Glacier Bancorp, Inc. (GBCI) Q2 2026 Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Glacier Bancorp second 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 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, Randy 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 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. 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 the 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 pre-tax, 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 percent, down seven 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 percent, down two 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 reflected at our continued focus on disciplined production and 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 liquidity and funding strategy. Credit quality remains excellent, consistent with our disciplined underwriting culture. Early stage delinquencies declined from the prior quarter, while non-performing assets increased modestly but remain 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. Included 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 2026 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 assets on a tax equivalent basis for the first half of 2026 was 3.85 percent, 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 33 cents 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 star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Matthew Clark of Piper Sandler. Your line is open.

Hey, good morning, everyone.

Good morning.

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

Sure, Matthew, this is Byron. You're looking for the spot cost at the end of June. June 30, our deposit cost was 118 in line with our average for the quarter. So in terms of our outlook, I do think our deposit costs will likely be stable from here. Of course, that depends on what the Fed does. But assuming Fed 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, we would have to adjust that outlook a little bit. But I think from now, a good outlook is just stable from here.

Okay. And then just on the loan side, loan growth stepped up here. I think 3Q tends to be a seasonally strong one for you, but 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've seen that for a lot.

I don't see anything that would really change that, but pipelines still remain very healthy. we're seeing pull through we're seeing back build and you know and entering into the and then maybe one for Ron 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're gonna stick with the quarterly guide I gave for Q2, so that'll be $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're not, we're just allowed for that, but overall very, very good control expenses.

Great, thank you.

Thank you, and our next question comes from Jeff Rulis of DA Davidson. Your line is open.

Thank you. Good morning. I guess a question on the, a follow on the loan growth, and Randy, you mentioned pretty broad-based. I, just to unpack that a little bit, in 2.1, 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've stated, we're really operating in two regions, Southwest, Mountain West. Southwest continues to do very well. I think they're rebuilding the pipeline after a very strong first quarter. But we see really, really good trends there. And in the Mountain West, they had a very strong quarter. So it's, I think, both 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. But going forward, it looks like a strong pipeline across the region. Is that fair? Yeah, exactly right. Got it. And, Randy, I guess I'd check in on the – it's been a bit on the M&A side, a quiet start nationally. But we're still going 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 you hold a lot of them but just want to see where where we sit on on the M&A side sure yeah I you know maybe separate that into two pieces there's our internal discussions that we have meaning it's not an official sale we're 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 that I've had with the investment banker, I think that we'll probably start to see that increase a bit towards the end of the year. But overall, compared to first quarter, I'd say about the same. Jeff, really, you know, probably still a bit muted.

Okay. Appreciate it. And sorry, if I could slip in the last one, I just, on the earning asset balance, the mix, and I guess trying to get a sense for, you know, accelerating loan growth, but, you know, I guess your intentions on the securities portfolio and and maybe expectations for start to see some earning asset growth to comment on that sure and we'll have Byron come on that we did we did make some purchases this quarter so we kind of slowly wading back into the investment purchase purchase of investments but I'll let Byron give some color on that yeah as Randy mentioned we did give our toes back into

the to the bond market we purchased about 250 million dollars of bonds in the quarter night and I expect we'll continue we'll continue purchasing putting putting some cash to work going forward in terms of growth I do see our AEA will expand from here. I think what you saw even in Q2 with the decline in AEA, it's 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 didn't happen until late in Q1. And so when you look at the averages of Q1 versus the average of Q2, that that still had an impact. Now that's complete. I would expect from here, our AEA will increase.

Great, thanks for the color.

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

Hey, good morning. Thanks for the question. I would love to talk a bit about the margin. you had a few things working in kind of a negative direction this quarter, one being the non-accrual interest reversal and then a lower level of accretion. So if you had had a similar level to last quarter, you'd be closer to, you would have actually come in in the mid three, nine. So I'm just wondering, you know, as we think about that exit 4% margin, it feels like that's in the range how how are you any updates on how you're thinking about the exit margin from here and maybe some I know the accretion can swing around so some commentary on what's a normal level at least for modeling purposes would be helpful thank you sure Kelly thank you for the question yeah we're very very pleased that our margin continues to expand and I and I in it we expect that it will continue to grow.

When you're looking at that 4%, I do think we'll hit that 4% level early in the fourth quarter of 26, and we'll keep going from there. So when you think about an exit margin for 26, I do expect we'll be north of 4%. I do think what you saw, some of those headwinds were a little bit of an anomaly there is, you can never really, you know, 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're not expecting that 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's really helpful. And then I appreciate the color on the securities reinvestment. Can you provide additional detail on what you're seeing on loan pricing and any commentary on the competitive dynamics impacting new loan production yields either way?

Thank you. sure um yeah kelly this is tom we're still seeing production yields in excess of six and a half percent um you know we we saw that consistently throughout the quarter um from a from a competitive standpoint you know that probably is the 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 is continuing and you know I think you know that's probably going to continue into the third quarter we're still not seeing a lot of competition on on underwriting discipline or structure which is which is good at least in the in the spaces that we we operate in so you know encourage encourage to see that it's still primarily focused on pricing which really hasn't been a a change over what got it that's helpful that all sounds really encouraging.

Um, with, with these, these factors in mind, um, you were, you were well above four, um, you know, pre, pre COVID at least for a bit, any, I know it's a little early to talk about 27, but is there any, um, preliminary thoughts on what given, given the pretty meaningful tailwind of backdoor through pricing still to come, what a normalized margin means for Glacier over the longer term? Thank you.

Yeah, Kelly, I do think, you know, 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 a margin in terms of a range, you know, between four and four and a half percent, you know, 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, a steeper yield curve would certainly be helpful. Meaningful loan growth, that always helps with the level of new production rates that Tom mentioned. That's going to lift our margin towards the higher end of that range. So, I do see that we'll continue to increase our margin throughout 27.

Ultimately, you know where it where it normalizes and where it kind of levels out that remains to be seen but i do see growth throughout super helpful thank you so much for all the color thank you and as a reminder if you have a question please press star one one and our next question comes from evan kwietowski of raymond james your line is open hey good morning guys it's evan on for david I just, firstly, just wanted to touch on maybe deposit competition across your footprint.

I know you've said in the past you're probably more insulated than others based on your presence in more rural areas. But I'm just curious how you view competitive funding cost pressures going forward and if there's been any change from your prior views.

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

Rational. And the other thing I'd add on the market, 75% more rural, 25% more urban, it's both the nature of the market and our focus on the core relationship in those markets, which really drives the lower cost. And we don't see those dynamics changing.

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

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

Got it. And then maybe going back to Texas, you know, you've noted in the past, it's still a bit too early to see impacts from disruption in the state. I'm just wondering if you've 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.

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

Thanks for the color. I'll step back.

Thank you. And we have a follow-up question from Kelly Mata 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, you know, you're 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'll have Byron give you some color on that. We've been talking a lot about that, obviously, because we're increasing capital and the industry is increasing capital broadly. And we see that as something that's going to continue here. But we'll 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's early yet. We're 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're keeping all of our options open we're having we're having discussions ongoing around around the topic and evaluating all of our appreciate that thanks thank you I show no further questions at this time I'd like to turn it back to Randy Chesler for closing remarks all right well thank you Dee Dee and thank you for the folks for your questions we appreciate it we We appreciate everybody dialing in in the summer and taking time to check in 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.