that trend will continue.
Byron: Continued to flow in terms of the outlook for noninterest bearing I think we could continue to see some outflow not just non interest bearing balances that remix there I would say visits where we land will give us a real boost their very strong noninterest bearing balances.
Operator: Please stand by while we compile the Q&A roster. One moment for our first question. Our first question comes from the line of Matthew Clark with Piper Sandler. Your line is now open. Hey, good morning, guys. Good morning, Matthew.
Byron: They're they're total deposit base is.
Is over 90 is over 45% noninterest bearing which is which is very strong now there is some seasonality seasonality to that.
Matthew T. Clark: Good morning, um, Starting on expenses, the run rate, well below prior guidance of 132 to 134. Can you speak to not only the run rate that you expect going forward, X, excluding Wheatland, but also? Maybe provide some color behind the staffing efficiencies that you gain just maybe, you know, speak to what exactly was done there. Yeah, Matthew, and Ron here.
Byron: It is influenced by the AG cycle, and what's going on there but.
Byron: But very encouraged by the strong deposit base that we want is bringing to the balance sheet.
Speaker Change: Okay. That's helpful. And then maybe just touching on the Securities book could you first remind us the cash flows that you are expecting op Ed book near term and I know you sold some securities gains this quarter curious your thoughts on maybe being more active on managing that book and at what point you maybe be interested in a restructuring and then just.
Speaker Change: To your point on on Wheatland, whether whether theres any you know rates have come down since that deal was announced I'm. Just curious if theres any additional opportunity from optimism for balance sheet optimization inclusive of that deal.
So yeah, what you should be proud of, be recognized for that, but in terms of the staffing, especially, but so. The guide was $132,000 to $134,000, and if you remove the FDIC $6,000,000 and some M&A half of $500,000, you get down to roughly $126,000. But our compensation... was down by about $6 million, and I want to normalize for that because that included performance-related, performance-based pay. That totals about $6 million. So when you take it all back, $132 million is basically what we came in at. And then, when you look forward to the guidance for Q1, excluding Wheatland, we would be at $138 to $140 million. And then when you add in $6 million for Wheatland, the guide for the full first quarter is $144 million to $146 million. That should be the high for each of the quarters in 2024. This is typical; the first quarter runs high.
Speaker Change: Yes, if I could comment on the investment portfolio. The gain there David was the sale of the visa B shares and so.
Speaker Change: We've been holding on to those for quite a while $1 7 million. We thought this was a good time based on a lot of factors to exit those share. So that was the gain that you saw this quarter got it.
Speaker Change: Got it sure David back to cash flow on the securities portfolio. We are we are expecting about $250 million a quarter.
And in that securities cash flow that that through the end of this year.
Speaker Change: In terms of restructuring I don't think as Randy mentioned, we didnt sell anything in the fourth quarter I don't think we will be looking to sell.
Speaker Change: So anything out of out of our portfolio when we learned when we when does come to US we are looking to sell those securities and so.
Speaker Change: The securities currently in their portfolio will be liquidated in February and we will just become part of our overall positive liquidity.
Speaker Change: Okay.
Speaker Change: And then maybe just touching on the loan growth side, obviously loan growth slowed and I know youre very conservative you've been you've been you've done a great job pushing pushing pricing I'm curious how much of that slowdown would you attribute to being strategic on your end and just less appetite for growth versus maybe weaker market demand or just a lesser.
Speaker Change: Less certain backdrop.
Speaker Change: For the borrowers and just any thoughts on how you think about loan growth going forward.
Speaker Change: Please standby.
Speaker Change: They just stopped.
You get the full impact of the merit pay increases, the FICA tax, the employer portion, you know, kicks in. So that's how that reconciles there. So the FTE count has continued to migrate down, particularly in the second and third quarters. The division, the teams, the corporate departments all did an outstanding job.
Speaker Change: Ladies and gentlemen, please remain on your line.
Speaker Change: The call will resume momentarily.
Continuing into the fourth quarter, we had another 20 FTE reduction. So overall, for the full year, it was a 96 FTE reduction. And a lot of that is attributable to the technologies that we've talked about, I think, on each of the calls. As we continue to implement those, think of the account opening process. Cut that in half. It's even doing better now.
Speaker Change: Again, ladies and gentlemen, please standby your call will resume moments.
Instead of doing end-of-day closing, we've gone to real-time adjustment, and that's greatly set up that process. The construction program we added built has been very, very good. Treasuring Management's making great strides. It's all very positive. We do continue to believe that we'll have some additional reductions in staffing, probably not to that same degree. Remember, we're bringing in Wheatland, and they've got 14 branches. So we feel pretty good about what we're able to achieve, certainly for the year, but in particular for the fourth quarter. Okay, that's great.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: David you might want to ask your question again.
David Feaster: Yeah sure.
David Feaster: My question was just kind of on the loan growth side, you know loan growth slowed in the quarter. I know you guys have a pretty conservative posture, you guys have done a great job pushing.
Matthew T. Clark: Thank you, and Shifting Gears to the Margin. I have a three-part question there. If you had the spot rate on deposits at the end of the year, the average NIM in the month of December, and then, What's your... deposit beta assumption on the way down with rate cuts, the stage. Hi Matthew. This is Byron.
