Image source: The Motley Fool.
DATE
Friday, July 25, 2025 at 3:00 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Randy Chesler
Chief Financial Officer — Ron Copher
Chief Credit Administrator — Tom Dolan
Chief Accounting Officer — Angela Dossi
Treasurer — Byron Pollan
Need a quote from an analyst? Email [email protected]
RISKS
Acquisition-related expenses contributed to a 3% sequential decline in net income, as management noted, "the second quarter net income represents a decline of 3% from the prior quarter due to acquisition expenses."
TAKEAWAYS
Net income—$52.8 million for Q2 2025, down 3% from the prior quarter due to acquisition expenses, but up 18% year over year.
Earnings per share—$0.45 per diluted share (GAAP), a 15% increase year over year.
Loan portfolio—$18.5 billion, up $1.3 billion (8%) from the prior quarter, including $239 million (6% annualized) inorganic growth.
Deposit growth—Deposits reached $21.6 billion, up 5% from the prior quarter; noninterest-bearing deposits increased 8% and comprised 30% of total deposits.
Net interest income—$208 million, up $17.6 million (9%) quarter over quarter and $41.1 million (25%) year over year.
Net interest margin (tax-adjusted)—3.2%, up 17 basis points sequentially and 53 basis points year over year.
Loan yield—5.9%, up 9 basis points sequentially and 28 basis points year over year; purchase accounting accretion contributed 4 basis points versus 8 basis points in Q1 2025.
Total earning asset yield—4.7%, up 12 basis points sequentially and 36 basis points year over year.
Total funding cost—1.6%, down 5 basis points quarter over quarter, with a $265 million reduction in federal home loan bank borrowings.
Core deposit cost—Held steady at 1.3%.
Spot rate on deposits at quarter-end—Core deposit cost was 1.3%; spot net interest margin for June 2025 was 3.3%.
Noninterest expense—$155 million, up 3% from the prior quarter, including $3.2 million in acquisition-related costs; core noninterest expense guidance updated to $159-$161 million for Q3 2025 and $161-$163 million for Q4 2025.
Efficiency ratio—62%, improved from 65% in Q1 2025.
Noninterest income—$32.9 million, up slightly quarter over quarter and 2% year over year; service charges and fees increased 8% sequentially.
Credit loss provision—$20.3 million, including $16.7 million for Bank of Idaho; core provision (excluding acquisition) was $3.6 million.
Credit quality—Nonperforming assets were 0.17% of total assets; net charge-offs were $1.6 million; allowance for credit losses remained steady at 1.2% of loans.
Tangible book value per share—$19.79, up 8% year over year.
Dividend—161st consecutive quarterly dividend declared at $0.33 per share.
Acquisitions and integration—Bank of Idaho acquisition completed, adding $1.4 billion in assets; definitive agreement to acquire Guaranty Bancshares ($3.1 billion assets) in Texas announced, with guidance to add $14 million in Q4 expenses if closed October 31.
Guidance and outlook—Margin is expected to grow by 15%-17% basis points per quarter in Q3 and Q4 2025; Guaranty Bancshares could add 6%-7% basis points to margin following completion of the acquisition. Expense increases are anticipated mainly due to the full-period integration of Bank of Idaho and planned operational hires for Q3 and Q4 2025.
SUMMARY
Glacier Bancorp(GBCI 2.12%) management highlighted continued net interest margin expansion, driven by organic loan growth and recent acquisitions. The company reduced higher-cost federal home loan bank borrowings by $265 million, contributing to an improved efficiency ratio of 62%. Technology upgrades and operational hires were emphasized as part of the scaling strategy, particularly ahead of the Guaranty Bancshares integration.
Pollan said, "We do think that we can continue this pace of increase, at least for the next couple of quarters," regarding net interest margin growth.
Copher stated, "Core noninterest expense is expected at $159-$161 million for Q3 2025 and $161-$163 million for Q4 2025, exclusive of future M&A impacts."
Dolan noted, "We continue to see good and consistent deal flow and customers continue to be optimistic," suggesting stable demand pipelines in core markets.
Management indicated strategic flexibility in operational hiring, with an emphasis on back-office and select revenue roles to support divisional growth and acquisition integration.
INDUSTRY GLOSSARY
FHLB (Federal Home Loan Bank) borrowings: Short- or long-term advances from the Federal Home Loan Bank system, used by depository institutions to manage liquidity or fund loan growth.
Purchase accounting accretion: The recognition in interest income of the discounted fair value adjustment from acquired loans, typically decreasing over time post-acquisition.
Efficiency ratio: Noninterest expense as a percentage of revenue (net interest income plus noninterest income), indicating a bank's operating efficiency; a lower ratio reflects improved efficiency.
