49 Commons Loop
With assets of more than $950 million, Glacier Bancorp, Inc. is one of the largest financial institutions in Montana. A multibank holding company, Glacier Bancorp operates in western and central Montana through five principal subsidiaries--Glacier Bank, Glacier Bank of Whitefish and Glacier Bank of Eureka, First Security Bank of Missoula, Valley Bank of Helena, and Big Sky Western Bank. In 1999, Glacier Bancorp ventured outside its traditional Montana markets when it acquired Mountain West Bank of Idaho; it now runs five banking offices in Idaho. With 23 branches, Glacier Bancorp offer a full range of retail and commercial banking products and services.
A Small Town Thrift: 1955-80
Glacier Bancorp's roots date back to 1955, when several business leaders in Kalispell, Montana joined together to establish First Federal Savings and Loan of Kalispell. Among the founders were Alton Pierce (who operated a Kalispell drug store), Owen Sowerwein, Milt Mercord, and Ruben Nordem (the owner of a local shoe store). Bob Gattis was recruited to be the new savings and loan's first managing officer. In 1977, Charles Mercord replaced Gattis as managing officer and chief executive.
Like other savings and loan associations (also known as 'thrifts'), First Federal Savings and Loan was a federally chartered bank. Although federal regulations gave such institutions special privileges, including lower capital requirements than their commercial bank counterparts, these same regulations limited the types of services thrifts could offer. While empowered to make real estate loans, savings and loans could not make consumer or commercial loans. Furthermore, thrifts were required to rely solely on individual deposits for their funds. For these reasons, First Federal operated for most of its early history simply as a depository and real estate loan center for the Kalispell area.
Deregulation and Growth in the 1980s
First Federal's outlook changed drastically in 1980, when Congress began to overhaul the regulations governing the banking industry as a whole. By the end of the 1970s, the industry had become considerably more complex, with unregulated financial institutions entering into traditional banking activities. Moreover, depository institutions--such as savings and loans--had sought ways to outmaneuver the regulations that barred them from offering banking services, such as checking accounts. For instance, many thrifts began to tout Negotiable Order of Withdrawal (NOW) accounts. These interest-bearing savings accounts were a near substitute for checking accounts.
In 1980, Congress passed the Depository Institutions Deregulation and Monetary Control Act. This legislation approved NOW accounts and broadened the sphere of thrifts' permissible activities. With the passage of the Garn-St Germain Depository Institutions Act of 1982, savings and loans gained 'new investment, deposit, and lending powers, including the ability to make commercial and consumer loans,' according to the Dallas Morning News. The restrictions on the interest rates thrifts could offer were loosened, as were those that forbade thrifts from borrowing from other financial institutions.
First Federal immediately used its new powers, and it began to offer checking accounts and consumer loans. While many of the nation's savings and loan associations, however, overindulged in the wake of deregulation--making rafts of bad loans and nearly causing the collapse of the American banking industry in the late 1980s--First Federal remained 'focused on stability and profits,' John MacMillan, the company's future chief executive later told U.S. Banker. 'We've always believed that a good, strong bottom line protects the company from bad loan decisions.'
As First Federal strove both to expand and to diversify its loan mix to include small consumer loans, the company needed to raise additional capital. In an effort to do so, First Federal opted to become a publicly held company in 1984, starting with an initial offering of 550,000 shares. According to the Missoulian, going public 'positioned the bank for purchases.' At the same time, First Federal insured that its employees retained a significant stake in the thrift by rewarding all staff with stock options after they had worked one year with the company. 'We have consistently tried to make all employees owners in the bank,' MacMillan later explained, adding 'It just wasn't our philosophy to reward only the top four or five people.'
Bolstered both by its conservative lending policies and loyal employees, First Federal grew during the mid-1980s--despite the fact that Montana's core industries of mining and lumber were mired in a deep slump. The company's assets rose from $140 million in 1986 to $148 million in 1988, while its net income increased from $1.7 million to $1.9 million during the same period. The efficacy of First Federal's approach was further underscored by the failure of other savings and loans. As the Billings Gazette reported, across the county thrifts lost a total of $5.8 billion in 1987 and an astounding $11.1 billion the following year. Meanwhile, First Federal held the distinction of being Montana's most profitable thrift in 1988, a fact that led Barron's to proclaim that the company was 'nestle[d] like a rose among the thorns of the thrift industry.'
