Glacier Bancorp Inc
NYSE:GBCI
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Good day, ladies and gentlemen, and welcome to the Glacier Bancorp First Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Randy Chesler, President and CEO. Please go ahead.
All right. Thank you, Ayla. Well, good morning, and thank you for joining us today. With me here in Kalispell this morning and on the phone is Ron Copher, our Chief Financial Officer; Don Chery, our Chief Administrative Officer; Barry Johnston, our Chief Credit Administrator; Angela Dose, our Principal Accounting Officer; and Don McCarthy, our Controller.
Yesterday, we released our first quarter 2018 results. Overall, the company got off to a very good start in what was one of our busiest quarters in the company's history. Earnings were $38.6 million, an increase of $7.3 million, or 23%, over the first quarter a year ago. Notably, pretax income was $41 million for the quarter, an increase of $5.9 million or 15% over the prior year first quarter. During the quarter, we completed the acquisition of Columbine Capital, the holding company for Collegiate Peaks Bank in the Denver area, with total assets of $551 million. We also completed the acquisition of Inter-Mountain Bancorp, the holding company for First Security Bank in the Bozeman, Montana area, with total assets of $1.1 billion.
We had core business growth of $110 million or 7% annualized, and we also had organic deposit growth of $144 million or 8% annualized, with 20% of the increase coming from noninterest-bearing deposits. With all this activity, we easily surpassed the important milestone of $10 billion in total assets and ended the quarter at $11.7 billion, an increase of almost $2 billion or 20% from the prior quarter.
Diluted earnings per share were $0.48, an increase of 17% from the prior year first quarter. Our return on average assets for the quarter was a strong 150 basis points, while return on average equity was 11.9%, and our return on tangible equity was 14.6%. These represent across-the-board increases over the prior year. We declared a regular dividend of $0.23 per share, which is an increase of $0.02 per share or 10% from the prior quarter. This will be our 132nd consecutive quarterly dividend paid by the company.
Loan production for the first quarter was $592 million, which was generally well distributed among all the divisions. Pay downs were $481 million, which was consistent with our expectations. The loan category with the largest increase this quarter was commercial real estate, which organically increased $56 million or 2%. Excluding the current quarter acquisitions and the acquisition of Foothills Bank, the loan portfolio increased $519 million or 9% since the first quarter of 2017. This was primarily driven by growth in commercial real estate loans, which increased $346 million or 11%.
Investment securities of $2.8 billion increased $363 million or 15% during the current quarter and decreased $193 million or 6% from the prior year first quarter. The current quarter increase was primarily due to the addition of $314 million from the acquired banks. Investment securities represented 24% of total assets at the end of the first quarter compared to 25% at year-end and 31% at the prior year quarter-end. Our key credit quality ratios generally improved this quarter, while the absolute dollars of credit-challenged assets increased. Nonperforming assets as a percentage of subsidiary assets at the end of the first quarter were 64 basis points, which was a decrease of four basis points from the prior year-end and a decrease of 11 basis points from the prior year first quarter.
Nonperforming assets at the end of this quarter were $74 million, an increase of $8.8 million or 14% from the year-end 2017, with the majority of the increase coming from acquired banks. Early-stage delinquency as a percentage of loans at the end of the quarter were 59 basis points, which was an increase of two basis points from the prior year-end and a decrease of eight basis points from the prior year first quarter. Early-stage delinquencies were $45 million at the -- at quarter-end and increased $7.3 million from the prior quarter and $5.8 million from the quarter-end a year ago. These increases were also attributable to the acquired banks.
The allowance for loan and lease losses as a percentage of total loans outstanding at the end of the quarter was 1.66%, a decrease of 31 basis points from the 1.97% at the end of 2017. This decrease was primarily driven by the addition of new loans from new acquisitions as they were added to the portfolio on a fair-value basis. And as a result, they do not require an allowance. We continue to carefully review our portfolio performance, manage our asset type -- appetite limits and continue to feel good about the credit outlook.
