Good day, everyone, and welcome to the Glacier Bancorp Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please note this conference is being recorded. Now it's my pleasure to turn the call over to Glacier's Bancorp's President and CEO, Randy Chesler. Please go ahead.

Good morning, and thank you for joining us today. With me here in Kalispell is Ron Cofer, our Chief Financial Officer, Tom Dolan, our Chief Credit Administrator, Angela Dosey, 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. We delivered another excellent quarter, continuing our momentum with strong margin expansion, higher loan yields, lower deposit costs, and solid high-quality loan growth. We also completed the core conversion of the Bank of Idaho with assets of approximately $1.4 billion, and shortly after quarter end, we successfully closed the acquisition of Guaranteed Bank and Trust, adding $3.1 billion in assets and expanding our presence in the Southwest. Bank of Idaho was successfully folded into three of our existing divisions, Citizens Community in Pocatello, Mountain West in Boise, and Wheatland Bank in Eastern Washington. The Bank of Idaho brought us a terrific team of lenders and staff as well as excellent customer relationships. The guarantee transaction marks our first entrance into the state of Texas and we're excited about the long-term opportunities this brings. Our focus now is on delivering a flawless conversion in the first quarter of 2026 and making sure we have happy employees and customers. For the third quarter, Glacier Bancorp reported net income of $67.9 million or $0.57 per diluted share. The third quarter net income represents an increase of 29% from the prior quarter and reflects a 33% increase in net income compared to the same quarter last year. Pre-tax, pre-provision net revenues of $250 million for the first nine months of the current year increased 77.1 million or 45% over the prior year first nine months. Our loan portfolio grew 258 million to 18.8 billion or 6% annualized from the prior quarter. Commercial real estate continues to be a key driver of loan growth. Deposits also grew, reaching 22 billion, up 4% annualized from in the last quarter. Non-interest bearing deposits grew again this quarter, increasing 5% annualized, and now representing 31% of total deposits. We reported net interest income of 225 million, up 18 million or 9% from the prior quarter, and up 45 million or 25% from the same quarter last year. year. Our net interest margin on a tax-adjusted basis expanded to 3.39%, up 18 basis points from the prior quarter and up 56 basis points year over year. This marks our seventh consecutive quarter of margin expansion, reflecting the strength of our loan portfolio repricing, our ability to get good margin on new loans, and our continued continued focus on managing funding costs. The loan yield of 5.97 percent in the current quarter increased 11 basis points from the prior quarter and increased 28 basis points from the prior year third quarter. The total earning asset yield of 4.86 percent in the current quarter increased 13 basis points from the prior quarter and increased 34 basis points from the prior year third quarter cost of funding declined to 1.58% down five basis points from the prior quarter as we reduced higher cost federal home loan bank borrowings by 360 million. Core deposit costs decreased in the quarter to 1.23% from 1.25% in the prior quarter non-interest expense was a hundred and sixty-eight million up 13 million or eight percent from the second quarter primarily due to increase cost from acquisitions non-interest income totaled 35 million in the current quarter up 2.4 million or seven percent from the prior quarter and up two percent year-over-year. Service charges and fees increased five percent from the prior quarter, while gains on loan sales increased 18 percent from the prior quarter. Our efficiency ratio remained at 62 percent, down from 65 percent a year ago with good momentum for continued steady reduction. Credit quality remains very strong. Our non-performing assets remain low at 0.19% of total assets, and net charge-offs were 2.9 million for the quarter, or three basis points of loans. Our allowance for credit remains at 1.22% of total loans, reflecting our conservative approach to risk management. We continue to maintain a strong capital position with tangible stockholders equity increasing $304 million or 14% in the current year. Tangible book value per share increased to $20.46, up 8% year over year. And we declared our 162nd consecutive quarterly dividend of 33 cents per share, underscoring our commitment to delivering consistent shareholder returns. We are very pleased with our performance this quarter. Our expanding footprint, unique business model, strong business performance, disciplined credit culture, and strong capital base provide a solid foundation for future growth. That ends my formal remarks, and I would now like the operator to open the line for any questions that our analysts may have.

