Glacier Bancorp, Inc. Q4 FY2025 Earnings Call

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 on Page 14 of our press release, and we encourage you to review this section. 2025 was a transformative year for Glacier Bancorp. We successfully closed two strategic acquisitions: Bank of Idaho in April and Guaranty Bank & Trust in October, growing our footprint in fast-growing Idaho and expanding our Southwest region to include the great state of Texas. These markets offer strong growth potential and fit seamlessly with our long-term growth strategy. We converted the Bank of Idaho business operating platform in September and plan to convert Guaranty Bank & Trust in February. This was the largest acquisition year in our history with over $4.7 billion acquired, topping our previous record of $4.1 billion in 2021. We delivered strong financial results in 2025 with significant growth in all key metrics. We also delivered an excellent quarter, continuing our momentum with strong margin expansion, higher loan yields, lower cost of funding, and solid high-quality loan growth. The company's total assets exceeded $30 billion in the quarter, ending the year at $32 billion in total assets, which was another record for the company. Net income was $63.8 million for the quarter, including the $36 million of expenses related to our 2025 acquisitions. Net income for 2025 was $239 million, an increase of $48.9 million or 26% from the prior year's net income, driven by the two acquisitions and our disciplined approach to increasing our net interest margin during the year. Pretax pre-provision net revenues of $362 million for 2025 increased $107 million or 42% over the prior year. Diluted earnings per share for the quarter was $0.49 per share. Diluted earnings per share for 2025 was $1.99 per share, an increase of $0.31 per share or 18% from the prior year. Net interest income of $266 million for the quarter increased $41 million or 18% from the prior quarter. Net interest income of $889 million for 2025 increased $184 million or 26% from the prior year. The loan portfolio of $21 billion at the end of 2025 increased $2 billion or 11% from the prior quarter. For 2025, the loan portfolio increased $3.7 billion or 21%. Total deposits of $24.6 billion increased $2.7 billion or 12% from the prior quarter. Total deposits increased $4 billion or 20% during 2025. The net interest margin as a percentage of earning assets on a tax-equivalent basis for the quarter was 3.58%, an increase of 19 basis points from the prior quarter and an increase of 61 basis points from the prior year's fourth quarter. The loan yield of 6.09% in the quarter increased 12 basis points from the prior quarter and increased 37 basis points from the prior year fourth quarter. The total earning asset yield of 5% in the quarter increased 14 basis points from the prior quarter and increased 43 basis points from the prior year's fourth quarter. The total cost of funding, including noninterest-bearing deposits of 1.52% in the quarter, decreased 6 basis points from the prior quarter and decreased 19 basis points from the prior year's fourth quarter. Total noninterest expense of $195 million for the quarter increased $26.8 million or 16% over the prior quarter, primarily due to the increased costs from our two acquisitions. Included in noninterest expense for the quarter was $24 million from the Guaranty Bank & Trust acquisition and $3 million of expenses related to vacating branch locations. Noninterest income for the quarter totaled $40 million, which was an increase of $5 million or 14% over the prior quarter and was up 28% over the prior year's fourth quarter. In 2025, our efficiency ratio dropped from 66.7% at the beginning of the year to 63%, showing good momentum for continued steady reduction. Credit quality remains at historically low levels. Our nonperforming assets remained low at 22 basis points of total assets with a slight increase from the prior quarter, driven primarily by the acquisition of Guaranty Bank & Trust. Net charge-offs were 6 basis points of total loans for the year compared to 8 basis points in the prior year. Our allowance for credit remains at 1.22% of total loans, reflecting our conservative approach to risk management. We continue to improve our strong capital position with tangible stockholders' equity increasing $609 million or 29% in 2025. Tangible book value per share increased to $21, up 12% year-over-year. And in November, we declared our 163rd consecutive quarterly dividend of $0.33 per share, underscoring our commitment to delivering consistent shareholder returns. We are very pleased with the performance in the fourth quarter and for the full year 2025. Our exceptional team, expanding footprint, unique business model, strong business performance, disciplined credit culture, and strong capital base provide a very solid foundation for future growth. So, that ends my formal remarks, and I would now like the operator to open the line for any questions our analysts may have.

