Glacier Bancorp, Inc. Aktie

Thank you for standing by, and welcome to the Glacier Bancorp First Quarter 2026 Earnings Conference Call. [Operator Instructions]

As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Randy Chesler, President and CEO. Please go ahead, sir.

Good morning, and thank you for joining us today. With me here in Kalispell is Ron Copher, our Chief Financial Officer; Tom Dolan, our Chief Credit Administrator; Angela Dose, our Chief Accounting Officer; and Byron Pollan, our Treasurer.

I'd like to point out that the discussion today is subject to the same forward-looking considerations outlined starting on Page 9 of our press release, and we encourage you to review this section. Last night, we issued our earnings release for the first quarter of 2026, and we believe it represents a great start to the year with another quarter of strong results.

Net income was $82.1 million, an increase of $18.4 million or 29% from the prior quarter and an increase of $27.6 million, or 51%, from the prior year first quarter. Diluted earnings per share was $0.63 per share, an increase of $0.14 per share or 29% from the prior quarter, an increase of $0.15 per share or 31% from the prior year first quarter. A key driver of our performance continues to be margin expansion.

The net interest margin as a percentage of earning assets on a tax equivalent basis was 3.80%, an increase of 22 basis points from the prior quarter and an increase of 76 basis points from the prior year first quarter. The loan yield of 6.16% in the current quarter increased 7 basis points from the prior quarter and increased 39 basis points from the prior year first quarter. The total earning asset yield of 5.11% in the current quarter increased 11 basis points from the prior quarter and increased 50 basis points from the prior year first quarter.

The total cost of funding of 1.4% in the current quarter decreased 12 basis points from the prior quarter and decreased 28 basis points from the prior year first quarter. Turning to balance sheet trends. The loan portfolio of $21 billion at the end of the quarter increased $106 million, or 2%, annualized from the prior quarter. The Southwest region, which includes Arizona and Texas grew in excess of 7% annualized during the current quarter, underscoring the strength of our diversified geographic footprint.

On the funding side, total deposits of $24.7 billion at quarter end increased $151 million or 2% annualized from the prior quarter. Noninterest-bearing deposits of $7.4 billion increased $113 million or 6% annualized from the prior quarter. Looking past the quarterly acquisition-related expenses, the non-GAAP operating results show the core strength of the business without acquisition expenses.

Operating EPS was $0.70 per share. Operating expenses were $188.2 million for the quarter, demonstrating consistent cost control. Our credit portfolio continues to perform very well. Nonperforming assets remained low at 25 basis points of total assets with a slight increase from the prior quarter. Net charge-offs declined to 2 basis points of total loans, down from 6 basis points in the prior quarter. Our allowance for credit remains at 1.22% of total loans, reflecting our conservative approach to risk management.

We also executed well on integration and operations. During the quarter, we completed the core conversion of Guaranty Bank, which we acquired in October of 2025. And I want to thank our teams for their excellent work and focus on our customers throughout the conversion.

As always, we remain committed to consistent shareholder returns. In March, we declared our quarterly dividend of $0.33 per share, representing our 164th consecutive quarterly dividend. We are very encouraged with the business performance in the first quarter and look forward to a strong 2026. Our exceptional team, expanding footprint, unique business model, strong business performance, disciplined credit culture and strong capital base continue to provide a solid foundation for future growth. That ends my formal remarks. And now I would like the operator to please open the line for any questions that our analysts may have.

Certainly. And our first question for today comes from the line of Jeff Rulis from D.A. Davidson.

Randy, just kind of at a high level, I wanted to chat about the sort of the Texas market on the Southwest footprint. And I got larger banks kind of spare the names of those, but talking about as they enter the market kind of putting a positive spin on maybe an out-of-market buyer, getting in and talking about the opportunities. We've also heard from smaller banks that there's even greater market share opportunities due to disruption.

I guess what how would you put your experience as you've been in the market now for some time and particularly through guarantee. What -- how would you couch that environment?

Yes. Well, I think to some extent, the numbers speak for themselves. They grew in excess of 6% in the first quarter. During the same period of time, we were doing -- completing the conversion. So they did a great job. I really see the bulk of what's happening there is business as usual. They're just continuing to grow with -- in the markets that they're in with good customers.

There is some disruption happening in some of the larger banks acquire some of the midsized banks there. It's still a little bit early to tell just how extensive that's going to be at this point, Jeff.

Fair enough. And Randy, if I could extend that maybe a question to additional M&A conversations in the footprint, and I guess I'd ask you if you could just focus on Texas for a bit and then maybe opine on the broader Glacier footprint as well. But starting with just what -- as guarantee and conversations have occurred, how is that update? And then broadly speaking.

Yes. One of the things that we thought would happen is that our model and our approach would be really well received in the market in Texas, given the dynamics down there, given the type of banks and the type of business very aligned already with how we do business.

And I think that's been demonstrated. We've had already multiple conversations. So I think that's proceeding well, and people are on different time lines, and we're in no hurry, and we continue to be very, very disciplined with good banks and good markets with good people. So that's continuing. Mountain West region, still some very good discussions. That hasn't changed at all. So again, I think we made the point, one of the strengths for our -- for Glacier Bancorp is the size of the geographic area that we have to kind of look for opportunities. And so I think that's continuing and will prove to be a very good advantage for us.

Okay. I appreciate the perspective. And then just 1 last one, if I could just talk to the margin. I want to check in on -- you've had that north of 4% goal or had that coming into the quarter and a pretty sizable jump. I don't know if that resets the ceiling or you just got there quicker. If you could just reorient where we sit on the margin traction trend.

Yes, Jeff, this is Byron. I would say very pleased with our margin lift in the first quarter. Yes, I would say our margin was really firing on all cylinders in Q1. We've now had 9 consecutive quarters of margin expansion and that plus 22 was the largest quarterly increase over that run. So just very pleased to see what we've been able to accomplish there.

We do see more lift ahead of us. And with this strong start to the year, I would say that puts us right on track to hit that 4% target. I wouldn't say that we're looking to go much beyond that, maybe it accelerates it a little bit. But I still think we're -- we'll see that 4% in the second half of this year. So it really hasn't changed our timing in terms of that broader guide of second half of '26 in terms of hitting [indiscernible]

Okay. Byron, if I just put that a different way, if this is correct, the levers that you had and maybe the FHLB, I mean you're kind of pulling those and you took advantage of, but that doesn't necessarily mean that you've pushed that ceiling higher potentially, but you just -- you got to there quicker maybe than some had expected. Is that fair?

I think that's right. And I would say going forward, you talk about the levers. The drivers of our margin are shifting a little bit. I would say we retain a clear upward bias. But just kind of you mentioned FHLB payoff well, that's complete. We did finalize the payoff of our FHLB advances in Q1. So that's done.

From a deposit cost perspective, I think we could, from here, maybe squeak out another couple of basis points of deposit cost reduction. But I would say with the Fed on hold, it feels like deposit costs for the most part, will be stabilizing and moving sideways from here. So to this point, we really enjoyed a boost from both sides of the balance sheet. I think going forward, we're going to lean a little bit more on the asset side of our balance sheet to see further margin lift.

Our asset repricing, as we've talked a lot about, does have momentum to it. I think you could see a slow and steady up on our asset repricing through '27, in fact. We have $3 billion of loans repricing in the next year, and that's going to earn an incremental rate of 75 to 100 basis points. Now that we have all the guaranteed data and converted and into our reporting, that's where that increased number is coming from that $3 billion of repricing and then new loans, new production rates are very strong, I would say, north of 6.5%.

So that's very helpful. And on the investment side, we're still seeing very strong cash flow. And that -- those securities are running off at a very low rate with the one handle on them. So you put all those drivers together, we're still seeing lift ahead of us. But probably going to be leaning more on the asset side of the balance sheet to realize that additional lift.

Understood. That's great. And Byron, the $3 billion, is that just a forward look 12 months or you're talking about just in '26.

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

And our next question comes from the line of Matthew Clark from Piper Sandler.

Just wanted to start on the loan growth this quarter, 2% annualized at least end of period basis, maybe a little slower start to the year, but I assume there was some -- that's partly due to seasonality. Just remind us how you feel about the kind of growth expectations for the year. I think we were thinking somewhere in that 3% to 5% range, but -- and just speak to the pipeline, I guess, coming into 2Q.

Yes. Matthew, at this point, I think we're still comfortable with that low to mid-single digits. But the pipeline still shows continued strength in levels, in both pull-through and back build. But there's a lot of uncertainty out there. And depending on some of the geopolitical and associated economic risk that go along with that, that could potentially change.

So I think we're still comfortable with the low to mid-single digits. Your point on the first quarter, definitely, was a seasonal impact. I think we'll see improvement in the second and the third quarter. And as we -- as Randy mentioned in his comments, the benefits of the southwestern region of our footprint doesn't quite have the same level of seasonality trends that the northern part of the footprint a lot more susceptible to colder weather that tends to slow down construction advances, et cetera. .

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

Yes, Matthew, Ron here. We definitely plan to get to the 54%, 55% efficiency ratio. I just want to point out, again that, that's core operating. So when you look at our efficiency ratio reported for the first quarter, it came in at 63%, well that's loaded in the numerator with the acquisition expenses, including the compensation release coming out of that acquisition.

So yes, we'll do that. The guide that I gave 3 months ago on the call in January, I just want to reiterate that at [ $750 million to $766 million ] for the full year. And I think it's important to point out that we remain cautious on hiring, spending in general. Given the economic uncertainty, certainly add in the building conflicts. So we think all of our divisions, corporate departments have done a good job in looking at where they might fall back on some expenses, but likely to show up in the -- as the year unfolds, too early to tell. So just reiterating 54% to 55%, I feel very good about that on a core operating basis and staying with the guide.

Okay. And that efficiency ratio. I know it obviously excludes merger charges and related comp. But does it also exclude amortization expense?

No. So for instance, you're talking the core deposit intangible amortization.

Yes.

That would still be in there.

And our next question comes from the line of David Feaster from Raymond James.

I wanted to -- maybe just switching back to Texas and the Guaranty deal just for a minute. That's converted integrated at this point. It sounds like they did about 6% growth in the first quarter. I guess, first, how did the conversion and integration go? It sounds like they didn't miss a beat, but just wanted to see how that went and the growth that they're seeing, are they -- what's driving that?

And what are they excited about? Is it growth from existing clients where they can deepen relationships now that -- they've got more capabilities and a bigger balance sheet? Or is this new relationships that you can now service them because they previously could. Just kind of curious some of those dynamics, if you could touch on that.

Sure. Yes, the conversion is behind us. I think the teams are doing a great job, continuing to help out the folks in Texas and get them used to our systems. But that's moving forward. As you noted, they really didn't miss a beat. You look at the loan growth of 6%. I'm very, very pleased with that. So I think all those things have gone well and are moving really -- moving in the right direction. I think Tom can give you a little color on the makeup of that business. Tom, do you want to comment on that?

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

And maybe just a high level follow-up kind of on Matthew's question on the growth side. Could you maybe just elaborate on the -- like how are the pipelines across your footprint? Where are you seeing growth? I know there was some noise from reclassification this quarter from resi to CRE. But just kind of curious, the complexion of the pipeline and how competition is across your footprint. Anecdotally, we hear a lot on the pricing front. But curious if you're seeing that and kind of how origination yields are looking in the pipeline and just any details you could help us out with?

Sure. Yes, the composition of the pipeline, still largely driven by commercial real estate and it's a good representation of both owner and nonowner and that's really spread throughout the footprint. And following on the heels of that is probably some C&I opportunities as well.

And I've mentioned this in the last couple of calls, a bigger component of the total pipeline compared to rewind the clock a couple of years, we're starting to see more construction demand. And as we know, those don't fund at close. So we've seen good, strong top line production levels. And as we get into the summer parts of the early year, we'll start to see those lines draw in addition to utilization lines for other segments of the portfolio as well, including agriculture as we get into the growing season.

So I think certainly, we're going to see some stronger second and third quarter as we move into this year. And then from a competition standpoint, we haven't really seen any significant change in the last quarter. Markets where we have a controlling market share, we're generally able to get much better pricing. And that allows us to compete better in the larger markets where we do have more pricing competition.