Thank you. And as a reminder to ask a question, simply press star 1-1 to get in the queue and wait for your name to be announced. To remove yourself, press star 1-1 again. Please stand by while we compile the Q&A roster. One moment for our first question that comes from the line of Jess Rulis with DA Davidson. Please go ahead.

Thanks. Good morning, Jeff. You guys, on the margin, you did note the seven consecutive quarters of expansion. You know, this quarter was the largest sequential of all of them. I won't read into kind of the lumpiness of that, I suppose, but a good sign nonetheless. You guys have really guided very well on the trend on that front. maybe just to catch us up on where you think you see it headed in light of September's cut and potentially a couple more through the end of the year. That would be great on the visibility front.

Hi, Jeff. This is Byron. Yeah, it has been great to see the continued improvement in our margin. And I would say those repricing drivers in our balance sheet that we've discussed, they remain in place. And so we do see continued growth ahead of us in terms of our outlook. For Q4, we anticipate that that will grow our margin, an additional 18 to 20 basis points in the fourth quarter. That does include the impact of guarantee. I know a lot of folks will be interested in our 2026 outlook. I don't have specifics for you there. We're just now starting our budgeting cycle for 2026. But broadly speaking, what I can say is we do expect to see continued margin growth throughout the year. I would say, though, that the pace of quarterly increase is likely to moderate throughout next year. So hopefully that gives you some color for where we're headed. We do see continued growth. Just to refine that, Byron, when you said the margin growth throughout the year, you're mentioning additionally in 26 but not specifically and is that what you were referring to exactly right yeah I don't I don't have a specific guide for you in 26 I think we need to get you our budgeting cycle first to really you know refine that that expectation but you know from where we sit right now we do we do see continued growth throughout the year but quarter to quarter I could see the pace of growth you know starting to starting to moderate a little bit.

Understood. Thank you. And Randy, you know, we are early goings in the Texas market, but interested in the reception there and how potentially your view of finding further partnerships in Texas and Oklahoma, if you've got any update there, if you're just as encouraged or less more just interested in that feedback so far? Again, very early, but notable anyway.

Yeah, no, absolutely. You know, first I'd say I think Guarantee may be the best cultural fit of any acquisition we've done in the last 10 years. Very, very good fit. Our focus right now is on getting guarantee converted in one queue and making sure that goes extremely well I will tell you there's conversations already we'll have plenty of interested banks who would like to have a conversation when we're ready our our job one right now is making sure we get through the conversion and one queue and do it really really well make sure our customers are happy employees are happy and then like I said we'll have plenty of banks to talk to too.

Gotcha. Maybe one last housekeeping, if I could squeeze it in. The tax rate seemed a little elevated. I don't know if that's a factor of kind of merger costs, but if you could just point us to maybe a good rate going forward.

Yeah, Jeff, Ron here is a function of largely the merger-related expenses, some of which are non-deductible, and I would tell you that third quarter rate, I would use that as well for fourth quarter.

Okay. And, Ron, is that an assumption of additional merger costs or just more of a core rate to match third quarter?

We'll have some more merger costs as well, but I think it's a pretty good rate to go Okay.

Thank you.

Thank you so much. One moment for our next question. That comes from the line of David Pfister with Raymond James. Please proceed.

Hey, good morning, everybody.

Morning, David.

Maybe just on the growth side, I mean, you know, loan growth has been solid, kind of remained in that mid-single-digit realm. Just wanted to get a sense of how demand's trending, how the pipeline's shaping up and you're backfilling that production and then you know just any comments on on the competitive landscape as well um and you know i mean we're hearing more competition especially on the on the pricing side maybe a bit more on the on the structure as well um but just again wanted to get a sense of your thoughts on the loan growth side and and how that competitive landscape's shaping up yeah david this is tom yeah third third quarter was another good quarter for us and you know typically second and third quarter are seasonally stronger for us a little bit less so in fourth and first quarter you know I think we expect that a little bit but you know from a pipeline

perspective you know we continue to see consistent pull through we continue to see consistent build back and it is really fairly consistent throughout the footprint too and you know I think the from a competition standpoint it's a little bit geographic specific in some of the larger markets we'll see more pricing competition a little bit less so in markets where we have you know more of a controlling market share we're in the you know certainly in the types of deals that we that we go after you know just core main street lending we're not really seeing competitors stretch on the structure side which is encouraging and that's certainly not something that we would do so it tends to be more pricing pricing related.

