Q1 2024 Glacier Bancorp Inc Earnings Call
Thank you for standing by and welcome to the Glacier Bancorp first quarter earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to.
Thats Star one on your telephone if your question has been answered and you'd like to remove yourself from the queue simply press star one again.
As a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Randy Kessler, President and Chief Executive Officer of Glacier Bancorp. Please go ahead Sir.
Alright, Thank you Jonathan and 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 consideration starting on page 10 of our press release and we encourage you to review this section.
Yesterday, we released our first quarter earnings and then announcement regarding the approval of our purchase of six Montana branches. After the close of the market.
We experienced an increase in the net interest margin for the first time since the third quarter of 2022.
The company's net interest margin as a percentage of earning assets on a tax equivalent basis was 2.59% compared to 2.56% in the prior quarter and was primarily driven by the increase in loan yields outpacing the increase in deposit costs.
This was a very welcome result, and arrived a quarter sooner than we expected.
We believe this trend will continue throughout 'twenty four and into 'twenty five.
It appears that we are entering a higher for a longer period of interest rates and that environment is good for the company as our lower rates.
Yeah.
Interest income of $279 million in the quarter increased $5 9 million or 2% over the prior quarter and increased 47 5 million or 20% over the prior year first quarter.
The loan yield for the current quarter was 546%.
Increased 12 basis points compared to $5 three 4% in the prior quarter and increased 44 basis points from the prior year first quarter.
The loan portfolio of $16 7 billion increased $534 million or 3% during the quarter.
The core deposit cost was 1.34%, which increased 10 basis points for the quarter, which was the smallest increase since the fourth quarter of 2022.
Total deposits of 24, 24 billion increased $498 million or 3% during the current quarter and increased $279 million or 1% from the prior year first quarter.
The $2 7 billion of Federal Reserve Bank term funding was paid off during the quarter through a combination of federal home loan bank advances and cash.
Nonperforming assets of $25 million at quarter end decreased 206000, or 1% from the prior quarter and decreased $6 6 million or 20% from the prior year first quarter.
Net income was $32 6 million for the current quarter, a decrease of $21 7 million or 40% from the prior quarter net income of $54 3 million.
However, the current quarter included a total of $13 3 million related to credit loss expense from the acquisition of Wheatland Bank acquisition related expense and increased expense from the federal deposit Insurance Corporation Special assessment.
We completed the acquisition and core conversion of community financial group.
Parent of Wheatland Bank, a leading eastern Washington community Bank headquartered in Spokane, with total assets of $778 million.
As you May remember, we consolidated our other eastern Washington Division, North Cascades Bank under Wheatland to create one brand in eastern Washington.
The two divisions have been combined and the team has done an excellent job, bringing our employees and customers together and focusing on building the wieland brand across the state.
In February we announced the purchase and assumption agreement with Heartland Bank to purchase six Montana branches permits Rocky Mountain Bank division, including the deposits loans owned real estate and fixed assets associated with the branches.
I am very pleased to announce that we received all regulatory approvals yesterday and expect to close this transaction in July.
It is a rare opportunity to purchase six branches of a well running franchise in good markets, where we already have divisional branch leadership and a good knowledge of the customers.
This transaction includes high quality deposits and loans and a great team of employees to.
We expect to close and convert these branches in July.
We also declared a quarterly dividend of 33 per share. The company has declared a 156 quarterly dividends and has an increase the dividend 49 times.
And this quarter, we're very pleased to be recognized by J D power to be number one in retail banking satisfaction in Montana.
And Washington.
And Forbes also announce that they ranked glacier bank as top 10 in the U S of the world's best banks.
And that now makes it five consecutive years, we have achieved this recognition.
So Jonathan that ends my formal remarks, and I would now like you to open the line for any questions that our analysts may have.
Certainly and as a reminder, ladies and gentlemen, if you do have a question at this time simply press star one on your telephone. Our first question comes from the line of David Feaster from Raymond James Your question. Please.
Hey, good morning, everybody.
Good morning, David.
Just.
Starting on the margin you were able to like you talked about drive the core margin higher quarter over quarter, you've been pretty vocal about calling the bottom and we're able to do it earlier than expected.
And then you talked about the higher for longer environment, and a positive which makes sense just given the earning asset remix.
I guess I was just hoping that you could help us think through the margin trajectory over the course of the year.
Assuming rates do stabilize here and then.
