Glacier Bancorp, Inc. (GBCI) Q2 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Glacier Bancorp Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference, Randy Chesler, President and CEO. Sir, you may begin.

All right. Thank you, Heather. Well, good morning, and thank you for joining us today. With me here in Kalispell this morning and on the phone are Ron Copher, our Chief Financial Officer; Don Chery, our Chief Administrative Officer; Barry Johnston, our Chief Credit Administrator; Angela Dose, our Principal Accounting Officer; and Don McCarthy, our Controller. So yesterday, we released our second quarter 2018 results. As you can see, the business really began to pick up speed later in the quarter, which resulted in a very strong second quarter and year-to-date performance for the company. Earnings were $44 million, an increase of $10.7 million, or 32% over the second quarter a year ago. Pre-tax income was $53.9 million for the quarter, an increase of $8.3 million, or 18% over the prior year second quarter. Earnings for the first-half of the year were $82.9 million, an increase of $18 million, or 28% over the first-half of 2017. Pre-tax income of $108 million for this period increased $14.2 million, or 16% over the first-half of 2017. We had loan growth of $279 million, or 15% annualized in the second quarter and organic growth of $389 million, or 12% annualized for the first six months of the year. We grew our non-interest bearing deposits $103 million, or 4% from the prior quarter and increased them organically by $209 million, or 9% from the prior year second quarter. Diluted earnings per share for the quarter were $0.52, an increase of 21% from the prior year second quarter. Our return on average assets for the quarter was a strong 1.53%, while return on average equity was 12.07% and our return on tangible equity was 16.2%. We declared a regular quarterly dividend of $0.26 per share, which is an increase of $0.03 per share, or 13% over the prior quarter and a 24% increase over the second quarter a year ago. This will be our 133rd consecutive quarterly dividend paid by the company, and we completed the conversion of Inter-Mountain Bancorp, the holding company for First Security Bank in Bozeman, Montana with total assets of $1.1 billion. I’m also very pleased that we added David Boyles to the Board of Directors as well. Dave has a great banking experience in the Colorado market, a very strategic market for us with plenty of room to grow. Dave will be an excellent addition to our existing strong Board of Directors. We got to know Dave when we acquired Collegiate Peaks Bank in Colorado and felt he had the right experience and business perspective to help us as we continue to grow in Colorado and the West. So loan production for the second quarter was $919 million, which was once again generally well distributed among all the divisions. Pay downs were $640 million, which is consistent with past seasonality. The loan portfolio ended the quarter at $7.9 billion. Excluding the last quarter’s acquisitions, the loan portfolio increased $621 million, or 10% since June of 2017, and was primarily driven by growth in commercial real estate loans, which increased $373 million, or 11% over the same period. Our investment securities portfolio of $2.7 billion increased only $8.5 million, or 30 basis points during the current quarter and decreased $4.1 million, or 14 basis points from the prior year second quarter. Investment securities represented 24% of total assets at the end of the second quarter, compared to 28% at the prior year second quarter-end. Our key credit quality ratios improved in most areas, and we remain very confident in our credit quality. Early-stage delinquencies as a percentage of loans in the quarter were 50 basis points, a decrease of 9 basis points from the first quarter and an increase of 1 basis point from the prior year second quarter. Net charge-offs were a moderate $762,000, or 4 basis points as a percentage of total loans consistent with the prior quarter and down slightly 3 basis points from the same period a year ago. Non-performing assets as a percentage of subsidiary assets at the end of the first quarter were 71 basis points, which was an increase or – at the end of the second quarter were 71 basis points, which was an increase of 7 basis points from the prior quarter and an increase of 1 basis point from the prior year second quarter. At the end of the quarter, NPAs were $84.5 million, an increase of $10.6 million, or 14% from the prior quarter. We don’t see any underlying portfolio trend driving these new NPAs and have active plans underway to resolve them. Primarily as a result of strong new loan growth and the increase in NPAs, we increased the loan loss reserve by $4.7 million to $131.5 million. The allowance for loan and lease losses as a percentage of total loans outstanding at the end of this quarter was 1.66%, which is flat to the prior quarter and a decrease of 31 basis points from the end of 2017. Our low-cost and very stable funding foundation across our Western multistate footprint continued to perform really well for the company. Core deposits ended the quarter at $9.2 billion. Excluding acquisitions, core deposits increased $430 million, or 6% from the prior year second quarter. Total core deposits were essentially flat versus the prior quarter as we continue to focus on growing relationship-based business accounts. Non-interest bearing deposits increased $103 million, or 4% from the prior quarter and organically increased $209 million, or 9% from the prior year second quarter. The total cost of funding for the current