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Edited Transcript of GBCI earnings conference call or presentation 19-Apr-19 3:00pm GMT

Q1 2019 Glacier Bancorp Inc Earnings Call

KALISPELL Apr 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Glacier Bancorp Inc earnings conference call or presentation Friday, April 19, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Barry L. Johnston

Glacier Bancorp, Inc. - Senior VP & Chief Credit Officer

* Randall M. Chesler

Glacier Bancorp, Inc. - President, CEO & Director

* Ronald J. Copher

Glacier Bancorp, Inc. - Executive VP, CFO & Secretary

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Conference Call Participants

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* Gordon Reilly McGuire

Stephens Inc., Research Division - Research Associate

* Jacquelynne Chimera Bohlen

Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research

* Jeffrey Allen Rulis

D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst

* Matthew Timothy Clark

Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst

* Michael Masters Young

SunTrust Robinson Humphrey, Inc., Research Division - VP and Analyst

* Timothy Norton Coffey

FIG Partners, LLC, Research Division - VP & Research 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 First Quarter Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Randy Chesler, President and CEO of Glacier Bancorp. Sir, you may begin.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [2]

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All right. Thank you, Joel, and good morning, and thank you for joining us today. With me here in Kalispell this morning is Ron Copher, our Chief Financial Officer; Barry Johnston, our Chief Credit Administrator, Angela Dose, our Chief Accounting Officer; and joining us by phone is Don Chery, our Chief Administrative Officer.

So let me first thank you all for joining us today and let you know that we'll try to keep -- we'll try to avoid scheduling this call on a holiday going forward. So I'll try to keep my comments brief this morning. Yesterday, we released our first quarter 2019 results, and this was a solid quarter with well-balanced business performance and we announced 2 acquisitions: First National Bank of Layton in Utah and Heritage Bank in Reno, Nevada. That one being one of the largest transactions in the company's history. These transactions will add over $1.1 billion in assets by year-end.

So some highlights and some details from the quarters -- from this quarter. Earnings for the quarter were $49.1 million, an increase of $10.5 million or 27% over the prior year first quarter. Diluted earnings per share for the quarter were $0.58, an increase of 21% over the prior year first quarter. Average loan balances increased 4% annualized from the prior quarter and 2% annualized point to point. We also had core deposit growth of $70.1 million or 3% annualized. Notably, noninterest deposit growth was $49.9 million or 7% annualized. Our net interest margin of 4.34% of earning assets was up 4 basis points over the prior quarter and up 24 basis points versus a year ago. Our yields on earning assets increased 10 basis points from the prior quarter to 4.74%, and our loan yields increased 13 basis points from the prior quarter to 5.18%.

Return on assets for the company was a very strong 1.67% for the quarter, a 1 basis point increase over the prior quarter. We also declared a regular dividend of $0.26 per share, our 136th consecutive quarterly dividend. And right after the quarter closed, we announced the signing of a definitive agreement to acquire Heritage Bank, a community bank in Reno, Nevada. This is a great community bank. One of the best performers in the industry with a stable low-cost deposit base and excellent high quality, high-margin loans. We believe the growth drivers in Nevada specifically, Reno, are in place for the long term. Reno is strategically located near Silicon Valley and numerous large markets on the West Coast, offers a business-friendly environment and fantastic quality of life. So this new addition to the Glacier family will position us very nicely for future growth, and we are really excited to expand our presence into this dynamic market and state.

So loan production for the quarter was $650 million, which was once again well distributed among all our divisions. Loan paydowns were $615 million, which is slightly elevated when compared to past seasonality and it was primarily due to payoffs of land, lot and other construction loans. The loan portfolio ended the quarter at $8.3 billion. We had a number of construction projects reach completion in the first quarter and pay off their loans without starting new activity. February in Montana was one of the fifth coldest and fifth snowiest on record, with half the month in below 0 territory. This and a paydown of one of our larger construction loans for $33 million contributed to the slower first quarter growth. That being said, we still feel very good about our 8% loan target for the year as our western markets remain healthy and active and our business model remains very effective.