We stay in this higher for longer environment, and just remind us expectations for the benefits of each rate cut if they do arise.
Sure. David This is Byron I can I can touch on margin I would say first of all we're very pleased to see that our margin did grow in the first quarter I think that was that.
That was huge and as you mentioned a little sooner than we anticipated I would say the trends are there for growth throughout the year, whether the fed cut or not.
Do a little better if the fed cuts, but higher for longer is still good for us I would say in this rate environment with fewer cut pushed back later in the year, we do give up a little bit of the margin upside. However, our branch acquisition that Randy talked about gives us some of that back. So I would say net net we're pretty much.
Same play even with fewer expected rate cut this year.
I would say overall I would see our full year margin margin coming in at the low end of our previous guidance of $2 80, and that does include the benefit of the branch acquisition.
I would say I would caution you on that though there is a potential headwind and that is with noninterest bearing migration. If we can if we see.
Outflow in our noninterest bearing deposit balances that could pressure deposit cost and margin.
That comes there.
Absolutely and maybe just kind of staying on that topic.
Could you talk about the trends that you saw in the quarter, especially on core deposits.
And how that progressed throughout the quarter and just kind of the early read on the second quarter so far.
And just how you're thinking about core deposit growth as we enter into the seasonally stronger months.
Speaker Change: Sure, yes, noninterest bearing balances.
Did that we did on our core.
From a organic perspective noninterest bearing balances did outflow I would say if you break that down within the quarter all of our outflow happened in January followed by slight growth in February and March again, with the acquisition of Cleveland They brought in.
No.
$250 million of noninterest bearing balances that was that was <unk>.
Inefficient booth.
The balance sheet I do think we could continue to see some some additional outflow in future quarters.
For example, we do see.
<unk> seasonal tax outflows this time of year so.
That's something that that we've seen so far in April that's consistent with prior year as well overall in terms of in terms of.
Core deposit.
Sure.
I do think we could we could see a little bit of outflow in the second quarter I do think we will be returning more toward seasonal trend.
Which means in a very strong.
Flows during the summer months and early fall and then as we get later in the year, we could see a little bit about outflows. So overall kind of getting back to some of the normal seasonality that we see year to year.
And so thats that.
I think that deposit for us overall in terms of where I see the balance ending I think I think we will end up at the end of 'twenty three pretty close to where we ended in this is organically.
Close to where we ended the year last year with growth coming from the acquisition of the Cleveland <unk> and the branch deal.
Okay.
Helpful Color and then maybe just last one for me that's not credit no mean broadly credit remains pretty benign you guys are aggressive managers or credit.
NPA still are low, but early stage delinquencies did tick up and it sounds like it's primarily on one credit I'm. Just curious if you could touch on what drove that and then your thoughts on credit more broadly what you're seeing what you're watching more closely in and your thoughts on credit as you stress your book.
Yes. Thank you.
The increase this quarter was primarily one relationship we should have some resolution this quarter second quarter.
On that transaction more broadly on the portfolio, we're not seeing any specific industry asset class or geography, that's that's showing any trends in stress.
So no material cracks in the portfolio yet certainly we keep watching we still regularly stress test the portfolio not only for economic trends, but also interest rates those results continued to be favorable and.
We just continue our strong disciplined credit risk management.
And so that credit what industry was it in and it sounded like you're expecting a resolution with no losses or anything pretty quickly.
Yes, the industry that is in.
Hospitality.
And what's behind it it's really more like Harvey cabin type structure and.
It's.
The sponsors just involved in some other transactions.
And.
That are coming out of the ground and so instead of where these projects are typically slow in the winter. Some funds left there to support some other project and we expect it to return back to its normal trends with summer.
That's great color thanks, everybody.
Okay. Thank you one moment for our next question.
And our next question comes from the line of Kelly Motta from K VW. Your question. Please.
Hey, good morning, Thanks for the question.
And then Kelly.
Maybe just starting with the expenses it looks like you came in right.
Right down the middle of where you said you had last quarter.
I'm wondering as we look ahead.
If there is any sort of puts and takes cost savings we should be.
<unk> with Wheatland as well as.
How we should be thinking about any of the.
Associated costs with the Heartland branch transaction.
You announced.
Yes, Kelly Ron here.
Thanks for the recognition we hit it right down the middle there.
That's pretty good.
One I want to make is.
The division's corporate departments, everybody continues to focus on that.