Improving loan yields I'm curious how much of the slowdown in loan growth was.
David Feaster: Strategic on year end and you know you all just having less appetite for growth versus weaker market demand in and maybe a less certain economic backdrop as your clients are working out and just how you think about loan growth more broadly going forward sure. David This is Tom.
Tom: I really think it's twofold, we have been more selective.
I can I can address that. So the spot rate for total deposits in December. This is a December 31 total deposit spot rate of 1.30. You asked for the margin, the December margin, that was 2.59%, and beta is on the way down. I think what we'll likely see, as the Fed begins to cut rates, is an adjustment period. Maybe there is a lag in customer expectations as well as in the competitive deposit environment.
Tom: Especially around.
Tom: Higher risk areas, especially in uncertain economic times speculative repayment.
Tom: Cash out refi based on market appreciation those are.
Tom: Things that were.
Tom: Even more conservative on now that we have been I think thats a portion of it I think the other side of it is we do still have a lot of borrowers while developers wait on the sidelines until they.
Tom: We're comfortable with kind of a market outlook and <unk>.
Tom: Byron mentioned the slowdown in the residential side.
Tom: <unk> seen our.
Tom: Builder finance and subdivision finances, not a big business line for us but.
Tom: We do make some very well heeled multi recession tested developers in and they are proactively scaled down as well just kind of thing what was coming on the forefront. So I really think it's it's two fold.
I think for the first few cuts, we're expecting a lower beta on the way down, maybe less than 10%. I think we will see some opportunities, some near-term opportunities to reduce rates. Our first rate reduction opportunity will be with a higher cost CD that we've ramped up in recent quarters. I'm thinking of our CD specials that we have in place. We've kept our CD specials intentionally short.
Tom: Being more selective borrowers being more cautious in terms of the production yield that we saw.
Tom: We have done that are bank division has done a phenomenal job getting strong pricing on our deal that hasnt really.
Tom: Low growth that much.
Tom: Constantly talking to our bank divisions I'm not hearing that we're losing deals over pricing is.
Tom: Its generally just overall pipelines are music from where they were back in the 8-K, although they have been somewhat stable over the last couple of quarters and the tailwind as we saw in the first half of 'twenty three with a lot of construction draws as those deals have moved through to completion and into the firm category. We're just not replacing the construction.
Almost 60% of our CDs mature in the first quarter, and so that will afford us an opportunity to reprice those CDs as they mature and as market rates are falling. And so that's our expectation. I think it will take a little bit of time for the down rate beta to gain some traction. And for the first few cuts, we're thinking less than 10%. Okay, great. And then, on the loan portfolio, you know, particularly within residential construction and landlots and other construction that's come down in the last couple of quarters, I assume those are just projects being completed, but maybe speak to the trend there. Is it, is it maybe a little more? Cautious on that front, or is it just tough to get things done? you know, find workers and get things done. Yeah, Matthew, this is Tom.
Tom: Volume at the same pace that we were as expected.
Speaker Change: And then to answer your last question I'll go forward outlook for 2024, we're thinking low to mid single digits for the year.
Speaker Change: Perfect. Thanks, everybody.
Speaker Change: Alright. Thank you. Thank you one moment for our next question. Please.
Speaker Change: Our next question comes from the line of Kelly Motta with <unk>. Your line is now open.
Kelly Motta: Hey, good morning, Thanks for the question good morning Kelly.
Kelly Motta: I wanted to ask about that.
About $2 7 billion of bps.
Kelly Motta: That you guys have just wondering what your plans are there.
Kelly Motta: Replacing that amount and how we should be thinking about.
Kelly Motta: In context of the balance sheet.
Kelly Motta: Sure Kelly this is Byron.
Byron: As you know, we have $2 $74 billion of ETF feedback Bts P balances those mature in March at the rate curve in Q4 allowed us to lock in some forward starting FHL fee advances, we locked in one $8 billion of forward starting advances at a very similar.
Yeah, the reduction in the construction segments. You're absolutely right. That's the function of projects getting completed and moving into the permanent functions, which is why you saw one to four family, multi-family, and some other CRE segments lift in the quarter. In terms of volume in the construction segments, we're definitely seeing a reduction there, really across the board, residential and commercial construction. And I think it's, I think it's really twofold
Byron: Right.
Byron: We have our Bts P borrowing rate that from a dividend adjusted basis those.
Byron: So we're starting advances will begin in March to coincide with the maturity of the <unk> borrowings.
Byron: And we ladder those maturity from 12 to 24 months until we spread the refinancing of that over five quarters.
Byron: So we locked in the $1 8 billion that leaves us with $940 million left to refinance in March and we've got some flexibility and options that we have got a little bit of extra cash right. Now we could use some of that to pay down that debt at 940, we'll look at what the overnight.
Randall M. Chesler: We are being more selective and cautious than we normally are, even more so than our Existing Conservative Underwriting Standards, but we've also seen customers waiting on the sidelines to get a little bit more clarity on what's going to happen. So there definitely is some pent-up demand out there. With the current interest rate environment, especially on the commercial side, it takes certainly more cash equity to make a deal pencil to our underwriting standards. So I think all of those things together have construction production muted a bit. Okay, and then last one for me, a bit of a two-part question around M&A. Great to see you guys getting the regulatory approvals here.
