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Edited Transcript of GBCI earnings conference call or presentation 18-Oct-19 3:00pm GMT

Q3 2019 Glacier Bancorp Inc Earnings Call

KALISPELL Oct 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Glacier Bancorp Inc earnings conference call or presentation Friday, October 18, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Angela L. Dose

Glacier Bancorp, Inc. - Senior VP & Principal Accounting Officer

* 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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* Andrew Brian Liesch

Sandler O'Neill + Partners, L.P., Research Division - MD

* Gordon Reilly McGuire

Stephens Inc., Research Division - Research Analyst

* 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

Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts

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Presentation

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Operator [1]

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

I'd now like to turn the conference over to your host, Randy Chesler, President and CEO of Glacier Bancorp. Mr. Chester, the floor is yours.

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

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All right. Thank you, Rusty. Good morning, and thank you for joining us today. With me here in Kalispell this morning is Ron Copher, our Chief Financial Officer; Don Chery, our Chief Administrative Officer; Angela Dose, our Chief Accounting Officer; Barry Johnston, our Chief Credit Officer; Tom Dolan, our Deputy Chief Credit Administrator; and Byron Pollan, our Treasurer.

Let me first thank you all for joining us today and hope you're all enjoying the fall. Yesterday, we released our third quarter 2019 results. This was a very strong quarter for us, with strong net interest margin, excellent deposit growth, steady and improving credit performance and good quality loan growth. As we noted in the last quarter's call, we feel we are very well positioned to navigate through the current interest-rate environment. And despite the headwinds in the market for banks, challenging interest rate curve later innings of the long-term recovery, the Glacier team is strong and we are continuing to build the balance sheet and the company for the long haul.

Some highlights from the quarter.

Earnings were at $51.6 million, an increase of $2 million or 5% over the prior year third quarter, including current period acquisition-related expenses of $2.1 million and $5.4 million of stock compensation expense related to the accelerated vesting of options from the Heritage Bancorp acquisition. Without the acquisition expenses, net income would have been $56.2 million, an increase from the prior year third quarter of $6.9 million or 14%.

Diluted earnings per share for the quarter were $0.57, a decrease of 2% over the prior year third quarter, but this included the acquisition-related expenses. Organic loan balances increased $84 million or 4% annualized. On a full year basis, loan balances grew $393 million or 6%.

We also had organic core deposit growth of $302 million or 12% annualized. And organic noninterest deposit growth was a very strong $211 million or 26% annualized. This quarter's deposit growth exceeded our expectations.

Net interest margin for the quarter of 4.42% of earning assets increased 9 basis points over the prior quarter. Excluding the 2 basis points from discount accretion and 5 basis points from nonaccrual interest, the core net interest margin grew 8 basis points in the quarter to 4.35 up from 4.27 in the prior quarter, and up 17 basis points from 4.18 in the prior year third quarter. We are very pleased to be one of the few banks in this earnings season to be able to talk about an expanding margin.

Return on assets was 1.55% for the quarter, a 14 basis points decrease over the prior quarter as a result of the acquisition-related expenses that occurred during the quarter. Without those expenses, ROA would have been 1.69% for the quarter. Tangible book value per share at $15.53 at quarter end increased $0.50 a share from the prior quarter and increased $1.90 per share from a year ago. We also declared a regular dividend of $0.29 per share, our 138th consecutive quarterly dividend, which was a 7% increase over the prior quarter.

At the end of July, we successfully closed on the acquisition of Heritage Bancorp in Reno, Nevada. Heritage became our 16th division and our first entrant into Nevada. And we are very excited to welcome the Heritage Bank team to the Glacier team.

And then in late September, we also announced the acquisition of State Bank Corp. at Lake Havasu, Arizona with total assets of $677 million. State Bank will be combined with our Foothills Bank Division and continue its over 20 years legacy of serving Arizona communities. The acquisition, of course, is subject to regulatory approvals and customary conditions of closing, and we're expecting to close that late this year or early next year.