So production yield was about [ 6.75 ] for the quarter. We're still getting good spreads. We saw that middle part of the curve increase in March. And as a result, we saw late quarter and into the early second quarter, production yields come up a little bit as well to follow suit.

Okay. That's helpful. And maybe just on the other side of the balance sheet, I mean, deposit growth is really strong. And what's typically a seasonally slower period, especially on the noninterest-bearing side. Just -- could you touch on again, the competitive landscape on the funding side as the industry is trying to accelerate growth and fund that. And then are there any segments or markets where you're having more success driving core deposit growth?

Yes, David, we had a great quarter for deposits. First quarter can be a mixed bag sometimes. Sometimes the outflow in Q1, so to see such good such strong deposit growth was really encouraging. I think the divisions are doing a great job of competing in their market. And you saw our balance increase and at the same time, bringing our overall cost down.

And so just a fantastic result and really encouraged by what we see on the noninterest-bearing side. And so that really outperformed our expectations for Q1. And so I think that bodes well for the rest of the year. I can't say exactly kind of where that will play out. But we do see headwinds in Q2, particularly with the seasonal tax flows. But overall, what we see, we've seen a very strong start to the year and encouraged by the success that our divisions have had.

And our next question comes from the line of Andrew Terrell from Stephens.

If I could go back to just the margin quickly. Good to see you guys in the quarter at 0 and the FHLB advances. I don't think there's any broker deposits. But just curious on -- as you look forward, kind of throughout the year, I heard the commentary around deposits and maybe being able to eke out just a little bit more on the cost side. But any other changes you can make in the funding position or deposit base just acknowledging kind of the cash flows you'll have coming up this year on the bond book or what the kind of net expectation is there?

Yes, I do think we could see a couple of more basis points in Q2. And really, I'd point to our CD portfolio. We do have over 60% of our CDs maturing every quarter. And so in Q2, what we have maturing, we are -- the renewal rates that we've seen, at least early on, are coming in a little bit lower than those maturing late. And so I think if I were to point to any particular line item, I would say, look for maybe a little bit of cost decline in our overall CD portfolio. But beyond that, with the Fed on hold, I do think, for the most part, we might see deposit rates moving sideways for the rest of the year.

Yes. Got it. Okay. And then I guess with the FHLB is now down at 0, should we expect relative kind of stability in the bond book? Are you starting to purchase securities again? Or is that kind of excess cash cow?

Yes. With excess cash that we see building, particularly in the second half of this year, we are evaluating investment strategy. So we do expect to be active in the market buying bonds in the second half of this year. So yes, looking to put that excess cash to work.

Okay. Great. And if I can ask just around you guys have had the dividend pretty stable in the past couple of years, and the payout ratio has obviously dropped pretty drastically over the past 2 years or so. Just can you remind us where you generally like to operate from a dividend payout dividend payout range and just kind of your thoughts on capital deployment going forward?

Yes. I think the -- we -- yes, the dividend payout ratio has dropped significantly. We're very, very pleased to see that. it's Going to continue to trend down. We're looking forward to seeing that drop below 50 very -- in the next couple of quarters. So I think we feel very good about that. And certainly, we've had a lot of discussions about capital. We're going to be building quite a bit of capital when you take in the regulatory relief plus just the position of the balance sheet.

And so Byron and team, Ron, been very active and looking really at rethinking all options, given the amount of capital that's going to be accumulating.

Do you have a general expectation on -- I know it's just a proposal right now, but the kind of capital benefit you could expect if the proposal goes through as written right now?

Yes. We took a look at that. It's -- I understand it's still early in proposed stage. But most of the impact to us would be on the risk-weighted asset side. So we do expect to see some risk-weighted asset relief. Early calculations indicate that, that could be somewhere in the neighborhood of 75 to 80 basis points of CET1 capital ratio for us. And so this rule as proposed does become final. I think we see -- I think we'd see a bump somewhere in the neighborhood of 75 basis points on our risk-weighted ratio. .

[Operator Instructions] Our next question comes from the line of Kelly Motta from KBW.

I would love to follow up. I apologize if I missed it, but when you were discussing the margin in regards to the excess liquidity and the deployment of that. Could you quantify what you consider to be kind of excess cash levels currently on the balance sheet. It's a little tougher to see given the breakout in taxes [indiscernible] taxable, it's baked in with securities. So I'm trying to just get a sense of kind of the dry powder in there.

Yes. I don't know that we have a specific target in mind. More than anything, I think we're looking at the runoff as bonds are maturing and cash builds, and I'll just throw a number of that, somewhere above the $1 billion range in terms of overall cash. I think that's really where we'll be looking to redeploy those cash flows going forward. It could -- that level could ebb and flow, kind of depending on market opportunities, depending on timing of what we see ahead of us and what's going on in the broader balance sheet, but probably somewhere in that $750 million to $1 billion in cash beyond that would be a zone where we would look to reinvest.

Okay. Great. That's helpful. And then not to beat a dead horse about the margin. But understanding that this really remarkable level in Q1 was in part driven by the liability side where things are leveled off kind of from here, it still seems like there's a lot of earning asset expansion, 11 basis points, I believe, this quarter, which bodes well for exit market potentially higher than that 4% by 4Q.

Just wondering, is that 11 basis points sustainable? Any sort of puts or takes there? And is there a way that we should be thinking about that continued cadence and exit margin in '26 and through '27 given it seems like those dynamics are fairly durable. Sorry, I know there's a lot in there.

Yes, sure. The 11 basis points in Q1. One thing to point out with the day count and the way the interest accrued, I would say that helped. That margin is or that boost has increased in Q1. So a little bit of an unwind, we would expect to see just from a day count perspective in 2Q and beyond, the repricing lift that I mentioned earlier, as you say, is durable and will be there. .

In terms of an exit margin, there's a little bit of potential to maybe go past 4%, I wouldn't say we're going to blow through it. Maybe we creep above it a little bit. But those are my expectations, at least at this point.

Okay. And that sustainability of earning asset yields understanding the day count into '27. Is that the correct kind of way to think about it given the long-term tail of the repricing story?

I think it is. Yes, I think it is.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Randy Chesler for any further remarks.

Yes. Thank you, Jonathan, and thank you, everyone, for dialing in today. We appreciate you taking time out of your Friday. We wish everyone a great weekend, and thank you again for joining us.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Good day, and thank you for standing by. Welcome to the Glacier Bancorp Fourth Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Randy Chesler, President and CEO of Glacier Bancorp. Please go ahead.

Good morning, and thank you for joining us today. With me here in Kalispell is Ron Copher, our Chief Financial Officer; Tom Dolan, our Chief Credit Administrator; Angela Dose, our Chief Accounting Officer; and Byron Pollan, our Treasurer.

I'd like to point out that the discussion today is subject to the same forward-looking considerations outlined on Page 14 of our press release, and we encourage you to review this section. 2025 was a transformative year for Glacier Bancorp. We successfully closed two strategic acquisitions: Bank of Idaho in April and Guaranty Bank & Trust in October. Growing our footprint in fast-growing Idaho and expanding our Southwest region to include the great state of Texas.

These markets offer strong growth potential and fit seamlessly with our long-term growth strategy. We converted the Bank of Idaho business operating platform in September and plan to convert Guaranty Bank & Trust in February. This was the largest acquisition year in our history with over $4.7 billion acquired, topping our previous record of $4.1 billion in 2021.

We delivered strong financial results in 2025 with significant growth in all key metrics. We also delivered an excellent quarter, continuing our momentum with strong margin expansion, higher loan yields, lower cost of funding and solid high-quality loan growth. The company's total assets exceeded $30 billion in the quarter, ending the year at $32 billion in total assets, which was another record for the company.

Net income was $63.8 million for the quarter, including the $36 million of expenses related to our 2025 acquisitions. Net income for 2025 was $239 million, an increase of $48.9 million or 26% from the prior year net income and was driven by the two acquisitions and our disciplined approach to increasing our net interest margin during the year.

Pretax pre-provision net revenues of $362 million for 2025 increased $107 million or 42% over the prior year. Diluted earnings per share for the quarter was $0.49 per share. Diluted earnings per share for 2025 was $1.99 per share. An increase of $0.31 per share or 18% from the prior year. Net interest income of $266 million for the quarter increased $41 million or 18% from the prior quarter. Net interest income of $889 million for 2025 increased $184 million or 26% from the prior year. The loan portfolio of $21 billion at the end of 2025 increased $2 billion or 11% from the prior quarter.

For 2025, the loan portfolio increased $3.7 billion or 21%. Total deposits of $24.6 billion increased $2.7 billion or 12% from the prior quarter. Total deposits increased $4 billion or 20% during 2025. The net interest margin as a percentage of earning assets on a tax equivalent basis for the quarter was 3.58%. An increase of 19 basis points from the prior quarter and an increase of 61 basis points from the prior year fourth quarter.

The loan yield of 6.09% in the quarter increased 12 basis points from the prior quarter and increased 37 basis points from the prior year fourth quarter. The total earning asset yield of 5% in the quarter increased 14 basis points from the prior quarter and increased 43 basis points from the prior year fourth quarter. The total cost of funding, including noninterest-bearing deposits of 1.52% in the quarter decreased basis points from the prior quarter and decreased 19 basis points from the prior year fourth quarter.

Total noninterest expense of $195 million for the quarter increased $26.8 million or 16% over the prior quarter, primarily due to the increased cost from our two acquisitions. Included in noninterest expense for the quarter was $24 million from the Guaranty Bank & Trust acquisition and $3 million of expenses related to vacating branch locations. Noninterest income for the quarter totaled $40 million, which was an increase of $5 million or 14% over the prior quarter and was up 28% over the prior year fourth quarter. Service charges and fees increased 14% from the prior quarter and increased 20% over the prior year fourth quarter.

In 2025, our efficiency ratio dropped from 66.7% at the beginning of the year to 63%, showing good momentum for continued steady reduction. Credit quality remains at historically low levels. Our nonperforming assets remained low at 22 basis points of total assets with a slight increase from the prior quarter driven primarily by the acquisition of Guaranty Bank & Trust. Net charge-offs were 6 basis points of total loans for the year compared to 8 basis points in the prior year.

Our allowance for credit remains at 1.22% of total loans, reflecting our conservative approach to risk management. We continue to improve our strong capital position with tangible stockholders' equity increasing $609 million or 29% in 2025. Tangible book value per share increased to $21, up 12% year-over-year. And in November, we declared our 163rd consecutive quarterly dividend of $0.33 per share, underscoring our commitment to delivering consistent shareholder returns.

We are very pleased with the performance in the fourth quarter and for the full year 2025. Our exceptional team, expanding footprint, unique business model, strong business performance, disciplined credit culture and strong capital base provide a very solid foundation for future growth.

So that ends my formal remarks. And I would now like the operator to open the line for any questions our analysts may have.

[Operator Instructions] And our first question comes from David Feaster of Raymond James.

I just wanted to -- I want to start on the growth side. Obviously, it was a noisy quarter. We had the Guaranty deal organic growth, you guys laid it out, it was about 1% annualized, a little bit slower than maybe we expected. It looks like it's actually pretty solid in the quarter.

So I just wanted to -- of what you saw on the loan side that maybe kept things a little bit slower this quarter. And then just how you think about growth going forward? And when you'd expect Guaranty to maybe start contributing more meaningfully as all those bankers are trained on the new systems and fully ramped up?

Yes. Yes, there's a lot going on, and we actually feel good about the growth. But let me let Tom fill you in on some of the details there.

Yes, David. Fourth quarter and even first quarter is seasonally slower for us. In the fourth quarter, we exited the ag season, the construction season. So the tailwind provided by those draws earlier in the year, those fees for the ag growers at the end of their season, we saw a lot of line paydowns as they went to harvest. And then not unusual for us to see lower line utilization in the latter part of the year as well.

Looking into 2026, we're looking to low to mid-single digits for the full year. But one thing I want to mention, we are now at a record level of our pipeline early this year. And it's too early to tell whether the increase in the pipeline that we've seen is a surge or if it's sustainable.