quarter was 36 basis points, compared to 35 basis points for the prior quarter and 37 basis points for the prior quarter – prior year second quarter. Once again, our 14 divisions and their teams continue to do an outstanding job of tightly managing deposit cost specific to each of their markets. Interest income increased $14.6 million to $118 million, or 14% from the prior quarter and increased $23.7 million, or 25% over the prior year second quarter with both increases primarily attributable to the increase in interest income from commercial loans due to organic and acquisition growth. Interest income on commercial loans increased $10.3 million, or 16% from the prior quarter and increased $19.6 million, or 35% from the prior year second quarter. The company’s net interest margin as a percentage of earning assets for the quarter was 4.17%, compared to 4.1% in the prior quarter. This 7 basis point increase in the net interest margin was primarily the result of increased yields on the loan portfolio and also included a 2 basis point increase in the loan discount accretion. The current quarter net interest margin increased 5 basis points over the prior year second quarter net interest margin of 4.12, even though there was a current quarter decrease of 14 basis points driven by the decrease in the federal income tax rate. The increase in core margin from the prior year second quarter was a result of the remix of earning assets, the higher-yielding loans, improved interest rates on the loan portfolio and our stable funding cost. Non-interest income for the current quarter totaled $31.8 million, an increase of 5.7%, or 22% from the prior quarter and an increase of $4.2 million, or 15% over the same quarter last year, driven by seasonality and increased accounts from our recent acquisitions. Service charges and other fees of $18.8 million increased $1.9 million, or 11% from the prior year quarter, primarily due to seasonality and the increased number of accounts. Miscellaneous loan fees and charges were up as a result of the recent acquisitions, acquisitions and increased loan growth. Gain on sale of loans increased $2 million, or 34% from the prior quarter as a result of seasonality and strong residential real estate refinance and purchase activity. Non-interest expense for the quarter increased $8.2 million, or 11% over the prior quarter and increased $16.5 million, or 25% over the prior quarter – second quarter, primarily due to the full quarter impact of both our new acquisitions added at the end of the first quarter. Compensation and employee benefits increased $3.3 million, or 7% from the prior quarter and $9.5 million, or 24% from the prior year second quarter due to a full quarter of annual salary increases, the increased number of employees from acquisitions and organic growth. Tax expense, while acquisition-related expenses were $2.9 million during the current quarter, compared to $1.8 million in the prior quarter and $867,000 in the prior year second quarter. Tax expense for the – during the second quarter was $9.5 million, which is a decrease of $2.4 million, or 20% from the prior year second quarter and was attributed to the Tax Act. The effective tax rate in the second quarter of 2018 was 18% compared to 26% in the prior year second quarter. The current quarter efficiency ratio was 55.4%, a 236 basis point decrease from the prior quarter efficiency ratio of 57.8%. The decrease was a result of an increase in interest income and seasonal increases in the gain on sale of loans and deposit charges combined with the company controlling operating costs – core operating cost, I should add. In closing, the second quarter of 2018 represents another excellent quarter for the company. We started the integration process for Collegiate Peaks in Colorado and First Security Bank in Bozeman, Montana. These two transactions added $1.7 billion in assets and grew the company almost 20% in the first quarter alone. We’re starting to see the benefits of those two transactions as the financials start to settle down to reflect their steady operating contribution. A lot of dedicated folks worked very hard to successfully convert First Security over to our core processing system at the end of the second quarter, and we are still on track to convert Collegiate Peaks at the end of the third quarter. Our division presidents and their teams across our seven states really rose to the occasion and delivered very strong results in the second quarter overcoming what looked like a bit of a slow environment at the beginning of the quarter. In closing, for a number of years, you’ve heard me introduce Don McCarthy, our Controller, as part of these earnings calls. Don will be retiring at the end of this month. He has been with the company for 16 years, the last 13 of which he served as our Controller. He has contributed significantly to our company’s success, including assisting with the acquisition and integration of 19 banks. We’re also excited to announce that Melody Pieri has been promoted to the Controller position. Reflective of the bench strength in our company, Mel has been with the company for more than 18 years, the last 10 years of which she served as Controller for Glacier Bank right here in Kalispell. She has worked in the lending operations and accounting areas of Glacier Bank and has assisted with the operational merger of 13 of our bank acquisitions. So congratulations to Melody on the promotion and Don, thank you for all you’ve done for our company. Heather, that ends my formal remarks. And I’d now like to open the line for any questions that the folks or analysts may have.

