GBCI

Thank you for standing by, and welcome to the Glacier Bancorp, Inc. 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 one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. 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 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 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 $0.15 per share or 31% 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%, 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% 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 2 basis points of total loans, down from 6 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 Guaranty Bank, which we acquired in October of 2025. 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. Now I would like the operator to please open the line for any questions that our analysts may have.

Certainly. Our first question for today comes from the line of Jeff Rulis from D.A. Davidson. Your question, please.

Thanks. Good morning.

Morning, Jeff.

Randy, just kind of at a high level, wanted to chat about the Texas market or the Southwest footprint. You got larger banks, kind of sparing the names of those, but talking about as they enter the market, kind of putting a positive spin on maybe an out-of-market buyer getting in and talking about the opportunities. 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 Guaranty, 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-size 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. Randy, if I could extend that maybe question to additional M&A conversations in the footprint, and I guess I'd ask you to, 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 Guaranty and conversations have occurred, how has 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. I think that's been demonstrated. We've had already multiple conversations. I think that's proceeding well, and people are on different timelines, and we're in no hurry, and we continue to be very disciplined with good banks and good markets with good people. That's continuing. Mountain West region, still some very good discussions. That hasn't changed at all.

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. I think that's continuing and will prove to be very good advantage for us.

Okay. Appreciate the perspective. Just one last one, if I could just hop to the margin. 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. Yeah, I would say our margin was really firing on all cylinders in Q1. We've now had nine consecutive quarters of margin expansion, and that +22 was the largest quarterly increase over that run. Just very pleased to see what we've been able to accomplish there. We do see more lift ahead of us. With this strong start to the year, I would say that puts us right on track to hit that 4% target. I wouldn't say that we're looking to go much beyond that. Maybe it accelerates it a little bit. I still think we'll see that 4% in the second half of this year. It really hasn't changed our timing in terms of that broader guide of second half of 2026 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, 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 got to there quicker maybe than some had expected. Is that fair?

I think that's right. 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's complete. We did finalize the payoff of our FHLB advances in Q1. That's done. From a deposit cost perspective, I think we could, from here, maybe squeak out another couple basis points of deposit cost reduction. I would say, with the Fed on hold, it feels like deposit costs, for the most part, will be stabilizing and moving sideways from here. To this point, we've 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 lift.

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 2027, in fact. We have $3 billion of loans repricing in the next year, and that's going to earn an incremental rate of 75-100 basis points. Now that we have all the Guaranty data converted and into our reporting, that's where that increased number is coming from, that $3 billion of repricing. New loans, new production rates are very strong, I would say north of 6.5%, so that's very helpful. On the investment side, we're still seeing very strong cash flow. Those securities are running off at a very low rate with the one handle on them.

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.

Understood. That's great. Byron, the $3 billion, is that just a forward look 12 months or are you talking about just in 2026?

That's a forward look 12 months from March 31.

Great. Thanks. I'll step back. Appreciate it.

Thank you. Our next question comes from the line of Matthew Clark from Piper Sandler. Your question, please.

Good morning, everyone.

Morning.

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 kind of growth expectations for the year. I think we were thinking somewhere in that 3%-5% range, but 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. There's a lot of uncertainty out there, and depending on some of the geopolitical and associated economic risks that go along with that could potentially change. 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. 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 slow down construction advances, et cetera.

Great. Then just on expenses, you came in a little bit below the guidance range for the quarter. Any update there going forward? Do you still contemplate getting to that 54%-55% efficiency ratio in the fourth quarter?

Yeah, Matthew, Ron here. We definitely plan to get to the 54%-55% efficiency ratio. I just want to point out again that that's core operating. When you look at our efficiency ratio reported for the first quarter, it came in at 63%. Well, that's loaded in the numerator with the acquisition expenses, including the compensation release coming out of that acquisition. Yeah, we'll do that. The guide that I gave three months ago on the call in January. Just want to reiterate that as 750-766 for the full year. I think it's important to point out that we remain cautious on hiring, spending in general given the economic uncertainty, certainly add in the Middle East conflict.

We think all of our divisions, corporate departments have done a good job in looking at where they might pull back on some expenses, but likely to show up as the year unfolds. Too early to tell. Just reiterating 54%-55%, feel very good about that on a core operating basis and staying with the guide.

Okay. That efficiency ratio, I know it obviously excludes merger charges and related comp, but does it also exclude amortization expense?

No. For instance, you're talking the core deposit intangible amortization?

Yes.

That would still be in there.

Okay, thank you.

Yep.

Thank you. Our next question comes from the line of David Feaster from Raymond James. Your question, please.

Hey, good morning, everybody.

Morning.

Maybe just switching back to Texas and the Guaranty deal just for a minute. That's converted, integrated at this point. Sounds like they did about 6% 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. The growth that they're seeing, what's driving that and what are they excited about? Is it growth from existing clients where they can deepen relationships now that they've got more capabilities and a bigger balance sheet? Or is this new relationships that you can now service them because they previously couldn't? 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. Continuing to help out the folks in Texas and get them used to our systems. That's moving forward. As you noted, they really didn't miss a beat. You look at the loan growth of 6%. Very, very pleased with that. I think all those things have gone well and are 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?

Yeah. Good morning, David. I think your question around whether it's coming from existing borrowers deepening the relationship or new borrowers, it's a little bit of both. They've seen some nice strong pipeline growth that's continuing to be stable even going into the second quarter. Certainly, one of the main benefits for them is the ability now to deepen those relationships that at one point, from an aggregate standpoint, might have been bumping up against their comfort level. We're able to continue growing with those as well. Certainly new customers really throughout their footprint has been a good source of pipeline growth as well.