The guide.
To give for Q2 I'm going to stick with the 144 to $1 46.
Going to be on the high end of that I think.
As we get through the second quarter, but speaking to Wheatland, we do expect to.
Another $2 million of cost savings.
That we'll have there and those will be spread out over the three quarters Ratably one thing to keep in mind. Another reason why I say the high end of that range closer to the 146, we only had two months wieland in there and now we're going to have a full three months, though.
That helps explain why it would be at the high end of that.
That range.
And then.
Let me pause there any any questions on that information.
I think that was explained quite well thanks Ron.
Okay, but let me then get into the.
The branch acquisition of Rocky Mountain.
Thanks, everybody to take away is we're going to on an operating basis for the five months of 2024.
We're factoring in.
Three cents per share Thats operating but we've got the transaction related expenses that will largely be expense in the.
And that third quarter again, we're going to close that in July.
The operating there'll be three over that five months.
Penny and a half in each quarter. If you will but then the transaction expenses on an after tax basis, that's five so that'll.
Show up primarily in that.
Third quarter, and then very little that will show up in the.
And that in that fourth quarter, but.
We felt pretty good about it.
Got it that's helpful maybe may be turning.
Speaker Change: Loan growth.
Can you just.
I'll provide an overview of our pipeline look like.
Youre seeing the most opportunities and.
Your outlook as you look ahead through the balance of this year.
Sure Kelly this is Tom.
Yes.
Rewind the clock a little bit we felt pipelines muted.
Pretty much throughout 2023.
Now that there's been a little more stable guidance around where interest rates are going we've seen our pipelines pick up a little bit in the first quarter, which is encouraging and so.
Our guidance for the full year.
We're going to we're still at the low to mid single digits I think we'll probably see some stronger growth in Q2, Q3, Q4 tends to be a little bit slow so for the overall overall year low to mid single digits and then in terms of specific industry or geography, it's pretty it's fairly widespread.
Across industries and across.
Our HVAC footprint, so nothing is really standing out as the outlier.
Got it that's helpful. And then maybe last one for me I appreciate the color around <unk>.
Margin in your expectation now that that.
On the.
The lower end of the previously provided range just wondering as we think ahead. There is a lot of moving parts this quarter with the Bts P of repayment and just how.
How should we be thinking about the size of the balance sheet portion do you still expect the balance sheet too.
Grow through the balance of the year or.
If loan growth, mostly going to be funded with securities filings and whatnot.
Okay.
Do you think loan growth will be funded with the securities outflow.
We do continue to see about $250 million of.
Cash flow coming off of our securities portfolio, I think thats going to be enough to fund.
The loan growth.
Conversely on his side of the balance sheet. So.
I think overall, our cash balance will probably maintain it in the range that you see it now somewhere between seven and $800 million. So.
To see fairly stable balance sheet.
Sure.
And where we ended the quarter organically and from there just add.
The branch acquisitions that will happen later this year.
Thanks, a lot I'll step back.
Thank you one moment for our next question.
And our next question comes from the line of Jeff <unk> from D. A Davidson your question. Please.
Thanks, Good morning.
Hi, Jeff.
Byron sorry to get back on that margin, but I just wanted to clarify I think when you said kind of low ended at $2 80, we are talking about.
Trajectory towards that at year end is that is that correct way to think about that.
Yes, we do think it will be growing quarter over quarter and on the full year ended up.
And that $2 80 area. So I would just I would say.
Say premier continued growth quarter over quarter, we have we have a lot of.
Positive dynamics.
And the structure of our balance sheet and the repricing of our assets that are not dependent on fed cut and.
So that's really where you're going to see the growth in our margin for the rest of it.
Okay with that.
I think we were talking last quarter about.
Potentially kind of Q4 exiting the year you could yes.
3% I think that includes maybe some rate cuts and you talked about this time around that.
Okay.
<unk> cuts would be better understanding that it's still trending up so is that am I thinking about that right that even with a $2 80 low guide maybe not.
Hi, and exiting at three with cuts if that doesn't play out.
But it is that I mean that.
Without cut so let me put it this way.
Yeah, it's probably something north of $2 80 to end the year is that fair if we're getting.
On average for the full year at $2 80.
That's right, yes will be.
Approaching the.
Hi to the high twos.
We exit the year and as I mentioned, what we give up with fewer fed cut we kind of get back with the addition of the branches that are coming onto the balance sheet. So the puts and takes there but overall.
