Q3 2024 Glacier Bancorp Inc Earnings Call
Good day, and thank you for standing by to the Glacier Bancorp third quarter earnings Conference call.
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Speaker Change: I'd like to hand, the conference over to your Speaker today, Randy Chesler Glacier Bancorp President and CEO. Please go ahead.
Randy Chesler: Good morning, and thank you for joining us today.
Randy Chesler: With me here in Kalispell is Ron Copher, our Chief Financial Officer.
Randy Chesler: Iron Pollan, our treasurer.
Randy Chesler: Tom Dolan, our chief credit administrator.
Randy Chesler: Don Chery, our chief administrative officer, and joining us on the phone as Angela dose, our chief Accounting Officer.
Randy Chesler: I'd like to point out that the discussion today is subject to the same forward looking considerations outlined starting on page 13 of our press release and we encourage you to review this section.
Randy Chesler: The positive organic trends that emerged in our first and second quarters continued and became more pronounced through our third quarter and.
Randy Chesler: In addition in the third quarter, we finalized the purchase of six Montana branches from Heartland Financial <unk>, Rocky Mountain Bank division, including the deposits loans owned real estate and fixed assets associated with the branches totaling $403 million in assets we closed this.
Randy Chesler: Transaction on July 19, and converted these branches to glacier systems over that weekend.
Randy Chesler: This quarter, we had strong EPS growth at 15% or 45.
Randy Chesler: Primarily driven by increasing interest income and higher non interest income.
Randy Chesler: Net income was 51 million, which increased $6 3 million or 14% from the prior quarter and net income of $44 7 million.
Randy Chesler: Net interest margin grew 15 basis points from 268% to $2 eight 3%.
Randy Chesler: Net interest income was $180 million for the current quarter, an increase of $13 8 million or 8% from the prior quarter net interest income.
The loan portfolio of $17 1 billion increased $329 million or 2% during the current quarter and organically increased $57 6 million or 1% annualized during the current quarter.
Randy Chesler: The loan yield of 569% in the current quarter increased 11 basis points from the prior quarter loan yield of 558%.
Randy Chesler: Total core deposits up $20 7 billion increased $613 million or 3% during the current quarter and organically increased $216 million or 4% annualized during the current quarter.
Randy Chesler: Non interest bearing deposits of $6 4 billion increased $314 million or 5% during the current quarter and organically increased $221 million or 14% annualized during the current quarter.
Randy Chesler: Our total cost of funding in the quarter, including noninterest bearing deposits decreased one basis point from the prior quarter to a total cost of funding of 179 basis points.
Randy Chesler: Core deposit cost, including noninterest bearing deposits was 137% for the current quarter compared to 136% in the prior quarter.
Randy Chesler: Total non interest expense of $145 million was within our expected range, increasing three 8 million in the quarter or 3% over the prior quarter.
Randy Chesler: While nonperforming assets to bank assets and net charge offs to average loans and early stage delinquencies increased slightly our credit portfolio continues to perform at near record levels with no material negative trends emerging.
Randy Chesler: The current quarter credit loss of $8 million included $3 6 million of provision for credit losses from the acquisition of Rocky Mountain Bank, excluding the acquisition of Rocky Mountain Bank, but current quarter credit loss expense was $4 4 million, including four.
Randy Chesler: $2 million, a credit loss expense from loans and 225000 of credit loss expense from unfunded loan commitments.
Randy Chesler: Non interest income for the current quarter totaled $34 7 million, which was an increase of $2 5 million or 8% over the prior quarter.
Randy Chesler: Tangible stockholders' equity of $2 1 billion increased $68 1 million or 3% compared to the prior quarter and was primarily the result of a decrease in unrealized loss on the available for sale debt Securities, which was partially offset.
Randy Chesler: By the increase in goodwill and core deposit intangibles associated with our Rocky Mountain Bank acquisition.
Randy Chesler: We also declared a quarterly dividend of 33 per share. The company has declared 158 consecutive quarterly dividends and has increased the dividend 49 times.