Now for a little more color on the quarterly results. Loan production for the first quarter was once again generally well distributed among all divisions. Loan paydowns were slightly elevated compared with past third quarters. The loan portfolio ended the quarter at $9.5 billion. As a result of the slower third quarter and typically slower fourth quarter, we're anticipating a 6% organic loan growth rate for the year.

While we continue to feel very good about our Western markets, we've seen an increase in payoffs, with customers taking advantage of the strong markets. Liquidity generated from these sales has not been immediately reinvested by sellers at the rate we've seen in the past due to those sellers being a bit more cautious about making new investments. In addition, we've seen a small increase in money center banks making larger loans to some of our customers at rates we don't think adequately pay for risk at this point in the cycle. So we're happy with our rate of growth and we're going to be -- continue to be disciplined in our approach to lending with our eye on the longer term.

Total investment securities of $2.6 billion decreased $28 million or 1% during the quarter and are flat compared to the prior year third quarter. Investment securities represented 20% of total assets at the end of the quarter compared to 23% at the end of the third quarter a year ago. Once again, our key credit quality ratios improved in almost all categories across the board, reflecting the strength of our loan portfolio. Early-stage delinquencies as a percentage of loans at the end of the third quarter were 31 basis points, a decrease of 12 basis points from the prior quarter and flat to the prior third quarter in a year ago. Net charge-offs for the quarter were $3.5 million compared to $2.2 million in the third quarter a year ago. This increase in net charge-offs was primarily centered in 1 loan with a $1.9 million loss resulting from a negotiated short sale. Nonperforming assets as a percentage of subsidiary assets at the end of the quarter were 40 basis points, which is 1 basis point lower than the prior quarter and 21 basis points lower than the prior third -- prior year third quarter.

At the end of the quarter, the dollar amount of NPAs were $55.1 million, an increase of $3.1 million or 6% from the prior quarter, but the increase was primarily driven by a $2.7 million loan that we expect to resolve early next year. A number of our divisions and division chief credit officers continue to do an excellent job working through these credits. We think now is the time to be more proactive with the weaker credits, and we will continue to do so.

The allowance for loan and lease losses as a percentage of total loans outstanding at the end of this quarter was 1.32%, which is down 14 basis points from the prior quarter and down 31% from a quarter a year ago. Provision for loan losses were 0 in the current and prior quarters. This reflects our continued very positive outlook on our portfolio and our markets. We don't see these one-off loan issues as a trend.

Core deposits ended the quarter at $10.7 billion. Total core deposits were organically up 12% annualized or $302 million and increased $287 million or 3% from the quarter a year ago. Noninterest-bearing deposits were organically up $211 million or 26% annualized and increased $280 million or 9% over the prior year's third quarter. We've been focused on growing our share of noninterest deposits for some time now and are really pleased to see the growth trend. Noninterest deposits are now 35% of deposits, up from 32% a year ago. The cost of our core deposits was up slightly from 19 basis points to 21 in the current quarter and up 5 from the prior year's third quarter. We ended the quarter with a loan-to-deposit ratio of 88.71, down from 90.27 at the end of the prior quarter, resulting from the acquisition and really strong deposit growth. The total cost of funding for the current quarter was down -- was 39 basis points. This was down from 45 at the end of the prior quarter and 36 basis points at the end of the prior year third quarter. The decrease was driven by an increase in low-cost deposits that was utilized to pay down high-cost borrowings.

Net income for the quarter was $131 million, which was up $11.1 million or 9% from the prior quarter and increased $17.7 million or 16% over the prior year third quarter. Interest income on commercial loans increased $9.2 million or 10% from the prior quarter and increased $16.6 million or 21% from the prior year third quarter. As I noted last quarter, there've been a lot of talk about margin, and now fast forward to this earnings season and the conversation about margin is still continuing. Going forward in 2019, we continue to believe we'll see a generally stable core margin operating in a tight band around current levels. Now the impact on the margin in '20 will depend on the steepness of the interest rate curve at that time, but overall, we feel very well positioned to navigate through this environment.

