Glacier Bancorp, Inc. (GBCI) Q2 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Glacier Bancorp Second Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a Q&A session. To ask a question during the session, you will need to press *11 on your telephone You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. 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 Ronald J. Copher, our chief Financial Officer; Tom Dolan, our Chief Credit Administrator; Angela L. Dose, our chief Accounting Officer; and Byron Pollan, our treasurer. I would 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 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 pre provision 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 cost including non interest bearing deposits, was 1.18%. Down 2 basis points from the prior quarter. Non interest 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 reflects 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% 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 26 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 asset on a tax equivalent basis for the first half 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 49 times 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.

Thank you. As a reminder to ask a question, please press *11. To withdraw your question, please press *11 again. And our first question comes from Matthew Clark of Piper Sandler. Your line is open.

Good morning. Just wanted to start on the funding side, deposit cost down nicely again here. Because it would be helpful to have the spot rate at the end of June and then your outlook on deposit cost in general. Just assuming the Fed remains on hold and how the competition is these days.

Sure, Matthew. This is Byron. Looking for the spot cost at the end of June 30. Our deposit cost was $1.18. In line with our average for the quarter. So in terms of our outlook, I do think our deposit cost will likely be stable from here. Of course, that depends on what the Fed does. But assuming you know, it is been on hold, as you mentioned, I would think that we would just kind of maintain this level of deposit cost going forward. Now if the Fed does hike rates at some point later in the year, you know, we would have to adjust that outlook a little bit. But I think from now, a good outlook is just is a stable from here.

Okay. And then just on the loan side, loan growth stepped up here. I think Q3 tends to be a seasonally strong 1 for you. We just wanted to touch base on the pipeline and your outlook for growth.

Yeah. Matthew, this is Tom. Yeah. Second and third quarter are typically our stronger quarters in the year. You know, more so than the fourth and the first quarter. We have seen that for the last couple of years. I do not see anything that would really change that, but pipelines still remain very healthy. We are seeing pull through. We are seeing backfill. And of the tailwinds we also saw in the second quarter with construction draws and entering into the ag growth season, that will continue into the third quarter as well.

Okay. And then maybe 1 for Ronald. Your expenses came in a lot better than expected. I just wanted to get the updated guide for the second half of the year.

Yeah. The updated guide. We are going to stick with the quarterly guide I gave for Q2. So that will be a 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 are not we just allow for that But overall, very, very good control on expenses.

Great. Thank you.

Thank you. And our next question comes from Jeffrey Allen Rulis of D.A. Davidson. Your line is open.

Thank you. Good morning. I guess a question on the--a follow-on the loan growth. And Randy, you have mentioned pretty broad based. I would 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, you know, as we have stated, we are really operating in 2 regions, Southwest, Mountain West, Southwest continues to do very well. I think they are rebuilding the pipeline after a very strong first quarter. So we see really, really good trends there. And in the Mountain West, they had a very strong quarter. So I think both are doing very well. So, yeah, 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 going forward, it looks like a strong pipeline across the region? Is that-- Exactly.

Yeah. Okay. You are exactly right. Got it.

And, Randy, I guess I would check in on the--it is been a bit on the M&A side, a quiet start. Nationally, but we are 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 have you hold a lot of them, but, just wanna see where we sit on the M&A side.

Sure. Yeah. I would maybe set separate that into 2 pieces. there is our internal discussions that we have, meaning, it is not an official sale. We are 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, you know, that I have had with the investment banker, I think that we will probably start to see that, increase a bit towards the end of the year. But overall, compared to first quarter, I would say about the same. Jeff, really probably still a bit muted. Okay. Appreciate it. And sorry if I could slip in the last 1. I 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 to start to see some earning asset growth If you could comment on that. Sure, And we will have Byron come on that. We did make some purchases this quarter, so we are kind of slowly wading back into the investment purchase of investments, but I will let Byron give you some color on that.