Moving on to deposits, our low-cost and stable-funding foundation across our multistate footprint continued to perform for the company. We moved $395 million of deposits back on to our balance sheet during the current quarter that were previously transferred off the balance sheet as part of our strategy to stay below $10 billion in total assets through the end of 2017. Now excluding the acquisitions and the deposits moved back on to the balance sheet, core deposits still increased $143 million or 2% from the prior quarter, and increased $523 million or 7% from the prior year first quarter. Excluding acquisitions, noninterest-bearing deposits increased $193 million or 9% from the prior year first quarter.
Interest income, that increased $6.2 million or $103 million, or 6%, from the prior quarter and increased $15.4 million or 18% over the prior year first quarter. Both of these increases were primarily attributable to the increased interest income from commercial loans, driven by strong production in 2017 and rate increases as well. Interest income on commercial loans increased $15.5 million or 31% from the prior year first quarter. Current quarter interest expense, that increased -- of $7.8 million, increased $700,000 or 10% from the prior quarter and increased $408,000 or 6% from the prior year first quarter. The total cost of funding for the current quarter was 35 basis points compared to 33 basis points for the prior quarter and 37 from the quarter a year ago. The two basis point increase from the prior quarter was primarily driven by the $395 million of higher-cost deposits brought back on to the balance sheet during the current quarter. However, most importantly, our 14 divisions continue to do an outstanding job, tightly managing deposit costs specific to each of their markets.
Company's net interest margin as a percentage of earning assets on a tax-equivalent basis for the current quarter was 4.10% compared to 4.23% in the prior quarter. The 13 basis point decrease in the net interest margin was primarily the result of a 15 basis point decrease in the tax benefit effect on certain earning assets as a result of the tax act. The current quarter net interest margin increased seven basis points over the prior year first quarter, net interest margin of 4.03%, even though there was a current quarter decrease of 15 basis points driven by the decrease in the federal income tax rate.
The increase in the core margin from the prior year first quarter was a result of the remix of earning assets to higher-yielding loans and generally very stable funding cost. Noninterest income for the current quarter totaled $26.1 million, a decrease of $1.6 million or 6% from the prior quarter and an increase of $397,000 or 2% over the same quarter last year. Service charges and other fees of $16.9 million increased $1.2 million or 8% from the prior year first quarter, primarily due to the increased number of accounts. Gain on sale of loans decreased $1.3 million or 18% from the prior quarter and decreased $261,000 from the prior quarter as a result of decreased residential real-estate finance and purchase activity. Other income of $2 million decreased $844,000 or 30% from the prior year first quarter, due to the decrease in the gain on sale of other real estate owned. Gain on sale of OREO during the fourth quarter of 2018 was $72,000 compared to $966,000 in the prior year first quarter.
Noninterest expense for the quarter increased $408,000 or 6% over the first quarter a year ago. Compensation and employee benefits increased by $5.3 million or 13% from the prior year fourth quarter, due to annual salary increases and the increased number of employees from the acquisitions. Occupancy and equipment expense increased $349,000 or 5% over the prior quarter and increased $628,000 or 9% over the prior first year quarter and was also attributable to the acquisitions. Data processing expense increased $843,000 or 27% from the prior year first quarter as a result of acquisitions and volume-driven cost increases. Other expenses increased $1.7 million or 17% from the prior year first quarter, primarily from an increase in acquisition-related expenses from the two acquisitions during the current quarter. Acquisition-related expenses were $1.8 million during the current quarter compared to $936,000 in the prior quarter and $83,000 in the prior year first quarter.