Thank you. [Operator Instructions] And your first question comes from Michael Young with SunTrust. Your line is open.

Hey, good morning.

Good morning, Michael.

I wanted to start with just a good deposit growth this quarter and non-interest bearing deposits and then some outflow in some of the higher-cost categories. Could you just walk us through maybe provide a little more color on what drove the growth, anything that was seasonal in nature? And then, maybe just what the outlook is as we move through the back-half of the year for continued growth in that area?

Sure. I’d say, over a year ago, we met and decided to really focus on the non-interest aspect of the business. So that’s been in motion for a while – for quite a while. I think, we’re starting to see the results of that, so the 14 divisions have really made that particular aspect of our offering a priority. And I think, as I said, through promotion and through their normal hard work, they’ve really built – continue to build that up and we see the percentage of that increasing very nicely. In terms of – and we expect to see that continue. We’re very happy with the overall cost of deposits. And I think, that some of the areas are not growing, but we’re just choosing to kind of focus on the areas that we think will benefit us in the long run.

And maybe just kind of tying that together with the net interest margin and loan to deposit ratio, obviously, very good loan growth this quarter. So the loan to deposit ratio drifted up. Is there more room there? And how does that kind of affect the outlook for net interest margin going forward?

Sure. I’m going to let Ron talk to that, because we’ve spent quite a bit of time studying that very specific question. So, Ron, do you want to take that?

Yes, particularly on the loan to deposit ratio, it certainly could drift higher with loan growth. But to Randy’s point, we want to grow our deposit base and we remain focused obviously on non-interest bearing as he just said. So it could drift higher. We’ll have to wait and see what that is, but we’re actively gathering deposits, it’s relationship banking, if you get the loans, bring in the deposits. So on the margin, we’re optimistic, it could expand. You could see it do well just because we’re getting the higher yield on the loan productions, and we see that, that is likely to continue. And if we can keep the cost of our interest bearing deposits, the whole deposit base in check, that would then allow the margin to expand.

Okay, I’ll step back for now. But Don, congratulations on the upcoming retirement.

Thank you.

Thank you. Your next question comes from Jeff Rulis with D.A. Davidson. Your line is open.

Good morning.

Good morning, Jeff.

Question on the expenses and maybe just the outlook here. You’ve got a couple of deals and given the timing of the conversions. I guess, if we take this quarter and strip out the merger costs, what are your expectations on the expense side?

So I’m going to also hand that over to Ron as well. And you’re right, we had a little elevated expenses on the M&A side, but – this quarter. But that’s really given the size of those transactions and the complexity is kind of what we expected. Ron, do you want to comment on going forward?

Yes. So as we – we had higher expenses in the first quarter. And I think, we addressed it, but let me repeat it. So we are growing into the deposit- excuse me, the expense base. So we don’t see it accelerating. Obviously, we’re getting bigger, so we’re going to have more expenses, but we would actually see. There is room for efficiency ratio to certainly hold steady, it could go down, and that’s driven more by our ability to grow our income side of it. But the expenses of – we’re going to have acquisition-related certainly in the third quarter as we do the conversion. But putting that aside, we should do pretty well and we alluded to that in the press release controlling operating cost, our divisions are focused on that as well.

Okay. So from a core basis, it sounds like kind of holding the line on expenses is the expectation?

Yes, when we look at the core, Jeff, we feel very good. You can’t see it because of the M&A expense in there and the growth all the fact that we grew 20% in the first quarter. But the core expenses, as Ron said, we’re very happy with how those are being controlled.

Got it. And maybe just a couple of credit questions. The lot of the increase in the overall NPAs came from the 90-day past due bucket. Any detail on that? And is there any maybe subsequent payoffs within that – anything within that bucket?

So Barry is on the phone, our Chief Credit Administrator. And again, we spent a lot – because of the increase, we obviously looked at what was going on there quite closely. So Barry, do you want to make a comment on that?

Yes, the bulk of the increase was centered in one credit that was just a little over $7 million, it was a commercial real estate income-producing property. Subsequent to that going over 90 days, we had a paydown of $2.9 million that came from external financing sources and there’s a change in ownership of the property. And we fully anticipate that with that ownership change that loan will be paid current before month end.

Great. And I guess, if that impacted the provisioning, say, Q1 and Q2 a wide range of provisioning and a little outsized movement given the loan growth. But any broader or specific guidance on the provision level?