Total investment securities of $2.778 billion decreased about $91 million or 3% from the current quarter and decreased $114 million (sic) $11.4 million or 41 basis points from the prior year first quarter. Investment securities represent 23% of total assets at the end of the first quarter compared to 24% at the end of the first quarter a year ago.

Once again, our credit quality ratios improved in almost all categories across-the-board. I'm especially proud of the team's performance in this area. Early-stage delinquencies, as a percentage of loans, at the end of the first quarter were 44 basis points, a decrease of 15 basis points from the prior year's first quarter. Net charge-offs for the quarter were $1.5 million or 2 basis points of total loans compared to $2.8 million or 4 basis points of loans in the first quarter a year ago.

Nonperforming assets, as a percentage of subsidiary assets, at the end of the first quarter were 42 basis points, which is 5 basis points lower than the prior quarter and 22 basis points lower than the prior year first quarter. At the end of the quarter, NPAs were $50.8 million, a decrease of $5.9 million or 10% from the prior quarter. We are very pleased to see this continued reduction in the level of NPAs, and as you know and as we've mentioned on prior calls, we've been working on this for quite some time. Our divisions did an excellent job working through these difficult credits and we expect the NPAs to be, at this point, stable around this level as we move forward.

The allowance for loan and lease losses as a percentage of total outstanding loans at the end of this quarter was 1.56%, which is down 2 basis points from the prior quarter and down 10 basis points from the first quarter a year ago. Provision for loan losses was $57,000 versus $1.2 million in the prior quarter. This reflects a continued very positive outlook on our portfolio and markets. Core deposits ended the quarter at $9.4 billion. Total core deposits were up 3% annualized or $70 million from the prior quarter and noninterest-bearing deposits were up $49.9 million or 7% annualized. The cost of these core deposits increased 2 basis points to a total of 19 basis points compared to 17 basis points for the prior quarter and 15 basis points in the prior year's first quarter. We ended the quarter with a loan-to-deposit ratio of 87%, essentially unchanged from prior quarter.

Total cost of funding for the current quarter was 43 basis points, up from 36 in the prior quarter and 35 basis points in the prior year first quarter. The increase in the current quarter was primarily driven by the increased cost of borrowed funds needed to mitigate deposit fluctuations early in the quarter due to seasonality. We had an increase in deposits later in the quarter and the borrowings were largely paid off before quarter end.

Our 14 divisions continued to do an outstanding job managing deposit cost specific to each of their markets and we expect to continue to outperform our peers in this area. Interest income for the quarter was $115 million, which was about -- which was flat to prior quarter and increased $19.9 million or 21% over the prior year first quarter. Both of these increases were primarily attributable to interest rate increases on renewing and new loans and an increase in commercial loans. Interest income on commercial loans increased $1.3 million or 2% from the prior quarter and $18 million or 28% from the prior year's first quarter.

Our net interest margin as a percentage of earning assets for the quarter was 4.34% compared to 4.3% in the prior quarter. The 4 basis point increase in the net margin was primarily the result of increased yields on the loan portfolio from 5.05% to 5.18%, and the current quarter net interest margin increased 24 basis points over the prior year first quarter net margin of 4.10%. The increase in the margin from the prior year first quarter was a result of the remix of earning assets to higher-yielding loans and improved interest rates on the loan portfolio.

Noninterest income for the quarter totaled $28.5 million, flat to the prior quarter and an increase of $2.4 million or 9% over the same quarter last year. Service charges and other fees of $18 million increased $1.1 million or 7% from the prior year first quarter. The increase was primarily due to the increased number of accounts from organic growth and acquisitions. Gain on sale of loans decreased to $159,000 or 3% from the prior quarter as a result of real estate seasonality in the extreme cold February weather, which impacted purchase activity. Gains decreased $388,000 or 7% from the prior year first quarter.

Noninterest expense for the quarter was $82.8 million, which increased $1 million or 1% from the prior quarter and $9.2 million or 13% over the prior year first quarter. Compensation and employee benefits increased $2.3 million or 5% from the prior quarter, primarily due to annual salary increases and benefit adjustments, and increased $7 million or 15% from the prior year's first quarter, primarily due to the increased number of employees from acquisitions. Other expenses of $12.3 million decreased $1.7 million or 12%, primarily due to a reduction in acquisition-related expenses.