Tax expense for the first quarter of 2018 was $8.4 million, which is a decrease of $1.4 million or 14% from the prior year first quarter and was attributable to the tax act. The effective tax rate in the first quarter of 2018 was 18% compared to 24% in the prior year first quarter. Tax expense decreased $22.9 million from the prior quarter due to the onetime $19.7 million reevaluation of the company's net deferred tax assets and a decrease in the federal income tax rate in the current year. Excluding the impact of the reevaluation of the deferred tax asset, the effective federal and state income tax rate for the company was 25% in the prior quarter. The current quarter efficiency ratio was 57.8%, a 378 basis point increase from the prior quarter efficiency ratio of 54.02% and a 223 basis point increase from the prior year first quarter efficiency ratio of 55.57%. This increase in the first quarter included 230 basis points related to the impact of the decrease in the federal income tax rate and increase in acquisition-related expenses. As we noted last quarter, the impact on tax advantage investments and loans negatively impacted our efficiency ratio beginning in 2018.
So in closing, the first quarter of 2018 represents an excellent quarter for the company. We crossed over the $10 billion asset mark, closed on our acquisition of Collegiate Peaks Bank in Colorado and First Security Bank in Bozeman. These two transactions alone added $1.7 billion in assets and grew the company almost 20% in the first quarter. We plan to convert First Security over to our core processing system at the end of the second quarter and Collegiate Peaks at the end of the third quarter. The Glacier team's been working hard to prepare for these conversions and has developed detailed plans to ensure a smooth and successful outcome. Our division presidents and their teams across our seven-state footprint remain very enthusiastic about the possibilities of -- in each of their market for 2018. So that ends my formal remarks.
I'd now like Ayla to open the line for any questions that you may have.
[Operator Instructions]. And our first question is from Jeff Rulis will D.A. Davidson.
Just a question on expenses. If we look at the -- probably an increase in 2Q, with both banks on for the fourth quarter. I guess, the outlook beyond that, given the conversions, is it -- is the idea that those would flatline, sort of, at the back half of the year. Any color on the expense side.
Yes. No, I think expenses -- we do have the two as you noted. We have the two banks that we've added. I think that the -- so the expense there, if you look at the efficiency ratio combined to those two banks is a little higher than where we had been. So there's going to be a little elevated expense as we integrate those. And so I think it'll trend down towards the end of the year. But you're seeing a bit of an elevated expense and it's as a result of bringing those banks on. And then we have our -- we're on track with our cost plans, with both acquisitions doing really well. But that -- those costs come out over time in '18 and then in '19 as well.
Got you. And then an increase in the loan-to-deposit ratio, I guess, really back to levels you had before you started to move those off balance sheet. But I guess, any plans to kind of manage out any higher-cost funding for increased leverage? Or is it the idea that just to kind of grow into that funding base?
Well, if you look at the funding base, the only higher-- what I would call the only higher-cost funding is there for our swap management. Other than that -- and those are going to stay for the foreseeable future, unless we decide to take some action there. But no, we're happy with the deposit -- the funding cost. And so I think that profile should stay pretty much where you see it today. I would tell you, we do -- as you think about that and then the margin, we are starting to see a little bit of pressure on deposit cost. So you're seeing where they are now. You saw -- we're just starting to see some pressure, so we think there's probably going to be a little move up there throughout the year as we hit a point where we have to make some movement on our deposit costs.
When you say move up, you're referencing the deposit side?
Yes.
Okay. So netting that on the margin front, it's -- a couple of moving pieces in the quarter, but from the 4.10% base, your thoughts on kind of just holding the line here given that deposit pressure hope to outpace on the yield side?
Yes. We were very happy with the 4.10%, of course, adjusted for the tax impact. But we think that's pretty good margin. We think there's probably going to be a little possibility that's going to deteriorate and it's probably going to be primarily on the interest expense side. We just think that there'll be a little pressure on our deposit funding. And we've held the line, I think, exceptionally well. We're just starting to reach the point in a couple of our markets where we need to do -- we need to take some action to -- for competitive reasons.
Our next question is from Matthew Clark with Piper Jaffray.
Can you quantify the purchase accounting accretion in the quarter?