In addition to that, a growing piece of the production is related to construction, and that's been evident for the last couple of quarters. And as you know, those don't fund at origination. So it should give us some decent tailwinds heading into the stronger seasonal quarters, second, third quarter. So we could be towards the higher end of that range for 2026.

And then in terms of Guaranty, to answer your other question there, they've hit the ground running. I think they're going to add meaningful production for us, quite frankly, they are starting immediately.

That's great. That's great. And then, Byron, I just wanted to maybe dig back into the margin trajectory going forward. I mean, thus far, it's kind of played out exactly how you've laid it out. I know you've laid out that kind of that 4% threshold by the end of this year. I just wanted to make sure that, that was still on track. And maybe if you could walk us through the NIM walk and what gives you confidence in your ability to achieve that? And how dependent is that 4% level on Fed cuts?

Yes, David, this is Byron. Yes, we've seen tremendous progress in our net interest margin. We've got great momentum, and we continue to see momentum ahead of us. We have a lot of programmatic structural repricing drivers in the balance sheet. That will, to your point, that will continue to lift margin regardless of the Fed. So we're not in any way Fed dependent. And we continue to see growth ahead of us. We do expect to hit 4% at some point later this year, probably second half of second half of '26. So green lights ahead.

Okay. That's great. And then, maybe just touching on the expense side. Obviously, there's a lot of noise just with the Guaranty deal, ongoing savings from [ Boyd ], just wanted to see if you could help us think about the core expense run rate heading into the new year and how you'd expect expenses to trend over the year and maybe some investments that you might have on the horizon just including potential hiring, I mean there is a lot of disruption in the market. Just kind of curious what investments in your thoughts on that.

Yes. Dave, this is Byron here. So our -- just to cover what's happened in Q4. So our reported all-in noninterest expense was $194.6 million, but we had some onetime -- we had M&A of $5.8 million. As we explained in the earnings release, $3 million related to -- three leased branches, and then we had $827,000 reversal of FDIC assessment. So taking those three adjustments into account, our operating core noninterest expense was $186.6 million, which was within the guide, we said $185 million to $189 million. So feel good about that. The run rate for next year, the first quarter, as is traditional, will step up.

We're going to guide $189 million to $193 million, and that represents just a 2% increase compared to Q4. And then it will step down there over Q2, Q3, Q4 as we grow into our expense base. And basically, that's the typical pattern that we exhibit. So -- but in terms of the technology spend, the really good news is that helping us control our noninterest expense as we get more efficient as our divisions, our people embrace that technology.

So it's made a difference certainly in the numerator of the efficiency ratio, but as well, it's helping to help with us with our net interest income, the loans, the commercial loans, what we're doing there, the treasury management services, we continue to pick up good news there as the divisions embrace it more so.

And including what Guaranty Bank & Trust will bring to us. They're very excited about that. So as Randy commented, we've made some pretty good headway, especially if you look at the four consecutive quarters in '25. Each time whether you look at reported or operating, our efficiency ratio continues to improve. And the good news is, we think in this year, we will be able to hit mid-50s, 54% to 55%, which is our traditional range.

In terms of investment in people, David, and there is a lot of disruption. I think one of the interesting things here is and we're looking at all the people. We really kind of whittle funnel the folks, the talent down and find that there's fewer rather than many that we think would be a good fit for our team and add some real significant lift.

And so, really no material increase in expense associated with bringing those people on, it's more individual. And as I said, that's because there's a lot of people. But when you really sort through who has a relationships and who's got a lot to bring to the table, it's actually a smaller number.

And our next question comes from Andrew Terrell of Stephens.

If I could just follow back up on expenses. I appreciate the guide, the $189 million to $193 million in the first quarter, but it sounds like it moderates afterwards. I know you guys will have the core system conversion and some cost saves coming through from Guaranty. But I'm just trying to get a sense of a full year kind of expected expenses if you add it for 2026. Just the 1Q guide is a little bit higher than where consensus is. I'm just trying to make sure we're maybe stepping down appropriately throughout '26.

Yes. So Ron here. I appreciate the question. So Q2 through Q4, I would estimate it will range, and this is for each of the three remaining quarters. $187 million to $192 million. So on a full year guide basis, that shapes up to be -- and I'm talking core. I want to make that very clear. So when I say core, I'm excluding M&A, onetime unusual items, gain or loss on any facility sales, et cetera. But the full year guide would be $750 million to, say, -- excuse me, to $766 million for the full year. Again, that's core operating expense.

Understood. I appreciate it. If I could move over just to margin quickly. You guys buy into your credit, really spot on kind of with where we've talked about margin going. I'd just like to maybe better understand on the origination side? And just as we think about the asset repricing potential, what are you seeing in terms of new origination yields and spreads right now? Have you seen any level of increased competition that's impacted that? Just hoping to get some more comfortability around the pace of loan yield expansion or earning asset yield expansion?

Yes. Let me -- I think Tom can answer a part of that. And then, Byron, if you have things to add, that would be great.

Yes. On the production, we're still seeing good spreads. We're around 300 basis points over the index. We that we utilize. For the fourth quarter, we were a little over 6.8%. We've seen that come up a little bit towards the latter part of December and continuing into January. That's what we're seeing on the production side right now.

Byron, anything to add?

No. I think you covered it. Repricing is another area of lift for us. I think we expect to see north of $2 billion of assets reprice and we'll be gaining 75 to 100 basis points on that balance. So another strong driver there.

Great. I appreciate it. And then last one for me, just I'd be curious, do you guys have the final day 1 tangible dilution for Guaranty, and maybe I missed it, but I think it's all to be fairly dilutive when you guys announced. But your tangible book value was up pretty nicely this quarter, and capital is obviously in a better spot than what you were forecasting as well. So I was just hoping if you had the update there.

Yes. No. That was one of the -- there's many good things about that guaranteed transaction, but one of them was a tangible book value payback period, which was 6 months. So don't see any change to that. So still tracking to that.

Our next question comes from Kelly Motta of KBW.

I'm sorry, I do want to get a few points of clarification on certain pieces of the guide. Ron, I just wanted to make sure on the expenses at the upper end was $766 million. Is that correct?

That's correct.

Okay. So in terms of where you -- it sounds like you're still expecting to get into that mid-50s efficiency by the second half of the year. In terms of where the expenses kind of come out, can you -- I would imagine the upper end of the range would be commensurate with higher revenues. Like is that the right way to think about it? And just kind of any puts and takes of what could push you higher versus lower end?

Yes. So yes, revenues increase. And as we add some talent, you the expenses would expect to go up. And that just -- that's a typical pattern. So I have a complete agreement with that. Jeff, I want to be clear, just on that first quarter, that's typically our higher first quarter because we have the merit pay increases, employment taxes and then it will drop down. And we're doing very well across the divisions, the corporate department with controlling our noninterest expense. And so I think that's really helping with the efficiency ratio. But the net interest income revenue is growing is certainly making a big difference as well as we continue to get towards that. As you said in the second half, get to the mid-50s on the efficiency ratio.

Got it. That's really helpful. And then what was a nice, I guess, surprise or at least relative to my model is your loan yields came in higher and granted there was the contribution from Guaranty. It looks like loan fees were fairly minimal. So as you look ahead, maybe can you provide where new loan pricing is coming on and how we should be thinking about that as being additive to the outlook ahead?

Yes. I think that, as Tom commented on, we're getting a little better margin at origination than we expected. We saw some compression in the tail end of '25. But December was really strong, and that margin, we're getting closer to 3% margin on the new loan pricing. And so whether that continues or not, it's a little difficult to say. It's a little early, but we're encouraged. We're starting off the year with that dynamic, and we'll just see if that trend carries through for the rest of '26.

Got it. That's helpful. And then maybe a last question for Byron is obviously, the cash flows from securities with the treasury ladder maturing has been a nice tailwind. Can you remind us kind of the cadence of securities cash flows as we get through the year?

Sure. We're expecting roughly $425 million of cash flow from the securities book every quarter. And that's a rough estimate quarterly for '26.

Got it. Do you have the blended roll-off yields on that?

That's going to be -- it's going to have a one handle on it. It's going to probably be in the low to mid-1% range.

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

Tom, I wanted to circle back to the -- to your -- the growth conversation. And I think you're loans up 3% organically this year. And I understand kind of the guide for this coming year is at a minimum that level and hope to do better. But was there anything in '25 that you had more kind of credit trimming or balance sheet adjustments, certainly brought on a lot of your busiest acquisition year. So I don't know if there was some balance sheet reshaping.

Just trying to get a sense for -- it feels like the model is in some fantastic markets and repeating 3% might be a little mild. So anything in '25 that you maybe had headwinds versus '26 that releases maybe some of those pressures?

Yes. I think there's two things that are real tailwinds. One is the construction production we've had over the last few quarters, as we know the construction season, that's going to be a tailwind for net growth. Those don't typically fully fund at close. So as we enter the construction season, especially in the northern part of the footprint, that will pick up.

Same thing with the ag book, and then we typically see stronger line utilization towards the middle part of the year. From a headwinds perspective, 2025 was impacted, probably a little more than normal with some early term payouts. We've talked about that on prior calls. We'll just have to watch that to see if that's continuing trend.

And just given the overall CRE market, cap rate is still quite low. NOI is probably better than anticipated. That gives a pretty good investment return for those developers as they hit stabilization on those projects. So the economics around that are still pretty positive for the investor side. So that's just something we'll need to watch to.

Okay. And Randy, I guess the baseline question for you on busiest acquisition here in the history of the bank as you get into the Southwest footprint in terms of more conversations as well as the historical regions that you've been in. How is the M&A outlook from your perspective?

No, I think it's good. And we're having conversations in the Mountain West region, as well as the Southwest. And there's increasing activity there. And I'd say we're being very disciplined and selective as we've always been as more and more things appear. And right now, our focus is on getting the Guaranty Bank & Trust conversion done. We're going to do that in mid-February. And really making sure that goes exceedingly well, which we believe it will. And then I think we have a lot of conversations ongoing. We'll see where that will take us. But I think it should be a very good environment for the next couple of years.

We have a follow-up from Andrew Terrell of Stephens.

Just a couple of quick questions around the margin. Byron, I think you said it was a little north of $2 billion for repricing assets in 2026. Do you have a -- can you confirm that? Do you have a comparable figure for 2027? And then separately, I was going to ask, you're getting close to the end on the FHLB balances. Do the rest of those come off in the first part of 2026. And then with some of the excess cash flow you're generating, what should we think about in terms of uses of that? Does it go back into the bond book? Is there anything else that needs to come off in terms of higher cost funding? Just a couple of the moving pieces there?

Sure. In terms of the repricing, Andrew, I don't have the '27 number in front of me. I can look that up and get back to you. I think it would be comparable to what we expect in '26, $2 billion, $2.5 billion, somewhere in that neighborhood would likely be repricing in '27. In terms of the FHLB paydown, we expect to complete the payoff of our FHLB advances later in the first quarter. I think mid-March is the payoff of that. And so that will be great to see the path of that higher cost debt. And that's been a big part of our margin recovery story as well.

And that will be funded with securities cash flow with the elevated cash flow that we noted earlier coming off of the securities portfolio perfectly sufficient to fund that payoff. So -- and once we pay off that remaining $440 million, that's pretty much it in terms of our wholesale funding that's left.

Yes. And so it just probably gets put back into the bond book at that point, the excess cash flows?

Exactly right. Yes. We're looking at strategies for later this year to what to do to redeploy that cash that would build.

And we have a follow-up from David Feaster of Raymond James.

I wanted to circle back to Guaranty and just kind of get a sense of how that integration has gone so far. Going into a new market can be very difficult and Texas isn't easy, but I know that's a market that you know well or Andy. I suspect it's pretty limited disruption just given, this is a new division that you are creating, no real branch changes or anything like that?

And again, Tom, I appreciate the commentary that they're already starting to contribute. But I just wanted to get an early read on the integration now that we're a few months in post close and kind of what's you're most excited about with them at this point?

Sure. Yes. I mean to start with our model, we keep the name. It's a 100-year-old bank in terms of minimizing disruption. We've -- we keep the people, we have seen leadership in place. And so that is very, very helpful compared to some of the other transitions ongoing in the market down there. We think that we're extremely well positioned with customers and employees.

