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Edited Transcript of GBCI earnings conference call or presentation 20-Jul-18 3:00pm GMT

Q2 2018 Glacier Bancorp Inc Earnings Call

KALISPELL Jul 20, 2018 (Thomson StreetEvents) -- Edited Transcript of Glacier Bancorp Inc earnings conference call or presentation Friday, July 20, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Randy Chesler

Glacier Bancorp, Inc. - President and CEO

* Ron Copher

Glacier Bancorp, Inc. - CFO

* Don McCarthy

Glacier Bancorp, Inc. - SVP and Controller

* Barry Johnston

Glacier Bancorp, Inc. - Chief Credit Administrator

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Conference Call Participants

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* Michael Young

SunTrust Robinson Humphrey - Analyst

* Jeff Rulis

D.A. Davidson & Co. - Analyst

* Matthew Clark

Piper Jaffray & Co. - Analyst

* Jacque Bohlen

Keefe Bruyette & Woods Inc. - Analyst

* Andrew Liesch

Sandler O'Neill & Partners - Analyst

* Tim Coffey

FIG Partners, LLC - Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Glacier Bancorp second-quarter earnings conference call. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference: Randy Chesler, President and CEO. Sir, you may begin.

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [2]

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All right, thank you, Heather. Good morning and thank you for joining us today. With me here in Kalispell this morning and on the phone are Ron Copher, our Chief Financial Officer; Don Cherry, our Chief Administrative Officer; Barry Johnston, our Chief Credit Administrator; Angela Dose, our Principal Accounting Officer; and Don McCarthy, our Controller.

So yesterday we released our second-quarter 2018 results. As you can see, the business really began to pick up speed later in the quarter, which resulted in a very strong second-quarter and year-to-date performance for the Company.

Earnings were $44 million, an increase of $10.7 million or 32% over the second quarter a year ago. Pre-tax income was $53.9 million for the quarter, an increase of $8.3 million or 18% over the prior-year second quarter. Earnings for the first half of the year were $82.9 million, an increase of $18 million or 28% over the first half of 2017. Pre-tax income of $108 million for this period increased $14.2 million or 16% over the first half of 2017.

We had loan growth of $279 million or 15% annualized in the second quarter and organic growth of $389 million or 12% annualized for the first 6 months of the year. We grew our non-interest-bearing deposits $103 million or 4% from the prior quarter and increased them organically by $209 million or 9% from the prior-year second quarter.

Diluted earnings per share for the quarter were $0.52, an increase of 21% from the prior-year second quarter. Our return on average assets for the quarter was a strong 1.53%, while return on average equity was 12.07%. And our return on tangible equity was 16.2%.

We declared a regular quarterly dividend of $0.26 per share, which is an increase of $0.03 per share or 13% over the prior quarter and a 24% increase over the second quarter a year ago. This will be our 133rd consecutive quarterly dividend paid by the Company. And we completed the conversion of Intermountain Bancorp, the holding company for First Security Bank in Bozeman, Montana, with total assets of $1.1 billion.

I'm also very pleased that we added David Boyles to the Board of Directors as well. Dave has a great banking experience in the Colorado market, a very strategic market for us with plenty of room to grow. Dave will be an excellent addition to our existing strong Board of Directors.

We got to know Dave when we acquired Collegiate Peaks Bank in Colorado and felt he had the right experience and business perspective to help us as we continue to grow in Colorado and the West.

So loan production for the second quarter was $919 million, which was once again generally well distributed among all the divisions. Paydowns were $640 million, which is consistent with past seasonality. The loan portfolio ended the quarter at $7.9 billion.

Excluding the last quarter's acquisitions, the loan portfolio increased $621 million or 10% since June of 2017. And was primarily driven by growth in commercial real estate loans, which increased $373 million or 11% over the same period.

Our investment securities portfolio of $2.7 billion increased only $8.5 million or 30 basis points during the current quarter and decreased $4.1 million or 14 basis points from the prior-year second quarter. Investment securities represented 24% of total assets at the end of the second quarter compared to 28% at the prior-year second-quarter end.

Our key credit quality ratios improved in most areas, and we remain very confident in our credit quality. Early-stage delinquencies as a percentage of loans in the quarter were 50 basis points, a decrease of 9 basis points from the first quarter and an increase of 1 basis point from the prior-year second quarter.