Tax expense for the first quarter was $11.7 million, flat to the prior quarter, increase of $3.3 million or 39% from the prior year first quarter. The effective tax rate in the first quarter was -- of 2019 was 19% compared to 18% in the prior year first quarter. Our efficiency ratio was 55.37%, a 243 basis point improvement over the prior year first quarter efficiency ratio of 57.8% and a 144 basis point increase from the prior quarter efficiency ratio of 53.93%. We still expect the full year efficiency ratio to be between 54% and 55%.

Well, the first quarter represents another strong performance for the company. In addition to delivering solid performance for the quarter, the company announced the acquisition of First National Bank of Layton and Heritage Bank in Reno. And as I previously noted, these acquisitions will add over $1.1 billion in assets in 2019. I should also add, we received all the regulatory approvals to proceed with the closing of First National Bank of Layton, which will occur as planned at the end of this month.

Our 14 division presidents and their teams across our 7 states as well as our senior staff continue to produce market-leading results, and I'd like to thank them all for their commitment and drive to be the best. That ends my formal remarks. I would now like to ask Joel to please open the line for any questions that you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Jackie Bohlen with KBW.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [2]

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I wonder if you could provide us with, just a reminder or an update on what the impact of Durban will be on July 1 and outside of the 2 acquisitions just on the legacy Glacier?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [3]

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Yes. Outlook is really the same, so it does start to kicking in, in this July. And then for the first -- for 2019, about $8 million impact. And then going forwards, between $17 million and $20 million is what we are estimating in 2020.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [4]

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And then that -- is that related to acquisitions or just expectations for growth at the combined franchise that jump -- because if I double that 8, I get 16.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [5]

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Yes, it's a little of both.

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [6]

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Yes.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [7]

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Okay. That's helpful. And then, outside of seasonality, understanding it was a cold winter and everything that happened, was there anything unusual increase that occurred in the first quarter?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [8]

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No. No. We hate to bring up weather. We had a long discussion about it, but it was just such a cold February with record-breaking temperatures and record-breaking snowfall. And our customers, our builders tell us that when the temperature drops below 0, where it was for more than half the month or about half that month, they stop all activity, equipment breaks, people get injured. So things really stop at that point, and that had a bit of an impact on our volume.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [9]

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Yes. No, I understand, that's not a condition anyone should be working in. And then, I guess, when you think about the go-forward volume, particularly, in terms of mortgage banking, how are you thinking about 2019 versus 2018?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [10]

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Yes, we feel very good about our mortgage business. We are having a very strong start to this quarter, so we're happy to see that. We see refinances starting to actually pick up given the interest rates drop a bit. So on a full year basis, once again we feel it's going to look a lot like 2018, just about the same kind of range of volume. So very, very stable.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [11]

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Okay. And is there a possibility that if refinance volume dependent on rates obviously continues to pick up, but we might see even a little bit higher in '19? Or are there other forces that might offset some of that pickup?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [12]

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Well, our own -- a bit of a headwind here is just supply. So we continue to rest within, in many of our markets, lack of supply. And so -- and also labor to build is in tight supply. So that's a bit of a limiter on really over-performing against the prior year. And I think, when we look at the amount of refis, rates would have to drop little bit more for that to open up significantly. So I would say there is a possibility, Jackie, but we just don't see that as being a material change to the outlook.

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Operator [13]

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And our next question comes from Gordon McGuire with Stephens Inc.

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Gordon Reilly McGuire, Stephens Inc., Research Division - Research Associate [14]

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So maybe just to start on the NIM. Ron, do you have how much the accretion in the quarter was? And then maybe also the yield on the new originations this quarter?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [15]

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Yes, so on the newer originations, that's north of 550. And that, hopefully, will continue. When you say the accretion, you are talking the purchasing accounting discount accretion?

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Gordon Reilly McGuire, Stephens Inc., Research Division - Research Associate [16]

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Yes.

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [17]

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Yes, that's same as it was in the fourth quarter, 5 basis points.

