GLACIER BANCORP, INC. Q3 FY2024 earnings call

Key Points

• Positive organic trends from prior quarters continued and became more pronounced in the third quarter.
• Finalized the purchase of 6 Montana branches from Heartland Financial, totaling $403 million in assets, which were converted to Glacier systems over the weekend of July 19.
• Strong EPS growth of 15% ($0.45) driven by increasing interest income and higher non-interest income.
• Loan portfolio increased $329 million or 2%, with organic growth of $57.6 million annualized. Core deposits increased $613 million or 3%, with organic growth of $216 million annualized. Non-interest expense was $145 million, within expected range.
• Credit portfolio performed near record levels, with slight increases in nonperforming assets and net charge-offs but no material negative trends.
• Declared a quarterly dividend of $0.33 per share, with 158 consecutive quarterly dividends and 49 dividend increases.

In the third quarter, Glacier Bancorp had strong financial performance. Net income was $51 million, increasing 14% from the prior quarter's $44.7 million. Net interest income was $180 million, an 8% increase from the prior quarter. The net interest margin grew from 2.68% to 2.83%. The loan portfolio of $17.1 billion increased 2%, with an organic increase of $57.6 million annualized. Loan yield was 5.69%, up 11 basis points from the prior quarter. Total core deposits of $20.7 billion increased 3%, with organic growth of $216 million annualized. Non-interest-bearing deposits of $6.4 billion increased 5%, with organic growth of $221 million annualized. Non-interest income totaled $34.7 million, an 8% increase from the prior quarter. Tangible stockholders’ equity was $2.1 billion, increasing 3% compared to the prior quarter.

Forward-Looking Statements

• Non-interest-bearing deposits: Expected to be flat to down in the fourth quarter due to unwind of seasonal inflow.
• Core non-interest expense: Guide lowered by $2 million on each end for Q4, expected to be $143 million to $145 million.
• Securities portfolio cash flow: Expected to be $250 million per quarter for the next couple of quarters, with increased maturity in 2025 starting from $50 million in Q2 2025 and $270 million in Q4 2025.
• Loan yields: Expected to increase with re-pricing of the back book, with loan yields still seeing mid to upper-7 in top line production.

Risk Factors

• Seasonal unwind of non-interest-bearing deposit inflow could lead to flat to down performance in Q4.
• Uncertainty in the market is keeping pent-up loan demand on the sidelines, potentially affecting loan growth.
• Elevated payoffs in construction and development projects, with volume not replacing outflow, impacting loan portfolio growth.

Q: Jeff Rulis asked about non-interest-bearing growth organic side and timing impact on deposit cost.

A: Byron Pollan responded that non-interest-bearing had organic growth in Q3 due to seasonal strength, with possible flat to down in Q4 due to unwind of seasonal inflow. Spot rate for total deposits on September 30 was 1.35%.

Q: Jeff Rulis inquired about expenses, with core non-interest expense guide.

A: Ron Copher said core non-interest expense came in at $143.4, and they think it can be maintained, lowering the guide by $2 million on each end for Q4 to $143M-$145M.

Q: Kelly Motta asked about expense growth rate and loan growth.

A: Byron Pollan said expense growth rate is expected to be 3%. Tom Dolan stated loan growth had pent-up demand but pipelines were stable, with continued optimism but uncertainty keeping demand on sidelines.

Q: David Feaster asked about loan growth drivers, re-pricing, and securities book.

A: Tom Dolan mentioned loan growth drivers were weaker demand and elevated payoffs. Byron Pollan talked about securities portfolio cash flow of $250M per quarter and loan yields with mid to upper-7 in top line production.

Q: Jeff Rulis asked about credit side small increase.

A: Tom Dolan said no specific industry, asset class, or geography showing material concern, just normalization in asset quality with one agriculture relationship being managed.

Q: Matthew Clark asked about core loan yields and floating loan book.

A: Byron Pollan said ~7% of loan portfolio is truly floating, and loan yield expected to increase with re-pricing of back book. Margin in September was $288 million.