In early September, the company implemented balance sheet strategy to increase its net interest income and net interest margin. The strategy included early termination of the company's $260 million notional pay-fixed interest rate swaps and corresponding debt at 3.73%, along with the sale of $308 million of available-for-sale debt securities. Sale of the investment securities during the quarter resulted in a gain of $13.8 million. Offsetting the gain was a $10 million loss recognized on the early termination of the swaps and a $3.5 million write-down of deferred penalty payments on Federal Home Loan Bank borrowings. So the net here is we believe this strategy will mitigate the 5 to 7 basis points of margin headwinds that we talked about for the rest of 2019 on our last quarter's call and continue to provide a bit of support under our margin going forward.

Noninterest income for the quarter totaled $43 million, that was up 40% or $12 million from the prior quarter and increased $10.6 million or 33% over the same quarter last year. These increase is primarily attributable to the sale of securities and related to the balance sheet strategy. Service charges and other fees of $15.1 million decreased $4.9 million or 24% from the prior quarter, and this was due to the decrease in interchange fees as a result of the Durbin Amendment.

Notably, gain on sale of loans of $10.4 million increased $2.6 million or 34% over the prior quarter and $3.1 million or 43% over the prior year third quarter. This was due to increased purchase in refinance activity at very, very strong levels. The company sold $308 million of securities and recognized a 13.8 -- a gain of $13.8 million, an increase of $13.7 million from the prior quarter. Other income was down $2.3 million from the prior year's third quarter and this was a result of a gain of $2.3 million on the sale of our former branch building in the prior year third quarter. Noninterest expense for the quarter was $111 million, and this increased 24.5 or 28% from the prior quarter and 27.8 or 34% over the prior year third quarter. Compensation and employee benefits increased $10.5 million or 20%, and this was primarily due to the $5.4 million stock comp expense related to the acquisition and organic and acquisition growth which required more employees. Regulatory assessment insurance decreased $1.3 million or 68% from their prior quarter as a result of the $1.3 million of small bank assessment credits applied by the FDIC during the quarter. Other expenses of $29.1 million increased 13.8 or 91% from the prior quarter. This was driven by the $3.5 million loss in the paydown of Federal Home Loan Bank, debt and a $10 million loss on the termination of the cash flow hedges. Acquisition-related expenses were $2.1 million during the quarter compared to $1.8 million in the prior quarter and $1.3 million a year ago.

Tax expense was $12.2 million, a decrease of $356,000 or 3% compared to an increase of $1.4 million or 13% from the prior year third quarter. Effective tax rate is 19% compared to 18% in the prior year third quarter. Efficiency ratio impacted by the current quarter unusual events that we've talked about primarily related to the balance sheet strategy and the acquisition. Excluding those things, the efficiency ratio would have been closer to 54.4, which keeps us in the range of the 54%, 55% that we've been talking about.

So a lot going on but we think this third quarter really represents an excellent performance by the company. In addition to delivering strong operating performance for the quarter, the company completed the acquisition of Heritage Bank and announced the acquisition of State Bank of Arizona. So our 16 division presidents and their teams across our 8 states now with Nevada as well as our senior staff continue to produce market-leading results. And I would like to thank them all for their commitment and their drive to be the best.

So Rusty, that concludes my formal remarks, and I'd now like to turn the call back over to you to open the line for any questions that our analysts may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have our first question on the line, Jeff Rulis from D.A. Davidson.

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Jeffrey Allen Rulis, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [2]

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Randy, your comments on, I guess, elevated paydowns and perhaps the more aggressive competition, moderating that growth outlook a little bit. We've got your kind of guide for '20 -- or excuse me, through the end of the year. But how does that bleed into '20? And do you see the pays as somewhat temporary? And I guess the balance of '20, how would you look at growth?

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

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At this point, it looks like a pretty kind of equal segue into '20 at these growth rates. We don't see -- don't expect a huge change in kind of those factors, but 5% to 6% kind of feels like what '20 is going to look like at this point.