Byron: Borrowing environment is then we'll look at what the what the curve looks like in terms of term FHL be advances and so we will keep our options open we will evaluate that that last 940, as we get closer to maturity.
Speaker Change: Got it that's super helpful. Thank you.
Speaker Change: You alluded to.
Speaker Change: Higher levels of liquidity you have can you remind us where you're comfortable.
Speaker Change: Running those cash balances.
Speaker Change: We can normalize bubble sure we could bring our cash down to somewhere in the 500 to 750 range somewhere in that mid probably a more comfortable level.
Randall M. Chesler: Does this elongated approval process change your appetite for and wanting to do deals? And if not, can you speak to the incremental change in conversations you've had over the last quarter? Sure. Well, we're 30 days longer than we expected, so I think that we are very, very happy to get all the approvals and get it closed. No, I don't think this will change our appetite one bit.
Speaker Change: Okay Super helpful. And then just on the margin overall.
Speaker Change: Really encouraging.
The documents are out about spot rates and whatnot.
Speaker Change: Mike.
Speaker Change: Please.
Somewhat reached a bottom, but I was just wondering why you guys are expecting in terms of the glide path.
Matthew T. Clark: I think it will change our expectations that we set at the beginning of this process and allow more time for regulatory approval. In terms of activity, yes, the market has picked up. We are getting more inbound calls and a lot of very interesting opportunities. So I think coming out of 23, there is just a little more of an increase in inquiries, interest, as well as different types of opportunities, be it whole banks or branches or just quite a bit of more activity picking up. We'll see if it continues, Matthew, but at the start here, a marked increase. Okay, thank you. Thank you. Please take a moment for our next question. Our next question comes from the line of David Feaster with Freeman James. Your line is now open. Hey, good morning everybody.
Speaker Change: NII this year.
Yes.
Speaker Change: And margin really.
Speaker Change: Especially.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: Considering potential rate cuts, maybe given the market.
Speaker Change: Sure. Yeah, Q4 margin was down only two basis points that was a significant improvement over the pace of decline that we have seen in prior quarters. So very encouraged by that we are seeing signs of stabilization. The biggest driver of that is the slowing of our deposit cost increase.
Speaker Change: So in terms of our outlook I think we do see Q1 continued stabilization I think from there we will see an inflection point likely somewhere in the second quarter and then we see growing NIM from there.
Speaker Change: We are also encouraged by again, we land and and the lift that they will help provide on the margin side that will be helpful to put up to put a range in terms of our expectation for the full year I think we'll come in on a full year 'twenty for somewhere in the range of $2 80 to $2 90.
Speaker Change: And so Thats you know thats given our current rate outlook that includes three cuts in 'twenty four spread.
David Feaster: Morning, David. Maybe just starting on the deposit front, I'm curious about some of the dynamics that you're seeing there and if you could help us think about, like, how much of the deposit flows that you saw in the quarter would you attribute to maybe client activation or perhaps some seasonality. I'm hoping you could quantify that and just kind of how you think about deposit growth going forward and, really, I guess the overall balance sheet size. Obviously, probably targeting core deposit growth, but would you expect the balance sheet to remain relatively stable and just remix the book? Sure. David, this is Byron.
Speaker Change: Spread evenly throughout quarters, two three and four later this year.
Speaker Change: Got it that's super helpful and if we were to get more rate has been more in line with the forward curve.
Yes, Directionally why.
Speaker Change: Would you anticipate that would.
When do you anticipate that would impact that expectation I think that I think there'll be helpful. So I think our margin could could improve even above the range that that I mentioned.
Speaker Change: Previously.
Speaker Change: Okay Awesome. That's really helpful. Last question I wanted to ask was on expenses.
I'll start with deposits. You know, our deposit flows in Q4 were primarily driven by our non-interest bearing decline. We also had some decline in our brokerage TDs, but we just let those mature and run off.
Speaker Change: That increases.
Speaker Change: We earned $1 44 to one for each sector in Q1 that.
Speaker Change: That was a little higher than where I was.
Speaker Change: Can you remind us.
In terms of our outlook for total deposits for 24, we do think we'll be reverting back to some typical seasonal patterns. I think we'll be down in the first quarter. But on the year, I think we'll likely be flat versus where we ended in 23. That's in terms of total deposits. Digging into the non-interest bearing a little bit, the majority of our non-interest bearing decline came from typical seasonal outlooks. Another driver that we looked at, though, the bulk of the outflow of nitrospermine came from this. So we looked at what type of businesses saw balance decline. The top three categories were all related to the housing market.
Speaker Change: Net debt a partial impact of Wheatland and can you just remind us the.
Speaker Change: Dollar amount of cost saves do you anticipate expecting for Wheatland and.
Speaker Change: Overall the core.
Speaker Change: <unk> expenses it seems like from the release and your commentary here, they're looking to control I'm just wondering.
Speaker Change: What you're anticipating in terms of.
Speaker Change: And of course, that's out there.
Speaker Change: Yes, Kelly Ron Let me go back I, just want to make sure the 144 to $1 46 guide.
