Glacier Bancorp, Inc. ($GBCI)

Thank you for standing by. Welcome to the Glacier Bancorp First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Randy Chesler, President and CEO. Please go ahead, sir.

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 9 of our press release, and we encourage you to review this section. Last night, we issued our earnings release for the first quarter of 2026, and we believe it represents a great start to the year with another quarter of strong results. Net income was $82.1 million, an increase of $18.4 million or 29% from the prior quarter and an increase of $27.6 million or 51% from the prior year first quarter. Diluted earnings per share was $0.63 per share, an increase of $0.14 per share or 29% from the prior quarter and an increase of $0.15 per share or 31% from the prior year first quarter. A key driver of our performance continues to be margin expansion. The net interest margin as a percentage of earning assets on a tax equivalent basis was 3.80%, an increase of 22 basis points from the prior quarter and an increase of 76 basis points from the prior year first quarter. The loan yield of 6.16% in the current quarter increased 7 basis points from the prior quarter and increased 39 basis points from the prior year first quarter. The total earning assets yield of 5.11% in the current quarter increased 11 basis points from the prior quarter and increased 50 basis points from the prior year first quarter. The total cost of funding of 1.4% in the current quarter decreased 12 basis points from the prior quarter and decreased 28 basis points from the prior year first quarter. Turning to balance sheet trends. The loan portfolio of $21 billion at the end of the quarter increased $106 million or 2% annualized from the prior quarter. The Southwest region, which includes Arizona and Texas, grew in excess of 7% annualized during the current quarter, underscoring the strength of our diversified geographic footprint. On the funding side, total deposits of $24.7 billion at quarter end increased $151 million or 2% annualized from the prior quarter. Noninterest-bearing deposits of $7.4 billion increased $113 million or 6% annualized from the prior quarter. Looking past the quarterly acquisition-related expenses, the non-GAAP operating results show the core strength of the business without acquisition expenses. Operating EPS was $0.70 per share. Operating expenses were $188.2 million for the quarter, demonstrating consistent cost control. Our credit portfolio continues to perform very well. Nonperforming assets remained low at 25 basis points of total assets with a slight increase from the prior quarter. Net charge-offs declined to 2 basis points of total loans, down from 6 basis points in the prior quarter. Our allowance for credit remains at 1.22% of total loans, reflecting our conservative approach to risk management. We also executed well on integration and operations. During the quarter, we completed the core conversion of Guaranty Bank, which we acquired in October of 2025. And I want to thank our teams for their excellent work and focus on our customers throughout the conversion. As always, we remain committed to consistent shareholder returns. In March, we declared our quarterly dividend of $0.33 per share, representing our 164th consecutive quarterly dividend. We are very encouraged with the business performance in the first quarter and look forward to a strong 2026. Our exceptional team, expanding footprint, unique business model, strong business performance, disciplined credit culture and strong capital base continue to provide a solid foundation for future growth. That ends my formal remarks. And now I would like the operator to please open the line for any questions that our analysts may have.

Certainly. And our first question for today comes from the line of Jeff Rulis from D.A. Davidson.

Randy, just kind of at a high level, I wanted to chat about the sort of the Texas market or the Southwest footprint. I got larger banks kind of spare the names of those, but talking about as they enter the market kind of putting a positive spin on maybe an out-of-market buyer getting in and talking about the opportunities. We've also heard from smaller banks that there's even greater market share opportunities due to disruption. I guess what -- how would you put your experience as you've been in the market now for some time and particularly through Guaranty, what -- how would you couch that environment?

Yes. Well, I think to some extent, the numbers speak for themselves. They grew in excess of 6% in the first quarter. During the same period of time, we were doing -- completing the conversion. So they did have -- did a great job. I really see the bulk of what's happening there is business as usual. They're just continuing to grow with -- in the markets that they're in with good customers. There is some disruption happening as some of the larger banks acquire some of the midsized banks there. It's still a little bit early to tell just how expensive that's going to be at this point, Jeff.

Fair enough. And Randy, if I could extend that maybe a question to, additional M&A conversations in the footprint, and I guess I'd ask you if you could just focus on Texas for a bit and then maybe opine on the broader Glacier footprint as well. But starting with just what -- as guarantee and conversations have occurred, how is that update and then broadly speaking?

Yes. One of the things that we thought would happen is that our model and our approach would be really well received in the market in Texas, given the dynamics down there, given the type of banks and the type of business very aligned already with how we do business. And I think that's been demonstrated. We've had already multiple conversations. So I think that's proceeding well, and people are on different time lines, and we're in no hurry. And we continue to be very, very disciplined with good banks and good markets with good people. So that's continuing. Mountain West region, still some very good discussions. That hasn't changed at all. So again, I think we made the point, one of the strengths for our -- for Glacier Bancorp is the size of the geographic area that we have to kind of look for opportunities. And so I think that's continuing and will prove to be very good advantage for us.

