Thank you for standing by and welcome to the Glacier Bank Corp. First Quarter 2026 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 ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Randy Chesler, President and CEO. Please go ahead, sir.
Good morning, and thank you for joining us today. With me here in Kalispell is Ron 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 9 of our press release, and we encourage you to review this section. Last night, we issued our earnings release for the first quarter of 2026, and we believe it represents a great start to the year with another quarter of strong results. Net income was $82.1 million, an increase of $18.4 million, or 29% from the prior quarter, and an increase of $27.6 million, or 51%, from the prior year first quarter. Diluted earnings per share was $0.63 per share, an increase of $0.14 per share, or 29% from the prior quarter and an increase of 15 cents per share or 31 percent from the prior year first quarter a key driver of our performance continues to be margin expansion the net interest margin as a percentage of earning assets on a tax equivalent basis was 3.80 percent an increase of 22 basis points from the prior quarter and an increase of 76 basis points from the prior year first quarter. The loan yield of 6.16% in the current quarter increased 7 basis points from the prior quarter and increased 39 basis points from the prior year first quarter. The total earning assets yield of 5.11% in the current quarter increased 11 basis points from the prior quarter and increased 50 basis points from the prior year first quarter. The total cost of funding of 1.4 percent in the current quarter decreased 12 basis points from the prior quarter and decreased 28 basis points from the prior year first quarter. Turning to balance sheet trends, the loan portfolio of $21 billion at the end of the quarter increased $106 million, or 2% annualized, from the prior quarter. The Southwest region, which includes Arizona and Texas, grew in excess of 7% annualized during the current quarter, underscoring the strength of our diversified geographic footprint. On the funding side, total deposits of $24.7 billion at quarter end increased $151 million, or 2% annualized from the prior quarter. Non-interest-bearing deposits of $7.4 billion increased $113 million or 6% annualized from the prior quarter. Looking past the quarterly acquisition-related expenses, the non-GAAP operating results show the core strength of the business without acquisition expenses. Operating EPS was $0.70 per share. Operating expenses were $188.2 million for the quarter, demonstrating consistent cost control. Our credit portfolio continues to perform very well. Non-performing assets remain low at 25 basis points of total assets, with a slight increase from the prior quarter. Net charge-offs declined to two basis points of total loans, down from six basis points in the prior quarter. Our allowance for credit remains at 1.22% of total loans, reflecting our conservative approach to risk management. We also executed well on integration and operations. During the quarter, we completed the core conversion of Guarantee Bank, which we acquired in October of 2025. And I want to thank our teams for their excellent work and focus on our customers throughout the conversion. As always, we remain committed to consistent shareholder returns. In March, we declared our quarterly dividend of $0.33 per share, representing our 164th consecutive quarterly dividend. We are very encouraged with the business performance in the first quarter and look forward to a strong 2026. Our exceptional team, expanding footprint, unique business model, strong business performance, disciplined credit culture, and strong capital base continue to provide a solid foundation for future growth. That ends my formal remarks. And now I would like the operator to please open the line for any questions that our analysts may have.
Certainly. And our first question for today comes from the line of Jeff Rulis from DA Davidson. Your question, please. Morning, Jeff.
Randy, just kind of at a high level, wanted to chat about sort of the Texas market as a southwest footprint. And I've got larger banks, kind of spare the names of those, but talking about as they enter the market, kind of putting a positive spin on, you know, maybe an out-of-market buyer getting in and talking about the opportunities. You know, we've also heard from smaller banks that there's even greater market share opportunities due to disruption. I guess how would you put your experience as you've been in the market now for some time, and particularly through Guarantee, how would you couch that environment?
Yeah, well, I think to some extent the numbers speak for themselves. They grew in excess of 6% in the first quarter during the same period of time we were completing the conversion, so they did a great job. I really see the bulk of what's happening there is business as usual. They're just continuing to grow in the markets that they're in with good customers. There is some disruption happening as some of the larger banks acquire some of the mid-sized banks there. It's still a little bit early to tell just how extensive that's going to be at this point, Jeff.