Speaker Change: Do.
Continuing to grow margin.
I think on the year will be close to that loan.
<unk> got as I mentioned.
Got it.
The margin does go Jeff and reaches that almost 3% in the fourth quarter, but then the full year margin is closer to what buyer and the same as the low when you take the full year margin thats going to be closer to the two eight.
Net.
Okay, and Randy as you mentioned on this call and I think prior calls theirs.
Momentum into 'twenty, five as well as we kind of.
Prior discussion that's correct as well.
Yes, okay.
And then sorry for the follow ons the expense side Ron.
I just wanted to kind of range, but I appreciate that the onetime expenses with the branch deal, but if we think about.
I and maybe an <unk> run rate of $1 46.
What is that head to.
If you get some cost saves, but then you bring on <unk> app or the whatever division they call that.
Where does that head in the third quarter in terms of quarterly kind of run rate ex the.
The transaction costs more core.
Yes.
So in the third quarter.
Kurt.
Rocky Mountain Bank branch.
<unk> that will pick up we only have four five months so.
Third we will have about 38% cost savings.
Overall, but we're only going to have 50% of that occur and then you've only got five months. So it won't be a big cost savings.
In that respect.
So up 25%, because we're going to have 100% cost saves there because of that.
Being in the market.
Having to convert right away.
Typical stock deal so.
There'll be some slight trending up.
And the.
Third, but in the fourth quarter, but I'm not ready to quantify it just yet I wanted to see what we're going to get when we actually close on the deal.
Okay.
One last one Randy.
Kind of a.
High level.
Thanks.
Question.
Yes, we are a year removed from kind of the liquidity crisis or the peak of that in and I think in early 'twenty three.
Kind of circle the wagons with your team in terms of bringing customers back.
<unk>.
Just high level do you feel like you've sort of reestablished.
With those customers in terms of maybe some led away.
In 'twenty two.
Just kind of feeling where you are competitively.
Deposit side.
Kind of a year removed if you will.
Yeah.
Yes, a lot has happened since 'twenty two I think the team.
Did an excellent job of.
Going back out after that.
Go back to some of the turbulence we had in the market.
Both with rates moving up quickly and people.
Moving based on market rates and then the fear around.
The Silicon Valley Bank failure.
Jim I think of all the customers.
We want to bring back and have done a very good job of bringing them.
Back and in fact.
I think that the current status right. Now is there are some very good customers kind of up for grabs in the market.
And based on what other banks are doing and so I think we're not only feel good about.
Holding on to the good customers that we had back in 'twenty two.
But growing some relationships with some new customers so right now.
Looks very favorable.
I still think the banking environment overall.
Could be a bit fragile, but as of right now Jeff looks looks very favorable.
Alright, thanks for the perspective I appreciate it thanks.
Yes.
Welcome.
Thank you one moment for our next question.
And our next question comes from the line of Matthew Clark from Piper Sandler Your question. Please.
Hey, good morning, Thanks for the questions.
Maybe just to close the loop on the margin if you could give us the spot rate on deposit costs at the end of December and then the average NIM.
Sorry at the end of March.
And then the.
Average NIM in the month of March.
Sure spot rates on total deposit.
On March 31 was $1 36.
And then the margin in the month.
Of March was $2 61.
Okay, great. Thank you.
And then.
The Heartland branch deal can you help.
Quantify the loans and deposits that are expected to come over or even if it's.
Somewhat of a range and then the related margin on.
Those combined balances.
Yes, Geoff Ron here.
On the deposits will pick up.
$463 million I'm going to throw at $7 million in there for repo, but the deposits.
Our $484 63.
The yield on that we're getting.
On the coupon is the $4 37 Netflix.
Coming over.
I'll get to the fair value Mark and the increase in the second on the loan $296 million.
Coming in again, a yield of $5 37 on the deposit the yield.
The average cost of $1 59 per.
<unk>.
In order to retain deposits they've had to price up and also some migration as you can imagine.
On the.
The loan marks.
Accretable dollar amount of $17 million that includes both the rate Mark.
And the credit Mark and combined $17 million fully amortize that over.
Five years.
So the margin should be should be pretty healthy both actual and then with the purchase accounting marks as well.
Okay great.
Thank you.
And then just on.
Your efficiency ratio.
Higher than I'm sure you'd like it to be I think on an operating basis about 72% well above kind of your longer term goal 50 455.