Full Conference Call Transcript
Randy Chesler: With me here in Kalispell is Ron Copher, our Chief Financial Officer, Tom Dolan, our Chief Credit Administrator, Angela Dossi, 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 are excited about the long-term opportunities this brings. We also announced a definitive agreement to acquire 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. 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 inorganic 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 nine 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 quarter. Total funding cost declined to 1.63%, down five basis points from the prior quarter, as we reduced higher-cost federal home loan bank borrowings by $265 million in the quarter. Core deposit cost 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 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: As a reminder, to ask a question, please press 11 on your telephone. And wait for your name to be announced. To withdraw your question, please press 11 again. Please standby while we compile the Q and A roster. And our first question comes from Jeff Rulis with D. A. Davidson. Your line is open. Thanks. Good morning.
Jeff Rulis: Good morning, Randy.
Randy Chesler: Good morning, Jeff.
Jeff Rulis: I wanted to check in on the margin. Certainly, it seems to be tracking really well to the guide. I think you have talked about it a 3.50 exit towards the end of the year. Just wanted to see if there is 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 kinda pre-guarantee?
Byron Pollan: Yeah. Jeff, this is Byron. I can address the margin. Yeah. We do think that we will see continued growth. We did see great traction in the second quarter from the NIM drivers that we have 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 at 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. You know, depending on what happens with loans between now and the end of the year, which you know, what happens with deposits between now and the end of the year. You know, that could drive some variability there.
Also, with Guaranty and the acquisition there, depending on the timing of when we close that acquisition, I think Guaranty could add an additional six to seven basis points on top of what we just discussed.
Jeff Rulis: Byron, thank you. Really detailed. Appreciate it. On the it sounds really positive. The expense side, Ron, you know, maybe we start applying it 80% of your expense guide, but I guess the bank's been pretty efficient. And I guess ex-merger cost, 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 kinda 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.
Ron Copher: Okay. And 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 to $158 million for core noninterest expense. Just want to remind everyone that guide included $6 million for Bank of Idaho. For the two months after its April 30 acquisition. And so think back to the first quarter, the second quarter, had the same environment in that we remain cautious in spending. Given the continuing economic uncertainty, market volatility, I think you are all aware of the noise that's in Washington, etcetera.
So of that $3.5 million, $500,000, half a million is attributable to Bank of Idaho coming in lower than the $6 million. They are not yet converted. That will happen later, but nonetheless, came in lowered 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 have noticed last year in 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 are corporate departments.
Each of the bank divisions have done a great job in pulling 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 2025, of the previous guide I gave in April, for core noninterest expense. For it was $160 to $162 million for each of the third and fourth quarters. Recall that higher guide reflects the $9 to $10 million increase because we are going to have three months of the Bank of Idaho versus the $6 million was there only for the two months. In quarter two?
So that's an increase of $3 to $4 million on each side of that guide. And then for the third quarter, we are going to reduce the core noninterest expense guide to $159 to $161 million. And I'll go ahead and for the fourth quarter, the guide will go to $161 to $163 million. I do want to point out that increase when we went we had a $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 three, the midpoint, and I want to focus there, is $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 have had some pretty strong deferred expenses back in As a reminder, third-party consulting Q1. 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 they 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 $2 million more over the third quarter estimate. So if to put that into perspective, that $2 million over the Q3 base midpoint $160, that's one and a quarter increase.
My point is that we are 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 are going to close on guarantee and say, October 31, you would add $14 million to the guide I gave for the fourth quarter. To include guarantee. With that, let me ask for any questions.
Jeff Rulis: No, Ron. You are very thorough. I appreciate it. Thanks for walking me through that. I'll step back.
Operator: Thank you. Our next question comes from Matthew Clark with Piper Sandler. Your line is open.
Matthew Clark: Hey, thanks. Morning, everyone.
Randy Chesler: Good morning.
Matthew Clark: Just going back to the loan yield expansion. 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.
Byron Pollan: I think it's right around four basis points for this quarter.
Matthew Clark: Okay. And last quarter, do you recall, like,
Byron Pollan: I want to say Yeah. That was closer to eight.
Matthew Clark: Okay. Thank you. Great. And then on the on your interest-bearing deposit costs, I think they were up one basis point this quarter. Trying to get a sense for if that was from Bank of Idaho you know, inflating that number a little bit, or is there I know the Fed's 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 kinda what you're seeing on the pricing front.
Byron Pollan: Yeah, Matthew. That was from the acquisition of Bank of Idaho. I think from here in terms of deposit cost, I would see our cost as being fairly stable, you know, kinda 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.
Matthew Clark: Yep. Got it. And then if you had the spot rate on deposits at the June, I'll take it in the average margin in the month of June.
Byron Pollan: Yes. Spot rates at the June on deposits was 1.25%. And the spot margin adjusted for timing difference within the quarter Spot margin in June was three thirty.
Matthew Clark: Okay. $3.30 for the month, not the end of not the June?
Byron Pollan: Correct.
Matthew Clark: Okay. Thank you.
Byron Pollan: Welcome.
