Glacier CEO Blodnick Eyeing Bulk Loan Sales, Hints at M&A

Glacier Bancorp (GBCI) in Kalispell, Mont., is off to a strong start in 2012 and its chief executive is optimistic that its performance will only improve as the company streamlines its operating structure and continues to shed problem assets.

In an earnings conference call with analysts Friday, CEO Mick Blodnick also said that the company would not use excess capital to buy back stock — at least not in the near-term — because "we want to keep our powder dry" for possible bank acquisitions.

The $7.2 billion-asset Glacier announced after markets closed Thursday that its first-quarter profit rose 59% from the same period last year, to $16.3 million, due primarily to a reduction in credit costs. Its provision for loan losses in the quarter was $8.6 million, down 56% from last year's first quarter.

Glacier's earnings per share climbed 64%, to 23 cents, topping by a penny the consensus estimates of analysts surveyed by Thomson Reuters.

In the follow-up conference call Friday, Blodnick said that unloading more distressed assets, particularly in its land development portfolio, is the key to reducing credit costs and, in turn, generating more earnings growth.

Nonperforming assets ticked up slightly in the quarter from three months earlier, to nearly $215 million, but Blodnick said that he is hopeful that Glacier can sell off a number of foreclosed properties in bulk to investors over the next two or three quarters.

"The offers that we are seeing [from investors] lately are more realistic than we've seen over the last couple of years," Blodnick said. He added that he would be "disappointed" if its total nomperforming loans is not reduced by at least 20% this year.

Blodnick said that Glacier's biggest challenge going forward is growing loans in its markets in Montana, Idaho, Washington, Wyoming, Colorado and Utah. The company is in process of collapsing its 11 charters into a single commercial bank, a move Blodnick said would reduce regulatory costs and free many employees who now spend much of their time on compliance to go out and generate new business.

Growth could also come from acquisitions. Glacier bought 10 banks between 2000 and 2009, and Blodnick said it is eager to start doing deals again if the prices are right. "We have the right model and the financial strength to participate in M&A" activity, he said on the conference call.

Glacier has had discussions with a number of potential sellers, but Blodnick said that the biggest hurdle to completing deals right now is disagreement between buyers and sellers on loan values. In short, sellers believe that loans on their books are worth more than buyers think they are.

Blodnick said that if Glacier doesn't complete a deal by the end of the year it would consider buying back some of its stock.

Glacier's shares were trading at $15.05 midday Friday, up 4% from Thursday's closing price.