In 1989, First Federal continued its pursuit of expansion, when it acquired Glacier National Bank of Columbia Falls, Montana for $150,000. In the process, First Federal became one of the first thrifts in the United States to acquire a bank. With more than $16 million in deposits and a low loan-to-deposit ratio of 37 percent, Glacier offered First Federal clear advantages. When the purchase was completed, First Federal's assets exceeded $165 million. To reflect its wider geographic reach, First Federal changed its name to First Federal Savings Bank of Montana. More important, First Federal altered its structure to became a Federal Reserve holding company, a move that it made to increase its flexibility.
Expansion in the 1990s
First Federal's fortunes received a dramatic boost in 1990, when Money Magazine named Kalispell as one of the best places to live in the United States. According to the Missoulian, this laudatory article helped 'kick off a housing and population boom' in western Montana. Those who flocked to the area's scenic vistas only a few miles from Glacier National Park were often affluent and in search of a second home. First Federal was uniquely poised to capitalize on the growth, as it controlled approximately 15 percent of all mortgages in the area. The company quickly devised tools to serve these wealthier newcomers, offering short-term loans in addition to conventional fixed-rate loans. 'We have many unique loans on larger properties,' MacMillan would later explain to Real Estate Finance Today.
While the Kalispell area around First Federal buzzed with new arrivals, the company made a number of internal changes as well. In October 1990, First Federal once again took a new name. The holding company was redesignated Glacier Bancorp, Inc., and the First Federal branches became Glacier Bank. Still intent on increasing its assets, the company announced in December 1991 that it would acquire Evergreen Bancorp, a privately held corporation that controlled First National Bank of Whitefish and First National Bank of Eureka (both in Montana). When the purchase was completed in 1992, Glacier Bancorp gained $46.2 million of assets, as well as new bank branches.
Soon after the Evergreen acquisition was finalized, chief executive Charles Mercord retired. His post was filled by company veteran John MacMillan. The change at the helm did little to affect Glacier's growth. Between 1992 and 1993, the company's net income surged from $4.10 million to $5.12 million, and by the close of 1993, Glacier had 13 bank branches--all located in northwest Montana. The national press took notice of Glacier's stellar performance. An analyst reporting to Barron's in 1992 praised Glacier as a 'first-class bank,' and Kiplinger's Personal Finance Magazine called it 'a growth company in a red-hot state's hottest sector.' In 1994, Glacier's net income rose again to $5.13 million.
After a record year in 1995, in which Glacier's net income surpassed $5.68 million, the company once again sought to expand its network of banks. In August 1996, Glacier announced that it planned to acquire Missoula Bancshares, Inc.--the Montana-based parent company of First Security Bank of Missoula. The deal, which was completed in December 1996, offered Glacier several clear advantages. First Security brought more than $110 million of assets to Glacier, boosting Glacier's combined assets to more than $520 million. Along with this heightened liquidity, the move bolstered the company's position in the marketplace, as the combined institution controlled 16 offices in ten western Montana communities. Even more impressive was First Security's sound financial record. As MacMillan said in a press release, 'First Security has consistently been one of the strongest performing banks in the whole country in recent years.' Furthermore, the acquisition provided Glacier access to the burgeoning Missoula market. About two hours south of Kalispell, Missoula was one of the fastest-growing regions in Montana. Unlike Kalispell, Missoula had a multifaceted economy, rooted in government services, medical care, forestry, technology, education, tourism, and trade, making it more adaptable to the vicissitudes of local economic conditions. Finally, the acquisition of First Security allowed Glacier to balance its loan portfolio. The bulk of Glacier's loans were in real estate, and thus 'First Security's commercial and consumer loans ... mesh[ed] nicely,' MacMillan explained in a press release. With stronger commercial and consumer loans, Glacier would be protected from any future fluctuations in the Montana real estate market.
Upon completing its purchase of Missoula Bancshares in December 1996, Glacier allowed First Security to retain its autonomy, local management, and local decision-making. This policy quickly became the centerpiece of Glacier's strategy in subsequent acquisitions. As Michael Blodnick--who would later become Glacier's chief executive--noted to the Northwestern Financial Review that the 'main reason we're buying the banks is because of the talents those banks have in their senior management teams.' He emphasized that Glacier's operating philosophy was 'to find excellent performers, fast-growing banks with reputations, and [let] those people keep doing their things.'
As it sought to integrate its new holdings, Glacier took the unconventional step of converting all of its banks from federal charters to state commercial charters in 1997. Although First Security was chartered as a commercial bank by the state of Montana, Glacier's other holdings still had been operating as federal thrifts. 'It becomes time consuming having to deal with all the different agencies,' a Glacier executive told American Banker. By simplifying this web of regulations and thereby having each bank subsidiary report to the same authority, Glacier hoped to create efficiencies and cut costs. As it streamlined its operations, Glacier also changed the names of First National Bank of Whitefish and First National Bank of Eureka to Glacier Bank of Eureka and Glacier Bank of Whitefish to 'more clearly identify the tie with Glacier Bank and expand customer recognition,' MacMillan explained in a press release.