Speaker Change: That included Wheatland Wheatland suggest to go back to that.
Speaker Change: Okay.
Speaker Change: Core ignoring wheatland.
So title company balances were down, you know, construction, construction accounts, contractor accounts, those. And so, no surprise there, given recent headlines that housing activity is at a very, very slow pace, a low point. I think I've seen, you know, a 30-year low in some headlines. I would say, on the other hand, when we're talking about non-interest-bearing balances, the rate-motivated migration is slowing. That trend has been slowing in recent quarters, and in Q4, it was half of what it was in Q3. So there is still some rate-seeking migration there, but it's much lower than it has been in previous quarters, and I think that trend will continue to slow. In terms of the outlook for non-interest bearing, I think we could continue to see some outflow of non-interest bearing balances, some mixing there. I would say this is where Wheatland will give us a real boost. Non-interest-bearing balances; their total deposit base is over 45% non-interest-bearing, which is very strong. Now, there's some seasonality to that.
Speaker Change: We're going to go from $1 32 in the fourth quarter.
Speaker Change: We will go up to $1 38 to $1 40, just on the.
Speaker Change: Divisions, we already had and then you add another 6 million. So the guide becomes $1 44 to $1 46.
Speaker Change: And on the.
Speaker Change: The expense base.
Speaker Change: We are in the model that we built we assumed a 20% reduction of their noninterest expense and that would be layered in 50%.
Speaker Change: In 'twenty four and then a 100% in 'twenty five and we feel that very very achievable I don't have the exact dollar amount I just remember, it's 20% they've been 50% 2400% 25.
Speaker Change: Got it and if they are adding.
6 billion there.
Speaker Change: Adding for the quarter that inclusive of any any one time.
Speaker Change: Nonoperating kind of just the merger charges.
Speaker Change: And then yes that will be mined.
Been there but.
Speaker Change: It's not really big numbers, but we just are giving the guide $1 44 to $1 46.
You know, it is influenced by the agricultural cycle and what's going on there, but very encouraged by the strong deposit base that Wheatland is bringing in. Okay, that's helpful. And then maybe just touching on the securities book. Could you first remind us the cash flows that you're expecting from that book in the near term? And I know you sold some securities again this quarter. Curious about your thoughts on maybe being more active in managing that book and at what point you'd maybe be interested in restructuring.
Speaker Change: Okay. That's the two months' contribution from them, yes, two months. Thank you got it awesome. Thank you so much I really appreciate all the color today I'll step back.
Thank you.
One moment our next question please.
Speaker Change: Our next question comes from the line of Jeff <unk> with D. A Davidson your line is now open.
Jeff: Thanks, Good morning good.
Jeff: Well I'm glad you asked it.
Jeff: Hi, Randy.
And then just to your point on Wheatland, whether there's any rates that have come down since that deal was announced. Just curious if there's any additional opportunity for balance sheet optimization, inclusive of that deal. Yeah, if I could comment on the investment portfolio, David, the gain there was the sale of the visa B shares.
Jeff: Got to chase down the margin Q2 might shift and I think you've framed up really well environment, particularly that last piece I just.
Jeff: Wanted to get sensitivity you do screen fairly liability sensitive so I just want to make sure.
Jeff: In that three cuts scenario.
And so we've been holding on to those for quite a while 1.7 million. We thought this was a good time, based on a lot of factors, to exit those shares. So that was the gain that you saw this quarter. Sure. David, let's go back to the cash flow on the securities portfolio. We are expecting about $250 million a quarter in securities cash flow through the end of this year. In terms of restructuring, I don't think, as Randy mentioned, we didn't sell anything in the fourth quarter. I don't think we'll be looking to sell anything in our portfolio.
Jeff: And kind of upward trending.
And you talked about kind of the the beta on the way down on deposits.
Jeff: Is that would that extended to 25, then some of that favorable kind of tailwind in a three cut environment had been and then Conversely.
Jeff: Margin expectations should there be no cuts. This year is there kind of a core.
Jeff: <unk>.
Jeff: Yes.
Speaker Change: Trying to chase that down thanks.
Speaker Change: Sure.
Speaker Change: I'll start with expectations of it.
When Wheatland does come to us, we are looking to sell those securities. The securities currently in their portfolio will be liquidated in February and will just become part of our overall pot of cash flow. Perfect. And then maybe just touching on the loan growth side. Obviously, loan growth has slowed, and I know you're very conservative. You've done a great job pushing prices. I'm curious, how much of that slowdown would you attribute to being strategic on your end and just less appetite for growth versus maybe weaker market demand or just a less certain backdrop for the borrowers? And just any thoughts on how you think about loan growth going forward? Please stand by. Ladies and gentlemen, please remain on your lines.
Speaker Change: If we don't see cuts I think we I think we can still see margin growth at will the pace of that growth will be a lot slower and the key to that is stabilization of.
Speaker Change: Our deposit costs, we're already seeing.
Good signs there and so we're kind of flattening out the curve of that deposit cost increase and so I think I think that will happen even without cut.
Speaker Change: It may push out that inflection point I mentioned second quarter. It may push that inflection point out further in the year.