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Jeffrey Allen Rulis, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [4]

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Do you get the sense that just when you're talking to business customers, any softening or any behavioral changes given macro events, that they're sort of pulling in the [horns] at all? Anything on that front?

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

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No. We talk to our customers a lot across our Western states. I think a lot of them remain very confident. I did make a note in my comments just as we see some of our longtime customers experienced in a lot of our markets sell properties, I think they're a little more cautious on making reinvestments. And that's part of what's taking our growth rate, moderating it slightly. I don't think they have any concerns other than they just want to continue to make good investments, and it's been a little bit harder as the economy has continued to do well over a long period of time.

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Jeffrey Allen Rulis, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [6]

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Got it. Okay. And I don't know if Barry's on or someone else can tackle. Just do you guys have a CECL update to provide? And just thoughts on that and provisioning levels potentially going forward.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [7]

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You want Barry? You got him.

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Barry L. Johnston, Glacier Bancorp, Inc. - Senior VP & Chief Credit Officer [8]

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Jeff, we have been running parallel runs since March. We went through about 6 different runs that we've compared the numbers with, where we're at now, where we're going. Based on what we're seeing, given the fact that there's -- it's still a moving target, the model isn't totally structured yet the way we want it. Also, we have an acquisition coming up with State Bank of Arizona that will impact the numbers. And of course, there's always the accounting adjustments that impact the numbers. But overall, we feel that with CECL implementation, there will be an increase in the reserve from where we project our reserve to be at, at year-end. How big that is, is still a soft number, so we're just kind of keeping that in our hip pocket until we get closer to year-end when we run the last incurred loss model.

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Jeffrey Allen Rulis, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [9]

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I see. Okay. And maybe just the one last one. The Mortgage Banking kind of gain on sale, pretty robust. Obviously, we'll expect some seasonality, but any thoughts on how that's going at quarter-to-date and maybe your thoughts on the outyears as well.

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

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Yes. We're very happy. Pretty -- very, very strong record quarter for us in terms of the volume, continues to look strong coming into the fourth quarter. So probably not quite as strong as our third quarter but pretty good strength across the board. So we see -- we should see some good strength to continue there.

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Operator [11]

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We have our next question on the line from Matthew Clark from Piper Jaffray.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [12]

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Maybe first one just on the securities that were sold this quarter. Can you give us a sense for kind of weighted average yield on that portion that was sold? Just trying to get a sense for what rolled off relative to what's still on the books.

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [13]

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Yes, Matt, it's Ron. So the weighted average yield was basically 2.94. We sold just some of the longer-dated units, but very few. The predominant portion of what we sold was the lower-yielding agency securities, including some of the agencies that we had from the Heritage acquisition. So in terms of reinvesting that, we're just about halfway done with that. And overall, the metrics of the portfolio really haven't changed much. The yield came down maybe 3 basis points when you look at it, Q3 over Q2. But in terms of the duration, weighted average life, it's pretty consistent with what we had at the end of the second quarter. I would also take note that we built our cash position, so we still got that to hopefully reinvest or even pay down some higher cost deposits we have.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [14]

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Okay. And then just on deposit cost. Have you stabilized pricing at this point? Or do you feel like there's still some upward pressure in terms of exception pricing and in closing rates?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [15]

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Yes. We'd probably say feel pretty stabilized. We've seen a lot less request for interest rate exceptions. So I think the market has settled down quite a bit. There's still always the one-off kind of circumstance. But generally, Matthew, I'd say it's stabilized quite a bit.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [16]

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Okay. And then just on charge-offs and credit in general. The $1.9 million loss on the short sale. Is there more cleanup work to be done here where we might see some lumpy charge-offs? Or is that process largely complete at this point?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [17]

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Yes. We don't see -- we don't have a pipeline of credits to work. This one had been in the portfolio for quite a while, had been troubled in the past. And we just -- the point I was -- I made in my comments were we just feel now is the time to get a little more proactive with some of these weaker credits and deal with them. We've kind of continued to kind of work that through over a number of years. We just felt it was a good time to exit. And I think on a one-off basis, we may see more of those pop up, but we don't -- right now, we don't see a lot of that. But again, our bias now with still a relatively strong economy is to be proactive with weaker credits. We don't see trends in the portfolio of weakness, but weaker operators are probably the biggest issue right now across the board. So if we see folks that we think can't carry us in the distance, we'll be a little bit more proactive.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [18]

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Okay. And then just last one. The operating efficiency ratio, 54.4. As you kind of work through the budgeting process for next year, you're looking to manage within that range still, the 54 to 55 on the operating basis?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [19]

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Yes. Yes.