And our first question comes from David Feaster of Raymond James.

I just wanted to start on the growth side. Obviously, it was a noisy quarter. We had the Guaranty deal. Organic growth you guys laid it out, it was about 1% annualized, a little bit slower than maybe we expected. It looks like it's actually pretty solid in the quarter. So I just wanted to get a sense of what you saw on the loan side that maybe kept things a little bit slower this quarter. And then just how you think about growth going forward? And when you'd expect Guaranty to maybe start contributing more meaningfully as all those bankers are trained on the new systems and fully ramped up?

Yes. Yes, a lot going on, and we actually feel good about the growth. But let me let Tom fill you in on some of the details there.

Yes, David. Fourth quarter and even first quarter is seasonally slower for us. In the fourth quarter, we exited the ag season, the construction season. So the tailwinds provided by those draws earlier in the year ceased, and for the ag growers, as they ended their season, we saw a lot of line paydowns as they went to harvest. And then it’s not unusual for us to see lower line utilization in the latter part of the year as well. Looking into 2026, we're looking at low to mid-single digits for the full year. But one thing I wanted to mention, we are now at a record level of our pipeline early this year. And it's too early to tell whether the increase in the pipeline that we've seen is a surge or if it's sustainable. In addition to that, a growing piece of the production is related to construction, and that's been evident for the last couple of quarters. As you know, those don't fund at origination. So it should give us some decent tailwinds heading into the stronger seasonal quarters, second and third quarters. So we could be towards the higher end of that range for 2026. And then in terms of Guaranty, to answer your other question, they've hit the ground running. I think they're going to add meaningful production for us, quite frankly, David, starting immediately.

That's great. That's great. And then, Byron, I just wanted to maybe dig back into the margin trajectory going forward. I mean, thus far, it's kind of played out exactly how you've laid it out. I know you've laid out that kind of that 4% threshold by the end of this year. I just wanted to make sure that, that was still on track. And maybe if you could walk us through the NIM walk and what gives you confidence in your ability to achieve that? And how dependent is that 4% level on Fed cuts?

Yes, David, this is Byron. Yes, we've seen tremendous progress in our net interest margin. We've got great momentum, and we continue to see momentum ahead of us. We have a lot of programmatic structural repricing drivers in the balance sheet. That will, to your point, continue to lift margin regardless of the Fed. So, we're not in any way Fed dependent. And we continue to see growth ahead of us. We do expect to hit 4% at some point later this year, probably in the second half of '26. So, green lights ahead.

Okay. That's great. And then maybe just touching on the expense side. Obviously, there's a lot of noise just with the Guaranty deal, ongoing savings from BOID. Just wanted to see if you could help us think about the core expense run rate heading into the new year and how you'd expect expenses to trend over the year and maybe some investments that you might have on the horizon, just including potential hiring. I mean, there is a lot of disruption in the market. Just kind of curious about what investments and your thoughts on that.

Yes, this is Byron. To summarize what occurred in Q4, our total noninterest expense was $194.6 million. However, there were some one-time factors, including $5.8 million related to M&A as mentioned in our earnings release, $3 million associated with three leased branches, and a reversal of $827,000 in FDIC assessment. After considering these adjustments, our core operating noninterest expense was $186.6 million, which is within our guidance of $185 million to $189 million. I’m pleased with that outcome. For the first quarter of next year, we expect an increase, guiding for $189 million to $193 million, which reflects a modest 2% rise compared to Q4. Expenses should decrease in Q2, Q3, and Q4 as we adjust to our expense base, following our usual pattern. Notably, our technology investments are effectively controlling our noninterest expense, enhancing efficiency as our teams adopt these technologies. This has positively impacted our efficiency ratio and supported growth in net interest income from loans and treasury management services, which are gaining traction. As Randy noted, we have made significant progress, especially over the past four quarters. Our efficiency ratio has consistently improved, and we anticipate reaching the mid-50s, around 54% to 55%, this year, in line with our typical range.