So that part, just setting the stage with the model is very, very helpful and positive from our standpoint. It's been a great fit. I think we've noticed that from the beginning and talked about that. The culture fit certainly on the credit side. Tom has done a lot of work and it's a very good fit. So it looks very much like a seamless handoff. They're integrated into the credit system right now. And we're very, very mindful of making sure that they have all the tools they need to succeed.

In terms of being excited about it. I mean, it's -- the franchise has been and still is extremely well positioned in that market. They've got a great legacy base in East Texas with the Mount Pleasant as the centerpiece there. But a lot of very, very good markets. And then they're exposed to some very strong growth markets with very good teams in place. So Dallas-Forth Worth, College Station, Houston, Austin. And so I think the opportunity, and they're really just have scratched the surface there. That's probably the most exciting thing is as we give them some sophisticated tools, so we're giving them our automated commercial loan processing system. That's going to create some productivity, some improvement in how we can serve customers there.

And then a much bigger balance sheet, so an ability to take care of customers, bring back relationships that had to be handed off from a $3 billion bank to a $30 billion bank. So all those things, David, we think will be really, really nice tailwinds going forward.

Okay. That's great. And then I don't want to beat a dead horse on the margin. You guys have been very clear on the near-term dynamics. But if I think longer term, just given the strength of your core deposit base, you've historically operated. You had a pre-pandemic, you had a margin in the mid-4% realm. I just wanted to get your thoughts on if that's still an achievable level, again, based on the back book repricing and securities tailwinds even into 2027, would you still expect fairly robust margin expansion in '27?

Yes, David, we do see continued expansion, whether we get to 4.5%. Let's get to 4% first and then work and build on that progress. But just from what I see ahead of us right now, yes, I could see us growing beyond that 4% in '27 absolutely.

And our next question comes from Matthew Clark of Piper Sandler.

I just want to clarify the expense run rate for the upcoming quarter, the guide. Did you say $189 million to $190 million or $189 million to $193 million?

$193 million, Ron here, $189 million to $193 million.

Got it. Okay. And then on your deposit costs this quarter, they ticked up a little bit here. I'm assuming that's from the guaranteed deal? Or was there something else going on? And I assume we're going to see deposit cost trend back down from here, though?

That's exactly right. Yes. The uptick that you saw was from the acquisition, and we do expect to see declining deposit costs from here.

Okay. Got it. And then on the -- for the cost saves, did you get any cost -- I think it was expected to be a little over $17 million from Guaranty. Did you get any of the cost saves out this quarter? Or is it all on the come beginning in 1Q?

Yes, Ron here, it will really take hold after the conversion. And so that's really where it is. We've been just doing a lot of things, as Randy pointed out, but they will show up. They've been very, very mindful of that, and we're working with them back to Randy's point, Integration, coordination going very well.

Good. Okay. And then on the net charge-offs this quarter. I know we're splitting hairs at 12 basis points, but up from the prior quarter. Anything unusual in that in those charge-offs, anything outsized? Or is that kind of more normal, you think?

No, more normal and typical for year-end cleanup. We typically -- as we continue to scrub the portfolio, if there's an opportunity to exit a credit, we'll do it. So it's normal. Nothing outsized, nothing unusual.

This concludes our question-and-answer session. I would like to turn it back to Randy Chesler for closing remarks.

Very good. Thank you, Didi, and thank you, everybody, for dialing in today. Very excited about the trends here and the growth into '26. So we appreciate everybody dialing in. Have a great Friday and a great weekend. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good day, everyone, and welcome to the Glacier Bancorp Third Quarter Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

Now it's my pleasure to turn the call over to Glacier Bancorp's President and CEO, Randy Chesler. Please go ahead.

Good morning, and thank you for joining us today. With me here in Kalispell is Ron Copher, our Chief Financial Officer; Tom Dolan, our Chief Credit Administrator; Angela Dose, our Chief Accounting Officer; and Byron Pollan, our Treasurer. I'd like to point out that the discussion today is subject to the same forward-looking considerations outlined starting on Page 13 of our press release, and we encourage you to review this section.

We delivered another excellent quarter, continuing our momentum with strong margin expansion, higher loan yields, lower deposit costs and solid high-quality loan growth. We also completed the core conversion of the Bank of Idaho with assets of approximately $1.4 billion. And shortly after quarter end, we successfully closed the acquisition of Guaranty Bank & Trust, adding $3.1 billion in assets and expanding our presence in the Southwest.

Bank of Idaho was successfully folded into 3 of our existing divisions: Citizens Community in Pocatello; Mountain West in Boise; and Wheatland Bank in Eastern Washington. The Bank of Idaho brought us a terrific team of lenders and staff, as well as excellent customer relationships.

The Guaranty transaction marks our first entrance into the State of Texas, and we're excited about the long-term opportunities this brings. Our focus now is on delivering a flawless conversion in the first quarter of 2026 and making sure we have happy employees and customers.

For the third quarter, Glacier Bancorp reported net income of $67.9 million or $0.57 per diluted share. The third quarter net income represents an increase of 29% from the prior quarter and reflects a 33% increase in net income compared to the same quarter last year. Pretax pre-provision net revenues of $250 million for the first 9 months of the current year increased $77.1 million or 45% over the prior year first 9 months. Our loan portfolio grew $258 million to $18.8 billion or 6% annualized from the prior quarter. Commercial real estate continues to be a key driver of loan growth.

Deposits also grew, reaching $22 billion, up 4% annualized from the last quarter. Noninterest-bearing deposits grew again this quarter, increasing 5% annualized and now representing 31% of total deposits. We reported net interest income of $225 million, up $18 million or 9% from the prior quarter and up $45 million or 25% from the same quarter last year.

Our net interest margin on a tax adjusted basis expanded to 3.39%, up 18 basis points from the prior quarter and up 56 basis points year-over-year. This marks our seventh consecutive quarter of margin expansion, reflecting the strength of our loan portfolio repricing, our ability to get good margin on new loans and our continued focus on managing funding cost. The loan yield of 5.97% in the current quarter increased 11 basis points from the prior quarter and increased 28 basis points from the prior year third quarter. The total earning asset yield of 4.86% in the current quarter increased 13 basis points from the prior quarter and increased 34 basis points from the prior year third quarter.

Total cost of funding declined to 1.58%, down 5 basis points from the prior quarter, as we reduced higher-cost Federal Home Loan Bank borrowings by $360 million. Core deposit costs decreased in the quarter to 1.23% from 1.25% in the prior quarter. Noninterest expense was $168 million, up $13 million or 8% from the second quarter, primarily due to increased costs from acquisitions.

Noninterest income totaled $35 million in the current quarter, up $2.4 million or 7% from the prior quarter and up 2% year-over-year. Service charges and fees increased 5% from the prior quarter, while gains on loan sales increased 18% from the prior quarter. Our efficiency ratio remained at 62%, down from 65% a year ago with good momentum for continued steady reduction.

Credit quality remains very strong. Our nonperforming assets remain low at 0.19% of total assets. And net charge-offs were $2.9 million for the quarter, or 3 basis points of loans. Our allowance for credit remains at 1.22% of total loans, reflecting our conservative approach to risk management. We continue to maintain a strong capital position, with tangible stockholders' equity increasing $304 million or 14% in the current year. Tangible book value per share increased to $20.46, up 8% year-over-year. And we declare our 162nd consecutive quarterly dividend of $0.33 per share, underscoring our commitment to delivering consistent shareholder returns.

We are very pleased with our performance this quarter. Our expanding footprint, unique business model, strong business performance, disciplined credit culture and strong capital base provide a solid foundation for future growth.

That ends my formal remarks. And I would now like the operator to open the line for any questions that our analysts may have.

[Operator Instructions] One moment for our first question that comes from the line of Jeff Rulis with D.A. Davidson.

You guys, on the margin, you did note the 7 consecutive quarters of expansion. This quarter's was the largest sequential of all of them. I won't read into kind of the lumpiness of that, I suppose, but a good sign, nonetheless. You guys have really guided very well on the trend on that front. Maybe just catch us up on where you think you see it headed in light of September's cut and potentially, a couple more this -- through the end of the year? That would be great on the visibility front.

Jeff, this is Byron. Yes, it has been great to see the continued improvement in our margin. And I would say those repricing drivers in our balance sheet that we've discussed, they remain in place. And so we do see continued growth ahead of us in terms of our outlook. For Q4, we anticipate that, that will grow. Our margin, additional 18 to 20 basis points in the fourth quarter, that does include the impact of Guaranty.

I know a lot of folks will be interested in our 2026 outlook. I don't have specifics for you there. We're just now starting our budgeting cycle for 2026. But broadly speaking, what I can say is that we do expect to see continued margin growth throughout the year. I would say, though, that the pace of quarterly increase is likely to moderate throughout next year. So hopefully, that gives you some color for where we're headed. We do see continued growth.

Just to refine that, Byron, when you said the margin growth throughout the year, you're mentioning additionally in '26, but not specifically. Is that what you were referring to?

Exactly right. Yes. I don't have a specific guide for you on '26. I think we need to get to our budgeting cycle first to really refine that expectation. But from where we sit right now, we do see continued growth throughout the year. But quarter-to-quarter, I could see the pace of growth starting to moderate a little bit.

Understood. And Randy, we are early goings in the Texas market, but interested in the reception there and how potentially, your view of finding further partnerships in Texas and Oklahoma, if that's -- if you got any update there, if you're just as encouraged or less, more? Just interested in that feedback so far. Again, very early, but notable anyway.

Yes. No, absolutely. First, I'd say, I think Guaranty may be the best cultural fit of any acquisition we've done in the last 10 years. Very, very good fit. Our focus right now is on getting Guaranty converted in 1Q and making sure that goes extremely well. I will tell you, there's conversations already. We'll have plenty of interested banks who would like to have a conversation when we're ready. Our job one right now is making sure we get through the conversion in 1Q and do it really, really well, make sure our customers are happy, employees are happy. And then like I said, we'll have plenty of banks to talk to.

Got you. Maybe one last housekeeping, if I could squeeze it in. The tax rate seemed a little elevated. I don't know if that's a factor of kind of merger cost, but if you could just point us to maybe a good rate going forward?

Yes, Jeff, Ron here. It is a function of, largely, the merger-related expenses, some of which are nondeductible. And I would tell you that third quarter rate, I would use that as well for fourth quarter.

Okay. And Ron, are you -- is that an assumption of additional merger costs or just more of a core rate to match third quarter?

We'll have some more merger costs as well, but it's -- I think it's a pretty good rate to go with.

One moment for our next question that comes from the line of David Feaster with Raymond James.

Maybe just on the growth side. I mean loan growth has been solid, kind of remained in that mid-single digit realm. Just wanted to get a sense of how demand is trending, how the pipeline is shaping up and you're backfilling that production? And then just any comments on the competitive landscape as well? And I mean, we're hearing more competition, especially on the pricing side, maybe a bit more on the structure as well. But just again, I wanted to get a sense of your thoughts on the loan growth side and how that competitive landscape is shaping up.

Yes, David, this is Tom. Yes, third quarter was another good quarter for us. Typically, second and third quarter are seasonally stronger for us, a little bit less so in fourth and first quarter. I think we expect that a little bit. But from a pipeline perspective, we continue to see consistent pull-through. We continue to see consistent build back. And it is really fairly consistent throughout the footprint, too.

And I think the -- from a competition standpoint, it's a little bit geographic-specific. In some of the larger markets, we'll see more pricing competition, a little bit less so in markets where we have more of a controlling market share. We're -- certainly, the types of deals that we go after, just core Main Street lending. We're not really seeing competitors stretch on the structure side, which is encouraging. And that's certainly not something that we would do. So it tends to be more pricing related.

Okay. And maybe just staying on credit broadly. I mean, credit is still pretty benign for you all, especially just in the government. The increase that you guys saw in nonaccruals, all government guaranteed. Is there anything on the credit front that you're seeing at this point or watch more closely? Or is there anything specific within the small business space that you're seeing notable pressures?