I appreciate the perspective. And then just one last one, if I could just talk to the margin, want to check in on you've had that north of 4% goal or had that coming into the quarter and a pretty sizable jump. I don't know if that resets the ceiling or you just got there quicker. If you could just reorient where we sit on the margin traction trend.

Yes, Jeff, this is Byron. I would say very pleased with our margin lift in the first quarter. I would say our margin was really firing on all cylinders in Q1. We've now had 9 consecutive quarters of margin expansion. And that plus 22% was the largest quarterly increase over that run. So just very pleased to see what we've been able to accomplish there. We do see more lift ahead of us, and with the strong start to the year, I would say that puts us right on track to hit that 4% target. I wouldn't say that we're looking to go much beyond that. Maybe it accelerates it a little bit, but I still think we're -- we'll see that 4% in the second half of this year. So it really hasn't changed our timing in terms of that broader guide of second half of '26 in terms of hitting 4%.

Byron, if I just put that a different way, if this is correct. The levers that you had and maybe the FHLB, I mean, you're kind of pulling those and you took advantage of, but that doesn't necessarily mean that you've pushed that ceiling higher potentially, but you've just -- you got to there quicker maybe than some had expected. Is that fair?

I think that's right. And I would say going forward, you talked about the levers. The drivers of our margin are shifting a little bit. I would say we retain a clear upward bias. But just kind of you mentioned FHLB payoff, well, that's complete. We did finalize the payoff of our FHLB advances in Q1. So that's done. From a deposit cost perspective, I think we could, from here, maybe squeak out another couple of basis points of deposit cost reduction. But I would say with the Fed on hold, it feels like deposit costs for the most part will be stabilizing and moving sideways from here. So to this point, we really enjoyed a boost from both sides of the balance sheet. I think going forward, we're going to lean a little bit more on the asset side of our balance sheet to see further margin lift. Our asset repricing, as we've talked a lot about, does have momentum to it. I think you could see a slow and steady up on our asset repricing through '27, in fact. We have $3 billion of loans repricing in the next year, and that's going to earn an incremental rate of 75 to 100 basis points. Now that we have all the guaranteed data converted and into our reporting, that's where that increased number is coming from, that $3 billion of repricing. And then new loans, new production rates are very strong, I would say, north of 6.5%. So that's very helpful. And on the investment side, we're still seeing very strong cash flow. And that -- those securities are running off at a very low rate with the one handle on. And so you put all those drivers together, we're still seeing lift ahead of us, but probably going to be leaning more on the asset side of the balance sheet to realize that additional lift.

Understood. That's great. And Byron, the $3 billion, is that just a forward-look 12 months? Are you talking about just in '26?

That's the forward-look 12 months from March 31.

And our next question comes from the line of Matthew Clark from Piper Sandler.

Just wanted to start on the loan growth this quarter, 2% annualized, at least in a period basis, maybe a little slower start to the year, but I assume there was some -- that's partly due to seasonality. Just remind us how you feel about the kind of growth expectations for the year. I think we were thinking somewhere in that 3% to 5% range, but -- and just speak to the pipeline, I guess, coming into 2Q.

Yes. Matthew, at this point, I think we're still comfortable with that low to mid-single digit. The pipeline still shows continued strength in levels in both pull-through and backfill. But there's a lot of uncertainty out there. And depending on some of the geopolitical and associated economic risks that go along with that, that could potentially change. So I think we're still comfortable with the low to mid-single digits. Your point on the first quarter definitely was a seasonal impact. I think we'll see improvement in the second and the third quarter. And as we -- as Randy mentioned in his comments, the benefits of the Southwestern region of our footprint doesn't quite have the same level of seasonality trends that the northern part of the footprint, a lot more susceptible to colder weather that tends to slow down construction advances, et cetera.

Great. And then just on expenses, you came in a little bit below the guidance range for the quarter. Any update there going forward? And do you still contemplate getting to that 54%, 55% efficiency ratio in the fourth quarter?

Yes, Matthew, Ron here. We definitely plan to get to the 54%, 55% efficiency ratio. I just want to point out again that, that's core operating, so when you look at our efficiency ratio reported for the first quarter, it came in at 63%, while that's loaded in the numerator with the acquisition expenses, including the compensation relief coming out of that acquisition. So yes, we'll do that. The guide that I gave 3 months ago on the call in January, I just want to reiterate that, $750 million to $766 million for the full year. And I think it's important to point out that we remain cautious on hiring spending in general, given the economic uncertainty, certainly add in the Middle East conflict. So we think all of our divisions, corporate departments have done a good job in looking at where they might pull back on some expenses, but likely to show up in the -- as the year unfolds, too early to tell. So just reiterating 54% to 55%, feel very good about that on a core operating basis and staying with the guide.