Net charge-offs were a moderate $762,000 or 4 basis points as a percentage of total loans, consistent with the prior quarter and down slightly 3 basis points from the same period a year ago. Nonperforming assets as a percentage of subsidiary assets at the end of the first quarter were 71 basis points, which was an increase -- at the end of the second quarter were 71 basis points, which was an increase of 7 basis points from the prior quarter and an increase of 1 basis point from the prior-year second quarter.

At the end of the quarter, NPAs were $84.5 million, an increase of $10.6 million or 14% from the prior quarter. We don't see any underlying portfolio trend driving these new NPAs and have active plans underway to resolve them.

Primarily as a result of strong new loan growth and the increase in NPAs, we increased the loan-loss reserve by $4.7 million to $131.5 million. The allowance for loan and lease losses as a percentage of total loans outstanding at the end of this quarter was 1.66%, which is flat to the prior quarter and a decrease of 31 basis points from the end of 2017.

Our low-cost and very stable funding foundation across our Western multistate footprint continued to perform really well for the Company. Core deposits ended the quarter at $9.2 billion. Excluding acquisitions, core deposits increased $430 million or 6% from the prior-year second quarter. Total core deposits were essentially flat versus the prior quarter as we continue to focus on growing relationship-based business accounts.

Non-interest-bearing deposits increased $103 million or 4% from the prior quarter and organically increased $209 million or 9% from the prior-year second quarter. The total cost of funding for the current quarter was 36 basis points compared to 35 basis points for the prior quarter and 37 basis points for the prior-year second quarter. Once again, our 14 divisions and their teams continue to do an outstanding job of tightly managing deposit cost specific to each of their markets.

Interest income increased $14.6 million to $118 million or 14% from the prior quarter and increased $23.7 million or 25% over the prior-year second quarter, with both increases primarily attributable to the increase in interest income from commercial loans due to organic and acquisition growth. Interest income on commercial loans increased $10.3 million or 16% from the prior quarter and increased $19.6 million or 35% from the prior-year second quarter.

The Company's net interest margin as a percentage of earning assets for the quarter was 4.17% compared to 4.1% in the prior quarter. This 7-basis-point increase in the net interest margin was primarily the result of increased yields on the loan portfolio and also included a 2-basis-point increase in the loan discount accretion.

The current-quarter net interest margin increased 5 basis points over the prior-year second-quarter net interest margin of 4.12%, even though there was a current-quarter decrease of 14 basis points, driven by the decrease in the Federal income tax rate. The increase in core margin from the prior-year second quarter was a result of the remix of earning assets, the higher-yielding loans, improved interest rates on the loan portfolio, and our stable funding cost.

Noninterest income for the current quarter totaled $31.8 million, an increase of $5.7 million or 22% from the prior quarter and an increase of $4.2 million or 15% over the same quarter last year, driven by seasonality and increased accounts from our recent acquisitions. Service charges and other fees of $18.8 million increased $1.9 million or 11% from the prior-year quarter, primarily due to seasonality and the increased number of accounts.

Miscellaneous loan fees and charges were up as a result of the recent acquisitions and increased loan growth. Gain on sale of loans increased $2 million or 34% from the prior quarter as a result of seasonality and strong residential real estate refinance and purchase activity.

Noninterest expense for the quarter increased $8.2 million or 11% over the prior quarter and increased $16.5 million or 25% over the prior quarter -- second quarter, primarily due to the full-quarter impact of both our new acquisitions added at the end of the first quarter.

Compensation and employee benefits increased $3.3 million or 7% from the prior quarter and $9.5 million or 24% from the prior-year second quarter due to a full quarter of annual salary increases, the increased number of employees from acquisitions, and organic growth. Tax expense -- while acquisition-related expenses were $2.9 million during the current quarter compared to $1.8 million in the prior quarter and $867,000 in the prior-year second quarter.

Tax expense during the second quarter was $9.5 million, which is a decrease of $2.4 million or 20% from the prior-year second quarter and was attributable to the Tax Act. The effective tax rate in the second quarter of 2018 was 18% compared to 26% in the prior-year second quarter.

The current-quarter efficiency ratio was 55.44%, a 236-basis-point decrease from the prior-quarter efficiency ratio of 57.8%. The decrease was a result of an increase in interest income and seasonal increases in the gain on sale of loans and deposit charges combined with the Company controlling operating costs. Core operating costs, I should add.