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Operator [20]

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We have our next question from Gordon McGuire from Stephens.

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Gordon Reilly McGuire, Stephens Inc., Research Division - Research Analyst [21]

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So I just wanted to follow-up deficiency question with just how to think about the next quarter expense levels. If I back out what I would've assumed for the acquisitions on the compensation line, it looks like the core compensation was up about $3 million, which I know you attribute it to some new hires, but it just seems a little bit elevated. I'm wondering whether there was some more unusual items or whether this is a decent run rate to look at before cost saves come in.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [22]

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Yes, no. There were no other unusual items in there, and I think you're seeing just the acquisition increases that we brought on with Layton and then with Heritage Bank pretty close together. So it should be a good -- what you have seen now, it should be a pretty good run rate then to -- for the future.

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Gordon Reilly McGuire, Stephens Inc., Research Division - Research Analyst [23]

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And just to clarify. The FDIC small bank assessments credits, those are more onetime. So I guess the regulatory spend should move back closer to $2 million a quarter once the remaining credits are applied.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [24]

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Yes. We don't know when they're going to give us the credits. It's probably going to be over the next couple of quarters. But really, it's up to the FDIC and their fund levels. So but once that's completed then that's the end of it.

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Gordon Reilly McGuire, Stephens Inc., Research Division - Research Analyst [25]

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Got it. And last one for me. On the loan yields, on a core basis, they've been up 4 basis points from the first quarter, but it's just hard for me to see what the underlying impact in the rate environment are just given the acquisitions, which I think came over at higher yields. Is there any way you can piece that out and help us think about repricing trends over the next few quarters on kind of a legacy basis?

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

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Let's see. So if you're looking at the loan yields, they are -- they have done pretty well. And we did -- we are getting some left out of the acquisitions that we brought on, both with little bit higher loan yields. So that's a positive. On the repricing, I don't know, Ron, do you want to comment on that? I think the question about the impact of the repricing.

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [27]

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Yes. So we have quite a lot of floor protection. We looked at this in the third quarter and in the fourth quarter. So we've got that holding up a lot of what could have repriced. So -- but the new production yields are definitely coming in lower, we're not going to defy gravity. But just keep in mind, when you look at the margin, you can see that the -- our overall loans went up to 5.23 from 5.20. So in there, you'll see the discount accretion plus the 5 basis points on the nonaccrual interest recoveries.

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

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So, yes. So I think on the floors, the -- well, just keep in mind, 3 quarters of the book has a floor. It's either fixed or has floor protection. And when we look at the fourth quarter, about 90% of the portfolio is protected in some -- one way or the other.

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Operator [29]

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We have our next question from Michael Young from SunTrust.

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Michael Masters Young, SunTrust Robinson Humphrey, Inc., Research Division - VP and Analyst [30]

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Wanted to follow-up first on the loan yields question that was just asked. Just on new production, where the new production yield's coming on relative to the back book just given the 150 basis point drop in 5-year rates since last year?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [31]

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Yes. So where the -- we said in the prior quarter call that we thought the loan production yields would come in just north of 5.15. It actually did pretty well. They came in at just a between 5.05, 5.10, right in that range. So that held up as well. Again, we think that's attribute to our floors, and we'll still see some of that downward pressure. So in terms of the back book, there's very little lift in the vintages going back 2 or 3 years ago just given where the 5-year Federal Home Loan Bank rates are, which we tend to price off the majority of our portfolio.

