Acquisitions Of Bank Of Idaho And Wheatland Bank Will Strengthen Market Position In 2025

Key Takeaways

• Anticipated earnings boost through margin expansion, strategic acquisitions, and repricing of loans and securities portfolios.
  
• Projected revenue growth driven by organic loan growth and cost reductions from recent acquisitions.
  
• Declining deposits and noninterest income, coupled with competitive pressures, suggest potential profitability challenges despite cost-cutting measures at Glacier Bancorp.

Catalysts

Operates as the bank holding company for Glacier Bank that provides commercial banking services to individuals, small to medium-sized businesses, community organizations, and public entities in the United States.

• Expectation of continued margin expansion through asset repricing, maturation of high-cost borrowings, and strategic acquisition of Bank of Idaho, potentially boosting net interest margin and earnings.
  
• Anticipation of increased loan yields with $2 billion of loans repricing in 2025, enabling higher net interest income and improved revenue.
  
• Organic loan growth projected in the low to mid-single digits for 2025, expected to enhance revenue through loan portfolio expansion.
  
• Cost savings from recent acquisitions, including Wheatland Bank and Rocky Mountain Bank, anticipated to reduce noninterest expenses, potentially improving net margins.
  
• Expected positive impact on margin from securities portfolio cash flow and treasury maturities in 2025, enabling the reduction of FHLB borrowings and improving net interest margin and earnings.

Glacier Bancorp Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Glacier Bancorp's revenue will grow by 18.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 23.7% today to 35.4% in 3 years time.
• Analysts expect earnings to reach $474.4 million (and earnings per share of $3.91) by about March 2028, up from $190.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.5x on those 2028 earnings, down from 26.8x today. This future PE is greater than the current PE for the US Banks industry at 11.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.65%, as per the Simply Wall St company report.

Glacier Bancorp Future Earnings Per Share Growth

Risks

• The decrease in total deposits by $168 million or 1% from the prior quarter may indicate challenges in retaining or growing deposit levels, which could negatively impact revenue due to reduced funds available for lending.
  
• The decline in noninterest income for the current quarter by $3.2 million or 9% over the prior quarter highlights a potential risk in relying on noninterest income streams, which could impact overall earnings if this trend continues.
  
• The decrease in noninterest expense by $3.7 million or 3% from the prior quarter might indicate cost-cutting measures that could be unsustainable or limit growth opportunities, potentially impacting net margins.
  
• The slowdown in expected loan growth to low-to-mid single digits for 2025 suggests potential challenges in driving significant revenue growth from lending activities.
  
• The potential competition and the need to sharpen the pencil on stronger deals due to pricing pressures could compress loan yields and therefore affect net interest margins and overall earnings.

Valuation

• The analysts have a consensus price target of $57.167 for Glacier Bancorp based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $474.4 million, and it would be trading on a PE ratio of 16.5x, assuming you use a discount rate of 6.7%.
• Given the current share price of $44.96, the analyst price target of $57.17 is 21.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.