The only industry that I would say is a little bit outsized is probably the ag sector. Hard grain prices, hay prices are still quite depressed. We're faring quite well through this. I think our banks do a good job of securing those assets with -- certainly more hard assets than crops. And so I think that gives the flexibility of both us and the borrower to work through these cycles. And certainly, our ag lenders have a tremendous amount of experience and have seen cycles like this over and over again.

But outside of that, David, there's really no specific geography or industry segment that's showing an outsized level of risk. We saw a little bit of an increase this quarter, similar to last quarter. I think we're just continuing to see more normalization from the historic lows that we were showing for the last couple of years.

Okay. And then maybe last one for me, just maybe a bit higher level, conceptual. Like, I mean, you look back, I mean, there's obviously -- you guys have done a great job driving the margin expansion, right? And there is a huge tailwind just from the remix in your pricing side. And then again, obviously, organic loan and deposit growth is, again, accretive to the margin as well.

You look -- pre-pandemic, right? I mean, you guys were consistently operating well north of 4%. Yes, is that -- just in this kind of world, is that still a reasonable target? I mean, you guys have continued to march your way towards that, but is that a reasonable target that we could hit in some time in the foreseeable future? Is that -- just kind of curious, your thoughts on that?

Yes, David, I do think we can get back to that 4% threshold. It's a matter of timing. I think it's really a matter of when, not if. I don't have specific timing for you. It wouldn't surprise me towards the end of next year if we see a full handle on our net interest margin.

Now a lot of things could impact that between here and there. What happens with our loan growth and deposit growth, what's the Fed doing and shape of the curve, all of those things are going to influence that longer-term margin. But I do see the potential to get there in the future.

Our next question comes from the line of Matthew Clark with Piper Sandler.

I want to start on the deposit cost side. Just -- if you could give us the spot rate on deposits at the end of September? And just give us a sense for what kind of beta you think you can achieve with this last rate cut that we just got and subsequent rate cuts?

Our spot deposit cost on September 30 was 1.22%. In terms of our beta, to this point, we've been able to achieve a down rate beta somewhere in the mid-teens with some amount of lag there. Our deposit cost doesn't react immediately to a rate cut. It takes us a little time to kind of work into that, call it, 15% deposit beta. With the addition of Guaranty, their deposit base has a slightly higher beta. So if we were 15%, I think somewhere going forward with a combination of Glacier and Guaranty, maybe that pushes us up another couple of percent. So somewhere in the range of, call it, 15% to 20% would be my expectation for our down rate beta going forward.

Okay. And then the other one for me, just around the expense run rate and your updated guidance there, whether or not that's changed since last quarter with Guaranty now in the fold at the start of the fourth quarter. I don't know if you want to -- it sounds like you're still budgeting for next year, so I don't know if you want to offer up anything in the first quarter, but I assume there's some seasonality there?

Yes. Let's -- Ron here. Thank you for the question. Yes, well, we're budgeting, so I'm just going to limit the discussion to the third quarter, I want to touch on that and then go towards the fourth quarter. So in the third quarter, we finished -- reported noninterest expense, $167.8 million. That includes $7 million in acquisition-related expense and $800,000 we incurred for a fixed asset write-down related to a branch consolidation in one of our Montana markets.

And I want to remind folks that the core noninterest expense includes merger-related expenses, other onetime unusual items. So taking those adjustments into account, our core noninterest expense was flat at $160 million, right in the midpoint of the guide of $159 million to $161 million that was shared on the last quarter's call.

And then moving into the fourth quarter. Just looking at Bank of Idaho, we had a full 3 months of expense from them versus 2 months in the prior quarter. So Bank of Idaho, projected to add $9 million to $10 million in that third quarter, came in just about $9 million, the low end of that guide. And we expect that to occur. Bank of Idaho impact for the fourth quarter will be just right around that $9 million number.

So then with the acquisition of Guaranty Bank on October 1 versus -- we think it would be October 31 -- we're now going to have a full 3 months of expense from Guaranty, and this will cause a step up in our core noninterest expense. It will add $21 million to $22 million to core noninterest expense in the fourth quarter. But in addition, because of purchase accounting, we're going to have $3 million of amortization expense for a core deposit intangible that we had to record as we would on any acquisition.

So in the fourth quarter, when you look across it and put it all together, we're expecting a range of $185 million to $189 million. And again, that includes Guaranty Bank. So -- but collectively, I just want to speak very highly of our bank divisions, corporate department. They've done very well in limiting, controlling their expenses. We do continue to take a cautious approach in hiring and spending in general. You still got higher levels of market volatility, et cetera. Let me open it up for questions.

One moment for our next question. And it's from the line of Andrew Terrell with Stephens.

Maybe I'll just start back there on expenses. Ron, I really appreciate the guidance on 4Q with all kind of the moving pieces. Just understanding that the core system conversion for Guaranty until the first quarter of '26, I'm assuming the $185 million to $189 million guide for the fourth quarter doesn't incorporate much in terms of cost save. And question being, should we expect some moderation of that $185 million to $189 million going into 2026, just as we experience the core system conversion and get some cost saves?

Yes, we will have in the beginning of the first quarter, again, largely related to after the conversion, that's when the cost saves really start to kick in. And as we modeled, we're modeling 20% reduction in noninterest expense cost saves. 50% of that, we will achieve in '26. The other 50% will be in '27. And so as I mentioned earlier, we're still beginning, I should say, in the budgeting process, but there will be some moderation.

Yes. Got it. Okay. I appreciate it. And if I could go back to just the margin commentary briefly for Byron. I appreciate all the color there. I specifically wanted to ask about the comment of just less margin expansion sequentially throughout '26 versus what you've experienced this year. And you guys have benefited from a few things this year. It's -- M&A has helped, the FHLB deleverage is up significantly, and I think that slows down or kind of ends in 1Q of next year, but then the fixed asset repricing. And I'm curious, the comments on slower margin expansion next year, is that mostly reflective of less FHLB deleverage, potential less M&A-related expansion, but asset repricing trends staying intact? Or do you expect relatively less asset repricing benefits as well?

I would say, for the most part, it's the FHLB deleveraging. As you point out, that -- we really finished that by the end of the first quarter. And so we don't -- that extra boost or pop that we get from paying down high-cost corporate funding, that will end in Q1. But also on the fixed asset repricing, we still see -- from a balance perspective, we still see that asset repricing is there. I would say from a rate perspective, the 5-year point of the curve has come down some. And so that's also kind of playing into and influencing that comment I made earlier, where we're seeing less lift. I think we'll see less repricing lift just because of the -- where that 5-year point in the curve is right now. It could change, of course.

Yes. Fair enough. Okay. And last one just for Randy. I appreciate your comments on the Texas market and how well the Guaranty acquisition has gone so far. I wanted to ask about your comments. I know the near-term priority is getting everything integrated from Guaranty, but it sounds like conversations maybe could be picking up. And I think your comments were specific to Texas, but I'm curious just on the overall M&A strategy going forward. Should we expect there is more of an emphasis in the Texas market as you build out scale there? Or are you equally as focused kind of legacy Mountain West franchise in Texas? I guess, is one more in a row? Or would you expect to grow more in one than the other?

Yes. So I'd say overall, M&A, I think what we offer is becoming even more attractive to sellers, especially with some of the larger banks purchasing banks in our market. We think that's very, very positive for us, so we offer something that's very different and very attractive to a lot of sellers.

I don't think we can put an emphasis on Texas over the Mountain West, the Southwest over the Mountain West. It's just getting back to -- we have a lot of optionality with very, very good sellers across that entire area. So we don't -- we're not really prioritizing one area over the other. Like I said, our focus is to do a great job on the conversion, and then we'll see where the conversations take us.

Our next question is from Kelly Motta with KBW.

Maybe one for Byron. I think the guidance for margin last quarter was 15 to 17 basis points, plus another 5 to 7 from Guaranty. It seems like at least near term, it might be a little bit lower. Can you provide any context for the color around that? Wondering if Guaranty is maybe contributing less or there's less accretion income? Any color would be helpful.

Sure. We have an estimate in there for the loan marks and the purchase accounting accretion. So we have an estimate in there. I think it may be a little bit more modest than it was prior quarter. Also, kind of back to that 5-year point of the curve, our repricing is just a little bit softer. And also, just looking at the rate cuts -- and I mentioned that lag on the deposit side. So the timing of the cuts and the reaction of our deposit base can create a little bit of noise during the quarter. And so put that all together, thought it might be good to just kind of rein in just a little bit, that margin cut. 18 to 20 is still a very strong quarter for us.

Got it. That's really helpful. Another question that maybe you can humor me on, this nondepository financial institution lending. From what I can see in the call reports, it looks like it's almost negligible, where you guys -- what your exposure is. Just wondering if that's the case? And if you could provide -- just a moment -- credit has been such a strong selling point of Glacier, just the types of commercial credits you look at and kind of what gives you comfort with the outlook ahead?

Sure, Kelly, it's Tom. And you're right on the assessment of the nondepository financial institution. It's immaterial. And Kelly, it's just -- it's not a business line for us, neither is syndicated or any other indirect type of business. With our division model, kind of answer the last part of your question. At the end of the day, we're a collection of community banks, we're Main Street lenders that deal with local businesses and consumers. And we just haven't had the appetite really at all for syndicated indirect, nor do we foresee exploring it. And so I think when we look at the nature of the pipeline, it really falls right in line with how the footprint is laid out. Good, strong local borrowers, Main Street lenders that we've had relationships with for years.

Thank you, Tom. I'll step back.

[Operator Instructions] All right. And our last question comes from the line of Tim Coffey with Janney Montgomery Scott.

Tom, if I could follow on that last question Kelly was asking. I mean, we've seen a handful of missteps in the last couple of weeks from some banks. And I was wondering if, in general, you could discuss kind of the processes and checks you have in place at Glacier to ensure that borrowers are doing what they're supposed to be doing?

Yes, sure. Well, first of all, it begins with knowing your customer. And the other thing is the loans that we have on our books, we're in control over. So that kind of goes back to that indirect comment or purchase participations or syndication. That's just isn't really a space that we play in. We want to be directly in control of the relationship.

And then I think to answer the latter part of your question, we have a credit administration function in every single one of our divisions. And that's proximate to the Street, proximate to the customers. They're in the communities, where we meet with our borrowers on a regular basis, typically minimum on a quarterly basis for our larger borrowers. But we're also seeing these borrowers at community events and sporting events.

And so it goes back to just the true core community bank-type lending. And then from a more formal perspective, we're very good and deliberate with our covenant structure and our new originations, our ongoing annual reviews of both -- each of the division banks and then also an ongoing regular review of the portfolio at large. And so I think when you just encapsulate all those things together, we really have a strong understanding of what's going on with our borrowers.

All right. That's great. All my other questions have been asked and answered.

Thank you so much. And this will conclude our Q&A session, and I will pass it back to Randy for concluding comments.

All right. Thank you, Carmen. And I want to thank everyone for dialing in today and joining our call. Have a great Friday and a great weekend.

Thank you. And this concludes our conference. Thank you all for participating, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Glacier Bancorp Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Randy Chesler, President and CEO of Glacier Bancorp. Please go ahead.

Good morning, and thank you for joining us today. With me here in Kalispell is Ron Copher, our Chief Financial Officer; Tom Dolan, our Chief Credit Administrator; Angela Dose, our Chief Accounting Officer; and Byron Pollan, our Treasurer. I'd like to point out that the discussion today is subject to the same forward-looking considerations outlined starting on Page 13 of our press release, and we encourage you to review this section.

We delivered an excellent quarter, continuing our momentum with higher loan yields, lower deposit costs, increasing margin, solid growth and disciplined expense management. We successfully completed the acquisition of the Bank of Idaho, adding $1.4 billion in assets and expanding our presence in Idaho and Eastern Washington. The integration is progressing very smoothly, and we're excited about the long-term opportunities this brings.

We also announced a definitive agreement to acquire our Guaranty Bancshares, a $3.1 billion bank headquartered in Mount Pleasant, Texas. This marks our first entry into the state and represents a significant step for our company and in our strategic expansion of our Southwest presence.