Okay. And maybe just staying on credit broadly. I mean, credit is still pretty benign for y'all, especially just, you know, the government. The increase that you guys saw in non-accruals, all government guaranteed. Is there anything on the credit front that you're seeing at this point or watch more closely? Or is there anything specific within the small business space that you're seeing notable pressures?

You know, the only industry that I would say is a little bit outsized is probably the ag sector. You know, hard grain prices, hay prices are still quite depressed. You know, we're faring quite well through this. You know, I think our banks do a good job of securing those assets with, you know, certainly more hard assets than crops. and so you know I think that gives the flexibility both us and the bar to work through these cycles and you know certainly our ag lenders have a tremendous amount of experience and have seen cycles like this over and over again but outside of that David you know there's really no specific geography or industry segment that's showing an outside level of risk you know we saw a little bit of an increase this quarter similar to the last quarter I think we're just continuing to see more normalization from you know the historic lows that we were okay

um and then maybe last one for me just maybe a bit higher level conceptual like i mean we look back i mean there's obvious you guys have done a great job driving the margin expansion right and there is a huge tailwind just from the remixing your pricing side um and then again Again, obviously, organic loan and deposit growth is, again, accretive to the margin as well. You look, pre-pandemic, right? I mean, you guys were consistently operating well north of 4%. Yeah, is that, just in this kind of world, is that still a reasonable target?

I mean, you guys have continued to march your way towards that, but is that a reasonable target that we could hit in some time in the foreseeable future? is that just kind of curious your thoughts on that yeah david i do think we can get back to that four percent uh threshold it's a matter of timing i think it's really a matter of when uh not if um i don't have specific timing for you i you know it wouldn't surprise me you know towards the end of next year if we see a full handle on on our net interest margin now a lot of things could impact that between here and there uh you know you know what happens with their loan growth and deposit growth, you know, what's the Fed doing and shape of the All of those things are going to influence that longer-term margin, but I do see the potential to get there in the future.

Okay. That's super helpful. Thanks, everybody.

You're welcome.

Thank you. Our next question comes from the line of Matthew Clark with Piper Sandler. Please proceed. Hey, good morning, everyone.

I want to start it on the deposit cost side, just if you could give us the spot rate on deposits at the end of September and just give us a sense for what kind of beta you think you can achieve with this last rate cut that we just got and subsequent rate cuts.

Our deposit cost on September 30 was 1.22%. In terms of our beta, to this point, we've been able to achieve a downright beta somewhere in the mid-teens with some amount of lag. Our deposit cost doesn't react immediately to a rate cut. It takes us a little time to kind of work into that, call it 15% deposit beta. with the addition of guarantee their deposit base has a slightly higher beta so you know if if we were 15 i think somewhere going forward with a combination of of glacier and guarantee you know maybe maybe that pushes us up you know another couple of percent so somewhere in the range of you know call it 15 to 20 percent would be my expectation for our down rate data going forward okay thank you and then the other one for me just around the expense run rate and you're updated guidance there, whether or not that's changed since last quarter with guarantee

now in the fold at the start of the fourth quarter. I don't know if you want to, sounds like you're still budgeting for next year, so I don't know if you want to offer up anything in the first quarter, but I assume there's some seasonality there.