Okay. And that efficiency ratio, I know it obviously excludes merger charges and related comp. But does it also exclude amortization expense?

No. So for instance, think of the -- you're talking the core deposit intangible amortization?

Yes.

That would still be in there.

And our next question comes from the line of David Feaster from Raymond James.

I wanted to -- maybe just switching back to Texas and the Guaranty deal just for a minute. That's converted integrated at this point, it sounds like they did about 6% growth in the first quarter. I guess, first, how did the conversion and integration go? It sounds like they didn't miss a beat, but just wanted to see how that went. And the growth that they're seeing, are they -- what's driving that? And what are they excited about? Is it growth from existing clients where they can deepen relationships now that they've got more capabilities and a bigger balance sheet? Or is this new relationships that, you can now service them because they previously could? Just kind of curious some of those dynamics, if you could touch on that.

Sure. Yes, the conversion is behind us. I think the teams are doing a great job continuing to help out the folks in Texas and get them used to our systems. But that's moving forward. As you noted, they really didn't miss a beat. You look at the loan growth of 6%, very, very pleased with that. So I think all those things have gone well and are moving -- really moving in the right direction. I think Tom can give you a little color on the makeup of that business. Tom, do you want to comment on that?

Sure. Yes. David, I think your question around whether it's coming from existing borrowers deepening the relationship or new borrowers, it's a little bit of both. they've seen some nice strong pipeline growth. That's continuing. That's continued to be stable even going into the second quarter. And certainly, one of the main benefits for them is the ability now to deepen those relationships that at one point, from an aggregate standpoint, you might have been bumping up against their comfort level. And so we're able to continue growing with those as well. But certainly, new customers really throughout their footprint has been a good source of pipeline growth as well.

And maybe just a high-level follow-up kind of on Matthew's question on the growth side. Could you maybe just elaborate on -- like how are the pipelines across your footprint? Where are you seeing growth? I know there was some noise from reclassification this quarter from resi to CRE. But just kind of curious the complexion of the pipeline and how competition is across your footprint. Anecdotally, we hear a lot on the pricing front, but curious if you're seeing that and kind of how origination yields are looking in the pipeline. And just any details you can help us out with?

Sure. Yes, the composition of the pipeline is still largely driven by commercial real estate, and it's a good representation of both owner and nonowner, and that's really spread throughout the footprint. And following on the heels of that is probably some C&I opportunities as well. And I've mentioned this in the last couple of calls, a bigger component of the total pipeline compared to, you know, you wind the clock a couple of years, we're starting to see more construction demand. And as we know, those don't fund at close. So we've seen good strong top line production levels. And as we get into the summer parts of the year, we'll start to see those lines drop in addition to utilization lines for other segments of the portfolio as well, including agriculture as we get into the growing season. So I think certainly, we're going to see some stronger second and third quarter as we move into this year. And then from a competition standpoint, we haven't really seen any significant change in the last quarter. Markets where we have a controlling market share, we're generally able to get much better pricing, and that allows us to compete better in the larger markets where we do have more pricing competition. So the production yield was about 6.75% for the quarter. We're still getting good spreads. We saw that middle part of the curve increase in March. And as a result, we saw late quarter and into the early second quarter production yields come up a little bit as well to follow through.

And maybe just on the other side of the balance sheet. I mean, deposit growth is really strong in what's typically a seasonally slower period, especially on the noninterest-bearing side. Just could you touch on, again, the competitive landscape on the funding side as the industry is trying to accelerate growth and fund that? And then are there any segments or markets where you're having more success driving core deposit growth?

Yes, David, we had a great quarter for deposits. First quarter can be a mixed bag sometimes. Sometimes it's the outflow in Q1. So to see such good -- such strong deposit growth was really encouraging. I think the divisions are doing a great job of competing in their market. And you saw our balance increase and at the same time, bringing our overall cost down. And so just a fantastic result and really encouraged by what we see on the noninterest-bearing side. And so that really outperformed our expectations for Q1. And so I think that bodes well for the rest of the year. I can't say exactly kind of where that will play out, but we do see headwinds in Q2, particularly with the seasonal tax flows. But overall, what we see, we've seen a very strong start to the year and encouraged by the success that our divisions have had.

And our next question comes from the line of Andrew Terrell from Stephens.

If I could go back to just the margin quickly. Good to see you guys in the quarter at 0, I mean, FHLB advances. I don't think there's any brokered deposits. But just curious on -- as you look forward kind of throughout the year, I heard the commentary around deposits and maybe being able to eke out just a little bit more on the cost side. But any other changes you can make in the funding position or deposit base, just acknowledging kind of the cash flows you'll have coming up this year on the bond book or what the kind of net expectation is there?