No, I think, look, we look at the provision every month and we assess it really at the end of the quarter. It was driven this quarter by very strong loan growth and the increase in NPAs. We’ll have to see where we are at the end of the next quarter – at the end of this quarter.

Okay. Thank you.

Thank you. Your next question comes from Matthew Clark with Piper Jaffray. Your line is open.

Hey, good morning.

Good morning, Matthew.

Can you give us what the weighted average rate on new production was this quarter? I think, it was 501 last quarter?

Yes, Matthew, it’s Ron. It’s averaging right about 520, so we picked up roughly another 20, 25 basis points, I actually should say, it’s actually higher, I’m looking over the report here. So we did, I should say, the division did very well where we can we’re able to get the higher yields. And that is to say, competition is certainly out there for the larger, better-quality credits. But on the average loans where we can get it our lenders are very focused on that.

Yes, we picked up a – we’re very happy with the loan pricing beta that we saw and were able to pickup a nice – pickup there. Didn’t expect that, because we thought at the beginning of the quarter, we would see a lot more competition for loans. But our markets in the West grew very strongly if you look at the H.8 data, the whole country grew. We saw some nice growth in the West, and I think that took a little pressure off some of the competitors in terms of their pricing practice.

Okay, great. And then can you remind us what – how much in production you did in the quarter as well?

So let’s see, I mentioned that. So we had – we – just – gross production was $919 million and we had paydowns of $640 million.

Got it. Okay. And then I think you had loan growth tracking kind of ahead of your expectations for the year. Do you have any – what’s your sense for the second-half? Do you think you can kind of continue at high single-digit, low double-digit pace, or do you feel like you may get a little more selective here with competition?

No, we think that Barry and I were talking about that this morning. And we obviously, Ron, Don and I talk about that just looking at it. I think, again, the market’s really picked up this quarter. And so in April, things were not looking as strong. And then May picked up and then June really picked up strongly. And based on what we’re seeing so far this month, that looks like it’s continuing. So overall, we’re thinking around 10%, it’s probably more realistic growth target at this point.

Okay, great. And then geographically, in terms of where you’re seeing that pick up maybe June, July. I know you mentioned for the quarter, it was broad-based throughout the footprint. But can you kind of point to certain regions of the footprint where you’re seeing maybe more activity?

We’re just seeing very good activity across the board. There’s not really one market that way out pulls another. We’ve got some very strong markets. I mean, our Denver, Collegiate Peaks is knocking it out of the park. They’re doing a terrific job. Bozeman, they’re seeing some good growth there. But we’re seeing great growth really good quality growth in Wyoming and Idaho, Washington. So there is no breakout star performer among the 14 divisions, they’re all doing very well.

Okay. Then last one for me. Just on the cost saves, can you quantify how much in cost saves or what percent of your cost saves you’ve realized so far from those two deals?

So we’re still in the middle of, I would tell you, we’re very much on track. The – we’ve put the overall cost saves in there for both deals. And if you remember, Collegiate Peaks, the bulk of those expenses will – of reductions we’ll recognize in this year. First Security, it’s spread out. It’s really – most of those costs will hit in 2019, the reductions we’ll achieve and we’ll see in 2019. But Collegiate Peaks is very much on track and First Security as well. We just completed the conversion of First Security last month. So we’re still – some of those expenses are in – now in process of being recognized. And as I said, Collegiate Peaks, a fair amount of that expense reduction was just the senior team retiring at the close. So I’d say on both of those Matthew, we’re tracking right along where we thought we would.

Okay, great. Thank you.

You’re welcome.

Thank you. Your next question comes from Jackie Bohlen with KBW. Your line is open.

Hi, good morning, everyone.

Good morning, Jackie.

Randy, I wonder if you could speak to the Colorado market. Just given the recent deal flow that happened there with some of the larger banks now acquisition targets if you’re seeing any movement in there? And kind of what your expectations are for potential market dislocation there and how you might be able to take advantage of that?