Fair enough. And Randy, if I could extend that maybe question to additional M&A conversations in the footprint. And I guess I'd ask you if you could just focus on Texas for a bit and then maybe opine on the broader glacier footprint as well. But starting with just what, as guaranteeing conversations have occurred, how is that updated and then broadly speaking?
Yeah, one of the things that we thought would happen is that our model and our approach would be really well received in the market in Texas, given the dynamics down there, given the type of banks and the type of business very aligned already with how we do business. And I think that's been demonstrated. We've had already multiple conversations. So I think that's proceeding well, and people are on different timelines, and we're in no hurry, and we continue to be very, very disciplined with good banks and good markets with good people. So that's continuing. Mountain West region, still some very good discussions. That hasn't changed at all. So, you know, again, I think we made the point. one of the strengths for Glacier Bancorp is the size of the geographic area that we have to kind of look for opportunities. And so I think that's continuing and will prove to be a very good
advantage for us. I appreciate the perspective. And then just one last one, if I could just hop to the margin. I want to check in on you've had that north of 4% goal or had that coming into the quarter and a pretty sizable jump. I don't know if that resets the ceiling or you just got there quicker. If you could just reorient where we sit on the margin traction trend.
Yeah, Jeff, this is Byron. I would say very pleased with our margin lift in the first quarter. I would say our margin was really firing on all cylinders in Q1. um we've now had nine consecutive quarters of margin expansion and you know that that plus 22 was the largest quarterly increase over that run so just very pleased to see what what we've been able to accomplish there we do see more lift ahead of us and with this strong start to the year i would say that puts us right on track to hit that four percent target i wouldn't say that we're looking to go much beyond that. Maybe it accelerates it a little bit, but I still think we'll see that 4% in the second half of this year. So it really hasn't changed our timing in terms of that broader guide of second half of 26 in terms of hitting 4%. Okay. Byron, if I just put
that a different way, if this is correct, the levers that you had and maybe the FHLB, I mean, And you're kind of pulling those and you took advantage of, but that doesn't necessarily mean that you've pushed that ceiling higher potentially, but you just got to there quicker maybe than some had expected. Is that fair?
I think that's right. And I would say going forward, you talk about the levers. The drivers of our margin are shifting a little bit. I would say we retain a clear upward bias. but just kind of you mentioned fhlb payoff well that that's complete we we did finalize the the payoff of our fhlb advances uh in q1 so so that's done from from a deposit cost perspective you know i think we could you know from here maybe squeak out another couple basis points of deposit cost reduction but i would say you know with the fed on hold you know it feels like deposit costs for the most part, we'll be stabilizing and moving sideways from here. So to this point, we really enjoyed a boost from both sides of the balance sheet. I think going forward, we're going to lean a little bit more on the asset side of our balance sheet to see further margin list. Our asset repricing, as we've talked a lot about, does have momentum to it. I think you could see it slow and steady up on our asset repricing through 27, in fact. We have $3 billion of loans repricing in the next year, and that's going to earn an incremental rate of 75 to 100 basis points. Now that we have all the guaranteed data converted and into our reporting, that's where that increased number is coming from, that $3 billion of repricing. And then new loans, new production rates are very strong, I would say north of 6.5%. So that's very helpful. And on the investment side, we're still seeing very strong cash flow. And those securities are running off at a very low rate with the one handle on them. So you put all those drivers together, we're still seeing lift ahead of us, but probably going to be leaning more on the asset side of the balance sheet to realize that additional lift.
I understood. That's great. Great. And Byron, the $3 billion, is that just a forward look 12 months? Are you talking about just in 26?
That's a forward look 12 months from March 31.
Great. Thanks. I'll step back. Appreciate it.
Thank you. And our next question comes from the line of Matthew Clark from Piper Sandler. Your question, please.