Speaker Change: But I still think we could see.
Some some growth although a more limited even if the fed doesn't cut.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: And I guess not so clear question if there was.
Speaker Change: Into 25, you talked about that.
Speaker Change: Three cut lift to kind of $2 80 to 90 range.
Speaker Change: As we progress into 'twenty factor, we see further lift is there sort of a tail of that beta down scenario, where you had.
Speaker Change: Foresee an environment, where margin could continue to propel higher in 'twenty five a long time from now, but just thoughts on that.
Sure I do think we'll see some tailwind into 'twenty five.
Operator: All will resume momentarily. Again, ladies and gentlemen, please stand by. Your call will resume momentarily.
Speaker Change: The way our balance sheet is structured it we get most of the benefit kind of in year two of a rate move and so.
Speaker Change: With three rate cuts in 'twenty four.
Speaker Change: We'll gain momentum in the 25% further cut beyond that it'll be a bit better. So yes, I do think I do think the outlook for 'twenty five is really positive.
Speaker Change: Okay I appreciate it thank you.
Speaker Change: And Randy.
Speaker Change: I appreciate the M&A kind of appetite and conversation.
Speaker Change: The dividend rate has been flat for a little while now and I know Thats, a board discussion, but as we read anything into that in terms of.
Speaker Change: Our holding capital for baby.
Speaker Change: A more active M&A or is that a separate channel that.
Speaker Change: Looking at the dividend you could you can kind of do boat.
Speaker Change: More specifically asking about the dividend thanks, Don we're comfortable where the dividend is I don't see it changing.
Speaker Change: And I think.
Speaker Change: This is still in an environment, where capital is king and so.
Operator: Thank you. David, you might want to ask your question again. Yeah, sure. My question was just kind of on the loan growth side. You know, loan growth slowed in the quarter. I know you guys have a pretty conservative posture.
Speaker Change: We will stay the course with the dividend in the foreseeable future again, thats up to the board, but Thats my expectation.
Speaker Change: Maybe some of those hikes were kind of.
Speaker Change: Kind of post pandemic.
David Feaster: You guys have done a great job pushing, you know, improving loan yields. I'm curious how much of the slowdown in loan growth was strategic on your end and, you know, you just have less appetite for growth versus weaker market demand and maybe a less certain economic backdrop as your clients are looking out and just how you think about loan growth more broadly going forward. Sure. Yeah, David. This is Tom.
Speaker Change: Yeah, there was.
Speaker Change: Some moves there I suppose.
Speaker Change: Anyway, I think you answered it I appreciate it the last one for me is just to check in on that tax rate.
Speaker Change: Kind of where you see in 'twenty four.
Speaker Change: Where we settle in.
Ron: Yes, Ron here.
Ron: Settlement it will range from 18% 18 five.
You know, I really think it's twofold. We have been more selective, you know, especially around, you know, higher-risk areas, especially in uncertain economic times, speculative repayment, you know, cash out refi based on market appreciation. Those are things that we're even more conservative on now than we have been. I think that's part of it. I think the other side of it is we do still have a lot of borrowers, a lot of developers waiting on the sidelines until, you know, they're comfortable with the kind of market outlook. And, you know, as Myron mentioned, the slowdown in the residential side, we've seen our builder finance and subdivision finance is not a big business line for us.
Ron: We're in that ballpark is the.
Ron: We achieved.
Net interest income and NIM all of that occurring.
Ron: Well.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: Our next question comes from the line of Brandon King with <unk>. Your line is now open.
Brandon King: Hey, good morning, good morning, Brandon.
Brandon King: So could you quantify the amount of loans right and adjustable rate loans, you expect to reprice in 2024 and with the run off yields are.
But, you know, we do have some very well-heeled, multi-recession-tested developers, and they've proactively scaled down as well, just kind of seeing what was coming on the forefront. So, I really think it's twofold, us being more selective, and borrowers being more cautious. In terms of the production yield that we saw, you know, we have done, our bank division has done a phenomenal job getting strong pricing on our deals. That hasn't really slowed growth that much. You know, I'm constantly talking to our bank divisions. I'm not hearing that we're losing deals over pricing.
Brandon King: Yes.
Operator: The answer is we're going to have to check on that for you Brandon.
Speaker Change: Okay. So let us get back to you with exact numbers.
Speaker Change:
Speaker Change: We do I was one thing I was going to add to the margin discussion. We do continue to get some lift with portfolio repricing, it's a lagged repricing and so there is some lift there and that is.
Speaker Change: Accelerating into 'twenty, five, but we will get to the actual numbers.
Speaker Change: Okay.
It's generally just overall pipelines are muted from where they were back in the A-Day, although they have been somewhat stable in the last couple of quarters. And, you know, the tailwinds we saw in the first half of 23 with a lot of construction draws, as those deals have moved through to completion and into the perm category, we're just not replacing the construction volume at the same pace that we were as expected. And then to answer your last question on our go forward outlook for 2024, you know, we're thinking low to mid single digits for the year. Perfect. Thanks, everybody.
Speaker Change: And then on the CD, if I remember correctly with what I heard 60.
Speaker Change: 60% mature in the first quarter.
