Glacier Bancorp, Inc. (GBCI) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Glacier Bancorp Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Randall Chesler, President and CEO of Glacier Bancorp. Please go ahead.

Well, good morning, and thank you for joining us today. With me here in Kalispell is Ron Copher, our Chief Financial Officer; Tom Dolan, our Chief Credit Administrator; Angela Dose, our Chief Accounting Officer; and Byron Pollan, our Treasurer. 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. Last night, we issued our earnings release for the second quarter, and we believe it represents another quarter of strong results. Net income was $97.9 million for the second quarter up 19% from the prior quarter and up 85% from the second quarter of last year. Diluted earnings per share were $0.75, up 19% from the prior quarter and up 67% from the prior year second quarter. A key driver of our strong performance continues to be net interest income and margin expansion. Net interest income increased to $276 million or 3% from the first quarter and up 33% from the second quarter of last year. Our tax equivalent net interest margin expanded to 3.9%, up 10 basis points from the first quarter and up 69 basis points from the prior year second quarter. From a pretax preprovision net revenue perspective, our PPNR for the second quarter was [ 130.8 million ], an increase of 23% from the prior quarter and an increase of 53% from the second quarter a year ago. We also saw continued improvement in our funding profile. The total cost of funding declined to 1.33%, down 7 basis points from the prior quarter and down 30 basis points from the second quarter of last year. Core deposit costs, including noninterest-bearing deposits, was 1.18%, down 2 basis points from the prior quarter. Noninterest-bearing deposits remained at 30% of total deposits for the quarter, consistent with the last quarter and the second quarter a year ago. Turning to the balance sheet. Loans ended the quarter at $21.4 billion, increasing $330 million or 6% annualized from the first quarter. Loan growth was broad-based and reflected our continued focus on disciplined production in attractive markets. Total average deposits were $24.5 billion for the quarter, up $112 million or 2% annualized from the prior quarter. Period-end deposits were $24.7 billion, down slightly from the prior quarter, but overall deposit levels remain stable and continue to comfortably support our liquidity and funding strategy. Credit quality remains excellent, consistent with our disciplined underwriting culture. Early stage delinquencies declined from the prior quarter. while nonperforming assets increased modestly but remained low as a percentage of subsidiary assets. Our allowance for credit loss at 1.22% of total loans reflects our conservative and consistent approach to reserving. Expenses were well controlled in the quarter, acquisition-related expenses declined meaningfully from the first quarter, and the operating efficiency ratio improved to 56.21% and compared to 63.05% in the prior quarter. For the first half of the year, net income was $180 million, an increase of 68% from the prior year first half. Diluted earnings per share for the first half of 2026 was $1.38 per share, an increase of 48% from the prior year first half. Net interest income for the first half of 2026 was $545 million, an increase of 37% from the prior year first half. The loan portfolio increased $2.831 billion or 15% from the prior year first half. Total deposits increased $3.026 billion or 14% from the prior year first half. The net interest margin as a percentage of earning assets on a tax equivalent basis for the first half of 2026 was 3.85%, an increase of 73 basis points from the prior year first half. These results clearly show the earnings and operating momentum that has occurred across the company. During the quarter, the Board declared a quarterly dividend of $0.33 per share. This marks our 165th consecutive quarterly dividend and we have increased the dividend 49x over our history. We are encouraged by the results for the second quarter and through the first half of the year. The continued progress in margin, efficiency and disciplined balance sheet growth driven by Glacier's community banking model, give us a solid foundation for the remainder of 2026. With that, I will ask the operator to open the line for any questions.

[Operator Instructions] And our first question comes from Matthew Clark of Piper Sandler.

Just wanted to start on the funding side, deposit cost down nicely again here. I guess it would be helpful to have the spot rate at the end of June and then your outlook on deposit costs in general, just assuming the Fed remains on hold and how the competition is [indiscernible]?

Sure, Matthew. This is Byron. You're looking for the spot cost at the end of June, June 30, our deposit cost was [ $118 million ] in line with our average for the quarter. So in terms of our outlook, I do think our deposit costs will likely be stable from here. And of course, that depends on what the Fed does. But assuming been on hold, as you mentioned, I would think that we would just kind of maintain this level of deposit costs going forward. Now if the Fed does high rate at some point later in the year, we'd have to adjust that outlook a little bit. But I think from now, a good outlook is just a stable comp.