Yeah, let's, Ron here, thank you for the question. Yeah, well, we're budgeting, so I'm just going to limit the discussion to the third quarter. I want to touch on that and then go towards the fourth quarter. So in the third quarter we finished reported non-interest expense $167.8 million. That includes $7 million in acquisition related expense and $800,000 we incurred for a fixed asset write down related to a branch consolidation in one of our Montana markets. And I want to remind folks that the core non-interest expense that includes merger related expenses other one-time unusual items so taking those adjustments into account our core non-interest expense was flat and 160 million right in the midpoint of the guide of 159 to 161 that was shared on the last quarter's call and then moving into the fourth quarter just looking at Bank of Idaho we had a full three months of expense from them versus two months in the prior quarter. So Bank of Idaho projected to add nine to 10 million in that third quarter, came in just about $9 million, the low end of that guide. And we expect that to occur. Bank of Idaho impact for the fourth quarter will be just right around that $9 million number. So then with the acquisition of Guaranty Bank on October 1st versus we were thinking it would be October 31 we're now going to have a full three months of expense from guarantee and this will cause a step up in our core non-interest expense it'll add 21 to 22 million to core non-interest expense in the fourth quarter but in addition because of purchase accounting we're going to have three million dollars of amortization expense for a core deposit intangible that we have to record as we would on any acquisition so in the fourth quarter when you look across it and put it all together we're expecting a range of 185 million to 189 million and again that includes guaranteed banks. But collectively, I just want to speak very highly of our bank divisions, corporate departments. They've done very well in limiting, controlling their expenses. We do continue to take a cautious approach in hiring, spending in general. You've still got higher levels of market volatility, etc. Let me open it up for questions.

That's great, Ron. Thanks for the color.

A moment for our next question. And he's from the line of Andrew Terrell with Stephens. Please proceed.

Hey, good morning. Good morning. Maybe I'll just start back there on expenses, Ron. I really appreciate the guidance on 4Q with all kind of the moving pieces. Just understanding that, you know, the core system conversion for guarantee isn't until the first quarter of 26. I'm assuming the 185 to 189 guide for the fourth quarter doesn't incorporate much in terms of cost save. Question being, should we expect some moderation off that 185 to 189 going into 2026 just as we experience the core system conversion and get some cost saves?

Yeah, we will have in the beginning of the first quarter, again, largely related to after the conversion, you know, that's when the cost saves really start to kick in. And as we modeled, we're modeling 20% reduction in non-interest expense cost saves, 50% of that we will achieve in 26, the other 50% will be in 27. And so, as I mentioned earlier, you know, we're still beginning, I should say, in the budgeting process, but there will be some moderation.

Yep, got it. Okay, I appreciate it. And if I could go back to just the margin commentary briefly for Byron, I appreciate all the color there. I specifically wanted to ask about the comment of just, you know, less margin expansion sequentially throughout 26 versus what you've experienced this this year and you know you guys have benefited from a few things this year it's um you know M&A has helped the FHLB deleverage has helped significantly and I think that slows down or kind of ends in one queue of next year but then the fixed asset repricing and I'm curious the comments on slower margin expansion next year is that mostly reflective of less FHLB deleverage potential, less, you know, M&A related expansion, but asset repricing trends staying intact? Or do you expect relatively less asset repricing benefits as well?

I would say for the most part, it's the FHLB deleverage. And as you point out that, you know, we really finished that by the end of the first quarter. And so we don't, you you know, that extra boost or pop that we get from paying down, you know, high cost of funding, you know, that will end in Q1. But also on the fixed asset repricing, we still see from a balanced perspective, we still see that asset repricing is there. I would say from a rate perspective, the five-year point of the curve has come down some. And so, um, you know, that, that's also kind of playing into and influencing that comment I made earlier where we're seeing less lift. Um, I think, I think we'll see less, uh, less repricing lift, uh, just because of the, the, where, where the, that five-year point of the curve is right now. It could change of course.

Yep. Fair enough. Okay. Um, and last one, just for Randy, um, I appreciate your comments on on the texas market and how well the guarantee acquisition has gone gone so far um i wanted to ask about your comments i know the the near-term priority is is getting everything integrated from guarantee but sounds like conversations maybe could be picking up and i think your comments were specific to texas but i'm curious just on the overall mna strategy going forward should we expect there's more of an emphasis in the texas market as you build out scale there? Or are you equally as focused kind of legacy Mountain West franchise and Texas? I guess is one more in a role or would you expect to grow more in one than the other?