Good morning, everyone. Good morning. I just wanted to start on the loan growth this quarter, 2% annualized, at least on a period basis. Maybe a little slower start to the year, but I assume that's partly due to seasonality. Just remind us how you feel about the growth expectations for the year. I think we were thinking somewhere in that 3% to 5% range. and just speak to the pipeline, I guess, coming into 2Q.
Yeah, Matthew, at this point I think we're still comfortable with that low to mid single digit. The pipeline still shows continued strength in levels in both pull-through and back-build. But there's a lot of uncertainty out there, and depending on some of the geopolitical and associated economic risks that go along with that, that could potentially change. So I think we're still comfortable with the low to mid single digits. Your point on the first quarter definitely was a seasonal impact. I think we'll see improvement in the second and the third quarter. And as Randy mentioned in his comments, the benefits of the southwestern region of our footprint doesn't quite have the same level of seasonality trends that the northern part of the footprint, a lot more susceptible to colder weather that tends to, you know, slow down construction advances,
et cetera. Great. And then just on expenses, you came in a little bit below the guidance range for the quarter. Any update there going forward? And do you still contemplate getting to that 54, 55 percent efficiency ratio in the fourth quarter yeah Matthew Ron here we
definitely plan to get to the 54 55 percent efficiency ratio I just want to point out again that that's core operating so you know when you look at our efficiency ratio reported for the first quarter came in at 63 percent well that's loaded in the numerator with the acquisition expenses including the compensation relief coming out of that acquisition so yeah we'll do that the guide that I gave three months ago on the on the call in January just want to reiterate that as 750 to 766 for the full year and I think it's important to point out that you know we remain cautious on hiring spending in general Given the economic uncertainty, certainly add in the Middle East conflict. So we think all of our divisions, corporate departments have done a good job in looking at where they might fall back on some expenses, but likely to show up as the year unfolds, too early to tell. So just reiterating, 54% to 55% feel very good about that on a core operating basis and staying with the guide.
Okay, and that efficiency ratio, I know it obviously excludes merger charges and related comp, but does it also exclude amortization expense?
No. So, for instance, think of the – you're talking the core deposit and tangible amortization?
Yes.
That would still be in there.
Okay. Okay, thank you.
Thank you. And our next question comes from the line of David Feaster from Raymond James. Your question, please.
hey good morning everybody morning um i wanted to maybe just switching back to texas and the guarantee deal just just for a minute you know that's that's converted integrated at this point sounds like they did about six percent growth in the first quarter i guess first how did the conversion and integration go it sounds like they didn't miss a beat but just wanted to see how that went and the growth that they're seeing are they what's driving that and and what are they excited about is it is it you know growth from existing clients where they can deepen relationships now that they've got more capabilities in a bigger balance sheet or is this new relationships that you know you can now service them because they previously could just kind of curious some of
those dynamics if you could touch on that sure yeah the convergence behind us i think the teams are doing a great job you know continuing to help out the folks in texas and get them used our systems but that's moving forward as you noted they really did miss a beat you look at the loan growth of 6% very very pleased with that so I think you know all those things that have gone well and are moving really moving in the right direction I think Tom can give you a little color on the makeup of that business Tom you want to comment on that good morning David you know I think you
know your question around whether it's coming from existing borrowers deepening the relationship or or new bars it's a little bit of both um you know they've seen some some nice strong uh uh you know pipeline growth that's that's continuing that's uh you know continuing to be stable even going into the second quarter and and certainly you know one of the main benefits for them is the ability now to deepen um those relationships that um you know at one point from an aggregate standpoint might have been buffing up against their their comfort level um and so we're able to continue growing with those as well. But certainly new customers really throughout their footprint has been a good source of pipeline growth
as well. Okay. And maybe just high level following up on Matthew's question on the growth side. Could you maybe just elaborate on how are the pipelines across your footprint? Where are you seeing growth? I know there was some noise from reclassification this quarter from resi to cre but just kind of curious the complexion of the pipeline and and how competition um is across your footprint you know it's anecdotally we hear a lot on the pricing front but curious if you're seeing that kind of how origination yields are looking in in the pipeline and just any any details you could help us out with sure yeah the composition of the pipeline