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Gordon Reilly McGuire, Stephens Inc., Research Division - Research Associate [18]

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Got it. And then maybe just talking around the NIM outlook for this year. In January, you sounded pretty positive just given your loan repricing dynamic and how it really excites kind of a second year following rates to reprice. In the same vein though, I think, most of your loans are priced off the 5 years, so I'm wondering just with the 5-year where it's at, if your NIM outlook versus kind of where it was 3 months ago, has that moderated any? And maybe if you could just talk about the repricing dynamics in your loan book and just the expectation for those yields throughout the year?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [19]

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Yes, so there is certainly momentum and really upward bias, but you're correct. Most of our portfolio was tied to the 5-year federal home loan bank advances and pulled the rates this morning, so just from 930 of last year, we dropped through night basically 50 basis points. No, we're starting to see that come back up, but that is one of the key drivers. So we still feel there is upward bias, but 2 things we're also observing. The credit unions have certainly done part of those irrational characters that we spoke into. They are not everywhere, but where they are, they act up, if I may say that. But we're also seeing it in some of the bank space as well, and we are not going to compete with irrational pricing. So I'll borrow the word, Randy said the headwinds are there, but we really feel that with the addition of Layton and Heritage that we will see expansion on our net interest margin. In fact, collectively, they will bring 2 basis points to the margin. So we still feel good about it, but I don't want to hazard a number, it's too early to do that.

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Gordon Reilly McGuire, Stephens Inc., Research Division - Research Associate [20]

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Got it. And then, just on the taxable securities yields, I think, they were up 19 basis points this quarter. I'm wondering if anything changed as far as your strategy around the investment portfolio with the changing rate outlook this quarter? Maybe can you talk about what you're buying at this point? And whether maybe that investment was early in the quarter, late in the quarter or just how can I think about maybe any carryover into the second quarter?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [21]

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Yes, so during -- so on the taxable investments, we've been buying selectively commercial mortgage-backed securities. And then, just going out a little bit longer with the duration, but nothing meaningful. And so the impact of that was really during the fourth quarter last year. We started buying the securities that we thought we'd want to have and decided to put them on, and so we'd have them for the full year. So that's really, really the impact there.

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Gordon Reilly McGuire, Stephens Inc., Research Division - Research Associate [22]

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Got it. And then just lastly, the tax rate guidance. Are you still thinking around a 20% level, just given you come in below that this quarter? Is that still good?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [23]

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Well, as I went back and look at the transcript, so what I said was for the full year, 20% would be the rate and truly that's in connection with the fact when you bring on that much income from Heritage and Layton, they don't have a big muni portfolio. And so our municipal investments are trending down. We actually sold some of the lower yielding ones in the first quarter. So 20% for the full year, and then you could ramp up quarter-over-quarter. It's just going to get steady, higher to where it will average out 20% for the full year.

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Operator [24]

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And our next question comes from Jeff Rulis with D.A. Davidson.

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Jeffrey Allen Rulis, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [25]

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Just wanted to touch on and not to focus too much on the weather, but the -- and you did reiterate the target for loan growth of 8%, but any sense that there was a little bit of pent up sort of potential that may be translated or pushed into the second quarter given weather kind of a lumpier. I guess, early returns on the second quarter you're seeing some pretty good activity on that front from a loan growth perspective?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [26]

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No, I wouldn't call it pent up demand. I actually think that what we are seeing is a little digestive capacity, that projects have been built. They are being utilized. They are being filled. They are being sold, but the economies are still good, but I think the velocity, there is a bit of a digestive period. And that I think is what we see a little bit now with our customers. And that -- that's why I say, we still feel good about the 8%, but I don't think we're going to overachieve that.

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Jeffrey Allen Rulis, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [27]

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Okay. So it was more -- yes, I think, you said $615 million in paydowns. So maybe just timing is kind of lumpy. Okay. Fair enough.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [28]

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Yes, yes. And the construction loans paid off, and because of that both the digestive capacity and the weather, we didn't see a lot of new activity startup. We are seeing some of it now, but I want to give you the right color. I wouldn't call it a surge of activity.