Speaker Change: I wanted to know what rates those Cds are coming off at and what Youre looking to reprice those Cds.
Speaker Change: Sure those are those Cds are priced at a little under four 5%.
Speaker Change: It.
Speaker Change: It will depend on the rate environment Windows CD comes up for maturity, but we're already starting to turn.
To test kind of peeling back those renewal rates, a little bit and we're having good success there so.
David Feaster: All right, thank you. Thank you. One moment for our next question, please. Our next question comes from the line of Kelly Murtha with KBW. Your line is now open. Hey, good morning.
Speaker Change: I would expect the renewal of those.
Speaker Change: Those Cds to come in just a little bit below where they are.
Speaker Change: Okay.
Speaker Change: That's helpful. And then lastly, with the CFPB proposal and overdraft fees.
Thanks for the question. Morning, Kelly. I wanted to ask about the about 2.7 billion BTS that you guys have. Just wondering what your plans are for replacing that amount and how you think that in context is going. Sure, Kelly. This is Byron.
Speaker Change: Are you considering any proactive changes to your overdraft policy.
Speaker Change: No we're watching that carefully and.
Speaker Change: Looking at it at this point in time, we don't anticipate any changes I think it's still early so theres a lot of discussion to be had about that have you read the full report pretty extensive.
Speaker Change: The industry's got a very strong point of view. So at this point, we're watching the discussion and too early to really anticipate any changes.
As you know, we have $2.74 billion of BTFP balances; those mature in March. The rate curve in Q4 allowed us to lock in some forward-starting FHLB advances. We locked in $1.8 billion of forward-starting advances at a very similar rate as our BTFP borrowing rate, but that's on a dividend-adjusted basis. Those forward-starting advances will begin in March to coincide with the maturity of the BTFP borrowing.
Speaker Change: Okay.
That's all I had thanks for taking my questions.
Thank you <unk>.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone.
Speaker Change: And our next question comes from the line of Andrew <unk> with Stephens. Your line is now open.
Andrew: Hey, good morning.
Andrew: Andrew.
Okay.
We laddered those maturities from 12 to 24 months, and we spread the refinancing of that over five quarters. We locked in the $1.8 billion. That leaves us with $940 million left to refinance in March.
Andrew:
Andrew: Maybe just to start BARDA.
Speaker Change: Barton I appreciate all the commentary you gave earlier on the deposit side. It was helpful. I just wanted to clarify.
Speaker Change: When do you discuss kind of year on year 24 versus 23 deposit balances kind of flat on the year is that inclusive or exclusive of wieland.
We've got some flexibility and options there. We have a little bit of extra cash right now. We could use some of that to pay down that $940.
We'll look at what the overnight borrowing environment is then. We'll look at what the curve looks like in terms of term FHLB advances. We'll keep our options open. We'll evaluate that last $940 as we get closer. Got it. That's super helpful.
Barton: That is the exclusivity so that would be that would be that the organic trajectory of our of our deposit base.
Barton: Okay.
Barton: I thought so just wanted to make sure there and then if I could clarify Ron on that just to go back to the core expense guide.
Thank you. And you alluded to the higher levels of liquidity you have. Can you remind us where you're comfortable running those cash balances for what's a more normalized bubble?
Barton: Before the Wieland deal Youre talking to kind of a $1 38 to $1 40 core.
Speaker Change: Core expense in <unk>, so call it even.
Sure, we could bring our cash down to somewhere in the $500 to $750 range, somewhere in that, and probably more. Okay, super helpful. And then just on the margin overall, it was really encouraging. The fact you threw out about spot rates and whatnot, it seems like, has somewhat reached the bottom. But I was just wondering what you guys are expecting in terms of the glide path of NII this year, and Marjin, really, especially.
Ron: Pretty significant build from from the <unk>, even even if you normalize for the $6 million that sound like a true up benefit this quarter I guess I'm struggling to figure out how you get from what I'm, what I call like a 132 core and <unk> up to $1 38 to $1 40 on a core basis in the first.
Ron: Quarter, just given some of the expense commentary some sounds pretty positive and you had some FTE reduction on the fourth quarter. It sounds like a lot of expense management focus I guess I'm just struggling to figure out how we get from 132 to 138 140.
Sure. Yeah, you know, Q4 margin was down only two basis points. That was a significant improvement over the pace of decline that we have seen in prior quarters, so I'm very encouraged by that. We are seeing signs of stabilization, and the biggest driver of that is the slowing of our deposit cost increase.
Ron: Yes.
Speaker Change: Certainly a good chunk of that is the merit increase.
Speaker Change: Talent cost and.
Speaker Change: So we've layered in a 5% increase so we're still seeing higher inflation out there.
Speaker Change: And so just being conservative, but feel very comfortable that $1 38 to one 140 and the team.
So in terms of our outlook, I think we do see Q1 continued stabilization. I think from there we'll see an inflection point, likely somewhere in the second quarter, and then we will see growing NIM from there. We are also encouraged by, you know, again, Wheatland and the list that they will help provide on the margin side. That will be helpful to put a range in terms of our expectations for the full year. I think we'll come in on the full year 24 somewhere in the range of 280 to 290.
The colleagues everybody's looking at it but.
We continue to have.