you know still largely driven by commercial real estate and it's a good representation of both owner and non-owner. And that's really spread throughout the footprint. And falling on the heels of that is probably some CNI opportunities as well. And I've mentioned this in the last couple of calls, a bigger component of the total pipeline compared to rewind the clock a couple of years, we're starting to see more construction demand. And as we know, those don't fund at close. so you know we've seen good strong top line production levels and as we get into the the summer parts of the year you know we'll start to see those lines drop in addition to utilization lines for for other segments of the portfolio as well including agriculture as we get into the growing season so I think you know certainly we're going to see some stronger stronger second and third quarter as we move into this year and then from a competition standpoint you know we haven't really seen any significant change in the last quarter markets where we have a controlling market share we're generally able to get much better pricing and that allows us to compete better in the larger markets where we do have more pricing confidence you know the production yield was a was about 675 for the quarter we're still getting good spreads you know we saw that middle part of the curve increase in March and as a result we saw late quarter and into the early second quarter production yields come up a little bit as well
to follow okay that's helpful and maybe just on the other side of the balance sheet i mean deposit growth is really strong um you know in what's typically a seasonally slower period especially on the non-interest bearing side just could you could you touch on again the competitive landscape on the funding side uh as the industry is trying to accelerate growth and fund that and And then are there any segments or markets where you're having more success driving for deposit growth?
Yeah, David, we had a great quarter for deposits. First quarter can be a mixed bag sometimes. Sometimes we see outflow in Q1. So to see such good, you know, such strong deposit growth was really encouraging. I think the divisions are doing a great job of competing in their market. And you saw our balance increase and at the same time bringing our overall costs down. And so just a fantastic result and really encouraged by what we see on the non-interest bearing side. And so that really outperformed our expectations for Q1. And so I think that bodes well for the rest of the year. I can't say exactly kind of, you know, where that will play out, but we do see headwinds in Q2, particularly with the seasonal tax flows. But overall, what we see, we've seen a very strong start to the year and encouraged by encouraged by the success that our divisions have had that's helpful thank
you thank you and our next question comes from the line of Andrew Terrell from Stevens your question please hey good morning morning if I could go back
to just the the margin quickly you know good to see you guys in the quarter at zero on the FHLB advances I don't think there's any broker deposits but just curious on, you know, as you look forward kind of throughout the year, I heard the commentary around deposits and maybe being able to eke out just a little bit more on the cost side, but any other changes you can make in the funding position or deposit base, just, you know, acknowledging kind of the cash flows you'll have coming up this year on the bond book or what the kind of net
expectation is there? Yeah, I do think we could see a couple more basis points in Q2 and really you know, I'd point to our CD portfolio. We do have, you know, over 60% of our CDs maturing every quarter. And so in Q2, you know, what we have maturing, we are, the renewal rates that we've seen at least early on are coming in a little bit lower than those maturing rates. And so I think if I were to point to any particular line item, I would say, you know, look for maybe be a little bit of cost decline in our overall CD portfolio. But beyond that, you know, with the Fed on hold, I do think, you know, for the most part, we might see, you know, deposit rates moving
sideways for the rest of the year. Yeah, got it. Okay. And then I guess with the FHLBs now down at zero, should we expect, you know, relative kind of stability in the bond book? Are you starting
to purchase securities again or where does that kind of excess cash go yeah with with excess cash that that we see building particularly the second half of this year uh we are uh evaluating uh investment strategies so we do expect to be active in in the in the market buying bonds in the in the second half of this year so yeah looking to put that excess cash to work
Okay. Great. And if I can ask just around, you know, you guys have had the dividend pretty stable the past couple of years and the payout ratio has obviously dropped pretty drastically over the past two years or so. Just can you remind us where you generally like to operate from a dividend payout, dividend payout range or just, you know, kind of your thoughts on capital deployment going forward?