What do you think that efficiency ratio can get to.
By the fourth quarter this year and then into next year.
I would say just to give you a range.
Again, we're going to have to factor in the fact that we have those transaction costs coming in for that factor than even I can pay their M&A, but I would tell you it will probably be.
69, 70% realistically the best that we can do that all in and if you pull out the operating I would say, we could get to $74 75% range.
You mean, lower if it's excluding yes, yes.
Okay, so lower than the 69, 7% if not higher.
Merger charges.
That's right.
Okay.
And that is that by the fourth quarter of this year is that what you're suggesting or is that.
How are you thinking about next year it would be for the full year.
For this year.
Yes, okay. Okay.
Alright Thats it from me thank you.
Welcome.
Thank you and as a reminder, ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone. Our next question comes from the line of Andrew <unk> from Stephens. Your question. Please.
Hey, good morning.
If I could just follow up quickly on the expenses.
The $1 44 to $1 46, and maybe kind of higher end of that for the second quarter.
I just wanted to clarify is that on an operating basis. So excluding any merger charges or is it kind of fully loaded on a GAAP basis I don't know if there are any more.
Merger expectations on <unk>.
Yes, so it is excluding the merger related.
Fences.
So we will still have some trailing and estimated to be no more than $2 million.
Trailing M&A.
Defensive.
Got it and then.
I don't know I might have I might have missed this but are you able to provide just the operating expense add we should expect in the third quarter from the branch acquisition. We can we can probably get there with the accretion math, but I think it would be helpful. If we add the operating expense figure.
I would say, it's going to be including the limited cost savings again, just because it's a matter of time I would go with.
$3 million.
Additional noninterest expense will pick up from that.
Okay.
That's helpful. I appreciate it.
If I could go back to just the margin.
Briefly if I look at the taxable securities yields in the quarter. It was 2.13%, but it looks like the cash position normalized a lot with some of the Bts P. Repayment can you maybe just provide the spot securities held at March 31st or just share.
Kind of expectations for how the reported securities yield should trend in the second quarter.
Okay.
Yes.
Bob.
Just double checking the.
The numbers here to give that to you.
And just while Byron is.
Checking at the expenses.
That Ron gave you for the branch acquisition.
As.
$3 million.
For the two till the end of the year.
31.
Through the end of the year of five months.
Okay.
Got it.
Yes.
And circling back to the investment yield on our tax exempt securities is set at $3 52, and our taxable investments at one six.
Fixed <unk> percent yield.
One okay.
Perfect and then maybe just a reminder on that.
Understand the repricing story on the on the loan side can you just remind us on the on the <unk>.
Bond book side, just how much in kind of a quarterly cash flow you expect there.
Yes, we're getting about $250 million a quarter in cash on our securities portfolio.
That includes the.
Principal Paydown and interesting.
Yes.
Okay very good thank you for taking my questions.
Yes.
Thank you one moment for our next question.
Okay.
And our next question is a follow up question from the line of Kelly Motta from <unk>. Your question. Please.
Hey, Thanks, so much for letting me jump back in.
Sure.
Follow up.
Q2 related questions on the margin.
Can you remind us.
The fixed loan.
The repricing coming off.
Over the course of this year.
Our next.
Sure.
Quick.
Second here.
So.
Fixed rate loans maturing this year, well I would say in March 31 to December 30.
<unk> 31, just under $900 million of fixed rate loans mature.
Got it that is Paul and then.
Last question for me and I hate to beat a dead horse I just wanted to make sure I'm understanding the guidance correctly.
Byron when you said you now expect margin at the low end of the provided range call. It 280.
Is that assuming.
Last quarter, you assumed three rate cuts is that assuming.
Higher for longer no change in rates here.
I just want to make sure I am understanding.
The provided guidance on the shore.
Sure in that in that margin guide, we do have to cut in our forecast to one at September one and December I would say because we do assume that there will be a lag between when the fed cut and when our deposit pricing, we will be able to come down we're not getting a lot of benefit from September.
December cut.
That current that current forecast so the difference between.
Higher for longer no cut and September December.
Not that big in our model, it's a basis point or two at this point.
Got it. Thank you so much that's all for me.
Okay great.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Tesla for any further remarks.
Alright, Jonathan Thank you.
We want to thank everybody for dialing into the call today have a great Friday and a great weekend. Thank you.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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