So we had six basis points this quarter coming across. Didn't know if -- did you have other -- maybe other questions on it? It was six basis point this quarter.
Yes. Yes, my follow-on question was around the 4.10% reported margin you mentioned, only includes six basis points of accretion, a partial impact from the two acquisitions. I would suspect that the accretion just alone would cause that 4.10% to step up a full run rate, maybe around $3 million. Obviously, a lot of moving parts with the Fed rate increase in March, the higher accretion and then the kind of full quarter impact of the two kind of core margins from those acquisitions? So I guess, maybe we could talk a little bit about your sense on the core margin. It sounds like you feel like there's a little bit of pressure on the 4.04 with deposit cost creeping up. But maybe you could just talk to kind of a competitive pricing environment on the loan side too?
Sure. And I think that we -- you've seen the credit performance, we intend to keep the credit performance. So it just -- there is just a little more competition that we're seeing and we're going to stick to our credit disciplined and -- but for good loans, we may need to make a little more rate concession than we have in the past. So not really seeing -- if you see what's coming on in new production, we've been pretty successful about passing on the rate increases. We just think that it's getting to a point in the market and the competition level where that's probably going to have to give some of that up a little bit. So probably a little pressure there, you're right on the discount accretion, that's going to flow through. It's probably going to step up a little bit on a full quarter with both banks. So that'll be pushing it the other way. And then the money cost, as I've already talked about, probably a little pressure there.
Okay. And then anything unusual in the deposit service charge line down slightly in quarter? But you have the partial impact of a deal. Is it because you might be waving some fees? Or is it just too less days in the quarter?
Yes, no, we were just something about that this morning. And it's really -- we feel, we looked at it pretty carefully, it seems to be just a bit of a seasonality, where there's just a little last usage, kind of, coming off a very strong fourth quarter.
Okay. And then last one for me just on loan growth. Little bit seasonally stronger than I think we expected at 7%, I guess. Where would you say it's coming from within the footprint? Is it largely market share gains? Or is it existing customers? And how do you -- does that change your view of your full year guide of 7% at all?
Yes. So we think 7% is a very good number, and we think that's very solid. We don't see a lot of upside on that right now. But we think 7% is pretty reasonable. The growth came in very well distributed. We look at where it's coming from and we get -- we have very nice diversification from all 7 states and all 14 divisions, so no big concentration. We just think we had a little better quarter than we thought. We just think that the 7% is a pretty good view, primarily municipal lending is just slowed down, that was a big part of our growth in '17. We had a fair amount of municipal-lending business in the first quarter but a fair amount of that was advances on deals already made. And so when I look at the new production, I just think that we don't see any signs it's going to get back to the same level as 2017. So we're -- I'm saying that because we forecasted 7% last year and then did a lot better. But I want to make sure that people don't think we're trying to manage it the same way. We just feel -- and we were surprised at the growth in '17. But we just don't see the same dynamics kind of forming at this point.
Our next question is from Michael Young with SunTrust.
Randy, I just wanted to maybe follow up on the deposit cost comment. I wanted to just, kind of, put some context around it that You guys have had a negative deposit beta to-date, so when you're talking about increase in deposit pricing or competition, it seems like it's coming off of a very low level, so we're still talking about pretty low betas on a whole -- for the book. Is that correct?
Yes, yes. And we had been negative that was really the result of moving some of those higher cost deposits off the balance sheet and then the two coming back is bringing them back on. It was somewhat muted because we had some very nice low-cost deposits from the acquisitions added during the quarter. But yes, we don't -- we expect still to be at a very low beta, but what I'm just saying is, we've seen -- we have -- we went from really all 14 divisions holding the line, now we have two that had to make some moves. We talk to them about this constantly. I don't think there's going to be a big rush to it. But I'm just communicating that we held the line very successfully, but I think we all knew that at some point in time we have to show some rate increases.