Operator: Thank you. Our next question comes from David Feaster with Raymond James. Your line is now open.
David Feaster: Hi, good morning everybody.
Randy Chesler: Morning.
David Feaster: I wanted to touch on the organic growth side. I mean, obviously, we got a couple deals going on. There 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.
Tom Dolan: Yeah. David, this is Tom. Yeah. We were quite happy with the organic growth. You know, second quarter's generally seasonally stronger. You know? And then in addition to that, you know, from not only from a top line perspective, but also you know, we enter the construction in the agriculture season, so we see stronger line utilization, which is a tailwind as well. You know, as you mentioned, your production levels were seasonally strong as well, particularly in theory. And, you know, 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 you know, tapping the brakes and waiting for more clarity is fewer and farther between. Certainly, more so the day since the from the beginning of the quarter. So, you know, I think you know, when you look at the whole year, you know, second quarter is generally the strongest. Third quarter also shows some strength, a little bit less though than first quarter and fourth quarter. But, you know, we've got some tailwinds as well.
David Feaster: Okay. And could you maybe touch on the competitive side? You know, anecdotally, we hear across the industry, know, that competition's increasing especially on the pricing front. Or are you seeing that? And just you know, have you seen anything beyond pricing? Are you seeing competition maybe increase on structure and underwriting?
Tom Dolan: Yeah. 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 you know, we tend to get, you know, pretty strong margins. And I think if you look at just margins overall, we're still seeing really strong production yield. I mean, for the quarter, we were at 7.35 average production yield for the quarter, which is still a pretty good spread.
David Feaster: Okay. That's great. And then, you know, you touched on touched on some hiring that you guys are looking at potentially here in the in the third quarter. I'm curious are you seeing opportunities? Are these revenue producers or more back office and then just you know, 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 Guarantee team might be looking at opportunities to add talent there from that potential disruption.
Randy Chesler: Yeah. So the hiring that we've been very slow to kinda 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 places, so we're gonna 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 a holding company that Texas yeah. There's a lot going on down there. We've been talking to the guarantee 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 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.
David Feaster: Okay. That's helpful. Everybody.
Randy Chesler: You're welcome.
Operator: Thank you. Our next question comes from Andrew Terrell with Stephens. Your line is open.
Andrew Terrell: Hey, good morning.
Randy Chesler: Morning.
Andrew Terrell: Wanted to stick on loan growth for a bit. You know, 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 kinda line of sight into that, do you feel like the payoff pressure is somewhat abated for you kinda moving into the back half of the year and then just kind 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?
Tom Dolan: Yeah. The payoff pressure, we still saw that in the second quarter. You know, especially when you're looking at some of the multifamily stuff where we did construction and stabilization and then the asset either sold. Or, you know, 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. You know, 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 enter the construction and ag season.
But, you know, I think for the full year, you know, that low to mid single digits is still where we're comfortable.
Andrew Terrell: Got it. Okay. Thank you. Then maybe for Byron or yeah, Byron. On the on the margin, I you know, I'm looking at the borrowing position. You guys are obviously doing a good job in deleveraging. I'm curious as the 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? $250 million or so off this quarter on the FHLBs. Is that kind of a fair run rate? Or does it more match securities cash flow? Just how should we think about, you know, the borrowing reduction, just size of the balance sheet?
Byron Pollan: Yep. 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, you know, 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 terms of FHLB maturities, Q4, I think, you know, somewhere in the, you know, $404,140,000,000 range in terms of maturity. 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, you know, 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 maturity.
Andrew Terrell: Understood. Okay. So, yeah, maybe a slightly increasing pace, and I'm assuming that's kind of fully reflected in the margin details margin guidance you gave earlier?
Byron Pollan: Yes. It is.
Andrew Terrell: Okay. Great. The rest of mine have been addressed. Thanks for taking the questions.
Operator: Welcome. Thank you. Our next question comes from Kelly Motta with KBW. Your line is now open.
Kelly Motta: Hey, good morning. Thanks for the question.
Randy Chesler: Good morning.
Kelly Motta: 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 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?
Byron Pollan: Kelly, I do think that we'll continue to see margin growth throughout 2026. Again, I don't want to put any numbers on it, but yeah, I do think that the tailwinds that we're feeling now, they will persist and kinda carry us through, the end of next year from a margin growth perspective. I don't see anything that would prohibit us from kinda getting back to some of our historic margin norm. You know, maybe by the end of next year.
Kelly Motta: Okay. That's really helpful. And, you know, I appreciate all the color, Ron, on the expense moving parts. You know, at a higher level, as you as you guys kinda grow and scale up through you know, 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 you know, your really nice growth that you've been having these past couple years?
Randy Chesler: 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 you know, 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 enhance, 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.
Kelly Motta: Thanks. Thanks, Randy. I'll step back.
Randy Chesler: Welcome.
Operator: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Randy Chesler for closing remarks.
Randy Chesler: Yes. Well, 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.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.