In closing, the second quarter of 2018 represents another excellent quarter for the Company. We started the integration process for Collegiate Peaks in Colorado and First Security Bank in Bozeman, Montana. These two transactions added $1.7 billion in assets and grew the Company almost 20% in the first quarter alone. We are starting to see the benefits of those two transactions as the financials start to settle down to reflect their steady operating contribution.

A lot of dedicated folks worked very hard to successfully convert First Security over to our core processing system at the end of the second quarter. And we are still on track to convert Collegiate Peaks at the end of the third quarter.

Our division presidents and their teams across our seven states really rose to the occasion and delivered very strong results in the second quarter, overcoming what looked like a bit of a slow environment at the beginning of the quarter.

In closing, for a number of years, you've heard me introduce Don McCarthy, our Controller, as part of these earnings calls. Don will be retiring at the end of this month. He has been with the Company for 16 years, the last 13 of which he has served as our Controller. He has contributed significantly to our Company's success, including assisting with the acquisition and integration of 19 banks.

We are also excited to announce that Melody Pieri has been promoted to the Controller position. Reflective of the bench strength in our Company, Mel has been with the Company for more than 18 years, the last 10 years of which she served as Controller for Glacier Bank right here in Kalispell.

She has worked in the lending operations and accounting areas of Glacier Bank and has assisted with the operational merger of 13 of our bank acquisitions. So congratulations to Melody on the promotion. And Don, thank you for all you have done for our Company.

Heather, that ends my formal remarks. And I'd now like to open the line for any questions that the folks or analysts may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Michael Young, SunTrust.

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Michael Young, SunTrust Robinson Humphrey - Analyst [2]

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Good morning. I wanted to start with just the good deposit growth this quarter and non-interest-bearing deposits and then some outflow in some of the higher-cost categories. Could you just walk us through, maybe provide a little more color on what drove the growth? Anything that was seasonal in nature? And then maybe just what the outlook is as we move through the back half of the year for continued growth in that area.

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [3]

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Sure. You know, I'd say over a year ago, we met and decided to really focus on the noninterest aspect of the business. So that's been in motion for quite a while. I think we are starting to see the results of that.

So the 14 divisions have really made that particular aspect of our offering a priority. And I think, as I said, through promotion and through their normal hard work, they have really built -- continue to build that up. And we see the percentage of that increasing very nicely.

You know, in terms of -- and we expect to see that continue. We are very happy with the overall cost of deposits. And I think some of the areas are not growing, but we are just choosing to focus on the areas that we think will benefit us in the long run.

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Michael Young, SunTrust Robinson Humphrey - Analyst [4]

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And maybe just kind of tying that together with the net interest margin and loan to deposit ratio. Obviously very good loan growth this quarter, so the loan to deposit ratio drifted up. Is there more room there? And how does that kind of affect the outlook for net interest margin going forward?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [5]

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Sure. I am going to let Ron talk to that because we've spent quite a bit of time studying that very specific question. So Ron, do you want to take that?

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Ron Copher, Glacier Bancorp, Inc. - CFO [6]

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Yes. Particularly on the loan to deposit ratio, it certainly could drift higher with loan growth. But to Randy's point, we want to grow our deposit base and we remain focused obviously on non-interest-bearing, as he just said.

So it could drift higher. We will have to wait and see what that is, but we are actively gathering deposits. It's relationship banking: if you get the loans, bring in the deposits. So on the margin, we are optimistic it could expand. You could see it do well just because we are getting the higher yields on the loan productions and we see that that is likely to continue. And if we can keep the cost of our interest-bearing deposits, the whole deposit base, in check, that would then allow the margin to expand.

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Michael Young, SunTrust Robinson Humphrey - Analyst [7]

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Okay, I will step back for now. But Don, congratulations on the upcoming retirement.

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Don McCarthy, Glacier Bancorp, Inc. - SVP and Controller [8]

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Thank you.

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Operator [9]

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Jeff Rulis, D.A. Davidson.

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Jeff Rulis, D.A. Davidson & Co. - Analyst [10]

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Morning. Question on the expenses. And maybe just the outlook here. You have got a couple deals and given the timing of the conversions, I guess if we take this quarter and strip out the merger costs, what are your expectations on the expense side?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [11]

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So I am going to also hand that over to Ron as well. And you are right: we had a little elevated expenses on the M&A side, but -- this quarter. But that's really given the size of those transactions and the complexity is kind of what we expected.