Speaker Change: AMC, 5%, absolutely could happen no doubt about it.
Speaker Change: Yeah Okay.
Speaker Change: Got it and then if I could just clarify one point on the on the margin guidance.
Speaker Change: You guys provided the 280 to 90 range for the full year inclusive of it sounds like three cuts in.
Speaker Change: The last three quarters of the year I guess, if the if the margin.
And so that's, you know, that's given our current rate outlook that includes three cuts in 24, you know, spread evenly throughout quarters 2, 3, and 4. Got it. That's super helpful. And if we were to get more rate cuts and more in line with the forward curve, um, just directionally, what, what would you anticipate that would impact the economy better?
The commentary for the NIM into <unk> is a pretty stable level versus the fourth quarter.
Speaker Change: And then maybe some inflection into Q, but then building in the back half of the year as you as you get the benefit of those cuts it kind of implies you're going to move.
Speaker Change: Like a 3% plus NIM exiting the year is that is that kind of a fair assessment or.
Speaker Change: How would you would you walk that back a little bit.
I think it would be helpful, so I think our margin could improve even above the range that I mentioned. Okay, awesome. That's really helpful. The last question I wanted to ask was on expenses. I think you had said for Wheatland, Wheatland 144 to 146 in Q1. That was a little higher than where I was.
Speaker Change: Yes.
Speaker Change: Thats a fair assessment.
Speaker Change: Okay.
Well thanks for taking my questions. This morning I appreciate it.
Speaker Change: Welcome. Thank you and I'm currently showing no further questions at this time I'd like to hand, the conference back to Mr. Randy Randy Chesler for closing remarks.
Randall M. Chesler: Great well. Thank you Norma. Thank you everyone for joining us this morning.
Randall M. Chesler: And as that concludes our call. So we appreciate everyone taking time out of your busy days to listen and have a great Friday and a great weekend.
Can you remind us, and that's a partial impact of Wheatland, can you just remind us the... $1 amount of cost pay as you anticipate expecting for Wheatland and overall core expenses? It seems like from the release and your commentary, you're.., wondering what you're anticipating in terms of. Yeah, Kelly, Ron, let me go back. I just want to make sure 144 to 146 guide that included Wheatland.
Speaker Change: Ladies and gentlemen, thank you for your participation in today's conference you May now disconnect everyone have a wonderful day.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
So just to go back to the, We're going to go from 132 in the fourth quarter; we'll go up to 138 to 140 just on the divisions we already have, and then you add another six million, so the guide becomes 144 to 146. And on the expenses. We are, in the model that we built, we assumed a 20% reduction in their non-interest expense, and that would be layered in 50% in 24, and then 100% in 25. And we feel that it's very, very achievable. I don't have the exact dollar amount.
I just remember it's 20% phased in, 50% 24, 100% 25, on it. And if they're adding that, that's 6 billion that they're adding for the quarter, inclusive of any one. We are in over 100 cases, and Mortish has done a very good job in these sort of non-operating kind of just merger charges in that. And that's the energy my, It's not a really big number, so we just are giving the guys 144 to 146. Okay, and that's that's a two month contribution. Yes, two months.
Speaker Change: Sure.
Speaker Change: Thanks.
Speaker Change: Yes.
Thank you. Got it. It's awesome. Thank you so much. I really appreciate all the colors now.
Speaker Change: [music].
Thank you. One moment for our next question, please. Our next question comes from the line of Jeff Rulis with D.A. Davidson.
Jeffrey Allen Rulis: Your line is now open. Thanks. Good morning. Hi Randy. You don't have to chase down the margin, do too much, and I think you framed it up really well, Byron, particularly that last piece, wanted to get sensitivity. You do screen fairly liability sensitive.
So I just want to make sure, in that three-cut scenario and kind of upward trending, and you talked about kind of the beta on the way down on deposit, would that extended to 25 then some of that favorable kind of tailwind in a three-cut environment and then, and then conversely, kind of margin expectations should there be no cuts this year? Is there kind of a core?
left, or is that just trying to chase that down? Thanks. Sure. I'll start with expectations if we don't see any cuts. I think we could still see margin growth, but the pace of that growth will be a lot slower, and the key to that is the stabilization of our deposit costs. We're already seeing good signs there, and so we're kind of flattening out the curve of that deposit cost increase, and so I think that will happen even without cuts. It may push out that inflection point. I mentioned the second quarter; it may push that inflection point out further in the year, but I still think we could see some growth, although more limited, even if the Fed doesn't cut.
Yep. Okay. And I guess the not so clear question there was about 25, you talked about that. 3-cut lift to the 280-290 range.
As we progress into 25, can we see further lift? Is there sort of a tale of that beta down scenario where you... You foresee an environment where margin can continue to propel higher in 25, a long time from now, but just thoughts on that. Sure, I do think we'll see some tailwinds into 25. But the way our balance sheet is structured, we get most of the benefit kind of in year two of a rate move. And so, with three rate cuts in 24, we'll gain momentum into 25, and if there are further cuts beyond that, it'll be even better. So yeah, I do think the outlook for 25 is really positive.