Yeah. 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 will continue--we will continue purchasing putting some cash to work going forward. In terms of growth, I do see our earning assets will expand from here. I think what you saw even in Q2, with the decline in earning assets it is still a little bit of an echo of the deleveraging that we had going on. We talked a lot about the paydown of our FHLB advances. And that last maturity, that last payoff did not 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 is complete. I would expect from here our earning assets will increase in Q3 and Q4.

Great. Thanks for the color.

Thank you. And our next question comes from Kelly Motta of KBW. Your line is open.

Hi. Good morning. Thanks for the question. I would love to talk a bit about the margin. You had a few things working in a negative direction this quarter, 1 being the nonaccrual interest reversal and then a lower level of accretion. So if you had a similar level to last quarter, you would be closer to you would have actually come in the mid-3.90s. So I am just wondering as we think about that an exit 4% margin, it feels like that is in the range. How are you any updates on how you are thinking about the margin from here? And maybe some I know the accretion can swing around, so some commentary on what is a normal level, at least for modeling purposes, would be helpful.

Thank you.

Sure, Kelly. Thank you for the question. Yeah, we are very, very pleased that our margin continues to expand. And we expect that it will continue to grow. When you are looking at that 4% I do think we will hit that 4% level early in the fourth quarter of 26. And we will keep going from there. So when you think about an exit of an exit margin for 2026, I do expect we will be north of 4% I do think what you saw, some of those headwinds were a little bit of an anomaly. The anomaly there is you can never really forecast the timing of payoffs and things like that. But it feels to me like that impact that you saw that headwind was a little bit elevated. We are not expecting that level will continue going forward. I think the level of discount accretion you saw in Q2 is probably a more normal level to assume going forward.

Okay. that is that is really helpful. And then I appreciate the color on the securities reinvestment. Can you provide additional detail on what you are seeing on loan pricing and any commentary on the competitive dynamics impacting new loan production yields either way? Thank you.

Sure. Yeah. Kelly, this is Tom. We are still seeing production yields in excess of 6.5%. You know, we saw that consistently throughout the quarter. From a competitive standpoint, you know, that probably is the largest competitive factor is the pricing, and we see it more in the large metro areas versus the smaller markets where we have a more commanding market share, I think that trend is continuing. And I think that is probably going to continue into the third quarter. We are still not seeing a lot of competition on underwriting discipline or structure, which is which is good. At least in the spaces that we operate in. So, I am encouraged to see that if it is still primarily focused on pricing, which really has not been a change over the last couple of years.

Got it. that is helpful. That all sounds really encouraging. With these factors in mind, you were well above 4, you know, pre-COVID, at least for a bit. Any I know it is a little early to talk about 2027, but is there any preliminary thoughts on what given the pretty meaningful tailwind of back-book pricing still to come, what a normalized margin means for Glacier over the longer term? Thank you.

Yeah, Kelly, I do think, as you mentioned, that there is a lot of momentum in our asset repricing. You know, I do think longer term, I do think about our margin in terms of a range between 4% and 4.5%, more of our historical norm. And I do think there are things that can kind of bring us towards the higher end of that range given enough time, a friendly yield curve, you know, a steep steeper yield curve would certainly be helpful. Meaningful loan growth, that always helps with the level of new production rates that Tom mentioned. that is going to lift our margin towards the higher end of that range. So I do I do see that we will continue to increase our margin throughout 27. Ultimately, you know, where it normalizes and where it kind of levels out, that remains to be seen, but I do see growth throughout next year as well.

Super helpful. Thank you so much for all the color.

Thank you. And as a reminder, if you have a question, please press *11. And our next question comes from Evan on for David Feaster of Raymond James. Your line is open.

Hi. Good morning, guys. it is Evan on for David. Morning. I, firstly, just wanted to touch on maybe deposit competition across your footprint. I know you have said in the past you are probably more insulated than others. Based on your presence in more rural and in more rural areas. I am just curious how you view competitive funding cost pressures going forward and if there is been any change from your prior views? Thanks.