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Michael Masters Young, SunTrust Robinson Humphrey, Inc., Research Division - VP and Analyst [32]

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Okay. So essentially, you're just getting wider spreads on new production?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [33]

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Yes. Where we can, yes.

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

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Okay. And also just wanted to follow-up on the comments of kind of the slower loan growth with higher payoffs, but it still seems like deposit growth remains very strong. So how are you kind of thinking about that strategically from a mix perspective on the balance sheet? Is that incremental deposit funding going to go into the securities book? Or how should we think about that?

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

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Yes. No. I think we like to see incoming deposits fund loan growth, and I think we're seeing that now. So we're happy to have a pretty good balance. But to the extent -- now that we have most of the high cost debt terminated and off the balance sheet, yes, any kind of excess will go towards reinvestment in the portfolio.

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

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Okay. So we could see some margin compression a little bit from the mix shift, but it would still be NII dollars positive because the balance sheet may grow a little faster than loan growth potentially?

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

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Exactly. Yes.

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

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Okay. And then maybe just the last one, kind of cleanup question on -- or an update on the State Bank acquisition. Just any updates on timing around closing or system conversion.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [39]

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Closing, we have to go through a regulatory approval and that's underway. And I think late this year, kind of early next year is probably the right timing. If that timing works out, we would look. We have a conversion spot open kind of towards the later end of the first quarter. And we generally like to do those acquisitions where we have 2 banks in the same markets sooner rather than later because this -- when we announced them, we have a lot of customers from both banks going to the new bank and trying to do transactions. So the sooner -- we generally like to do that sooner rather than later.

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

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Okay. And one last cleanup question for Ron, just on the tax rate with the securities restructuring. I don't think it'd be a meaningful adjustment, but any change to the tax rate that we should expect?

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

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I think we're going to hold at 19%. I've been saying that it would be 20%. It started to move up, but 19% is better. Part of that is we've been able to do some more tax credits, and that's had a pretty good benefit.

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Operator [42]

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We have our next question on the line from Andrew Liesch from Sandler O'Neill.

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Andrew Brian Liesch, Sandler O'Neill + Partners, L.P., Research Division - MD [43]

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You've answered nearly all my questions. Just one quick follow-up though. Just curious if you have the dollar amounts of the loan production and the dollar amounts of the paydowns.

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

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We can give you kind of a high-level number here. So production was somewhere between 900 and 1 billion payoffs kind of between -- right around 900, kind of in that ballpark.

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Andrew Brian Liesch, Sandler O'Neill + Partners, L.P., Research Division - MD [45]

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Got you. Yes, like I said, you've covered everything else.

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Operator [46]

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Our next question comes from the line of Jackie Bohlen from KBW.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [47]

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Just wondering if you could provide us with an update given some of the fluctuations in the securities portfolio as to where you're thinking about a target range of securities to assets. Ron, I know you mentioned you're going to be purchasing some and maybe deploying some cash, but I just wanted to know where you're thinking about that ratio going forward?

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Ronald J. Copher, Glacier Bancorp, Inc. - Executive VP, CFO & Secretary [48]

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Don't want to go below the 20%. I could see it going up 21%, no more, just -- I think that's the essence of that number I can give you right now, Jackie. I'm truly hoping that the excess cash goes into loans, but you've heard the comments.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [49]

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Okay. So pretty steady from here. And then just want to make sure that I understand all the NIM commentary and how those different actions play in with each other. So essentially, the actions that you took in September will have a positive flow-through next quarter because you'll get the full quarter's effect, and those will, in essence, offset some of the other pressures from the adverse rate environment to keep the margin fairly flattish. Is that the message?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [50]

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Exactly right.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [51]

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Okay. And then just one broader one probably for you, Randy. So you've had an excellent year with M&A just in terms of announcing and closing deals in fairly rapid succession. If you get this most recent one closed, you'll have one closing in 2Q, 3Q and 4Q. How are you feeling about future acquisitions? Is everything you do anticipated if that conversion takes place in 1Q to be fully integrated and ready to jump into the next one? Just your updated thoughts on everything.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [52]