In terms of investment in people, David, there is a lot of disruption. One interesting observation is that as we evaluate talent, we find that rather than many candidates, there are fewer individuals who we believe would be a good fit for our team and significantly contribute. There is no considerable increase in expense associated with bringing these individuals on board; it's a more selective process. As I mentioned, while there are many candidates, when we sift through to identify who has the necessary relationships and what value they can bring, it turns out to be a smaller group.

Our next question comes from Andrew Terrell of Stephens.

If I could just follow back up on expenses. I appreciate the guide, the $189 million to $193 million in the first quarter, but it sounds like it moderates afterwards. I know you guys will have the core system conversion and some cost savings coming through from Guaranty. But I'm just trying to get a sense of full-year kind of expected expenses if you have it for 2026, just the 1Q guide is a little bit higher than where consensus is. I'm just trying to make sure we're maybe stepping down appropriately throughout '26.

Yes, I appreciate the question. For the remaining quarters Q2 through Q4, I would estimate the range to be $187 million to $192 million for each quarter. When considering the entire year, I'm focusing on core expenses, which excludes M&A, one-time unusual items, and any gains or losses from facility sales. The full-year guidance would be between $750 million and $766 million for core operating expenses.

Understood. I appreciate it. If I could move over just to margin quickly. You guys buy to your credit, really spot on kind of with where we've talked about margin going. I'd just like to maybe better understand on the origination side and just as we think about the asset repricing potential, what are you seeing in terms of new origination yields and spreads right now? Have you seen any level of increased competition that's impacted that? Just hoping to get some more comfort around the pace of loan yield expansion or earning asset yield expansion.

Yes. I think Tom can address part of that. Byron, if you have additional insights, that would be great.

Yes. On the production, we're still seeing good spreads. We're at around 300 basis points over the index that we utilize. For the fourth quarter, we were a little over 6.8%. We've seen that come up a little bit towards the latter part of December and continuing into January. That's what we're seeing on the production side right now.

Byron, anything to add?

No. I think you covered it. Repricing is another area of lift for us. I think we expect to see north of $2 billion of assets reprice, and we'll be gaining 75 to 100 basis points on that balance. So, another strong driver there.

Great. I appreciate it. And then last one for me, just I'd be curious, do you guys have the final day one tangible dilution for Guaranty? And maybe I missed it, but I think it's supposed to be barely dilutive when you guys announced. But your tangible book value was up pretty nicely this quarter, and capital is obviously in a better spot than what you were forecasting as well. So I was just hoping if you had the update there.

Yes, that was one of the many positive aspects of the Guaranty transaction. One of them was the tangible book value payback period, which was six months. I do not foresee any changes to that, so we are still on track.

Our next question comes from Kelly Motta of KBW. Yes, that was one of the many positive aspects of the Guaranty transaction, but one of them was a tangible book value payback period, which was six months. So I don’t see any change to that. We are still tracking to that.

I'm sorry, I do want to get a few points of clarification on certain pieces of the guide. Ron, I just wanted to make sure on the expenses that the upper end was $766 million. Is that correct?

That's correct.

Okay. So, it sounds like you still expect to reach that mid-50s efficiency by the second half of the year. Regarding expenses, I assume the upper end of the range would correspond with higher revenues. Is that the right way to think about it? Also, can you share any factors that might influence whether you land on the higher or lower end?

Yes, as revenues increase and we add some talent, we do expect expenses to rise. This is a typical pattern. I want to clarify that in the first quarter, we typically experience higher costs due to merit pay increases and employment taxes, but this will decrease afterward. We are managing our noninterest expenses well across divisions and corporate departments, which is positively impacting our efficiency ratio. The growth in net interest income is also significantly contributing to this as we aim for the mid-50s efficiency ratio in the second half of the year.

