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Nation's No. 1 bank turns down bailout money

by NANCY KIMBALL/Daily Inter Lake
| February 1, 2009 1:00 AM

Glacier tops financial scorecard

Glacier Bancorp of Kalispell made national headlines twice last week.

Bank Director magazine named it the best bank in the country. And Glacier announced it would take no bailout money from the federal government's Troubled Assets Relief Program.

President and Chief Executive Officer Mick Blodnick is honored that the nationally respected magazine put the bank holding company in the lead spot in its annual ranking of the top 150 performers nationwide.

But there's more to the story.

"What we as a company, all of our 11 banks collectively, take more pride in is the fact that for the last five years we have been in the top five," Blodnick said Friday. "We were number two last year and number three the year before.

"Number one is nice," he said, "but all of us feel more proud of the fact that consistently we have been up there for some time."

Glacier Bancorp, with $5.03 billion in assets, is the holding company for Glacier Bank in the Flathead Valley and 10 other independent banks in Montana, Idaho, Wyoming, Utah, Colorado and Washington.

The magazine's top ranking is compiled from six different criteria measuring return on average assets, return on average equity, two measures of capital adequacy, and two indicators of loan quality.

Glacier Bancorp did respectably in each, but was not a standout in any category.

"While Glacier does not score higher than ninth in any single category," Paul Sweeney wrote in the Bank Director piece on the 2008 Bank Performance Scorecard, "it ultimately ranks highest by keeping on an even keel across several metrics. That makes it 'one of the best banking franchises in the country,' says Sandler O'Neill research analyst Brad Milsaps.

"Adds Mark Fitzgibbon, his colleague at Sandler O'Neill: 'The moral of the story is that you don't have to shoot the lights out to score well in the survey. You just have to do a good job in every category and be in the upper half of the companies on each list."

Blodnick said it's a reflection of the company's smart, hard-working staff in each independent bank - and each bank's autonomy.

"It's great for our people. They've done a fantastic job and it's been the worst banking climate ever," Blodnick said.

"Going with this model of separate, independent banks is also one of the reasons we have been able to maintain this performance," he said. "It allows each of our 11 independent banks to focus on their communities, with separate boards and separate presidents. They can focus on their customer base and market, and they're not getting interference from corporate headquarters."

With that well-capitalized and steady-performing backdrop, Glacier Bancorp's board turned down the $127 million in bank bailout money it had been approved for from the $250 billion earmarked for banks under the Troubled Assets Relief Program.

Glacier is one of about 20 community banks so far that have backed out of the program after applying for a share of the bailout money.

It's not just Glacier's comfortable financial position that prompted the decision.

"The TARP funds are not cheap, either," Blodnick said.

For the first five years, Blodnick said the money comes at a pre-tax cost of about 10 percent a year once all costs are accounted for. After tax, he said, it's about 6 or 6.5 percent.

But after that until the loan is repaid, he said, the annual pre-tax cost is about 16.5 percent.

"And there are a number of restrictions," he added. "We just never could get comfortable with getting our arms around just how restrictive it really was going to be, how much the government was going to require."

He said the government would call the shots on dividend payouts, stock buybacks and more. Potential limitations in the future made Glacier officials even more squeamish.

"Also, then the government would become a shareholder in the bank," he said. "Philosophically, we sure didn't think it was a road we wanted to go down. For some banks, TARP funding absolutely was the right road and they certainly needed it."

Blodnick hasn't heard much feedback, but assumes shareholders and customers would approve.

"The problem from the shareholders' perspective if you take these TARP funds, the government stands above you as a shareholder of common equity shares," he said. Among the American public, "there's a lot of misunderstanding about the bank bailout in general. It's not free."

Reporter Nancy Kimball can be reached at 758-4483 or by e-mail at nkimball@dailyinterlake.com