We reported net income of $52.8 million for the second quarter or $0.45 per diluted share. Our results include $19.9 million in credit loss expense and acquisition-related expenses, primarily from the completion of the Bank of Idaho acquisition. While the second quarter net income represents a decline of 3% from the prior quarter due to acquisition expenses, it reflects an 18% increase in net income and a 15% increase in earnings per share compared to the same quarter last year.

Our loan portfolio grew $1.3 billion to $18.5 billion, an 8% increase from the prior quarter with $239 million or 6% annualized in organic growth. Commercial real estate continues to be a key driver of loan growth.

Deposits also grew, reaching $21.6 billion, up 5% quarter-over-quarter.

Notably, noninterest-bearing deposits increased 8% and continue to represent 30% of total deposits. Deposits and repurchase agreements organically increased by $43 million or 1% annualized from the prior quarter.

We reported net interest income of $208 million, up $17.6 million or 9% from the prior quarter and up $41.1 million or 25% from the same quarter last year. This growth was driven by higher average loan balances, improved loan yields and declining funding costs.

Our net interest margin on a tax adjusted basis expanded to 3.21%, up 17 basis points from the first quarter and up 53 basis points year-over-year. This marks our sixth consecutive quarter of margin expansion, reflecting the strength of our loan portfolio repricing, our ability to get good margin on new loans and our continued focus on managing funding costs.

The loan yield of 5.86% in the current quarter increased 9 basis points from the prior quarter loan yield and increased 28 basis points from the prior year second quarter. The total earning asset yield of 4.73% in the current quarter increased 12 basis points from the prior quarter and increased 36 basis points from the prior year second quarter.

Total funding cost declined to 1.63%, down 5 basis points from the prior quarter as we reduced higher-cost federal home loan bank borrowings by $265 million in the quarter. Core deposit costs remained stable at 1.25%.

On the expense side, noninterest expense was $155 million, up 3% from the prior quarter. This includes $3.2 million in acquisition-related costs. Compensation and benefits rose due to increased headcount from the Bank of Idaho acquisition and annual merit increases.

Noninterest income totaled $32.9 million in the current quarter, up slightly from the first quarter and up 2% year-over-year. Service charges and fees increased 8% from the prior quarter, while gains on loans remained steady.

Our efficiency ratio improved to 62.08%, down from 65.49% in the prior quarter and 67.97% a year ago, reflecting positive operating leverage.

Credit quality remains very strong. Our nonperforming assets remain low at 0.17% of total assets. And net charge-offs were just $1.6 million for the quarter. Our allowance for credit remains at 1.22% of loans, reflecting our conservative approach to risk management.

We recorded a provision for credit loss of $20.3 million, which includes $16.7 million related to the Bank of Idaho acquisition. Excluding that, our core provision for credit loss was $3.6 million.

We continue to maintain a strong capital position. Tangible book value per share increased to $19.79, up 8% year-over-year and we declared our 161st consecutive quarterly dividend of $0.33 per share, underscoring our commitment to delivering consistent shareholder returns.

We are very pleased with our performance this quarter. Our expanding footprint, unique business model, strong business performance, disciplined credit culture and strong capital base provide a solid foundation for future growth.

That ends my formal remarks. And I would now like the conference call, operator, to open the line for any questions our analysts may have.

[Operator Instructions] And our first question comes from Jeff Rulis with D.A. Davidson.

I wanted to check in on the margin. Certainly seems to be tracking really well to the guide. I think you've talked about a [ 350 ] exit towards the end of the year. Just wanted to see if there's anything in the current quarter on kind of one-timer accretion bump? Or is that all-in number kind of, again, stair-stepping towards that exit kind of pre Guaranty?

Yes, Jeff, this is Byron. I can address the margin. Yes, we do think that we'll see continued growth. We did see great traction in the second quarter from the NIM drivers that we've discussed in the past. And we do think that we can continue this pace of increase, at least for the next couple of quarters. Our margin grew 17 basis points in the second quarter. And we think we can repeat that level of growth in Q3 and Q4. To put a range on it, maybe we grow 15 to 17 basis points per quarter. Keep in mind that does include the impact from the Bank of Idaho. So this does represent a little bit of an increase from our prior margin guide.

We did see better-than-expected lift from the Bank of Idaho. We also saw stronger-than-expected loan growth in the second quarter, which helped lift our margin. There is some variability around that outlook, depending on what happens with loans between now and the end of the year, what happens with deposits between now and the end of the year. That could drive some variability there.

Also with Guaranty and the announced acquisition there, depending on the timing of when we closed that acquisition, I think Guaranty could add an additional 6 to 7 basis points on top of what we just discussed.

Byron, thank you for really detailed. Appreciate it. On the -- it sounds really positive. The expense side, Ron, maybe we start applying it 80% of your expense guide, but I guess the bank has been pretty efficient. And I guess ex merger costs, if we think about the third quarter, we get a little pause between deals potentially. I guess ex merger costs and getting a full quarter of Bank of Idaho kind of getting into that $155 million, maybe that's a little skinny. If you could just course correct on where you think expenses plus growth head from here.

Okay. Thank you. Just let me go back for the benefit of everyone. That $153.5 million Randy covered in his opening remarks, $3.5 million below second quarter guide of $157 million to $158 million for core noninterest expense. Just want to remind everyone that, that guide included $6 million for Bank of Idaho for the 2 months after its April 30 acquisition. And so think back to the first quarter, the second quarter has the same environment in that. We remain cautious in spending given the continuing economic uncertainty, market volatility. I think you're all aware of noise that's in Washington, et cetera. So of out that $3.5 million, $500,000 or $0.5 million is attributable to Bank of Idaho coming in lower than the $6 million. They're not yet converted. That will happen later, but nonetheless, came in lower by $500,000.

And of that remaining $3 million, $1.2 million is due to lower third-party outside consulting services. Another $300,000 is lower occupancy and facilities expense. In part, you noticed last year and this quarter as well, we had a number of sales of former branch facilities, so it's getting more efficient there. And then the remainder of that $1.5 million, it really was spread across many other expenses. Collectively, the -- including Bank of Idaho, these corporate department, each of the bank divisions have done a great job in controlling their expenses.

And of that $1.5 million, there was no category greater than $250,000, so it really was pretty widespread. So looking ahead to the second half of '25, the previous guide I gave in April for core noninterest expense, it was $160 million to $162 million for each of the third and fourth quarters.

Recall that higher guide reflects the $9 million to $10 million increase because we're going to have 3 months of the Bank of Idaho versus the $6 million was there only for the 2 months in quarter 2. So that's an increase of $3 million to $4 million on each side of that guide. And then for the third quarter, we're going to reduce the core noninterest expense guide to $159 million to $161 million. And I'll go ahead. For the fourth quarter, the guide will go to $161 million to $163 million.

I do want to point out that, that increase we went -- we had $153.5 million. If you compare that back to the $152 million we had for Q1, that represents a 1% increase. And then just to add perspective, for quarter 3, the midpoint, I want to focus there, it's $160 million on the new guide. And that represents an increase of $6.5 million over the $153 million operating expenses for Q2. That $6.5 million includes incrementally $3.5 million for the Bank of Idaho acquisition. The remainder is $3 million from all the other divisions, corporate departments.

So I want to add perspective in that $3 million aside from Bank of Idaho, that represents a 2% increase when you compare that to the base of $153.5 million for Q2. We are going to see some increase in that $3 million because we've had some pretty strong deferred expenses back in Q1. As a reminder, third-party consulting, we came in lower by almost $800,000. And then here in the -- as I said a moment ago, third-party consulting came in $1.2 million. If you add that together, that's $2 million. So we are expecting some additional hiring in the third quarter and some of that deferred consulting will show up the bulk of it. There will be other increases, but that's the bulk of it.

And then looking to the fourth quarter, the midpoint for the Q4 guide is $162 million, which is $2 million more over the third quarter estimate. So to put that into perspective, that $2 million over the Q3 base, midpoint, $160 million, that's $1.25 million increase. My point is, is that we're going to have a step up in Q3. But overall, we continue to moderate the growth in our operating expenses. And just as a reminder, operating core means excluding M&A and any gain or losses on the sale of branches, anything else that's really unique here. So let me -- just so I don't forget, assuming we're going to close on Guaranty in, say, October 31, you would add $14 million to the guide I gave for the fourth quarter to include Guaranty. With that, let me ask for any questions.

No. Ron, you were very thorough. I appreciate it.

Our next question comes from Matthew Clark with Piper Sandler.

Just going back to the loan yield expansion. Can you quantify just how much in purchase accounting accretion contributed to interest income this quarter versus last quarter? I'm just trying to get a handle on the core loan yield trends.

I think it's right around 4 basis points for this quarter.

Okay. And last quarter, do you recall, I want to say...

Yes, that was closer to 8%.

Okay. Great. And then on the -- on your interest-bearing deposit costs, I think they were up 1 basis point this quarter. Trying to get a sense for if that was from Bank of Idaho inflating that number a little bit? Or is there -- I know the Fed has been on hold. You guys have probably been pretty steady in terms of your rates out there, but just trying to get a sense for any impact from the deal and kind of what you're seeing on the pricing front?

Yes, Matthew. That was from the acquisition of Bank of Idaho. I think from here, in terms of deposit costs, I would see our costs as being fairly stable, kind of moving sideways. A catalyst for change or additional cost reduction would be another Fed cut if we do get that. I would say that's on our cost of deposits. I would say on our cost of funds, we do expect that to continue to come down as we expect it to continue to pay down our higher cost FHLB borrowings.

Yes. Got it. And then if you had the spot rate on deposits at the end of June, I'll take it in the average margin in the month of June?

Yes. Spot rates at the end of June on deposits was 1.25% and the spot margin adjusted for timing differences within the quarter, spot margin in June was $3.30.

Okay, 3.30% for the month, not the end of June?

Correct.

Our next question comes from David Feaster with Raymond James.

I wanted to touch on the organic growth side. I mean, obviously, we've got a couple of deals going on. There's a lot of focus there. But I mean, your organic loan growth was solid. I'm curious maybe how pipelines are shaping up today, the pulse of your clients with maybe tariff uncertainty abating a bit. And just maybe the competitive landscape from your perspective.

Yes. David, this is Tom. We're quite happy with the organic growth. Second quarter is generally seasonally stronger. And then in addition to that, from -- not only from a top line perspective, but also we entered the construction and the agriculture season. So we see stronger line utilization, which is a tailwind as well.

As you mentioned, our production levels were seasonally strong as well, particularly in CRE. And from a pipeline perspective, we continue to see good and consistent deal flow and customers continue to be optimistic. I think the instances of us hearing from a customer that they're tapping the brakes and waiting for more clarity is fewer and farther between, certainly, more so today since the -- from the beginning of the quarter. So I think when you look at the whole year, second quarter is generally the strongest. Third quarter also shows some strength, a little bit less so in the first quarter and fourth quarter. But we've got some tailwinds as well.

Okay. And could you maybe touch on the competitive side? Anecdotally, we hear across the industry that competition is increasing, especially on the pricing front. Are you seeing that? And just have you seen anything beyond pricing? Are you seeing competition maybe increase on structure and underwriting?

Yes. I think it's -- we're not really seeing that much competition on the structure side, which is encouraging. We're glad to see that. We do see it on the pricing a little bit in some of the larger markets, but areas where we have more of a commanding market share, we tend to get pretty strong margins. And I think if you look at just margins overall, we're still seeing really strong production yields. I mean for the quarter, we were at 7.35% average production yield for the quarter, which is still a pretty good spread.

Okay. That's great. And then you touched on some hiring that you guys are looking at potentially here in the third quarter. I'm curious where are you seeing opportunities? Are these revenue producers or more back office? And then just again, high level, it's still early. I'm curious maybe your thoughts on potential opportunities in Texas, just given the additional M&A that's come after your deal was announced and whether that the Guaranty team might be looking at opportunities to add talent there from that potential disruption?

Yes. So the hiring that we've been very slow to kind of fill positions. And so, Dave, some of this is just infrastructure, back office to support some of the growth that's -- we've stretched a couple of places. So we're going to fill those. There is some revenue expansion hiring in there as well. But the bulk of it is more operational across the 17 divisions and the holding company that Texas, yes, there's a lot going on down there. We've been talking to the Guaranty folks, and they are all over these changes. And so I think there will be some opportunity as some of those transactions pan out. That being said, we've got a great staff down there. Ty and his team have some -- have a great lending staff already in place. So I think they'll be very selective, but there could be some opportunities given some of the transactions that have been announced.