The Glacier team has done an excellent job taking care of our customers, while growing the business organically and welcoming our new acquisitions and.
Randy Chesler: In 2024, we closed and converted two acquisitions during the year totaling approximately $1 2 billion in assets.
Randy Chesler: So that ends my formal remarks, and I would now like to ask the operator to open the line for any questions that our analysts may have.
Speaker Change: And at this time, we will conduct a question answer session. As a reminder to ask a question a unit to press star one on your telephone and wait for him to be announced toward drawing a question. Please press star one again, please standby with compile the Q&A roster.
Speaker Change: One moment for our first question.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Our first question comes from the line of Jeff <unk> from D. A Davidson your line is open.
Speaker Change: Thanks, Good morning.
Speaker Change: Good morning, Jeff.
Jeff: I wanted to touch on the noninterest bearing growth on the organic side I think a real outlier and most simply looking to hold that balance not show double digit annualized growth I guess what.
Speaker Change: What occurred in the quarter.
Speaker Change: With the noninterest bearing growth.
Speaker Change: Yes, Jeff this is Byron.
Speaker Change: Yes, we were really pleased to see that.
Speaker Change: That organic growth in the third quarter third quarter is typically a time when we see seasonal strength.
Speaker Change: In our in our deposit base, and particularly our noninterest bearing.
And Thats, what we thought this quarter and our divisions really did deliver on that.
Speaker Change: Great to see.
Speaker Change: We are continuing to see a little bit of migration to interest bearing accounts that is still there, but it's not nearly at the level that were seeing say a year ago.
Speaker Change: In terms of our of our outlook for.
Speaker Change: For the fourth quarter for noninterest bearing I do think that we could be flat to down a little we could see a little bit of an unwind of that seasonal and call that just came in.
Speaker Change: Okay and Byron.
Speaker Change: Timing of maybe.
Speaker Change: The timing of that noninterest bearing build in the quarter.
Speaker Change: Additionally, the timing of.
Speaker Change: Bringing borrowings down my guess is and.
Speaker Change: Ultimately go to your questions.
Hi.
Speaker Change: The.
Speaker Change: The impacted deposit costs, maybe you have an exit.
Speaker Change: Our spot deposit cost at the end of the quarter.
Speaker Change: We would also be helpful.
Sure.
Speaker Change: In terms of the timing of the noninterest bearing bear throughout the quarter. We saw every month July August September saw growth.
Speaker Change: On an organic basis in our noninterest bearing so it was really spread.
Speaker Change: Very nicely throughout the quarter.
Speaker Change: In terms of the timing of our FHL fee.
Speaker Change: Paid down the overnight portion of our epic episodic funding that did happen in July earlier in the quarter.
Speaker Change: And in terms of spot rates.
Speaker Change: Our.
Speaker Change: Our spot rate per total deposit rate on September 30 was 135%.
Speaker Change: Did I cover all year.
Speaker Change: Yeah that was a lot. Thank you.
Speaker Change: Okay.
Speaker Change: Maybe if I could hop to expenses.
Speaker Change: I think it really at that low end of the guide and I think it include merger costs. So I guess I'm hesitant to kind of ask about the run rate ahead. It seems like.
Speaker Change: Okay Ron.
Speaker Change: Beat that number a little bit each quarter. So what should we expect in terms of.
Speaker Change: You'd have.
Speaker Change: The branches for a full quarter I think you've missed a couple of weeks.
Speaker Change: And the third but maybe.
Speaker Change: Any thoughts on expenses ahead.
Speaker Change: Yes.
Speaker Change: Recognize the division really did a stellar stellar job being very focused on controlling expenses and so hats off to them.
Were happening yes.
Speaker Change: Pleasant development. So if you do exclude the gain on the sale and the M&A. The core noninterest expense came in at 100.
Speaker Change: 43 point.
Speaker Change: Four.
Speaker Change: We think that that.
Speaker Change: Can be maintained in the into the next quarter.
Speaker Change: We need to go back and understand whats really driving that youll see that our compensation is very well controlled even picking up both from the Rocky Mountain Bank branches very controlled and again thats been part in large measure to our technology I've spoken about in the path.