Right. And maybe the other side of the equation, you guys put in place the new, kind of, pricing model. Just wanted to get some early kind of feel for how that's working. Are you seeing any benefits there? And do you think we'll actually see any material results in terms of asset pricing going forward?
Well, we have Barry Johnston on the line, who took a -- was the person who helped us implement that. Barry is our Chief Credit Administrator and he's worked with all the divisions to get it implemented. So maybe you'd like Barry to just comment on what his thoughts are on the pricing engine and what he's seeing at this point.
Yes. We're kind of new to the game. We just got it implemented this first quarter, so all the bank divisions have been using it for the last couple of months. Overall, the project went very well. As like anything we have a couple of glitches, but it's up and running. What we're seeing is, it's more of an educational experience. Maybe then on a production experience, we're actually able to price individual relationships in regards to the respective assumptions that we input into the model. But we use that model in addition to -- generally we price off the swap curve. We pick an index plus a margin and try to price above that. And given that our loan yields have been above peers consistently over the years, we don't want to impact that, so it's a combination of two strategies we use. But overall, the pricing -- I think the pricing, ultimately, will benefit us. Not so much for our current very profitable customers, but for those customers that are on the other end of the spectrum, and we can facilitate increasing the yields on those loans by generating, for example, compensating balances, increasing fees, changing maturities. So ultimately, yes, I think it will be positive for the organization. But will we see any impact in the immediate future? No, I think it's going to take a while to get it all assimilated and transitioned through the organization.
Okay, great. And maybe one last one, this one may be for Ron. Just on average earning asset balance kind of exiting the quarter, there are obviously a lot of moving pieces who'd bring in the deposits back on and when the acquisitions close. But just trying to get a good feel for where the run rate should be, as we head into 2Q in terms of balance sheet growth?
Yes. So we had the two months of Columbine and then the one month of Inter-Mountain, First Security Bank in Bozeman. So it should be a bit higher, just allowing for the growth. And I want to make sure we're being consistent with what we've said here 7%, so it should trend up but not -- don't go too overboard with that. We're optimistic. The team there is -- both banks are very excited. But one of the things we've asked them to do is stay with what they already were doing. We didn't say, hey, just -- we got a bigger balance sheet and more capital, we didn't say go out and run with it. So we think they'll stay in their mode of the five loans that they typically grow, and so we'll see the benefit of that in the earning assets.
But given the timing of when the deals close, earning asset growth next quarter should be much higher than 7% though, correct?
Yes. I will say yes. You can hear the caution in my voice, I'm sure. But yes, so we think they'll -- it should be higher than what it is in the first quarter in order to fulfill that 7% on a full quarter basis.
Our next question is from Jackie Bohlen with KBW.
Randy, going back to the net interest margin, I know you gave great color on the deposit side of things, and you mentioned those -- the pressure on the loan yields. Where are you seeing new generation now versus where the portfolio is at? And does the fourth quarter reflect any of that pressure? Or is that more forward thinking?
So it's more forward thinking. The first quarter, our production's coming on at 5.01%, so you can see that versus the portfolio. So I think the portfolio is about 4.80%, 4.81%. So that's more forward thinking. At this point as you guys are kind of tuning your models, just trying to look a little forward to what kind of dynamics we think may develop over the year.
So given that there's roughly 20 basis point benefit for you in terms of what you're booking even with the pressure going forward, it's -- that's not necessarily going to pressure historical loan yields and could almost help them a little bit. Is that fair?
Yes. I mean, historical, if you're talking about the portfolio, those are obviously onboard and my comments were more -- were directed toward new production. And so we -- Barry talked about the pricing engine and the pricing model, that's moving -- that's helping us better price loans. But at the same time, we have -- the competition in the market is very heating and heating up. And we're just looking forward to saying, at some point we're probably going to have to -- there'll be a little bit more competition here. But that's more -- back to your original point or part of your question, that's more forward thinking Jackie, we just -- didn't see much of it this quarter but as we all sat down and talked about to look forward, we're just anticipating at this point.