[Operator Instructions] Our next question comes from Andrew Terrell with Stephens.

I wanted to stick on loan growth for a bit. The production and kind of pipeline commentary, all sounds pretty solid and good to hear you guys are getting some good pricing as well. I know that in the first quarter, there were some heavier payoffs. To the extent you guys do have kind of a line of sight into that, do you feel like the payoff pressure is somewhat abated for you kind of moving into the back half of the year? And then just kind of rounding out the loan growth, do you feel like this kind of mid-single-digit organic pace of growth is kind of achievable at least kind of in the near term?

Yes, the payoff pressure, we still saw that in the second quarter, especially when you're looking at some of the multifamily stuff where we did construction and stabilization and then the asset either sold or went to a secondary provider. That was still present in the second quarter. I do see that possibly abating somewhat towards the end of the year, just looking at the volume and the cadence of those projects coming around. So I think the growth in the second quarter was boosted by a couple of different factors. One, some increase in top line production and then also better line utilization as we entered the construction and ag season. But I think for the full year, that low to mid-single digits is still where we're comfortable.

Got it. Okay. And then maybe for Byron, on the margin, I'm looking at the borrowing position. You guys are obviously doing a good job in deleveraging. I'm curious as you kind of give the margin expectations, and I appreciate all the color there. How should we think about the pace of borrowing reduction that we could see over the balance of 2025 is $250 million or so off this quarter on the FHLB. Is that kind of a fair run rate? Or does it more match securities cash flow? Just how should we think about the borrowing reduction and just size of the balance sheet?

Yes. We put a ladder of term FHLB advances in place some time ago, and those mature on a quarterly basis and the quarterly maturities do increase. So I think we had a $300 million maturity in Q2. That was offset. We did inherit $35 million of advances from Bank of Idaho. But in terms of the third quarter, I think we'll see north of $300 million in terms of FHLB maturities. Q4, I think, somewhere in the $400 million, $440 million range in terms of maturities.

I do expect that we'll be able to pay down most, if not all, of those maturities, but we'll see. We'll evaluate what the lending opportunities are on Tom's side of the balance sheet, what deposits are doing.

But to answer your question in terms of maturity, we do have a progressively increasing maturities, and the final maturity will land in the first quarter of next year. At that point, those term advances will have matured.

Understood. Okay. So yes, maybe a slightly increasing pace. And I'm assuming that's kind of fully reflected in the margin details or margin guidance you gave earlier?

Yes, it is.

Okay. Great. The rest of mine have been addressed.

Our next question comes from Kelly Motta with KBW.

I did want to stick on the margin. It's great expansion this quarter, nice loan growth. And it seems like the trajectory remains quite strong. As we look to next year, are there any other factors in terms of either an acceleration or slowdown of back book pricing that would mitigate some of the really strong pickup we saw this year? Maybe said another way, pre-pandemic, you were 4% plus. Is there anything structurally different that would prohibit you from continuing to make progress towards that level?

Kelly, I do think that we'll continue to see margin growth throughout 2026. I don't want to put any numbers on it, but, yes, I do think that the tailwinds that we're feeling now, they will persist and kind of carry us through the end of next year from a margin growth perspective. I don't see anything that would prohibit us from kind of getting back to some of our historic margin norm maybe by the end of next year.

Okay. That's really helpful. And I appreciate all the color, Ron, on the expense moving parts. At a higher level, as you guys kind of grow and scale up through the real successful -- success you've had with acquisitions, are there any other areas of technology or within the organization that you're looking to strengthen in order to continue to support your really nice growth that you've been having these past couple of years?

So the technology, Kelly, in terms of -- we are looking at it in a number of places. It's making us more efficient. You're seeing some of that in the reduction in the efficiency. And we're continuing on those things. So implementation of a commercial loan platform across the entire company is really delivering really, really strong results. That's also welcomed by the folks that we're acquiring. They get excited about the more advanced technology and the capabilities to do a lot of things that make their lives easier. And I think ultimately, the customer have a better experience.

Our treasury platform, we're upgrading that and pushing that out right now. That's going really well. But that gives better tools to customers where they can manage their account and their finances more effectively. So those are just a couple of things, but we continue to look at our road map and look for ways to enhancing. And there's more behind that. We just tend to wait until they're out and getting traction before we really get into detail and describe them.

I'm showing no further questions at this time. I would now like to turn it back to Randy Chesler for closing remarks.

Yes. Well, thank you, everyone, for joining us today. We appreciate your interest. As always, if any questions, give us a ring. And have a fantastic weekend. Thanks again.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Glacier Bancorp Investor Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Randy Chesler, President and CEO of Glacier Bancorp. Please go ahead.

All right. Thank you, Gigi, and good morning, and thank you for joining us. I'm very pleased to be here and Mount Pleasant, Texas with the Guaranty team and I'm excited to talk to you today about our recently announced transaction.

So last night after the market closed, we announced our agreement to acquire Guaranty Bancshares, the holding company for Guaranty Bank & Trust, a community headquartered here in Mount Pleasant with 33 locations throughout East Texas as well as other dynamic Texas markets, including Dallas/Fort Worth, Houston, Austin, Bryan/College Station.

Joining me this morning on the phone from Kalispell is Ron Copher, our Chief Financial Officer; Byron Pollan, our Treasurer; and Tom Dolan, our Chief Credit Administrator.

Guaranty is a high-performing bank with a 100-year plus operating history, deep customer relationships in the communities they serve. At $3.2 billion in assets, the bank adds meaningful scale in our Southwest region, which we entered in 2017 with the acquisition of Foothills Bank in Arizona.

Upon closing, Guaranty will operate as a new division under the Guaranty name and brand and will represent Glaser's 18th separate bank division and our first in Texas. Guaranty is ideally positioned combining their market-leading East Texas deposit franchise with their presence in high-growth Texas markets. This was a negotiated transaction just between Glacier and Guaranty, and we believe this transaction presents very little execution risk given how strongly the cultures and business models align.

For some detail, I'll now jump into the investor presentation available on our website. On Page 4, this provides a summary of how this transaction fits within our goal of partnering with good banks in good markets with good people. Guaranty checks more than all the boxes through its proven track record of profitability, credit discipline through multiple cycles, quality markets and excellent people. Ty Abston, the Chairman and CEO of Guaranty, key members of his executive team and Board have all agreed to stay on and continue growing Guaranty.

Page 5 gives more detail on the strategic rationale of the deal. As I noted earlier, this transaction expands our presence in the fast-growing Southwest, and we are about the opportunity to grow our business in this region.

Zooming in on Page 6 highlights the attractiveness of the state's strong economy, growth prospects and demographics, which offers exactly what Glacier looks for, a business-friendly environment, higher quality of life and lower cost of living.

Texas is a competitive banking market and the Guaranty team has been very successful in carving out a very profitable and growing segment of the community banking market. Now they can continue what they've always done, but backed by a $30 billion balance sheet and enhanced technology to help better serve their customers.

Page 7 illustrates the snapshot of Guaranty's corporate history, financial highlights and markets of operation. Under Ty's leadership over the past 20 years, Guaranty has grown from its East Texas roots into a balanced and diversified community bank serving rural and metropolitan markets throughout the state of Texas. We think the most recent financial quarter results are a testament to Guaranty's best-in-class approach to community banking.

Page 8 further details Guaranty's presence in the 4 markets they operate in, and we are particularly excited about entering the distinct, diversified and complementary markets of East Texas, Dallas/Fort Worth, Houston, Brian/College Station and Austin. Guaranty approaches these large metro markets the same way as Glacier, by banking the small businesses that support the city centers.

Page 9 outlines the transaction's structure and assumptions, which clearly demonstrate our long-term disciplined approach to evaluating acquisitions. This transaction is a 100% stock deal with Guaranty shareholders receiving 1 share of Glacier common stock for each guarantee share outstanding. Based on the closing price of June 24 of $42.15, the aggregate consideration is roughly $483 million.

Guaranty is a conservative credit culture, as evidenced by their historically pristine asset quality metrics, and this was confirmed through a comprehensive due diligence review, including reviewing 100% of the loan portfolio. Our cost savings estimates of 20% is reflective of our thoughtful approach working with the Guaranty team of conservative, achievable savings.

The resulting transaction metrics are extremely attractive, as shown on Slide 10, both under current and the recently proposed FASB CECL accounting standards. We've been investigating expansion in the Southwest for many years, and we are pleased to have Guaranty join the Glacier family of banks and look forward to having Guaranty's talented employees, executive and Board members join our team.

I don't think we could have identified a better partner to enter Texas. The future for Glacier Bancorp is very bright. As you can see on Page 12, this transaction sets the stage for more than a decade of quality growth across the best markets in the country located in the Mountain West and Southwest. And with that, I'll now turn the call back over to Gigi to open the line for any questions.

[Operator Instructions] Our first question comes from the line of Matthew Clark from Piper Sandler.

The first one for me, just on the process. Can you give us some color on how the deal came together and whether or not there are other bidders along the way?

Yes. We've been talking to Guaranty for years. I've -- Ty and I have been talking about a possible transaction here for a number of years. We have spent time here with the Guaranty folks. They have come up to Kalispell, met our team and so this very much was a negotiated transaction.

You'll have to talk to the Guaranty folks. I know they have a lot of interest in this bank. But the conversations to get to this point were just between Guaranty and Glacier. And I think we worked out a great transaction for both sides.

Great. And then just on the Texas market being a little more competitive than I think what you're used to in some of your legacy markets being a little more rural. I guess what's your approach going to be in Texas from a competitive and pricing standpoint?

Yes. And I noted that in my comments, certainly, I understand this is -- it's a great state and a great set of markets but also some very great competitors as well. The core of Guaranty is really the East Texas market where they're a market leader across East Texas, and those are extremely similar to our rural markets that we're already in. So we feel extremely confident about helping them continue to be successful in those markets.

Their exposure to the city centers, the larger markets, Dallas/Fort Worth, Houston, Austin, that's very -- their approach is exactly the same way that we approach today Denver, Phoenix, Salt Lake, Boise, we bank the small businesses that bank the city center.

So really don't see any change in how they approach the business, and we feel very comfortable with their business model that it aligns very well with how we do business. So just as we're successful in all the markets we're in today, both exposed to the larger metro markets, and we don't expect that to change here.

Okay. And then just on the trust and wealth management piece that comes with Guaranty. Is that something you would look to incorporate in your other affiliate banks? Or does that make you more open to banks with wealth management platforms?

We're studying it, Matthew. We're too early to tell exactly how we'll proceed, but it is something we're taking a hard look at.

Our next question comes from the line of Jeff Rulis from D.A. Davidson.

Question on the -- kind of the growth profile looking at Guaranty. There's been a little bit of a loan runoff, and I understand that's a function of sort of taking a conservative approach given sort of recent macro and rate conditions. But should those pressures dissipate, kind of what should we consider sort of Guaranty's organic growth rate. We think that would match historical glaciers or possibly exceed it?

Yes. I think that with the observation, kind of the historical determined effort to kind of let some runoff occur. I very -- we very much believe that it will track right with the rest of the franchise with quite a bit of opportunity to accelerate.

So as we normally do with any transaction and certainly with Guaranty, we want them to just keep doing what they're doing. And I think they'll naturally with a larger balance sheet, expanded set of products, be able to take that growth rate up and fully expect it to track right where the guidance we've given you on the total company.

Great. And maybe if you could remind us Glacier's current CRE concentration as a percent of capital and possibly that goes to on a pro forma basis with guarantee?

Yes. Tom has got that. We spent a lot of time going through the portfolio. We did a 100% file review. So we're very comfortable with the portfolio and the metrics. Tom, do you want to share that metric?

Yes. I'm actually pulling that up right now. If you can give me just a moment.

Maybe just a last one, well, Tom's pulling that together. Just on the margin impact, is it kind of interrelated with the balance sheet questions about the -- is there any reshaping between now and close?