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Jeffrey Allen Rulis, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [29]

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Got it. Okay. The other income, that line item was up a little over $1 million sequentially. I don't know if that was a function of Q4 being a little light, but anything in that line item to note?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [30]

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Yes, Gordon, it's just sundry things -- I'm sorry Jeff, forgive me. Just had -- the gain on sale of OREO income, we had some income come in from our equity investments and that can vary from time to time, but nothing that really sticks out.

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Jeffrey Allen Rulis, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [31]

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Maybe just one last one for Barry. On the provisioning level, lighter net growth, credit certainly trending well. Just any thoughts on the provisioning level? It's a wide range, but any commentary on that front?

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Barry L. Johnston, Glacier Bancorp, Inc. - Senior VP & Chief Credit Officer [32]

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As always, we look at it every quarter, and depending on our credit metrics and growth in the portfolio or non-growth, we make the adjustment accordingly and given some improvement in NPLs and minimal loan growth, we adjusted the provision accordingly.

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Operator [33]

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And our next question comes from Michael Young with SunTrust.

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Michael Masters Young, SunTrust Robinson Humphrey, Inc., Research Division - VP and Analyst [34]

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I wanted to start with a quick follow-up actually on the provision question. Just as we look forward to maybe 2020 in kind of a post CECL environment, and you guys are still at a over 1.5% reserve and now the NPAs being so low, it just doesn't seem like there would be any upward pressure from kind of the implementation of that in terms of the onetime hit or even -- and maybe your provision run rate going forward, but I don't know if you have any early indications that you are willing to share at this point, just qualitatively?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [35]

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Well, so CECL, we're still -- we're proceeding with it. We are pulling it all together. We are starting to do our run. So I think it's a little early to tell, but I think, at a gut level, I think you're probably directionally correct, but I can't tell you that we have the numbers to support that at this point. But that feels about right. We feel we're very well positioned, very well reserved. We don't expect a lot of surprises to come out of CECL.

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Michael Masters Young, SunTrust Robinson Humphrey, Inc., Research Division - VP and Analyst [36]

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Okay. and then maybe switching gears to the deposit front. You guys have very good demand deposit inflows this quarter, that's been pretty light. I would say, generally across the industry with a lot of people having demand deposits go down. I know you guys have obviously stayed focused there, but I was wondering if there were any additional benefits from just some of these projects that did pay off, and on the loan side with some cash flowing back into the bank from those or was it really just kind of core growth?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [37]

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Yes, it seems to be pretty spread out, and I have to say more core growth. I don't think there was any particular kind of 1 source. So it seemed to be spread out and pretty much just consistent with our long-term strategy of building those kind of brick by brick. And increased I think Barry has turned up the discussions around loans and making sure deposit relationships follow.

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Michael Masters Young, SunTrust Robinson Humphrey, Inc., Research Division - VP and Analyst [38]

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Okay. And then last one from me, maybe just Ron, on the duration kind of on that 5-year loan book, is it pretty close to 5 years? Or is it in much shorter more like a 3-year kind of duration? I'm just trying to think about the vintage and pricing of the loans that are running off versus as you make these new loans at higher pricing dynamics, like kind of when the shift in the 5-year rates is going to actually start to flow through into loan yields.

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [39]

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Yes, it is closer to 5 years. And anything, it's come down a little bit, but it's hovering around 5-year duration.

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Michael Masters Young, SunTrust Robinson Humphrey, Inc., Research Division - VP and Analyst [40]

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Okay. So even with the decline in the 5-year rate over the last 6 months, as you mentioned, I mean, we still got multiple years of repricing higher on the loan front going forward, is that fair?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [41]

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Yes, very fair.

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Operator [42]

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And our next question comes from Matthew Clark with Piper Jaffray.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [43]

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Just on deposit rates. Do you happen to have the spot rate on your interest-bearing deposits at the end of March relative to the 34 basis points in the quarter?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [44]

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Interest-bearing. The overall core was up to and most of that was in money market and CDs. So I don't know if that's getting at to your question.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [45]

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Well, I guess, what I'm thinking about is just with the Fed on hold from here, is there less pressure to price up at this point. And maybe we start to see some stabilization of deposit cost, and you feel that because you are still below the market, you just going to need to continue to kind of play a little bit of catch-up here for the...