Yes. No, I think there’s certainly a lot of activity there. I’d say, we’re extremely happy with our bet on the market. We like the size of it and we like the quality of the franchise. I think, at least, preliminarily in talking to Liam, who is our President there, and Dave Boyles, we feel – well, actually both that’s what’s happening there will benefit us. We are becoming the larger community bank in the market. And I think, it’s both customers and employees who really like operating in our model are attracted to a bank that is a community bank and makes local decisions on the ground that is – should be very good for us. So we’re feeling good about those transactions. We’re seeing a lot of things happening there and feel like we have a lot of really good options, because we got a great stable platform that can grow. It was all expanded on a de novo basis. They’re very good with that strategy. So there’s a lot of options to grow organically and through de novo with our Collegiate Peaks franchise, as well as looking at other acquisitions. Our other bank in Colorado is Bank of the San Juans. And Art and his team have been in place for many years, really doing well, all right, really firing at all cylinders and they’re really covering the western slopes down to Pueblo, up into the springs and seeing a lot of good quality growth there. So a lot of upside in the State of Colorado, and so we’re very happy with what we see. And some of the banks get bigger as they acquire that I think works to our advantage.

Would you be open to acquiring any available talent in the market?

Yes, in fact, we have openings, as we speak, I know Liam is actively looking for a number of folks. So we’re growing and we’re almost looking for high-quality talent.

Okay, thanks. That’s a very helpful update. And then just one last one for me. The roughly $7 million CRE loans that were placed on non-accrual in that quarter. Was there any specific reserve associated with that movement?

So, again, ask the question again, Jackie, I’m not sure I followed it?

The bump-up in NPLs specifically related to the one larger commercial real estate loan. Did it have a specific reserve associated with the provisioning, the increase in the quarter?

So I’m going to let Barry answer that. We’re – and Barry, I don’t know how much we go into the details of the reserving. But I’ll let you cover that.

Yes.

I guess, I can clarify to you. The basis for my question is, I’m just wondering if specific reserving droves under the bump up, or if just given that you said that you expect that, everything to workout within the next month or so. So I’m wondering how much of that was a change in past rates that are affecting methodology versus something that’s just very specific to this quarter?

Yes, I – Randy, I can answer that.

Sure.

Generally, I never say never until a problem asset is finally resolved and paid off or brought current. So our current methodology is that as NPA levels generally increase our reserves, stay directionally consistent with those to cover any potential losses while you won’t have losses on any specific non-performing loans in general that you will. So we stay – we try to stay directionally consistent with our allocations. And that was just one loan out of the other increase. There was three or four other ones of very significant size that also given the portfolio. So on a portfolio basis of administering non-performing loans, we try to stay directionally consistent.

Okay. So if NPLs were to directionally trend downward next quarter, the provision would likely do the same?

That would be true, yes.

Okay. Thank you. That’s all I had.

All right, Jackie, you’re welcome.

Thank you. [Operator Instructions] Your next question comes from Andrew Liesch with Sandler O’Neill. Your line is open.

Good morning, everyone.

Good morning, Andrew.

Last quarter, you had talked about some deposit pricing concern, it generally seemed to play out. What are you seeing right now in your markets? Is there anything concerning? What are our competitors doing on the funding side?

It varies by market. We’re seeing the credit unions continue to be very, very aggressive, and that depends on the strength of the credit unions across the markets. Occasionally, we see some of the banks as they need funding get a little more aggressive probably more of their CD side, where they look to kind of fund themselves. But in our markets where we’re the significant leader, we’re really the pacesetter. We just have not seen other than credit unions a lot of activity. And again, we’re focused on the core relationship. And so we’re – these credit unions and others may get a little peace around the edges. They don’t appear to be getting at the core of their relationships.

Okay. And then moving to M&A, it seems like the integrations of these deals are going well. Is it still your sense that earlier you said you’d comfortable doing a deal be late this year maybe early next year, or do you think you can see one sooner?

No, you’re absolutely right. That’s what we communicated back in January, I think, and we’re still very much on that track. We – these were big acquisitions for us. We want to make sure we do it right. We want to make sure customers are treated well and employees. And so we’re still, we really want to make sure that those are done right that our systems and processes support those acquisitions and the growth. And I think, all that’s coming along very nicely, and we’re very comfortable kind of still staying on that track. So, yes, if there’s something that we think is – meets our criteria in terms of a good transaction for us, more likely that would be towards the end of the year as we previously communicated.

Okay, great. Thank you for taking my questions. You’ve answered everything else. Thanks.

All right. You’re welcome.

Thank you. Your next question comes from Tim Coffey with FIG Partners. Your line is open.

Great. Thank you. Good morning, everybody.

Good morning, Tim.

Hey, Randy, you’re forecasting gain on sale of loans is difficult in any environment, but you had a really strong quarter right now in 2Q. Did you pull anything in that, that you might not see again 3Q, or is the seasonality of the housing market start to kick in?