Yeah. So I'd say overall M&A, you know, I think what we offer is becoming even more attractive to sellers, especially with some of the larger banks purchasing banks in our market. We think that's very, very positive for us, so we offer something that's very different and very attractive to a lot of sellers. I don't think we can put an emphasis on Texas over the Mountain West, the Southwest over the Mountain West. It's just getting back to we have a lot of optionality with very, very good sellers across that entire area. So we're not really prioritizing one area over the other. Like I said, our focus is to do a great job on the conversion, and then we'll see where the conversations take us.

Great. Thanks so much for taking my questions.

Thank you. Our next question is from Kelly Motta with KBW. Please proceed.

Hey, good morning. Thanks for the question. Morning, Kelly. Maybe one for Byron. I think the guidance for margin last quarter was 15 to 17 basis points plus another 5 to 7 from guarantee. It seems like at least near term it might be a little bit lower. Can you provide any context for the color around that, wondering if guarantee is maybe contributing less or there's less accretion income. Any color would be helpful. Thank you.

Sure. We have an estimate in there for the loan marks and the purchase accounting accretion. So, we have an estimate in there. I think it may be a little bit more modest than it was prior quarter. Also, kind of back to that side-year point of the curve, our repricing repricing list is just a little bit softer and also just looking at the rate cuts and I mentioned that that lag on the deposit side so the timing of the cuts and the reaction of our deposit base can create a little bit of noise during the quarter and so put that all together thought it might be good to just kind of rein in just a little bit that that that margin cut 18 to 20 is still a very strong corridor for us.

Got it. That's really helpful. Another question that maybe you can humor me on, this non-depository financial institution lending. From what I can see in the call reports, it looks like it's almost negligible where you guys, what your exposure is. Just wondering if that's the case and if you, you know, could provide just a moment. Credit has been such a strong selling point of Glacier, just the types of commercial credits you look at and kind of what gives you comfort with the outlook ahead. Thank you.

Sure, Kelly, it's Tom. And you're right on the assessment of non-depository financial institution. It's immaterial. And, you know, Kelly, it's not a business line for us, you know, neither is syndicated or any other indirect type of business. You know, with our division model, can I answer the last part of your question? You know, at the end of the day, we're a collection of community banks. We're Main Street lenders that deal with local businesses and consumers, and we just haven't had the appetite really at all for, you know, syndicated and direct, nor do we foresee exploring it. And so, you know, I think when we look at the nature of the pipeline, it really falls right in line with, you know, how the footprint is laid out, good, strong local borrowers, Main Street lenders that we've had relationships with for years.

Thank you, Tom. Tom, I'll step back.

Thank you so much. And as a reminder to ask a question, simply press star 1-1 to get in the queue. All right, and our last question comes from the line of Team Coffee with Jenny Montgomery Scott. Please proceed.

Thank you. Good morning, everybody. Tom, if I could follow that last question Kelly was asking, I mean, we've seen a handful of missteps in the last couple of weeks from some banks, and I was wondering if, in general, you could discuss kind of the processes and checks you have in place at Glacier to ensure that borrowers are doing what they're supposed to be doing.

Yeah, sure. Well, you know, first of all, it begins with knowing your customer, and, you know, the other thing is the loans that we have on our books, we're in control over, so that kind of goes back to that indirect comment or purchase participations or syndications. That just isn't really a space that we play in. we want to be you know directly in control of the relationship and then you know I think they answer the latter part of your question you know we have a credit administration functions in every single one of our divisions and that's proximate to the street proximate to the customers they're in the communities where we meet with our borrowers on a regular basis typically minimum on a quarterly basis for our larger borrowers but we're also seeing these borrowers at community events and sporting events and so you know it goes back to just the true core community bank type lending and then you know from a more formal perspective you know we're very good and deliberate with our covenant structure and our new originations our ongoing annual reviews of both you know each of the division banks and then also an ongoing regular review of the portfolio at large. And so I think when you just encapsulate all those things together, we really have a strong understanding of what's going on with our borrowers.

All my other questions have been asked and answered. Thank you.

Thank you so much. And this will conclude our Q&A session. And I will pass it back to Randy for concluding comments.

All right. Thank you, Carmen. And I want to thank everyone for dialing in today and joining our call. Have a great Friday and a great weekend.

Thank you. And this concludes our conference. Thank you all for participating. And you may now disconnect.