Yes. I do think we could see a couple more basis points in Q2. And really, I'd point to our CD portfolio. We do have over 60% of our CDs maturing every quarter. And so in Q2, what we have maturing, we are -- the renewal rates that we've seen at least early on are coming in a little bit lower than those maturing rates. And so I think if I were to point to any particular line item, I would say, look for maybe a little bit of cost decline in our overall CD portfolio. But beyond that, with the Fed on hold, I do think for the most part, we might see deposit rates moving sideways for the rest of the year.

And then I guess with the FHLBs now down at 0, should we expect relative kind of stability in the bond book? Are you starting to purchase securities again? Or is that kind of excess cash go?

Yes. With excess cash that we see building, particularly in the second half of this year, we are evaluating investment strategies. So we do expect to be active in the market buying bonds in the second half of this year. So yes, looking to put that excess cash to work.

And if I can ask just around, you guys have had the dividend pretty stable the past couple of years and the payout ratio has obviously dropped pretty drastically over the past 2 years or so. Just can you remind us where you generally like to operate from a dividend payout range and just kind of your thoughts on capital deployment going forward?

Yes. I think the -- we -- yes, the dividend payout ratio has dropped significantly. We're very, very pleased to see that. It's going to continue to trend down. We're looking forward to seeing that drop below 50 very -- in the next couple of quarters. So I think we feel very good about that. And certainly, we've had a lot of discussions about capital. We're going to be building quite a bit of capital when you take in the regulatory relief plus just the position of the balance sheet. And so Byron and team, Ron been very active in looking really at rethinking all options given the amount of capital that's going to be accumulating.

Do you have a general expectation on -- I know it's just a proposal right now, but the kind of capital benefit you could expect if the proposal goes through as written right now?

Yes. We took a look at that. It's -- I understand it's still early in proposed stage. But most of the impact to us would be on the risk-weighted asset side. So we do expect to see some risk-weighted asset relief. Early calculations indicate that, that could be somewhere in the neighborhood of 75 to 80 basis points of CET1 capital ratio for us. And so if this rule as proposed does become final, I think we'd see a bump somewhere in the neighborhood of 75 basis points on our risk-weighted ratio.

[Operator Instructions] our next question comes from the line of Kelly Motta from KBW.

I would love to follow up. I apologize if I missed it, but when you were discussing the margin in regards to the excess liquidity and the deployment of that, did you quantify what you consider to be kind of excess cash levels currently on the balance sheet? It's a little tougher to see given the breakout in tax exempt and taxable, it's baked in with securities. So I'm trying to just get a sense of kind of the dry powder in there.

Yes. I don't know that we have a specific target in mind. More than anything, I think we're looking at the runoff as bonds are maturing and cash builds, and I'll just throw a number out there, somewhere above the $1 billion range in terms of overall cash. I think that's really where we'll be looking to redeploy those cash flows going forward. It could -- that level could ebb and flow kind of depending on market opportunities, depending on timing of what we see ahead of us and what's going on in the broader balance sheet, but probably somewhere in that $750 million to $1 billion in cash, beyond that would be a zone where we would look to reinvest.

And then not to beat a dead horse about the margin, but understanding that this really remarkable level in Q1 was in part driven by the liability side where things are leveled off kind of from here. It still seems like there's a lot of earning asset expansion, 11 basis points, I believe, this quarter, which bodes well for exit margin potentially higher than that 4% by 4Q. Just wondering, is that 11 basis points sustainable? Any sort of puts or takes there? And is there a way that we should be thinking about that continued cadence and exit margin in '26 and through '27, given it seems like those dynamics are fairly durable? Sorry, I know there's a lot in there.

Yes, sure. The 11 basis points in Q1, one thing to point out with the day count and the way that the interest accrued, I would say that was -- that helped. That margin is -- or that boost has increased in Q1. So a little bit of an unwind, we would expect to see just from a day count perspective in 2Q and beyond. The repricing lift that I mentioned earlier, as you say, is durable and will be there. In terms of an exit margin, there's a little bit of potential to maybe go past 4%. I wouldn't say we're going to blow through it. Maybe we creep above it a little bit. But those are my expectations at least at this point.

And that sustainability of earning asset yield understanding the day count into '27. Is that the correct kind of way to think about it given the longer-term tail of the repricing story?

I think it is. Yes, I think it is.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Randy Chesler for any further remarks.

Yes. Thank you, Jonathan, and thank you, everyone, for dialing in today. We appreciate you taking time out of your Friday. We wish everyone a great, great weekend, and thank you again for joining us.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.