Speaker Change: We've cut the time and have to open an account.
Speaker Change: We have got.
Closing on each day now instead of a batch submission it real time.
Speaker Change: The point of all this is that we're doing things very well.
Speaker Change: People.
Division have strongly embraced the technology.
Speaker Change: So they are able to do more with less and that's been a theme that we started talking about late last year and so that continues to happen.
Speaker Change: Happen and that will then help.
Speaker Change: Understand the guide I will give for court.
Speaker Change: Noninterest expense and I say core it means reported less gain on sale or loss it means excluding M&A.
Speaker Change: Im going to lower the guide, we're going to lower the guide by $2 million on each end, so it'll be a 143 to 145 million for Q4.
Speaker Change: Okay.
Thank you I'll step back.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Kelly <unk>.
Speaker Change: <unk> from <unk> Your line is open.
Speaker Change: Hey, good morning, Thanks for the question.
Speaker Change: Maybe maybe piggy backing off that expense question again.
Speaker Change: Compares really favorably to.
Speaker Change: Where do you think guiding now.
Speaker Change: A couple of quarters I think.
Speaker Change: Just as we look ahead I know you may not be ready to look at 2025, yet with square, where you are in the budget process, but as we think about the natural kind of expense growth rate of your company.
Speaker Change: Good.
Speaker Change: Yes.
Speaker Change: What looked a good run rate card borrowing expenses just on a normalized basis.
Speaker Change: It seems like most of the rooms and fat has been cut given what you've done but any additional thoughts there.
Yes, Kelly I appreciate the question I would go with the 3% at slightly better than what we've had on average this year and last year and in part that the efficiency gains we're getting there.
Speaker Change: We're still having.
Speaker Change: Using third party consultants to help build out of our control function and in large measure might they control function that reflects the heightened.
Regulatory expectations and so we want to make sure as we grow that we're staying on top of that staying ahead of it but coming back to the answer of 3%.
Speaker Change: Got it that's helpful.
Speaker Change: And then.
Maybe turning to loan growth have been.
Speaker Change: Ex the deals you've done this year, you're running in the low single digit range.
Speaker Change: I'm just wondering if you've seen any.
Speaker Change: Pent up demand ahead of rate cuts it and how to think through that.
Speaker Change: Well as.
Are you seeing opportunities from the state of the pipeline.
Speaker Change: Today.
Yes, Kelly this is Tom.
Speaker Change: We're seeing continued optimism from our customers.
Speaker Change: Especially after the recent rate reductions.
Speaker Change: Have yet to see it translate to significant deal flow.
Speaker Change: Answer your question on the pipeline it was fairly stable throughout the third quarter.
Speaker Change: But I think there is still a little bit of uncertainty that's keeping that pent up demand on the sidelines until there is a little bit more clarity over the next quarter.
For the rest of the rest of the year I think you are probably going to see more of the same fourth quarter is typically a little slower growth.
Speaker Change: Fourth anyway, particularly due to the agriculture paydowns.
Speaker Change: So.
Speaker Change: Like I said in the fourth quarter, I think we'll probably see a little bit more of the same.
Speaker Change: Got it that's helpful I'll step back thank you.
Speaker Change: On moment for our next question.
Speaker Change: Our next question will come from the line of Matthew Clark from Piper Sandler Your line is open.
Speaker Change: Matthew you may be on mute your line is open.
Speaker Change: Okay, we'll move on to our next question one moment.
Speaker Change: Our next question comes from the line of David Feaster from Raymond James Your line is open.
Speaker Change: Hi, good morning, everybody.
Speaker Change: Good morning, David.
David Feaster: Maybe touching on the growth side, I mean organic growth was a bit lighter I'm curious maybe some of the drivers behind that I mean, how much that's a function of weaker demand or higher payoffs and paydowns.
David Feaster: Curious kind of how the pipeline shaping up what's you're hearing from clients and where you're seeing opportunity to drive growth and just kind of how you think about the pace of organic loan growth going forward.