And maybe for Byron, just the margin, if we assume legacy Glacier kind of approaches 3.5% by year-end, do we kind of fold in guarantees 3.70% margin proportionate to the size of the balance sheet and maybe some accretion benefit. But -- and/or is there any reshaping that possibly could improve that margin any greater? Sorry to layer the questions, but thanks.

Sure, Jeff. We have our own margin trajectory and growth that we talked about on prior calls. And so I see that as remaining in place. I would say we would add to that some margin lift from the Guaranty balance sheet.

So I think right now, there's still some work to do on the purchase accounting and to nail down the accretion. But it looks like the lift that we would see from the Guaranty acquisition would be somewhere in the neighborhood of 6 to 8 basis points on top of the growth that we've already outlined for the core Glacier balance sheet.

And Jeff, this is Tom. The Supervisory CRE concentration were about 255% Tier 1 plus APL. Guaranty's portfolio structure is very closely aligned to ours, and we will not have a material impact.

Our next question comes from the line of Jackson Laurent from Stephens.

This is Jackson on for Andrew Terrell. So deal execution has been obviously pretty impressive over the past few acquisitions and then more recently with the Bank of Idaho deal closing in under 4 months, just to kind of get a better sense of deal timing here. I was wondering if you have an anticipated close date? And then secondly, if you have a goodwill estimate either with or without day 2 reserve, that would be helpful as well.

Sure. In terms of regulatory approval, yes, we did get the Bank of Idaho and very, very quick timing, record timing for us, from announcement to close. And of course, we talk to our regulator partners about these transactions. And this is -- should be very well received in kind of ability to flow through the process. We don't have a presence in Texas, so there's no HHI issues. This is an extremely well-run bank, very well rated and regarded. So really no issues there.

Some of that's a function of their workload and what's happening with other M&A. They have to do a lot of work to get these through. But we expect -- we really don't expect to see any issues with this in the conversations that we've had. And so I do know if it will break the Bank of Idaho record. We've got some summer vacations coming up for folks. So we'll see if that slows things down. But we're -- we feel, in general, this -- we'll close it early in the fourth quarter. And if things happen sooner, we'll see. In terms of the goodwill, I believe it's about $183 million, Ron. Is that correct?

That's correct. Yes. With and without the day 2, yes, it's the same.

Great. That's super helpful. And then kind of just more generally, this is a little bit larger deal than the past few that you guys have done. So I was just wondering your prospects for further M&A going forward after you guys get this deal closed.

I think our focus right now, we've been on a good string of acquisitions. We did the Rocky Mountain Bank acquisition, branch acquisitions. We did the Wheatland transaction. We followed that with the Bank of Idaho, which we closed in April and -- so this one on top of it at $3.1 billion, it's our second largest transaction between -- behind Alta. And or focus is really -- let's get this approved. Let's get it closed and let's do a great job working with the Guaranty team on integrating Glacier in Guaranty. And then we'll see about more transactions. So that's really our focus right now.

Understood. And if I could squeeze one more in there. You guys have executed nicely on the cost save front over the past few deals and you guys called out in the prepared remarks that the 20% cost save numbers is conservative and also achievable. I was wondering if you could give some more color on like what drives that number. And then also if there's any reinvestment into the franchise contemplated in that number? And then if there's also any reinvestment needed to grow the Texas footprint in general?

Sure. We work -- to get to the 20%, and we work closely with the investment bankers and closely with Guaranty to really make sure that's realistic. And as you know, from looking at our prior transactions, we don't seek to cut our way to success. We don't believe that's the way to be successful. That being said, we're very conservative on what we estimate as cost savings.

There's a fair amount of cost savings right out of the chute with this because, number one, our scale with our back-office core processor bring some immediate savings to Guaranty. This is a public company with a public company infrastructure that will be folded into the Glacier public company infrastructure.

And so there's a number of savings. Most of the savings are of that nature. And so we feel there's some people savings as well, but we feel very confident just based on those things to accomplish the 20%. In terms of reinvestment, as I noted before, this is a really well-run bank, great franchise, great markets, leadership positions in East Texas, great foothold in those growth markets.

We've already made all the investments that Guaranty will need to continue to grow. And those are in the technologies that we've already are in the process of implementing across our existing 17 divisions. So commercial loan operating system, upgraded frontline account opening tools, enhanced treasury services products, commercial card offering. Those are all things that are already up and running. And so that's another really nice thing about this.

Now we don't need to make additional investments. We just need to bring those tools to guarantee, train them, help them understand them, and then they'll take it out and do what they've always done, which is use those great products with their great customers.

Congrats on the deal.

Our next question comes from the line of David Feaster from Raymond James.

First question I have for you all is, look, we've talked about Texas for a while, right? And Texas is -- we already touched on the competitive landscape a bit. But operating in Texas as an out-of-state bank isn't always easy. I was hoping you could maybe touch on -- I mean the good news is you're coming in with some scale.

But I was hoping maybe you could touch on your thoughts. I mean you've obviously spent a lot of time thinking about this over a long period of time. Just kind of curious how you think about operating in the state as an out-of-state bank and yes, I'm just kind of curious what you're banking.

Sure. Yes, absolutely. We are entering the scale, which we think is great at $3.1 billion and a 100-year-old bank. It's really a great entry point. Texas is a great market, but also a great community banking market and the same fundamentals. I've lived in Texas. I've studied it. We've been down here quite a bit, looking at it.

The same formula that Guaranty uses to be very successful in their East Texas market and exposure to the growth markets, the larger metro markets is exactly the same formula that we've been using for years. So the 2 align extremely well. They've already proven the success of that approach, we're just going to help make it better with everything I kind of just went through in terms of enhanced technologies a $30 billion balance sheet to serve customers. So I feel very, very comfortable that the business models align flawlessly and the ability for the employees to go out and take care of customers is going to be very, very smooth.

Okay. That's helpful. And then we touched on the competitive landscape in Texas being tough, but just given the sheer amount of banks there, right? That's also a positive in a lot of ways as being an acquirer. I guess just given the significant opportunities in the number of banks there, I mean, would you expect deepening your footprint in Texas kind of being your M&A focus near term?

Well, I think the way to look at this step back and take a look at that map on Page 12 in the investor presentation where you see the Mountain West and the Southwest. And I think one of the great things about this deal is now we have a much larger playing field to think about in terms of organic growth and M&A.

And so as I was talking -- noted with Jackson, our focus right now, David, is to get this through, get it approved, work with the regulators, get it approved, close it and really focus on Guaranty. And yes, I think once we do that, our main goal is to make sure we don't lose one good customer or one good employee.

Once we're comfortable that we're on the right track with that, then we can think about M&A across that entire area, both in the Mountain West, we're not going to take our eye off that ball but now really an enhanced opportunity in the Southwest. And there's some great banks in Texas that we think over the long haul could be really good partners for us as well. So yes, we will look at this, David, going forward across both regions and both the Mountain West and the Southwest with plenty of really, really good targets.

Yes. And then Randy, you touched on it a little bit already. You guys did a pretty thorough review of the bank. I was hoping you could maybe elaborate on the credit side. We already touched on the CRE concentration a little bit. But just as you guys went through that and Tom and your team did a pretty in-depth review.

Just kind of curious some of the takeaways from the credit perspective, similarities, anything that was cautious on any portfolios that you're maybe less comfortable with? Just kind of curious any takeaways that you had from that deep dive.

Yes, David. Yes, as you mentioned, we did a very thorough review. I think the biggest takeaway is how closely aligned the cultures are from a risk appetite standpoint, from a through-the-cycle underwriting lens that they take just like we do, the types of assets they like to finance fit very well with us.

There's no unusual product types or unusual asset classes that's favored by guarantee just like us. It's really kind of down the middle of the fairway type community banking. And it's very well aligned with what we do with a very similar credit culture and underwriting philosophy.

Congrats on the deal, everybody.

Thank you, David.

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

Randy, I want to ask you a question about kind of the future, not necessarily to nail you down [ on ] -- for M&A. But just kind of curious about how you see the world. Some of the bankers I've been talking to recently, when we talk about acquisitions, the one phrase I keep hearing about is, okay, look, the regulatory door is open right now, but at some point, it will close. And so if we're going to do something, it's probably good to do it right now. Do you subscribe to that philosophy?

Well, no, not really, Tim. I think that the -- if you look at our history, we did a number of deals through the last administration. We're going to do a nice deal now through this administration. I think if -- there's no doubt that the regulatory climate now is changing, and I think it's going to get easier to be a bank. But that there's still a process to go through. They still have their standards. They're going to stick to those. And so I think we don't feel any particular reason to rush and try to do things during the window.

But I do think the broader market will probably lean into that. But from our standpoint, the way we do deals and transactions, the sweet spot, the size of the deals that we do are very digestible for a company our size. Our regulatory posture is very good. We buy great banks. We don't buy fixer uppers. And so all that will just continue to perform through whatever the regulatory environment is. But for us, no, I see our pace just continuing kind of on our timetable.

Okay. That's helpful. And the given the depth of company experience we have on the phone here, if this digital does close in the first quarter or in the beginning part of the fourth quarter, excuse me, has Glacier ever closed back-to-back deals in right around 100 days?

Back-to-back deals in 100 days. I believe Ron, jump in, certainly, if you look at Rocky Mountain and Wheatland, I don't have the exact calendar in front of me, but there's been a few times where we've had some transactions that were relatively close.

Each time, Tim, we've been able to do it successfully. So our team is ready to go. We've got a pretty strong history of doing acquisitions.

Yes and good relations with the regulators, too.

Our next question comes from the line of Kelly Motta from KBW.

Congrats on the announcement. Just in terms of the cost saves, I know we discussed kind of how you're thinking about it and where they're coming from. Notably, you are keeping the management team as well as key players.

I was hoping you could discuss what you're doing more on that front as well as if any sort of agreements or bonuses related to retention are contemplated as part of that cost save number and kind of factored into how we should be thinking about that already or if there's additional costs that could be associated with that, that we should be aware of?

Sure. Yes, I think the cost saves like we previously discussed feel very good about the 20%. We're taking our -- we have it phased in. So we feel good about the pace and timing. As I said, a lot of those occur are non-people expenses and some people but very few, given this is a stand-alone bank, and that will operate as a separate division.

The -- in terms of the team, Kelly, I mean we've -- yes, we have agreements with the key management in the company. And we've sat down with them. We've -- this is probably an area where we spend most of our time on. It's the people because these great banks are all about the great people.

And so we -- that's where we spend most of our time sitting down with Ty, talking to him about his team and coming up, working together to come up with an attractive go-forward proposition. And I think we've had very good response to that. We have agreements with all the key folks.

And so I think they -- we want them to just keep doing what they're doing and be part of the Glacier team. And right now, that looks to be very well lined up.

Got it. So there -- we shouldn't associate any sort of like increase related to potential agreements there to mitigate some of the 20% cost saves. All in, it's factored in just for clarification purposes.

Exactly. Exactly right.

Great. That's really helpful. I really appreciate the color around that. And then just a technical part of the deal. I see in the deck, excess TCE net of transaction expenses are paid to Guaranty shareholders at close. Can you walk us through a bit how that works, the impact of AOCI? And is that just a special dividend on the day of close? I'm just trying to wrap my hands about what that means here.

The -- well, one of the unique things that we do that we believe keeps everybody aligned in these transactions is Guaranty will keep the operating income going forward until we close, and so we're able to keep that, and we don't factor that into our model. And we think having the bank and continue to operate with an incentive to continue to optimize because they can then take excess over the capital they need to deliver and dividend that out to their shareholders as a special dividend.

That really keeps everybody on the same page, Kelly. And so when we get to the end and we close, we've got to -- the bank continued to have been run in a way that is very shareholder focused. And so we think that's exactly the way we want to receive it. So that's I believe your question at closing that special dividend that Guaranty will pay.

Thank you. At this time, I would now like to turn the conference back over to Randy Chesler for closing remarks.

All right. Thank you, Gigi, and thank you, everybody, for your questions. Really great questions. Very excited about this transaction. We are all here. If you have any questions, just give us a ring. We'll be happy to take those questions. So thank you again for dialing in.

This concludes today's conference call. Thank you for participating. You may now disconnect.