Ron, do you want to comment on going forward?

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Ron Copher, Glacier Bancorp, Inc. - CFO [12]

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Yes, so as we -- we had higher expenses in the first quarter. And I think we addressed it, but let me repeat it. So we are growing into the deposit -- excuse me, the expense base, so we don't see it accelerating. Obviously we are getting bigger, so we are going to have more expenses.

But we would actually see there is room for efficiency ratio to certainly hold steady. It could go down, and that is driven more by our ability to grow our income side of it. But the expenses -- we are going to have acquisition-related certainly in the third quarter as we do the conversion.

But putting that aside, we should do pretty well. And we alluded to that in the press release: controlling operating costs, our divisions are focused on that as well.

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Jeff Rulis, D.A. Davidson & Co. - Analyst [13]

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Okay. So from a core basis, it sounds like kind of holding the line on expenses is the expectation?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [14]

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Yes. When we look at the core, Jeff, we feel very good. You can't see it because of the M&A expense in there and the growth, all the fact that we grew 20% in the first quarter. But the core expenses, as Ron said, we are very with happy with how those are being controlled.

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Jeff Rulis, D.A. Davidson & Co. - Analyst [15]

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Got it. And maybe just a couple credit questions. A lot of the increase in the overall NPAs came from the 90-day past-due bucket. Any detail on that? And is there any maybe subsequent payoffs within that bucket?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [16]

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So Barry is on the phone, our Chief Credit Administrator. And again, we spent a lot of -- because of the increase, we obviously looked at what was going on there quite closely.

So Barry, do you want to make a comment on that?

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Barry Johnston, Glacier Bancorp, Inc. - Chief Credit Administrator [17]

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Yes, the bulk of the increase was centered in one credit. It was just a little over $7 million was the commercial real estate income-producing property. Subsequent to that going over 90 days, we had a paydown of $2.9 million that came from external financing sources. And there's a change in ownership of the property, and we fully anticipate that with that ownership change, that loan will be paid current before month-end.

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Jeff Rulis, D.A. Davidson & Co. - Analyst [18]

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Great. And I guess if that impacted the provisioning, say, Q1 and Q2, a wide range of provisioning and a little outsize movement, given the loan growth. But any broader or specific guidance on the provision level?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [19]

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No, I think -- look, we look at the provision every month and we assess it really at the end of the quarter. It was driven this quarter by very strong loan growth and the increase in NPAs. We will have to see where we are at the end of this quarter.

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Jeff Rulis, D.A. Davidson & Co. - Analyst [20]

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Okay, thank you.

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Operator [21]

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Matthew Clark, Piper Jaffray.

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Matthew Clark, Piper Jaffray & Co. - Analyst [22]

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Good morning. Can you give us what the weighted average rate on new production was this quarter? I think it was 501 last quarter.

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Ron Copher, Glacier Bancorp, Inc. - CFO [23]

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Yes, Matthew, it's Ron. It's averaging right about 520, so we picked up roughly another 20 basis points, 25 basis points. I actually should say it's actually higher. I'm looking over the report here.

So we did -- I should say, the divisions did very well. Where we can, we are able to get higher yields. And that is to say competition is certainly out there for the larger, better-quality credits. But on the average loans where we can get it, our lenders are very focused on that.

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [24]

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We picked up -- we were very happy with the loan pricing beta that we saw and were able to pick up a nice pickup there. Didn't expect that because we thought at the beginning of the quarter we would see a lot more competition for loans.

But our markets in the West grew very strongly. If you look at the H.8 data, the whole country grew. We saw some nice growth in the West. And I think that took a little pressure off some of the competitors in terms of their pricing practice.

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Matthew Clark, Piper Jaffray & Co. - Analyst [25]

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Okay, great. And then can you remind us how much in production you did in the quarter as well?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [26]

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So let's see, I mentioned that. So we had -- we -- just gross production was $919 million. We had paydowns of $640 million.

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Matthew Clark, Piper Jaffray & Co. - Analyst [27]

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Got it. Okay. And then I think you had loan growth tracking kind of ahead of your expectations for the year. Do you have any -- what's your sense for the second half? Do you think you can kind of continue at high-single-digit, low-double-digit pace? Or do you feel like you may get a little more selective here with competition?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [28]

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No, we think -- Barry and I were talking about that this morning. And we obviously -- Ron, Don, and I talk about that just looking at it. I think, again, the market's really picked up this quarter.