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [46]

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Yes, we -- it's -- there's -- we think we're at a whole -- in all our markets, we're at a very interesting point, where, yes, the Fed has signaled stable, probably no change to possible decrease. Yet at the same time, banks in the market are -- many of them are loaned up past 100% loan-to-deposit and need deposits. And so that's a bit of a headwind. But our core -- what we are seeing, as our core deposits remain very, very good and, especially, our transaction accounts really not subject to a lot of pressure. In some markets and in this quarter is really, we price individually the 14 divisions. 2 in particular had a little more pressure. They decided to make some changes to their pricing. And I think it will depend on the actions of the Fed and kind of where I think loan demand goes in the industry to really tell us where it will be continued pricing. We don't expect a material change. I think it's more degrees of pressure on it.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [47]

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Okay. And then, when you look at your criticized classified trends, I mean, we know charge-offs were low this quarter, non-performers down, provision, obviously, is lighter than expected. But can you give us a sense for any migration in your criticized classified loans? And what, if there is some migration or some deterioration, what -- where it resides?

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Barry L. Johnston, Glacier Bancorp, Inc. - Senior VP & Chief Credit Officer [48]

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Yes, the only challenge that we're seeing right now is with our -- some of our agricultural credits, primarily, hard grains. Prices have moved up recently, but not to a point where those borrowers are able to clear their operating lines depending on the location and other factors, weather being one of the biggest ones. So that's the only place that we are seeing, and the rest of the portfolio is, we're very pleased with the performance there and have seen some improvement across the other product lines.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [49]

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Great. And maybe Barry as well on, just the discount on the loan portfolio that we can adjust the reserve or gross it up this quarter for acquisitions?

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Barry L. Johnston, Glacier Bancorp, Inc. - Senior VP & Chief Credit Officer [50]

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Okay. It's $24 million.

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Operator [51]

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(Operator Instructions) Our next question comes from Tim Coffey with FIG Partners.

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Timothy Norton Coffey, FIG Partners, LLC, Research Division - VP & Research Analyst [52]

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Randy, in your prepared remarks, you talked about having optimism on forward trends and credit quality for your markets. And I'm wondering what markets and/or data points you are using to kind of support your optimism?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [53]

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Well, 2 things. I'll let Barry follow. But I mean our NPAs, we continue to improve with NPAs. A lot of these projects are being sold to developers who intend to develop those properties. I think that's very positive. They are buying at a very attractive price, but then most are -- they intend to make investments into, and I think that's a pretty good indicator. In addition, you've seen our delinquency percentages drop down quarter-over-quarter, so we are showing better performance than we did a year ago. And then when we look out at our customers and see the health of the balance sheet, at this point, we are constantly looking to see if there are red flags. We just see a very good environment at this point. Barry, did you have anything to add?

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Barry L. Johnston, Glacier Bancorp, Inc. - Senior VP & Chief Credit Officer [54]

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Yes, across the markets, all the markets are still active. We have some good markets with some pretty strong growth. We are going to be coming into 2 new markets with -- in Utah and Nevada, which I think are going to bode well for us. So we are staying on the positive side as far as market growth and respective production from those markets.

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Timothy Norton Coffey, FIG Partners, LLC, Research Division - VP & Research Analyst [55]

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Okay. Great. And then my other question was, can you remind me what the magnitude of the seasonality is within the noninterest expenses?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [56]

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Let's see. So noninterest expense for the first quarter, we usually see that there is an uptick because all the reset of the comp hits really, that starts to hit in the first quarter. So that's pretty typical. I think what we saw this quarter is pretty much what the past pattern has been.

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Timothy Norton Coffey, FIG Partners, LLC, Research Division - VP & Research Analyst [57]

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Okay. All right. Yes, the rest of my questions have been answered.

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Operator [58]

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Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Randy Chesler for any closing remarks.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [59]

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Well, thank you, Joel. So I want to thank everybody for dialing in today on, with the holiday, for a number of folks on the call. We want you to all have a great day and a wonderful weekend. So thank you.

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Operator [60]

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