Jeffrey Allen Rulis: That's, I appreciate it. Thank you. And Randy, I appreciate the M&A kind of appetite and conversation. The dividend rate has been flat for a little while now, and I know that's a board discussion, but can we read anything into that in terms of... holding capital for May, a more active M&A, or is that a separate channel that, looking at the dividend, you could, you can kind of do both? Just more specifically asking about the dividend.
Randall M. Chesler: Thanks. Sure. We're comfortable where the dividend is. I don't see it changing. And I think this is still an environment where capital is king.
Randall M. Chesler: And so, you know, we'll stay the course with the dividends in the foreseeable future. Again, that's up to the board. But that's my expectation. Okay, maybe some of those hikes were kind of post-pandemic.
Yeah, there were some moves there, I suppose. Anyway, I think you answered it. I appreciate it. The last one for me is just to check in on that tax rate, kind of where you see in 24 where we settled in. Yeah, Ron here.
Settle in. It will range from 18% to 18 and a half. Somewhere in that ballpark is the NIM, all of that occurring as well. OK, thank you. Thank you. One moment for our next question. Our next question comes from the line of Brandon King with Truist. Your line is now open. Hey, good morning. Good morning, Brandon.
Brandon King: So could you quantify the amount of loans, fixed rate and adjustable rate loans, you expect to reprice in 2024 and what the runoff will be? The answer is, we're going to have to check on that for you, Brandon. Okay. So let us get back to you with the exact numbers. We do, that was one thing I was going to add to the margin discussion, we do continue to get some lift with portfolio repricing, it's a lag repricing. And so there is some lift there, and it is accelerating into 25.
But we'll get to the actual number later. OK. And then, on the CDs, if I remember correctly, was what I heard. 60% mature in the first quarter, and I wanted to know what rates those CDs are coming off at and what you're looking to reprice. Sure, those CDs are priced at a little under four and a half percent, and it will depend on the rain environment when those CDs come up for maturity, but we're already starting to test, you know, kind of peeling back those renewal rates a little bit, and we're having good success there, so I would expect the renewal rates of those CDs to come in just a little bit below where they are now.
Okay. That's helpful. And lastly, with the CFPB proposal and overdraft fees, are you considering any proactive changes to your overdraft policy? No, we're watching that carefully, and, You know, looking at it at this point in time, we don't anticipate any changes. I think it's still early. So there's a lot of discussion to be had about that. If you read the full report, it's pretty extensive. You know, the industry's got a very strong point of view.
Randall M. Chesler: So at this point, we're watching the discussion, and it's too early to really anticipate any changes. Okay. That's all I had.
Brandon King: Thanks for taking my question. Thank you. You're welcome. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone. And our next question comes from the line of Andrew Terrell with Stevens. Your line is now open.
Andrew Disdier: Hey, good morning. Good morning, Andrew. Um... Maybe just to start, Byron, I appreciate all the commentary you gave earlier on the deposit side. It was helpful. I just want to clarify. When you discuss kind of year-on-year 24 versus 23 deposit balances, kind of flat on the year, is that inclusive or exclusive of Wheatland? That is exclusive to the Wheatlands, so that would be that would be the organic trajectory of our Yeah, okay. I just wanted to make sure.
Andrew Disdier: And then if I could clarify, Ron, just to go back to the core expense guide, so, before the Wheatland deal, you're talking about kind of a 138 to 140 core, Corey Spence in OneCue, so call it even a..., a pretty significant build from the 4Q, even if you normalize for the $6 million, that's not like a true up benefit this quarter. I guess I'm struggling to figure out how you get from what I call a 132 core and 4Q up to 138 to 140 on a core basis in the first quarter. Just given some of the expense commentary, it sounds pretty positive. And you had some FTE reduction in the fourth quarter. It sounds like a lot of expense management focus.
I guess I'm just struggling to figure out how we get from 132 to 138 to 140. Yes, certainly a good chunk of that is the merit increase, you know, talent costs. And so we layered in a 5% increase, so we're still seeing higher inflation out there.
Andrew Disdier: And so just being conservative but still very comfortable between 138 and 140. And, you know, the team. Colleagues, everybody's looking at it, but we continue to negotiate and see 5% absolutely could happen, no doubt about it. Yeah, okay. Got it. And then if I could just clarify one point on the margin guidance that you guys provided, that the 280 to 290 range for the full year, inclusive of sounds like three cuts in the last three quarters of the year. I guess if the margin, the commentary for the NIM until 1Q is a pretty stable level versus the fourth quarter. And then maybe some inflection into Q, but then building in the back half of the year as you get the benefit of those cuts, it kind of implies you have to move to like a 3% plus NEM exiting the year.
Andrew Disdier: Is that kind of a fair assessment or not? Would you walk that back a little bit? That's a fair set. Okay, well, thanks for taking my questions this morning. I appreciate it. Welcome. Thank you. And I'm currently showing no further questions at this time.
Operator: I'd like to hand the conference back to Mr. Randy Chesler for closing remarks. All right. Well, thank you, Norma. Thank you, everyone, for joining us this morning. And that concludes our call.
Randall M. Chesler: So we appreciate everyone taking time out of their busy days to listen in. Have a great Friday and a great weekend. Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Everyone have a wonderful day, and many more. Thank you.