That’s very much seasonality. It was just a very, I mean, not very, very happy with our mortgage business. I mean, we’ve – it’s remarkably steady when we look at it compared to where we were a year ago and we’ve shifted to a lot of purchase activities. So very, very happy with that. We didn’t pull anything from one bucket to another to kind of get there. That’s really just a reflection of our seasonality.

Okay. And then earlier in the Q, you mentioned about this focusing more on growing your non-interest bearing deposits and you just talked about focus on grabbing the core relationship. What other color can you provide on how you’re starting to focus more on building a base of low-cost deposits?

I think, the – it’s been like – as Ron and I travel around and talk about, we’ve been talking about our core deposit franchise for years. And this isn’t – we kind of chunk a little bit. I mean, we and other people are saying, they’re going to build – they’re going to start to build. It takes years and a culture to create it. This – the culture here has been decades in terms of transactional core relationships. And so that’s the same formula for years. It’s just now as the tide is going out on easy money, it’s really starting to shine. And you can see, it’s a very, very stable base. So really the only thing that we added recently is just more emphasis on the non-interest side. And so we sat down and, like I said, over a year ago and just thought that given where we thought rates may go and given the attractiveness of that and given our commercial strength that we could do more there and it turns out. There’s a very, very good opportunity to grow that and continue to grow it.

Okay. And as well one last kind of a tactical question. Did you have a dollar amount for what might be a non-recurring M&A conversion expenses in 3Q?

I don’t think so in terms of what to expect there. I’ll let Ron comment on that. But I think some of that is in play as we speak so. Ron, what’s your thoughts on that?

Yes. I was – we know what our conversion – we know the conversion date, but exactly how those conversions go. We are planning. We have two or three weeks in advance. We do test. And so, as we know conversion is perfect, that should be no surprise to anyone. But I would at best give you a just a round number of 500,000 just for the quarter, but know that, that can change depending upon how things go.

Okay. All right. Well, those are all the questions. Thank you very much.

You’re welcome.

Thank you. Your next question comes from Michael Young with SunTrust. Your line is open.

Hey, Michael.

Hey, thanks for taking the follow-up.

Sure.

Just one kind of macro question just on the tariff chatter. Any – have you guys done any kind of a portfolio review on any impacts of kind of U.S.-Canada trade or just influx of travelers across the border or anything like that at this point, or do you just kind of feel like that’s not going be an issue for you?

Well, yes. We do – we’ve talked about tariffs quite a bit and there’s two components I think to your question. One is travelers. Our friends to the North, the Canadians. We haven’t seen any issue there. We look at our tax receipts and probably the easiest way they do that right here locally is the Whitefish, Montana market is very driven by the Canadian tourists. Those – the – we look at the tourists, we look at the tax. The tourists tax they call it on lodging and food, that’s up year-over-year. So we haven’t seen really any impact on people coming in. On tariffs, we looked closely at our ag book to see if any of the tariffs affected the kind of crops that we grow and we really don’t see a material impact. Of course, that whole conversation changes to dynamic conversation. But at this point, the things they’re pointing to are more Midwest crops than crops that we grow in our region. With the exception of apples and there’s a Mexican tariff on those. And we’re just talking to Charlie Guildner, our President up there in Chelan – in Lake Chelan. And actually, they have not seen much of an impact surprisingly. They’re still exporting and they’re opening up new markets to offset the small bit of trade that they lost because of those particular tariffs. So overall, I have to say at this point, we just have not seen much of an impact related to any kind of negative consequence of the tariffs.

Okay, great. Thanks for that color. And just also maybe, I think, over the last couple years, you guys have been more cautious on multifamily and then hotel finance, obviously, strong CRE growth quarter this quarter. Is any of that sort of you relaxing restrictions there, or any updated outlook on those two food groups?

No, we haven’t changed our point of view on those at all. We’re still very cautious and conservative. We kind of have our appetite limit. We may, as ones roll off, do another, but I think, we don’t haven’t really – still really have not increased our net position on either of those categories.

Okay, perfect. Thanks.

You’re welcome.

Thank you. And I’m showing no further questions at this time. I’d like to turn the call back over to Randy Chesler for closing remarks.

All right. Well, again, thank you for taking time and dialing in and listening in. We appreciate it. And have a wonderful fantastic weekend and enjoy the summer. Finally, hit here, so we will enjoy it as well. Thank you again.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you all may disconnect. Everyone, have a wonderful day.