Okay. And then just on the loan side, loan growth stepped up here. I think 3Q tends to be a seasonally strong one for you, but just wanted to touch base on the pipeline and your outlook for growth.

Yes. Matthew, this is Tom. Yes, second and third quarter are typically our stronger quarters in the year, more so than the fourth and the first quarter, and we've seen that for the last couple of years. I don't see anything that would really change that. But pipeline still remain very healthy. We're seeing a pull-through. We're seeing back build. And some of the tailwinds we also saw in the second quarter with construction draws and entering into the ad growth season, that will continue into the third quarter as well.

Okay. And then maybe one for Ron. Your expenses came in a lot better than expected. I just wanted to get the updated guide for the second half of the year.

Yes, the updated guide, we're going to stick with quarterly guide that I gave for Q2. So that will be $187 million to $192 million. We recognize we came in lower than that. But some of the discretionary spending could come back in the second half of the year. So we're not we just allow for that. But overall, very, very good control expenses.

And our next question comes from Jeff Rulis of D.A. Davidson.

I guess a question on the -- follow on the loan growth and Randy, you mentioned pretty broad-based. Just to unpack that a little bit. In Q1, you had pretty strong growth out of Texas. It was kind of the lion's share of the growth. Just wanted to kind of double down on the geography contribution this quarter of the loan growth.

Sure. So as we've stated, we're really operating in 2 regions, Southwest, Mountain West Southwest continues to do very well. I think they're rebuilding the pipeline after a very strong first quarter. So -- but we see really, really good trends there. And in the Mountain West, they had a very strong quarter. So it's I think both doing very well. So yes, we expect to see that continue.

Okay. So that was maybe they flipped strengths in the quarter in terms of net production as Southwest rebuilds. And -- but going forward, it looks like a strong pipeline across the region. Is that...

Yes. Exactly. Exactly right.

Got it. And Randy, I guess I'd check in on the -- been a bit on the M&A side, a quiet start nationally, but we're starting to see a pickup recently. And I just -- I guess, versus last quarter at this time versus now any more active discussions? I know you hold a lot of them, but I just want to see where we sit on the M&A side.

Sure. Yes, maybe separate that into 2 pieces. There's our internal discussions that we have, meaning it's not an official sale. We're talking to people. Those continue to move along at a good pace. What I still see is somewhat muted is the investment banker pipeline production of deals and where people are officially coming to market and we measure that by the phone calls we get, letting us know about those things. Still seems a bit muted, but from the talk that I've had with the investment banker, I think that we'll probably start to see that increase a bit towards the end of the year. But overall, compared to first quarter, I'd say about the same, Jeff, probably still a bit muted.

Okay. Appreciate it. And sorry, if I could slip in a last one. Just on the earning asset balance, the mix and I guess trying to get a sense for accelerating loan growth. But I guess your intentions on the securities portfolio and maybe expectations for start to see some earning asset growth. If you could comment on that.

Sure. And we'll have Byron comment on that. We did make some purchases this quarter, so we're kind of slowly wading back into the investment purchase of investments, but I'll let Byron give you some color on that.

Yes. As Randy mentioned, we did dip our toes back into the bond market. We purchased about $250 million of bonds in the quarter. And I expect we'll continue we'll continue purchasing -- putting some cash to work going forward. In terms of growth, I do see our AEA will expand from here. I think what you saw even in Q2 with the decline AEA, it's still a little bit of an echo of the deleveraging that we had going on. We talked a lot about the pay down of our FHLB advances. And that last maturity, that last payoff didn't happen until late in Q1. And so when you look at the averages of Q1 versus the average of Q2, that still had an impact. Now that's complete. I would expect from here, our AEA will increase in Q3 and Q4.

And our next question comes from Kelly Motta of KBW.

I would love to talk a bit about the margin. You had a few things working in kind of a negative direction this quarter, one being the nonaccrual interest reversal and then a lower level of accretion. So if you had a similar level to last quarter, you'd be closer to you would have actually come in, in the [ mid-3.9%. ] So I'm just wondering, as we think about that exit 4% margin, it feels like that's in the range. How are you -- any updates on how you're thinking about the exit margin from here? And maybe some -- I know the accretion can swing around. So some commentary on what's a normal level, at least for modeling purposes would be helpful.