Got it. That's really helpful. And then what was a nice I guess, surprise or at least relative to my model is your loan yields came in higher and granted there's the contribution from Guaranty. It looks like loan fees were fairly minimal. So, as you look ahead, maybe can you provide where new loan pricing is coming on and how we should be thinking about that as being additive to the outlook ahead?

Yes. I think that as Tom commented on, we're getting a little better margin at origination than we expected. We saw some compression in the tail end of '25, but December was really strong, and that margin, we're getting closer to 3% margin on the new loan pricing. So whether that continues or not, it's a little difficult to say. It's a little early, but we're encouraged we're starting off the year with that dynamic. And we'll just see if that trend carries through for the rest of '26.

Got it. That's helpful. And then maybe a last question for Byron is obviously, the cash flows from securities with the treasury ladder maturing has been a nice tailwind. Can you remind us kind of the cadence of securities cash flows as we get through the year?

Sure. We're expecting roughly $425 million of cash flow from the securities book every quarter, and that's a rough estimate quarterly for '26.

Got it. Do you have the blended roll-off yields on that?

It's going to have a one handle on it, likely in the low to mid-1% range.

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

Tom, I wanted to revisit the growth discussion. I think your loans are up 3% organically this year, and I understand that the guidance for the coming year is at least at that level, with hopes for better results. However, was there anything in 2025 that involved more credit trimming or balance sheet adjustments, particularly during one of your busiest acquisition periods? I’m curious if there was some reshaping of the balance sheet. It seems to me that the model is operating in some excellent markets, and repeating a 3% growth might be somewhat conservative. Were there any headwinds in 2025 compared to 2026 that might alleviate some of those pressures?

Yes. I think there's two things that are real tailwinds. One is the construction production we've had over the last few quarters. As we enter the construction season, that's going to be a tailwind for net growth. Those don't typically fully fund at close. So as we enter the construction season, especially in the northern part of the footprint, that will pick up. Same thing with the ag book. And then we typically see stronger line utilization towards the middle part of the year. From a headwinds perspective, 2025 was impacted probably a little more than normal with some early term payoffs. We've talked about that on prior calls. We'll just have to watch that to see if that's a continuing trend. And just given the overall CRE market, cap rates are still quite low. NOI is probably better than anticipated, which gives a pretty good investment return for those developers as they hit stabilization on those projects. So the economics around that are still pretty positive for the investor side. So that's just something we'll need to watch, Jeff.

Okay. And Randy, I guess the baseline question for you on the busiest acquisition year in the history of the bank as you get into the Southwest footprint in terms of more conversations as well as the historical regions that you've been in. How is the M&A outlook from your perspective?

No, I think it's good. And we're having conversations in the Mountain West region as well as the Southwest. And there's increasing activity there. And I'd say we're being very disciplined and selective as we've always been as more and more things appear. And right now, our focus is on getting the Guaranty Bank & Trust conversion done. We're going to do that in mid-February and really making sure that goes exceedingly well, which we believe it will. And then I think we have a lot of conversations ongoing. We'll see where that will take us. But I think it should be a very good environment for the next couple of years.

We have a follow-up from Andrew Terrell of Stephens.

I have a couple of quick questions regarding the margin. Byron, I believe you mentioned it was slightly above $2 billion for repricing assets in 2026. Can you confirm that? Do you have a similar figure for 2027? Additionally, I wanted to ask about the FHLB balances; are the remaining amounts set to mature in the early part of 2026? With the excess cash flow you're generating, how should we think about its allocation? Will it be reinvested into the bond portfolio, or is there other higher-cost funding that needs to be addressed? There are just a few moving pieces to consider.

Sure. Regarding the repricing, I don't have the 2027 number available right now, but I can find that information and get back to you. I believe it will be similar to what we anticipate for 2026, around $2 billion to $2.5 billion. As for the FHLB paydown, we expect to finalize the payoff of our FHLB advances by mid-March, which will be great as it eliminates that higher-cost debt. This has been a significant aspect of our margin recovery. We'll fund this payoff with cash flow from securities, which we've previously mentioned is elevated and sufficient to cover that amount. Once we clear the remaining $440 million, we will essentially be done with our wholesale funding.

