Community Banking Comes to Wall Street

By Beacon Staff

As Glacier Bancorp continues its rise in the banking world, company officials have resisted adopting a more consolidated, centrally controlled model of operation. They’re sticking with the community banking formula, which has been the backbone of the company’s business philosophy since its inception in 1955.

Judging by a new report, the approach appears to have particular relevance in today’s volatile economic climate.

Bank Director magazine recently published its annual bank performance scorecard, ranking the top 150 banks of all sizes across the country. This year, Kalispell-based Glacier Bancorp was No. 1, and in past years it has consistently been in the top five. A conservative lending approach is a large reason for the bank’s good standing, but CEO Mick Blodnick points to the community-based methodology as the central catalyst.

Even with 11 subsidiaries and 94 branch offices, Glacier Bancorp allows each subsidiary bank to control, in large part, its own operations through separate boards. The holding company’s flagship institution is Glacier Bank, which has 15 branch offices throughout western Montana. The 15th branch recently opened in Lakeside. Glacier’s 10 other subsidiary banks are spread out across Montana, Idaho, Wyoming, Utah and Washington.

Since each bank has its own board of directors and management, Blodnick said day-to-day decisions aren’t handed down from a distant, out-of-touch administrative team. Policies and procedures are created in-house by people who Blodnick said better understand the dynamics of the local economy because “they’re on the ground.”

This is not the standard operational model for a growing corporation worth $5.5 billion in assets, Blodnick said. In the banking landscape, Glacier is a relatively small- to mid-sized financial institution or, as Blodnick says, a “small regional” bank. Nevertheless, it has gained a substantial following on Wall Street.

“We don’t look at ourselves as a banking company,” Blodnick said. “We’re a company of banks.”

The Bank Director report, released while the nation is in the throes of a sweeping bank crisis, outlines a definitive trend: Small or mid-size banks like Glacier that have been conservative with their lending and avoided the subprime mortgage disaster are holding their ground – relatively speaking – while the big banks are taking huge hits.

To be sure, Glacier has taken its lumps over the past year. During the third quarter of 2008, its earnings slipped to $12.8 million, down 27.5 percent from $17.6 million for the same quarter the previous year.

Most notably, the bank was forced to write down nearly $3 million in investments in common stock of Fannie Mae and Freddie Mac.

In its study, Bank Director analyzed a wide set of criteria, including different components of profitability, capital adequacy and asset quality. Glacier doesn’t rank No. 1 in any major categories but consistently ranks toward the top or in the middle. Brad Milsaps, a research analyst at Sandler O’Neill, says in the report that Glacier “keeps it simple.”

“There’s no trust department, no credit cards, and no ancillary business like insurance,” Milsaps said. “It’s actually kind of boring.”

Blodnick is content with boring. As an emerging Wall Street player, Glacier Bancorp has faced plenty of opportunities to adopt the riskier practices of bigger banking companies. Glacier, like other Montana banks, stayed out of the “subprime debacle” and has avoided acquiring too many “problem assets,” Blodnick said. Also, he said his office has been flooded with thank-yous for turning down a large chunk of money from the Troubled Assets Relief Program.

“We’re philosophically opposed to it,” he said.

This year will be “a challenge,” Blodnick said. Soaring unemployment will lead to more frequent loan delinquencies and the real estate market is still a large question mark, as are the eventual outcomes of a series of federal efforts to stimulate the sagging economy.

“The best case is that we start to see some light at the end of the tunnel by the last of this year,” Blodnick said. “But that could easily push back to 2010.”

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