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Yes. No, with this -- so this was a record year in terms of announced transactions for us with the 3 transactions: first, National Bank of Layton, Heritage, and now, State Bank. Close to $2 billion in assets. And the team, I think, has done an incredible job of working on those and closing them and then doing the integration. I think we continue to have the doors open. We continue to talk to folks. We feel if there's the right opportunity, that, that's something we could act on next year. But we're going to continue our disciplined approach to the market and just look for the best really good banks, good markets, good people. So we -- that may mean another one is on the table. It may mean that we just not are seeing what we like to see. It's just difficult to tell at this point in terms of the quality of the deal flow. But we are -- the team is muscle memory and acquisitions is sharp, and so I think we'll get through the ones we have. And if something very compelling appears, we're not going to take a hard look at it.

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Jacquelynne Chimera Bohlen, Keefe, Bruyette, & Woods, Inc., Research Division - MD, Equity Research [53]

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Okay. And does the implementation of CECL have any effect on how you think about deal announcement timing and closing?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [54]

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No. We've modeled that out, Jackie. We've taken a look at how these would look with CECL and without. And other than the optics of a messy quarter when you make an announcement, it's not going to -- it doesn't change our long-term strategy and how we feel about acquisitions.

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Operator [55]

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Our next question comes from the line of Tim Coffey from Janney.

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Timothy Norton Coffey, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [56]

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Randy, as we kind of look at your interest-bearing deposits, do you have the opportunity to reprice those in the next quarter? I mean is it something that the markets provide you an opportunity to do from a competitive standpoint?

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [57]

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The core deposits I think are pretty stable. I think you saw us -- we didn't move a lot when rates went up. Didn't move a lot when rates came back down. And that's kind of our contract with our customers. We're steady stable. And I don't see really much, much change there.

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Timothy Norton Coffey, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [58]

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Okay. And in regards to the loan-to-deposit ratio, is there a level that you want to keep it at because it looks like it's going to be under pressure a little bit here at least in this next quarter? But you go into 2020, 2021, is there kind of a bottom level that you would like to kind of be able to stay at?

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

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Well, loan-to-deposit actually improved this quarter with the addition of Heritage. So real happy to see that. It's under 90. And don't see a big change in that going forward. We like kind of the range it's in right now. We could go higher if we need it to. But probably like to keep it in this -- the range it's in right now.

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Operator [60]

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(Operator Instructions) Our next question comes from the line of Matthew Clark from Piper Jaffray.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [61]

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Could you just give us the credit mark on the loan portfolio so we could just -- so we could gross up reserve-to-loan ratio? I think it was $25.9 million last quarter.

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Angela L. Dose, Glacier Bancorp, Inc. - Senior VP & Principal Accounting Officer [62]

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This is Angela. And the credit mark for this quarter was $2.9 million.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [63]

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On the -- with all the acquisitions you've done, it's -- I recall it being around $26 million last quarter.

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Angela L. Dose, Glacier Bancorp, Inc. - Senior VP & Principal Accounting Officer [64]

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Yes. Oh, you want the total of this? The total discount was $23.6 million. That's what we have left to amortize. During the quarter, with the acquisition of Heritage, the credit mark was $2.9 million. But that portfolio has such great rates that the net acquired loan discount was minimal. There's only about 8,000.

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Matthew Timothy Clark, Piper Jaffray Companies, Research Division - Principal & Senior Research Analyst [65]

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Okay. Yes, I was looking for the $23.6 million.

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Operator [66]

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(Operator Instructions) We don't have any more questions. I would like to turn the call over back to Randy Chesler, President and CEO of Glacier Bancorp.

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Randall M. Chesler, Glacier Bancorp, Inc. - President, CEO & Director [67]

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All right. Rusty, thank you, and thank you, everybody for -- on the call for dialing in today. Really appreciate you taking the time, and we hope you all had a wonderful weekend. Thank you for joining us.

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Operator [68]

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Ladies and gentlemen, this concludes today's conference call. Thank you for joining. Have a wonderful day. You may all disconnect