And so in April, things were not looking as strong, and then May picked up and then June really picked up strongly. And based on what we are seeing so far this month, that looks like it's continuing. So overall, we are thinking around 10% is probably more realistic growth target at this point.

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Matthew Clark, Piper Jaffray & Co. - Analyst [29]

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Okay, great. And then geographically, in terms of where you are seeing that pickup maybe June, July, I know you mentioned for the quarter it was broad-based throughout the footprint. But can you kind of point to certain regions of the footprint where you are seeing maybe more activity?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [30]

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You know, we are just seeing very good activity across the board. There is not really one market that way out-pulls another. We have got some very strong markets. I mean, our Denver Collegiate Peaks is knocking it out of the park. They are doing a terrific job.

Bozeman, they are seeing some good growth there. But we are seeing great growth, really good quality growth in Wyoming and Idaho, Washington. So there is no breakout star performer among the 14 divisions. They are all doing very well.

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Matthew Clark, Piper Jaffray & Co. - Analyst [31]

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Okay. And then last one for me, just on the cost saves. Can you quantify how much in cost saves or what percent of your cost saves you have realized so far from those two deals?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [32]

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So we are still in the middle of -- I would tell you we're very much on track. We put the overall cost saves in there for both deals. And if you remember, Collegiate Peaks, the bulk of those expenses will -- of reductions we will recognize in this year. First Security, it's spread out. It's really -- most of those costs will hit in 2019, the reductions we'll achieve and we'll see in 2019.

But Collegiate Peaks is very much on track and First Security as well. We just completed the conversion of First Security last month, so we are still -- some of those expenses are now in process of being recognized. And as I said, Collegiate Peaks, a fair amount of that expense reduction was just the senior team retiring at the close. So I'd say on both of those, Matthew, we are tracking right along where we thought we would.

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Matthew Clark, Piper Jaffray & Co. - Analyst [33]

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Okay, great. Thank you.

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Operator [34]

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Jacque Bohlen, KBW.

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Jacque Bohlen, Keefe Bruyette & Woods Inc. - Analyst [35]

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Good morning, everyone. Randy, I wonder if you could speak to the Colorado market. Just given the recent deal flow that's happened there with some of the larger banks now acquisition targets, if you are seeing any movement in there. And kind of what your expectations are for potential market dislocation there and how you might be able to take advantage of that.

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [36]

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Yes, no, I think there's certainly a lot of activity there. I'd say we are extremely happy with our bet on the market. We like the size of it and we like the quality of the franchise.

I think, at least preliminarily in talking to Liam, who is our president there, and Dave Boyles, we feel -- actually both that's what's happening there will benefit us. We are becoming the larger community bank in the market. And I think as both customers and employees who really like operating in our model are attracted to a bank that is a community bank and makes local decisions on the ground, that is -- should be very good for us.

So we are feeling good about those transactions. We are seeing a lot of things happening there and feel like we have a lot of really good options because we've got a great stable platform that can grow. It was all expanded on a de novo basis. They are very good with that strategy. So there's a lot of options to grow organically and through de novo with our Collegiate Peaks franchise as well as looking at other acquisitions.

Our other bank in Colorado is Bank of the San Juans. And Art and his team have been in place for many years, really doing well. Really firing on all cylinders. And they are really covering the western slopes down to Pueblo, up into the Springs and seeing a lot of good quality growth there.

So a lot of upside in the state of Colorado. And so we are very happy with what we see. And as some of the banks get bigger as they are acquired, that I think works to our advantage.

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Jacque Bohlen, Keefe Bruyette & Woods Inc. - Analyst [37]

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Would you be open to acquiring any available talent in the markets?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [38]

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Yes. In fact, we have openings as we speak. I know Liam is actively looking for a number of folks. So we are growing and we are always looking for high-quality talent.

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Jacque Bohlen, Keefe Bruyette & Woods Inc. - Analyst [39]

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Okay, thanks. That's a very helpful update. And then just one last one for me. The roughly $7 million [series] loan that was placed on non-accrual in the quarter, was there any specific reserve associated with that movement?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [40]

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Ask the question again, Jacque. I'm not sure I followed it.