Yeah, I think the, you know, we, yes, the dividend payout ratio has dropped significantly. We're very, very pleased to see that. You know, it's going to continue to trend down. We're looking forward to seeing that drop below 50, very, you know, in the next couple quarters. So I think we feel very good about that. And certainly, we've had a lot of discussions about capital. We're going to be building quite a bit of capital when you take in the regulatory relief plus just the position of the balance sheet. And so Byron and team, Ron, been very active in looking really at rethinking all options, given the amount of capital that's going to be accumulating.
Do you have a general expectation on, you know, I know it's just proposal right now, but the kind of capital benefit you can expect if the proposal goes through as written right now?
Yeah, we took a look at that. I understand it's still early in proposed stage, but most of the impact to us would be on the risk-weighted asset side. So we do expect to see some risk-weighted asset relief. Early calculations indicate that that could be somewhere in the neighborhood of 75 to 80 basis points of CET1 capital ratio for us. And so, you know, if this rule as proposed does become final, you know, I think we'd see a bump somewhere in the neighborhood at 75 basis points on our risk-related ratio.
Okay. Thank you for taking the questions.
Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Kelly Mata from KBW. Your question, please.
hey good morning thanks for the question um i i would i would love to follow up um i i apologize if i missed it but um when you were discussing um the margin in regards to the excess liquidity and the deployment of that did you did you quantify what you consider to be kind of excess cash levels currently um on the balance sheet it's a little tougher to see given um the the breakout in taxes done to tax folks. It's baked in with security. So I'm trying to just get a sense
of kind of the dry powder in there. Thank you. Yeah, I don't know that we have a specific, you know, target in mind. More than anything, I think we're looking at the runoff, you know, as bonds are maturing and cash bills, and I'll just, you know, throw a number out there somewhere above the billion dollar range in terms of overall cash. I think that's really where we'll be looking to redeploy those those those cash flows going forward it could that that level could could you know ebb and flow kind of depending on market opportunities depending on timing of what we see ahead of us and what's going on in the broader broader balance sheet but probably somewhere in that 750 to a billion dollars in cash you know beyond that would be a zone where we would look
to re-invest. Okay, great. That's helpful. And then, not to beat a dead horse about the margin, but understanding that this really remarkable level in Q1 was in part driven by the liability side where things are leveled off kind of from here. It still seems like there's a lot of earning the asset expansion, you know, 11 basis points, I believe, this quarter, which, you know, bodes well for, you know, exit margin potentially, you know, higher than that 4% by 4Q. Just wondering, you know, is that 11 basis points sustainable? Any sort of puts or takes there? And is there a way that we should be thinking about that continued cadence and exit margin in 26 and and through 27, given it seems like those dynamics are fairly durable. Thank you. Sorry, I know there's a lot in there.
Yeah, sure. The 11 basis points in Q1, one thing to point out with the day count and the way that the interest accrues, I would say that helps, that margin or that boost is increased in Q1. So, you know, a little bit of an unwind we would expect to see just from a day count perspective, you know, in 2Q and beyond. You know, the repricing lift that I, you know, mentioned earlier, as you say, is durable and will be there. You know, in terms of an exit margin, you know, there's a little bit of potential to maybe go, you know, past 4%. I wouldn't say we're going to blow through it. Maybe we creep above it a little bit. But, you know, those are my expectations, at least at this point.
And that sustainability of earning asset yields, understanding the day count into 27, is that the correct kind of way to think about it, given the longer-term tail of the repricing story?
I think it is. Yeah, I think it is.
All right. Thank you so much. I'll step back.
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Randy Chesler for any further remarks.
Yeah, thank you, Jonathan, and thank you, everyone, for dialing in today. We appreciate you taking time out of your Friday. We wish everyone a great, great weekend, and thank you again for joining us.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.