David Feaster: This is Tom yes, there is there still some pent up demand there is continued optimism.
David Feaster: Pipelines were relatively stable throughout the quarter. So the answer to your question on the drivers behind the growth is a little bit above others.
David Feaster: Not quite the strength of demand that we would normally see in addition to that we've seen elevated payoffs as some of these construction and development projects, either sellout or stabilization in either the asset is sold.
David Feaster: Or is refinanced into the secondary market. So we're continuing to see that as well.
David Feaster: Another reason why you're seeing the construction balances come down.
David Feaster: Other quarter, those things move into either the term portfolio or are sold in.
David Feaster: The volume is just not replacing the outflow.
David Feaster: Okay.
Speaker Change: And then maybe touching on some of the repricing and Remixing dynamics within the earning asset base I'm curious how do you think about cash flows from the securities book and the roll off rates, there and similarly with the upcoming maturities in the loan portfolio, where new loan yields are relative to roll off rates and just how do.
Speaker Change: You think about the repricing dynamics there in the near term.
Speaker Change: And.
Speaker Change: Just the opportunity to continue to remix earning asset base.
Speaker Change: Well, let's so let's take the first part of that new loan piece and what your thoughts are on that and then maybe Byron we can move on to the investment portfolio and cash flows.
Speaker Change: Yes, so the loan yields were still seeing mid to upper sevens.
Speaker Change: In our topline production so.
Speaker Change: The relation to the coming off.
Speaker Change: Pass it on to Byron.
Byron: Sure we continue to see strong cash flow off of our securities portfolio.
Speaker Change: $250 million a quarter for the next couple of quarters I think remains a good guide.
Speaker Change: That cash flow includes principal and interest.
Speaker Change: Yield that that cash flow is coming off that.
Speaker Change: About one 5% and so as we as we.
Speaker Change: Move that.
Speaker Change: Remix that into the loan portfolio.
Speaker Change: Tom just mentioned.
Speaker Change: That re pricing lift creates creates a lot of that.
Speaker Change: Create a lot of momentum for us I will say we.
Speaker Change: We do start to see some additional securities maturity in 2025, and so in the second quarter, we have when we start to see some treasury bonds come back to that.
We have $50 million in the second quarter.
Speaker Change: 2025, and then the fourth quarter of 2025, we have $270 million to make sure. So we have been running at a pretty consistent $250 million.
Speaker Change: Look for that to begin to increase.
Speaker Change: Next year.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And then maybe just kind of thinking high level. How do you think about your footprint right I mean, you've got a really broad network.
Speaker Change: And footprint in some massive density in some key markets, but maybe smaller footprints in some of the other other markets I'm curious how you think about expansion priorities, where youre focused on on driving growth and how you think about organic growth relative to supplementing that with M&A.
Just talk about how some of those conversations are going.
Yeah. So.
I think the outlook is very very good the eight states. We're in are some of the fastest growing states in.
Speaker Change: The United States in terms of GDP growth so.
Speaker Change: We're encouraged by that in terms, it's really.
Speaker Change: Both strategies, Dave So we have an organic strategy with each division, where theyre looking at their markets and expanding as they see opportunities in across the 17 divisions that takes place.
Speaker Change: Quite a few of them at.
Speaker Change: At the same time, we're looking at M&A opportunities to fill in and grow scale in a lot of these fast growth markets and so as we talk to people and look at opportunities.
Speaker Change: Those are the things that we see in more and more we see opportunities to add on to existing divisions and build scale with some of the things that we're looking at so really both David it's bolt on organic.
Speaker Change: We don't wait for an acquisition to appear but those markets. We think are good markets to go into will go into them organically and then an acquisition that.
Speaker Change: It might be available to us we look at is just building scale in the markets that we're in today.
David Feaster: Are there any of your markets, where you see the most opportunity at this point or where you'd like to.
Drive more density in our.
Speaker Change: Is there opportunity for market expansion that maybe looks attractive to you at this point.
David Feaster: Okay.
Speaker Change: Yes, there across the eight states. They all have areas that we'd be interested in growing through acquisition. So I cant say theres one that.