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Jacque Bohlen, Keefe Bruyette & Woods Inc. - Analyst [41]

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The bump-up in NPLs specifically related to the one larger commercial real estate loan, did it have a specific reserve associated with the provisioning that increased in the quarter?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [42]

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So I'm going to let Barry answer that. And Barry, I don't know how much we go into the details of the reserving, but I will let you cover that.

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Jacque Bohlen, Keefe Bruyette & Woods Inc. - Analyst [43]

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I can clarify, too. The basis for my question is I'm just wondering if specific reserving drove some of the bump-up. Or if just given that you've said that you expect that everything to work out within the next month or so, so I'm wondering how much of that was a change in past rates that are affecting methodology versus something that's just very specific to this quarter.

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Barry Johnston, Glacier Bancorp, Inc. - Chief Credit Administrator [44]

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Yes, Randy, I can answer that. Generally never say never until a problem asset is finally resolved and paid off or brought current. So our current methodology is that as NPA levels generally increase, our reserves stay directionally consistent with those to cover any potential losses, right. You won't have losses on any specific nonperforming loan in general that you will have.

So we try to stay directionally consistent with our allocations. And that was just one loan out of the other increase. There was three or four other ones of fairly significant size that also came in the portfolio. So on a portfolio basis of administering nonperforming loans, we try to stay directionally consistent.

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Jacque Bohlen, Keefe Bruyette & Woods Inc. - Analyst [45]

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Okay. So if NPLs were to directionally trend downward next quarter, the provision would likely do the same?

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Barry Johnston, Glacier Bancorp, Inc. - Chief Credit Administrator [46]

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That would be true, yes.

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Jacque Bohlen, Keefe Bruyette & Woods Inc. - Analyst [47]

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Okay, thank you. That's all I had.

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Operator [48]

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(Operator Instructions) Andrew Liesch, Sandler O'Neill.

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Andrew Liesch, Sandler O'Neill & Partners - Analyst [49]

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Morning, everyone. Last quarter, you had talked about some deposit pricing concern. It didn't really seem to play out. What are you seeing right now in your markets? Is there anything concerning? What are competitors doing on the funding side?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [50]

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You know, it varies by market. We are seeing the credit unions continue to be very, very aggressive, and that depends on the strength of the credit unions across the markets. Occasionally we see some of the banks as they need funding get a little more aggressive, probably more on the CD side, where they look to kind of fund themselves up.

But in our markets where we are the significant leader, we are really the pacesetter. We just have not seen, other than credit unions, a lot of activity. And again, we are focused on the core relationship. And so where these credit unions and others may get a little piece around the edges, they don't appear to be getting at the core of the relationships.

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Andrew Liesch, Sandler O'Neill & Partners - Analyst [51]

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Okay. And then moving to M&A, it seems like the integrations of these deals is going well. Is it still your sense at the earliest that you would be comfortable doing a deal would be late this year or maybe early next year? Or do you think we could see one sooner?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [52]

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No, you are absolutely right. That is what we communicated back in January, I think, and we are still very much on that track. These were big acquisitions for us. We want to make sure we do them right. We want to make sure customers are treated well and employees.

And so we are still -- we really want to make sure that those are done right, that our systems and processes support those acquisitions and the growth. And I think all that is coming along very nicely, and we are very comfortable kind of still staying on that track. So yes, if there is something that we think meets our criteria in terms of a good transaction for us, more likely that would be towards the end of the year, as we previously communicated.

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Andrew Liesch, Sandler O'Neill & Partners - Analyst [53]

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Okay, great. Thank you for taking my questions. You have answered everything else. Thanks.

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Operator [54]

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Tim Coffey, FIG Partners.

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Tim Coffey, FIG Partners, LLC - Analyst [55]

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Great, thank you. Morning, everybody. Randy, forecasting gain on sale of loans is difficult in any environment, but you had a really strong quarter right now in 2Q. Did you pull anything in that you might not see again in 3Q or is the seasonality of the housing market starting to kick in?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [56]

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It's very much seasonality. It was just a very -- I mean, I'm very, very happy with our mortgage business. I mean, it's remarkably steady when we look at it compared to where we were a year ago. And we've shifted to a lot of purchase activity. So very, very happy with that. We didn't pull anything from one bucket to another to kind of get there. That's really just a reflection of our seasonality.