Okay. No, fair enough, and I appreciate the forward thoughts. And then just one last one for me. The $14 million to $16 million range on interchange, is that upper end of $16 million? Does that just account for growth that you're going to have between now and July of '19?
I believe so. Just restate the question for me, I just want to make sure we give you the right answer.
The interchange impact range of $14 million to $16 million that you gave on an annual basis. I'm just wondering if the introduction of the $16 million on the upper end of the bound, if that's just accounting for growth that you expect to see over the next year plus...
Yes, exactly right. So Don McCarthy recalculates that for us. And we just put out a -- we want to keep you with the most current number. So yes, the $16 million was just a recalculation based on where the business is.
Our next question is from Andrew Liesch with Sandler O'Neill.
Just following up on Jackie's questions here on the margin. Getting 20 basis point improvement on just new originations and funding cost maybe moving up a couple bps. And sure there's intensifying competition and maybe there is some lagging -- repricing lag on the existing book by a couple of years. But just given where you're adding loan yields and what's happening on funding side and your caution there, why wouldn't we see the margin move up a little bit?
Let's see, why wouldn't we see the margin move up? So let's just take it apart. We're going to have discount accretion coming through, that's going to help. We'll -- we talked about the cost of funding. We are just beginning to see a little pressure there. So again, we're trying to look forward and think, okay, there maybe some -- a bit of compression there, although not a lot. But we went from negative, I mean, we can't do any better than that last year. So we just wanted to set the expectations that, that was pretty unusual. And then on the incoming loans, we'll just have to see. And that's a balance of we're going to -- Barry does a very good job and team. We look for good quality business. And on some of that -- a number of people are looking for that. And so as we see people in the market not growing as well as we are, they may decide they have to get more aggressive to, kind of, get a higher growth rate. So I think I made this kind of observation before. I think we do well because in most of our markets, in all of the markets really, we tend to have the better relationships already in the bank, put a lot of effort into that. So that business comes up and I think that's very sought after business. So that's really the point and it's more forward looking than something that we're trying to communicate that we've seen in this first quarter.
We have a follow-up question from Matthew Clark.
Just harping on the margin here.
Okay, not a problem.
How many Fed hikes are you assuming from here -- in this year?
Well, we look at the Dodd plan and we see 3. We don't really forecast rate increases on our planning. But when we have our outgo discussions, we clearly see the 3, and we think that's pretty realistic.
Okay, yes. And then I guess, just on the margin outlook, I just don't -- I would agree with some others. I just don't see how the -- even the core margin doesn't expand when you've got some excess liquidity to put to work here. You've got new loans coming on above the portfolio, deposit cost increasing modestly. But you also have two acquisitions, two targets that had margins above yours. So it's hard to see how the margin doesn't expand, but willing to hear if you have any other thoughts on that.
Sure. I think Ron's got another piece of information to add to that.
Yes. And Matthew, so you can see that the total dollars of -- in the investment portfolio went up, and we're not adding much in the way of munis. We're really adding the lower yielding, call it, 280, 290 on the mortgage-backed securities, the corporates, so you can also see that we're -- we have accumulated some cash, just looking to redeploy that. But I don't see the margin coming off the investment portfolio to be as historically high as it was. We had -- quite [indiscernible] at the end of December. That portfolio was just about 53% of the entire book. And already with what we've added, we're down to 45%. So that just supports the point I was making and so we're adding lower-yielding securities and some of those corporates were bullish they weren't cash flowing. So we're just expecting that, that would be a bit of a drag on the overall margin.
Our next question is from Don Worthington with Raymond James.
Just a couple of questions. What's your outlook for gain on sale going forward?
Well, we feel pretty good about it. We're thinking about 3.30 right now. So that's -- that moves around based on the market. But we think that should hold pretty steady. So, I guess, that's a stable outlook, to answer your question, in the mortgage business.