Yes. And so just probably gets put back into the bond book at that point, the excess cash flows?

Exactly right. Yes. We're looking at strategies for later this year to what to do to redeploy that cash that would build.

We have a follow-up from David Feaster of Raymond James.

I wanted to circle back to Guaranty and just kind of get a sense of how that integration has gone so far. Going into a new market can be very difficult in Texas isn't easy, but I know that's a market that you know well, Randy. I suspect it's pretty limited disruption just given this is a new division that you all are creating, no real brand changes or anything like that. And again, Tom, I appreciate the commentary that they're already starting to contribute. But just wanted to get an early read on the integration now that we're a few months in post-close and kind of what you're most excited about with them at this point?

Certainly. To start, we maintain our brand, which has a 100-year legacy, helping to minimize disruption. We’ve retained our leadership team, which provides significant stability compared to other transitions in the market. We feel extremely well positioned with both customers and employees. This framework is very beneficial to us. From the beginning, we recognized that the culture fit is strong, especially on the credit side, where Tom has done impressive work leading to a seamless integration. They are currently part of our credit system, and we are committed to ensuring they have the necessary tools for success. We’re excited about the franchise’s strong position in the market, with a solid legacy in East Texas centered around Mount Pleasant and solid prospects in growth areas like Dallas-Fort Worth, College Station, Houston, and Austin. They have only scratched the surface of these opportunities. One of the most exciting aspects is equipping them with advanced tools like our automated commercial loan processing system, which will enhance productivity and customer service. Additionally, the larger balance sheet allows us to better support customers, reconnecting with relationships that transitioned from a $3 billion bank to a $30 billion bank. We believe these factors will create favorable conditions going forward.

That's great. I don't want to dwell on the margin issue too much since you've clearly explained the near-term factors. Looking at the long-term perspective, considering the strength of your core deposit base, you used to operate with a margin in the mid-4% range before the pandemic. I'm curious about your thoughts on whether that level is still attainable, particularly with the impact of back book repricing and the benefits from securities extending into 2027. Do you still anticipate significant margin expansion in 2027?

Yes, David, we do see continued expansion. Whether we get to 4.5%, let's get to 4% first and then work and build on that progress. But just from what I see ahead of us right now, yes, I could see us growing beyond that 4% in '27, absolutely.

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

I thought my hand was raised. Just want to clarify the expense run rate for the upcoming quarter, the guide. Did you say $189 million to $190 million or $189 million to $193 million?

$193 million. Ron here. $189 million to $193 million.

Got it. Okay. And then on your deposit costs this quarter, they ticked up a little bit here. I'm assuming that's from the Guaranty deal? Or was there something else going on? And I assume we're going to see deposit costs trend down from here, though.

That's exactly right. Yes, the uptick that you saw was from the acquisition, and we do expect to see declining deposit costs from here.

Okay. Got it. And then regarding the cost savings, were you able to realize any of the expected savings of over $17 million from Guaranty this quarter, or will that begin in the first quarter?

Yes, Ron here, it will really take hold after the conversion. And so that's really where it is. We've been just doing a lot of things, as Randy pointed out, but they will show up. They've been very, very mindful of that, and we're working with them back to Randy's point, integration coordination going very well.

Yes. Good. Okay. And then on the net charge-offs this quarter, I know we're splitting hairs at 12 basis points, but up from the prior quarter. Anything unusual in those charge-offs, anything outsized? Or is that kind of more normal, you think?

It's more typical for year-end cleanup. As we continue to review the portfolio, we'll exit credits when there's an opportunity. So this is normal; nothing out of the ordinary is happening.

This concludes our question-and-answer session. I would like to turn it back to Randy Chesler for closing remarks.

Very good. Thank you, Didi, and thank you, everybody, for dialing in today. Very excited about the trends here and the growth into '26. So, we appreciate everybody dialing in. Have a great Friday and a great weekend. Thank you.

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