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Tim Coffey, FIG Partners, LLC - Analyst [57]

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Okay. And then earlier in the Q&A, you mentioned about focusing more on growing non-interest-bearing deposits. And you just talked about focus on grabbing the core relationship. What other color can you provide on how you are starting to focus more on building a base of low-cost deposits?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [58]

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You know, I think it's been -- look, like, as Ron and I travel around and talk about it, we have been talking about our core deposit franchise for years. And this isn't -- we kind of chuckle a little bit. I mean, we hear other people saying they are going to start to build it.

It takes years and a culture to create it. The culture here has been decades in terms of transactional core relationships. And so that's the same formula for years. It's just now as the tide is going out on easy money, it's really starting to shine and you can see it's a very, very stable base.

So really the only thing that we added recently is just more emphasis on the noninterest side. And so we sat down, and like I said, over a year ago and just thought that given where we thought rates may go and given the attractiveness of that and given our commercial strength, that we could do more there. And it turns out there is very, very good opportunity to grow that and continue to grow it.

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Tim Coffey, FIG Partners, LLC - Analyst [59]

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Okay. And then one last kind of a technical question. Did you have a dollar amount for what might be in nonrecurring M&A conversion expenses in 3Q?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [60]

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I don't think so. In terms of what to expect there, I will let Ron comment on that. But I think some of that is in play as we speak.

So Ron, what is your thoughts on that?

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Ron Copher, Glacier Bancorp, Inc. - CFO [61]

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Yes, we know what our -- we know the conversion date, but exactly how those conversions go, we are planning. We have two or three weeks in advance we do test. And so as we -- no conversion is perfect, that should be no surprise to anyone. But I would at best give you just a round number of 500,000 just for the quarter. But know that that can change depending upon how things go.

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Tim Coffey, FIG Partners, LLC - Analyst [62]

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Okay. All right. Well, those are all my questions. Thank you very much.

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Operator [63]

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Michael Young, SunTrust.

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Michael Young, SunTrust Robinson Humphrey - Analyst [64]

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Thanks for taking the follow-up. Just one kind of macro question, just on the tariff chatter. Have you guys done any kind of a portfolio review on any impacts of US/Canada trade or just influx of travelers across the border or anything like that at this point? Or do you just feel like that's not going to be an issue for you?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [65]

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Well, yes, we do -- we've talked about tariffs quite a bit. And there's two components I think to your question. One is travelers. Our friends to the north, the Canadians. You know, we haven't seen any issue there.

We look at our tax receipts, and probably the easiest way to do that right here locally is the Whitefish, Montana, market is very driven by the Canadian tourist. We look at the tourists, we look at the tax -- the tourist tax, they call it, on lodging and food. That is up year over year. So we haven't seen really any impact on people coming in.

On tariffs, we looked closely at our ag book to see if any of the tariffs affected the kind of crops that we grow and we really don't see a material impact. Of course, that whole conversation changes; it's a dynamic conversation. But at this point, the things they are pointing to are more Midwest crops than crops that we grow in our region. With the exception of apples, and there is a Mexican tariff on those.

And we were just talking to Charlie Guildner, our president up there in Lake Chelan. And actually, they have not seen much of an impact, surprisingly. They're still exporting and they are opening up new markets to offset the small bit of trade that they lost because of those particular tariffs. So overall, I have to say at this point we just have not seen much of an impact related to any kind of negative consequence of the tariffs.

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Michael Young, SunTrust Robinson Humphrey - Analyst [66]

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Okay, great. Thanks for that color. And just also maybe, I think over the last couple years you guys have been more cautious on multifamily and then hotel finance. Obviously, a strong CRE growth quarter this quarter. Is any of that sort of you relaxing restrictions there? Or any updated outlook on those two food groups?

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [67]

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No, we haven't changed our point of view on those at all. We are still very cautious and conservative. We kind of have our appetite limit. We may, as ones roll off, do another, but we don't -- haven't really -- still really have not increased our net position on either of those categories.

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Michael Young, SunTrust Robinson Humphrey - Analyst [68]

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Okay, perfect. Thanks.

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Operator [69]

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I am showing no further questions at this time. I'd like to turn the call back over to Randy Chesler for closing remarks.

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Randy Chesler, Glacier Bancorp, Inc. - President and CEO [70]

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All right. Well, again, thank you for taking time and dialing in and listening in. We appreciate it. And have a wonderful fantastic weekend and enjoy the summer. Finally hit here, so we will enjoy it as well. Thank you again.

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Operator [71]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you all may disconnect. Everyone have a wonderful day.