Okay. All right. And then what is -- is your guidance still the same on the tax rate going forward?
Yes, this is Ron, Don. Great question, thank you for asking it. I can actually see it's going to go up, say, from 18% to 19%, just given what I said about the muni income, the tax-exempt income, is going to be a lower percentage. And as you start to see the cost, our interest expense goes up, a portion of that becomes nondeductible, which translation of that increases the effective tax rate. So we were at 17.9% just as reported and so it would be somewhere closer to 19% on a full year basis.
We have a follow-up question from Jeff Rulis.
A quick one on the provisioning line, if you've got 7% organic growth and kind of sticking to that for the full year, a bit lower provisioning and maybe there's some fair value, sort of, adjustments as you bring in the acquired loans. But I guess, going forward, safe to assume that given consistent growth that, that's in $2 million to $3 million kind of where you had been on a quarterly basis?
So provision that's a tough one to answer. Other than, every quarter we spend a lot of time evaluating the adequacies of the reserve and looking at our charge-offs and making a decision at that time. So I think this quarter, we looked at where the reserve was? And our credit trends and we thought that level of provisioning was appropriate. So that's really an analysis we take -- that we do every quarter and I can't really give you a lot more guidance or insight there because we have to see where the numbers end up and make our decisions at that time.
Maybe I'd just ask Barry, if you've got charge off levels that have been very consistent and you've got NPA levels that are, barring the acquisitions, you've got a pretty drifting lower trend. Do you see anything that would suggest a sizable move in, in where your historical provisioning has been?
No, I think we're going to pretty much maintain the status quo. I don't see a huge changes in what we've done, will we continue to match charge-offs one to one, again, as Randy mentioned, we'll just have to see what type of charge-offs those were. Was it something that was systemic through the system or is it one-off credits? So but as -- $1.66 when you take a look at our allowance. We would still be considerably higher than peer. So I don't see us increasing the allowance through the end of the year. How much we might let it decrease is still going to be based on evaluation every quarter. Now of course this quarter, the big drop was due to the acquisitions as they came over mark-to-market and we have that accretion there to cover those respective portfolio, so as our organic loans continue to improve in asset quality, it'd be directionally consistent and continue to lower the reserve.
We'll have a follow-up question from Michael Young.
Just wanted to hit on the capital side of the equation. Obviously, with the lower tax rate now and these two deals once they, kind of, close and combine, it'll be the higher EPS run rate. How are you just thinking about the dividend payout ratio, especially with maybe closer to 7% organic growth as opposed to where we've been in the double digits, maybe historically?
Yes, what we intend to do is with our -- is stay pretty -- very consistent or consistent with the past payout practices. So we've been at about a 50% level. We're going to make more money this year, obviously, both organically and with our two acquisitions. We expect to just stick with the 50% regular dividend. And then obviously, we -- at the end of the year, we'll evaluate the special. But I think based on where our capital is, that's something we'll look at that time. But really see, Michael, very consistent on a percentage basis to where we've been.
Okay. One other one just on balance sheet management. With the loan-to-deposit ratio, you've had a little noise in the last two quarters. But you remix the balance sheet a lot over the last 3, 4 years. Are we kind of reaching a high water mark, so to speak, there? Or do you want to continue to remix that even higher, maybe to 85% or 90% loan-to-deposit ratio?
No, I think where we are is pretty much I think where we'd like to be. It may bubble -- it may bump up a little bit but I think we're in the right zone right now.
And I'm showing no further questions. I would now like to turn the call back to Randy Chesler for any further remarks.
Okay. Well, thank you, and thank you all for joining us. We're off to a great start. Very excited about the year, appreciate all the detailed questions and as always, we're here if there is anything else that you want to talk to us about, give us a ring, Ron and Don and I are here to answer any questions you might have. So with that, we'll end the call and hope you all have a great, great weekend. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect. Everyone, have a great day.