Yeah. David, I do not see any change in the level of competition. I think competition is strong. It always is. But it is rational. There are always some outliers in our market, but those outliers, they are not driving the market. And as you saw, you know, our result, we were able to bring our deposit cost down a couple of basis points in Q2. So yeah, from what I see, you know, it appears to me that competition is rational.

Rational. And the other thing I would add on the market, 75% more rural and 25% more urban. it is both the nature of the market and our focus on the core relationship. In those markets, which really drives the lower cost. And we do not see those dynamics changing.

that is really helpful. And then maybe just moving to credit. I know there is a slight uptick in non accruals, but trends seem really solid still. Just curious what you are seeing broadly, maybe what caused that uptick. And then maybe if there is any sectors or segments that you are watching more closely than others.

Sure. Yeah, this is Tom. You know, I would classify it as stable overall. We are not seeing any specific industry or geography or asset class that is showing any outsized risk. But, you know, I would say that, you know, if there is 1 segment where we are still watching closely, it is probably it is been this way for over a year now. We are watching the ag. But you know, 2025 ended up being stronger than, you know, we were anticipating. 2026 is off to a good start as well. But obviously, there has been some headwinds in that industry that we are paying--that we are paying some attention to. But I, going back to what Randy said about deposit aggregation, you know, same thing on the loan side. We really try to build the--or, you know, bank the long time operators in the market, and that is no different in the ag sector with, you know, banking the long time multigenerational grower families. They have led these time and again, and we see that happening this time.

Got it. And then maybe going back to Texas, you have noted in the past, it is still a bit too early to see impacts from disruption in the state. I am just wondering if you have seen any, emerging trends of being able to capitalize on displaced customers or new team members. or in any other part of your footprint where there may be dislocation? or disruption? Thanks.

Yeah. So we are watching that carefully, and I think by that, you mean bigger banks coming in acquiring some banks in our markets and what the implication of that is. So there are really 2 areas we are keeping an eye on. 1 is in Colorado with PNC's purchase of FirstBank. I would say that the preliminary, it is still early, and a lot of respect for PNC, At the same time, we do see some customers starting to move, and to our benefit. And so as these bigger banks come into the markets like this, their ability to carry forward the community banking that people have become used to is still kind of up for judgment. And so, but initially, it seems that there is some good movement our way with some very good customers. And so we are very happy to talk to those customers and take advantage of that opportunity in Texas. We have got some very strong commercial lending leadership, and I think they are having good success talking to people and bringing on incremental talent. We are finding as a result of some of the recent acquisitions. So I would say overall, right now, it feels like it is favorable for us. But again, some very good banks larger banks, and so maybe a little too early to say that is a conclusion, but early trends are positive for us.

Thanks for the color. I will step back.

Thank you. And we have a follow-up question from Kelly Motta of KBW. Your line is open.

Hi. Thanks for letting me jump back on. I did want to ask a question about capital management, just because in light of your improving profitability, capital continues to build. I appreciate the commentary on M&A, but any other thoughts as you look ahead here about capital management? Thank you.

Yeah, Kelly, we will have Byron give you some color on that. We have been talking a lot about that obviously, because we are increasing capital and the industry is increasing capital. Broadly and you know, we see that as something that is going to continue here. But we will let Byron fill in the blanks there.

Yeah, Kelly, our capital is strong, and as you point out, it will continue to grow with our earnings growth. it is early yet. We are still evaluating our outlook for capital build. But I would say we have a lot of flexibility in how we approach capital return, and we are keeping all of our options open. We are having discussions ongoing around the topic. And evaluating all of our options.

Appreciate that. Thanks.

Thank you. I show no further questions at this time. I would like to turn it back to Randy Chesler for closing remarks.

All right. All right. Well, thank you, Didi, and thank you for the folks for your questions. We appreciate it. We appreciate everybody dialing in the summer, taking time to hear on how things are going. Hope you have a great day, great weekend, and great rest of the summer. Thanks for dialing in.

This concludes today's conference call. Thank you for participating, and you may now disconnect.