Acquisitive Glacier Bancorp strikes deal to expand in Northwest

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Glacier Bancorp in Kalispell, Montana, is back on a well-worn path.

The $28 billion-asset bank, which has more than tripled in size over the past decade as it pursued a string of acquisitions, said it would pay $80.6 million to buy Community Financial Group in Spokane, Washington, in an all-stock deal slated to close in the fourth quarter.

Community Financial, the parent of Wheatland Bank, has total assets of $754 million, loans of $475 million and deposits of $609 million.

Randy Chesler, Glacier's president and CEO, said the combination would fortify the bank's presence in eastern Washington, help it diversify its loan portfolio and bolster its deposit base at a time when low-cost funding is hard to come by.

Wheatland Bank is a prominent agriculture lender across rural areas of eastern Washington, and it also capitalizes on urban economic strengths such as the technology and higher education sectors, Glacier executives said Wednesday during a call with analysts to discuss the deal.

Following regional bank failures earlier this year, including two in the West hastened by deposit runs, competition for funding intensified and, when coupled with high interest rates, put upward pressure on costs. About 45% of Wheatland Bank's deposits are non-interest bearing and more than 90% of its deposits are considered core — that is, tied to ongoing customer relationships.

"This acquisition continues our history of consistently adding high quality community banks to our proven banking model," Chesler said.

The deal, should it close as planned, would become Glacier's 25th acquisition since 2000 and its 13th M&A transaction in the past 10 years. However, it would mark the company's first acquisition in more than two years amid a broader lull in deal activity due in large part to rapidly rising interest rates — and the market and economic volatility created by higher borrowing costs. The Federal Reserve has raised rates 11 times since early 2022.

Glacier's last acquisition — and by far its largest — closed in September 2021. It paid more than $850 million to buy Altabancorp in Utah. That deal gave it $3.5 billion of assets.

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Glacier is the parent of several bank divisions across Utah, Idaho, Colorado, Wyoming, Montana, Arizona and the Pacific Northwest. The bid for Community Financial, announced after markets closed Tuesday, would join Wheatland Bank's 14 branches with one of those existing units, North Cascades Bank. The resulting new Wheatland division will have 23 branches and will be a top five bank by deposit market share in eastern Washington, Glacier executives said.

Susan Horton, currently president and CEO of Wheatland Bank, will lead the new division.

"We couldn't be more excited to join the Glacier family of banks. We will have the strength and depth of resources of a $28 billion-asset bank, expand our local Wheatland footprint and immediately double in size after integrating the North Cascades Bank division, to become a top five eastern Washington bank," Horton said in the joint press release announcing the deal. "This partnership will cement Wheatland Bank's legacy, strengthen our position in the marketplace and create more opportunity for all stakeholders."

Janney analyst Timothy Coffey said the latest deal was relatively small for Glacier, but he welcomed the addition of a strong deposit base, given the current environment. The deal "reflects the value of a stable funding source," he said.

Glacier estimated tangible book value dilution of 0.40% from the deal. It expects to earn back the dilution in less than one year. It projected earnings per share accretion of 3.4% in 2024 and 4.2% in 2025. The accretion estimates include anticipated 20% cost savings of the seller's non-interest expense base. The savings would be phased in by 50% in 2024 and fully in 2025.

Keefe Bruyette & Woods was financial adviser and Miller Nash acted as legal counsel to Glacier Bancorp. Piper Sandler and Otteson Shapiro advised Community Financial.