Glacier Bancorp, Inc. (NASDAQ:GBCI) Q2 2019 Earnings Conference Call - Final Transcript

Jul 19, 2019 • 11:00 am ET


Glacier Bancorp, Inc. (NASDAQ:GBCI) Q2 2019 Earnings Conference Call - Final Transcript


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Randall M. Chesler

funding for the current quarter was 45 basis points, up from 43 basis points in the prior quarter and 36 basis points at the end of the prior-year second quarter. The increase in the current quarter was driven by the increased cost of borrowed funds needed to fund our strong loan growth for the quarter. And our 15 divisions continue to do an outstanding job, managing the deposit costs specific to each of their markets.

Interest income for the quarter was $120 million, which was up $5.1 million or 4% from the prior quarter and increased $11.7 million or 11% over the prior-year second quarter. Both increases were primarily attributable to interest rate increases on renewing and new loans and an increase in commercial loans. Interest income on commercial loans increased $4.5 million or 5% from the prior quarter and increased $12.2 million or 16% from the prior quarter -- from the prior-year second quarter.

Our net interest margin as a percentage of earning assets for the current quarter was a stable 4.33% compared to 4.34% in the prior quarter. The core margin, excluding discount accretion and recovery of interest on non-accrual loans, increased 1 basis point to 4.27% from 4.26% last quarter. The yield on loans increased 2 basis points from the prior quarter and the margin was up 16 basis points from the second quarter a year ago. We had a very strong growth in the second quarter and needed to borrow from the Federal Home Loan Bank to support this growth given loan growth was much stronger than deposit growth. As a result, the 2 basis point increase in loan yields was offset by the 2 basis point increase in wholesale funding cost. We'll see how much the wholesale funding costs will have impact we'll have going forward as the second and third quarters are historically good for deposit growth.

Now there's been a lot of talk about margin this earnings season. And the drop of almost 50 basis points in the five-year treasury rate from the end of the first quarter to the end of the second quarter has changed the industry's view on margin and ours as well. We expect along with the market that the Fed will reduce interest rates 50 basis points to 75 basis points in 2019. And our modeling shows that this would have a modest impact on our business and margin in 2019. Going forward in 2019, we believe we'll continue to see a generally stable core margin operating in a tight band around the current levels with a slight downward bias of up to 5 basis points to 7 basis points. The impact on the margin in '20 will depend on the steepness in interest rate curve at that time.

Overall, we feel the Company is very well positioned to navigate through this current environment. In times like this when NIMs are under pressure across the industry, we think our consistent, strong and high-quality loan growth along with our