Speaker Change: That we would put at the top and I think that's one of the strengths that we have is we have multiple options across those eight states and so we're not really pinned down waiting for something in one particular area keep our options open look across those eight states and where the good opportunities occur that's where you'll see us go.
Speaker Change: Got it alright, thanks, everybody.
Speaker Change: Thank you and as a reminder to ask a question Thats Star one one.
Speaker Change: 101, one moment for any further questions.
Speaker Change: Okay.
Speaker Change: Question one.
Speaker Change: One moment.
Speaker Change: Our next question will come from the line of Jeff <unk> from D. A Davidson your line is open.
Speaker Change: Thanks, just had one one other I know, we're splitting hairs on the credit side, but just wanted to kind of check in on.
Speaker Change: The small increase in it's a fraction appears but just.
Speaker Change: It looked like some some AG and when to Port family.
Speaker Change: R&D I think in your opening comments didn't sound anything systemic and at these low levels.
Speaker Change: We're going to see it bumping around but anything to speak on it what you saw in terms of the quarter.
Speaker Change: Yes, Jeff I appreciate the context.
Speaker Change: Around the change.
Very appreciated.
Speaker Change: Just as Randy said Theres, no specific industry asset class or geography that Sean any level of outflows I think what we're seeing that with just continued signs of normalization.
And overall asset quality, we're obviously coming off of a very.
Speaker Change: Very strong position the asset quality, so it doesn't take much to move the needle.
Speaker Change: And then get into the particulars you mentioned agriculture.
Basically 101 relationship that we have been working with for some time now.
Speaker Change: The challenge there is more on the management side is not not market.
Speaker Change: So we'll be working through that over the next couple of quarters outside of that there is there is nothing of.
Speaker Change: Particular concern, it's pretty well spread out.
Speaker Change: Okay. Thank you Tom.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: I'm showing any further questions in the queue I would now like to turn it back over to Randy for any closing remarks.
Randy Chesler: Great well, thank you very much for dialing in today.
Speaker Change: We do have one question do you want to take it.
Speaker Change: Sure absolutely.
One moment.
Speaker Change: Our next question comes from the line of Matthew Clark from Piper Sandler Your line is open.
Matthew Clark: Hey, Matt Hey, how are you sorry about that I thought it was in the queue I think I'll say it wasn't.
Matthew Clark: First question just on the core loan yields they were up.
Matthew Clark: <unk> accretion.
By 12 bps to 561 can you just remind us.
How much of your loan book is truly floating and then assume.
Matthew Clark: When we get some additional rate cuts here.
Matthew Clark: In the fourth quarter and into next year.
Matthew Clark: What are your thoughts on just the trend in loan yields with the.
Matthew Clark: The benefit of the back book.
Matthew Clark: But also the pressure on on floating.
Matthew Clark: Yes. This is Brian I appreciate the question.
Matthew Clark: In terms of floating I truly firing about 7% of our loan portfolio is indexed the crime, we really don't have much indexed the surface of that is.
Matthew Clark: The floating component of our loan portfolio trend into into next year. As you mentioned the back book and the repricing of that is that it's going to be a very powerful dynamic for us and so I think I would continue to expect our loan yields to increase.
Matthew Clark: That repricing happened about about 20% of our loan portfolio will reprice.
Matthew Clark: In any given year.
Matthew Clark: And we do expect some lift in that re pricing.
Matthew Clark: Rates, where they are at rates, where we see the market expectations of growing that we do see continue.
Speaker Change: Great and then just the average margin in the month of September if you have it either.
Speaker Change: Either core reported.
Speaker Change: Sure our margin in the month of September was $2 88.
Speaker Change: Got it.
Speaker Change: Okay, great. Thank you.
Speaker Change: Welcome.
Speaker Change: Thank you and now we don't have any further questions Randy over to you.
Randy Chesler: Victor I appreciate it and thank you everybody for dialing in I appreciate the interest and want to wish everybody a great rest of the day Friday and weekend as well thanks for joining us this morning.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.
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