Yet while working to integrate its diverse subsidiaries, Glacier also continued to expand in terms of both its geographical reach and the services it offered. In 1997, Glacier launched a partnership with Robert Thomas Securities to provide full-service brokerage and investment services at many of the company's branch banks. Later in the year, Glacier announced its acquisition of HUB Financial Corporation, a holding company that controlled Valley Bank in Helena, Montana. With two offices in Helena (and an additional branch under construction), Valley Bank provided Glacier with $70 million in assets and access to the market in Montana's capital city. Consistent with its general philosophy, Glacier pledged that Valley Bank would retain its autonomy, as well as its decision-making authority.
In 1998, Glacier purchased Big Sky Western Bank, a commercial bank with about $40 million in assets and banking offices in Big Sky and Bozeman, Montana. 'We believe this acquisition significantly enhances our banking franchise by giving us access to another rapidly growing market area in Montana,' Michael Blodnick announced in a press release. Blodnick had succeeded MacMillan as president and chief executive officer of the company in April 1998. MacMillan, who had served at Glacier for 31 years, remained chairman of the board.
Despite the raft of changes implemented in the late 1990s, Glacier continued to enjoy record growth. In 1997, Glacier's assets increased by six percent, to more than $580 million, and its loans jumped by nine percent. The year 1998 was even more successful. Glacier had expanded its empire to 23 offices in 16 Montana communities, and its assets topped $710 million. As its first full year under state commercial charters, Glacier ranked fourth in U.S. Banker's mid-sized bank ranking. Glacier had extended its loan portfolio beyond real estate as well. According to the Missoulian, by 1999, the company's loan portfolio consisted of a balanced 42 percent commercial loans, 36 percent real estate, and 22 percent consumer loans. Although the company had achieved an unprecedented compounded annual earnings growth of more than 17 percent between 1988 and 1998, Glacier kept its perspective. 'We're just aggressive community bankers who are taking advantage of the changes occurring in this industry,' MacMillan told U.S. Banker.
But even with its stunning successes, Glacier did not overlook the communities it served. In May 1995, three of the company's banks had been recognized by the Federal Home Loan Bank of Seattle for contributing to the revitalization of the rural Flathead Valley. Specifically, the company was credited with pioneering innovative ways to create homeownership opportunities for low- and moderate-income families. In 1997, Glacier created the Glacier Affordable Housing Foundation, which in one year dispersed more than $2 million in grants and helped 70 families purchase homes.
1999 and Beyond
Glacier completed another acquisition in 1999, when it purchased two bank branches in Butte, Montana from Washington Mutual Inc. 'Butte adds a key location that helps expand our strong western Montana banking franchise,' Blodnick told the Associated Press. As with its other acquisitions, Glacier left control to local management.
Soon after completing its acquisition in Butte, Glacier announced in September 1999 that it would make its initial foray beyond Montana with the purchase of Mountain West Bank of Idaho. This commercial bank with $87 million in assets had offices in Coeur d'Alene, Hayden Lake, Post Falls, and Boise, Idaho. The advantages Glacier stood to accrue by purchasing Mountain West were significant. Most important was the fact that Glacier would no longer be dependent solely on Montana's growth. Mountain West provided Glacier with access to two of the fastest-growing markets in the United States--Idaho's Coeur d'Alene and Kootenai counties. According to Northwestern Financial Review, the population in these areas had exploded during the late 1990s. 'Our hope is to use this merger as a springboard into Idaho and eastern Washington,' Blodnick told the Spokesman Review. Moreover, Mountain West's strengths mirrored Glacier's own in the arenas of real estate and commercial loans. Therefore, rather than venture into new spheres (such as agriculture loans), Glacier could continue to focus on what it already did so well.
Glacier's flurry of activity paid off, as 1999 proved to be a banner year. The company's record earnings increased 11.6 percent to reach $12.18 million. At the same time, Glacier's assets grew 25 percent, while commercial loans and consumer loans rose 33 percent and 25 percent, respectively. With more than $950 million in assets, Glacier was one of the largest commercial banks in Montana, and with its plans to expand westward (especially into flourishing Idaho markets), Glacier's future prospects looked exceedingly bright.
Principal Subsidiaries: Glacier Bank; Glacier Bank of Whitefish and Glacier Bank of Eureka; First Security Bank of Missoula; Valley Bank of Helena; Big Sky Western; Mountain West Bank.
Principal Competitors: BancWest Corporation; Wells Fargo & Company; WesterFed Financial Corporation.