Okay. 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 how competition is across your footprint. Anecdotally, we hear a lot on the pricing front, but curious if you're seeing that and kind of how origination yields are looking in the pipeline and just any details you could help us out with.

Sure. Yeah. The composition of the pipeline, 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. Following on the heels of that is probably some C&I opportunities as well. I've mentioned this in the last couple of calls, but a bigger component of the total pipeline compared to rewinding the clock a couple of years, we're starting to see more construction demand. As we know, those don't fund at close. We've seen good, strong top-line production levels. As we get into the summer parts of the year, we'll start to see those lines drop in addition to utilization lines for other segments of the portfolio as well, including agriculture as we get into the growing season.

I think certainly we're going to see some stronger second and third quarter as we move into this year. From a competition standpoint, 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 competition. The production yield was about 675 for the quarter. We're still getting good spreads. We saw that middle part of the curve increase in March. As a result, we saw late quarter and into the early second quarter production yields come up a little bit as well to follow suit.

Okay. That's helpful. Maybe just on the other side of the balance sheet, deposit growth is really strong. In what's typically a seasonally slower period, especially on the non-interest bearing side, just could you touch on, again, the competitive landscape on the funding side as the industry is trying to accelerate growth and fund that? 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. To see such good, such strong deposit growth was really encouraging. I think the divisions are doing a great job of competing in their market. You saw our balance increase and at the same time bringing our overall costs down. Just a fantastic result and really encouraged by what we see on the non-interest bearing side. That really outperformed our expectations for Q1. I think that bodes well for the rest of the year. I can't say exactly kind of where that will play out. We do see headwinds in Q2, particularly with the seasonal tax flows. Overall, what we see, we've seen a very strong start to the year and encouraged by the success that our divisions have had.

That's helpful. Thank you.

Thank you. Our next question comes from the line of Andrew Terrell from Stephens. Your question, please.

Hey, good morning.

Morning.

If I could go back to just the margin quickly. Good to see you guys in the quarter at 0 on the FHLB advances. I don't think there's any broker deposits, but just curious on 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 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. Really, I'd point to our CD portfolio. We do have over 60% of our CDs maturing every quarter. In Q2, what we have maturing, the renewal rates that we've seen, at least early on, are coming in a little bit lower than those maturing rates. I think if I were to point to any particular line item, I would say look for maybe a little bit of cost decline in our overall CD portfolio. Beyond that, with the Fed on hold, I do think, for the most part, we might see deposit rates moving sideways for the rest of the year.

Yep. Got it. Okay. I guess with the FHLBs now down at 0, should we expect 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 excess cash that we see building, particularly in the second half of this year, we are evaluating investment strategies. We do expect to be active in the market buying bonds in the second half of this year. Yeah, looking to put that excess cash to work.

Okay. Great. If I can ask just around, you guys have had the dividend pretty stable the past couple of years, and the payout ratios 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 range and just kind of your thoughts on capital deployment going forward?

Yeah. Yes, the dividend payout ratio's dropped significantly. We're very, very pleased to see that. It's going to continue to trend down. We're looking forward to seeing that drop below 50% in the next couple of quarters. 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. 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, I know it's just a proposal right now, but the kind of capital benefit you could 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. We do expect to see some risk-weighted asset relief. Early calculations indicate that that could be somewhere in the neighborhood of 75-80 basis points of CET1 capital ratio for us. If this rule, as proposed, does become final, I think we'd see a bump somewhere in the neighborhood of 75 basis points on our risk-weighting ratio.

Great. Okay. Thank you for taking the questions.

Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press * one one on your telephone. Our next question comes from the line of Kelly Motta from KBW. Your question, please.

Hey, good morning. Thanks for the question.

Morning.

I would love to follow up. I apologize if I missed it, but when you were discussing the margin in regards to the excess liquidity and the deployment of that, could you quantify what you consider to be kind of excess cash levels currently on the balance sheet? It's a little tougher to see given the breakout in taxable and tax-exempt. It's baked in with securities. 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 target in mind. More than anything, I think we're looking at the runoff. As bonds are maturing and cash builds, and I'll just throw a number out there, somewhere above the $1 billion range in terms of overall cash. I think that's really where we'll be looking to redeploy those cash flows going forward. That level could 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 balance sheet, but probably somewhere in that $750 million-$1 billion in cash. Beyond that would be a zone where we would look to reinvest.

Okay. Great. That's helpful. 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 asset expansion, 11 basis points, I believe, this quarter, which bodes well for exit margin, potentially higher than that 4% by 4Q. Just wondering is that 11 basis points sustainable? Any sort of puts or takes there? Is there a way that we should be thinking about that continued cadence and exit margin in 2026 and through 2027 given it seems like those dynamics are fairly durable. Thank you. Sorry, I know there was 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 helped. That margin is or that boost is increased in Q1. Little bit of an unwind we would expect to see just from a day count perspective in 2Q and beyond. The repricing lift that I mentioned earlier as you say is durable and will be there. In terms of an exit margin there's a little bit of potential to maybe go past 4%. I wouldn't say we're going to blow through it. Maybe we creep above it a little bit. Those are my expectations, at least at this point.

Okay. That sustainability of earning asset yield, understanding the day count into 2027, 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 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.