Glacier Bancorp Inc. of Kalispell, Mont., says it may use proceeds from a common stock offering to acquire failed banks, a strategy that management had previously left off the table.

Yet analysts say the number of imminent failures in Glacier's market is small compared with the Southeast or Pacific Northwest markets, for instance, and an acquisition could be several months off. Meanwhile, the fresh capital could serve as a buffer as the $6.3 billion-asset company works through a growing pool of nonperforming assets.

Mick Blodnick, Glacier's chief executive, said it had previously ruled out transactions outside its market, and hadn't seen many possibilities of failed-bank acquisitions nearby.

"But in the fourth quarter that started really changing," Blodnick said in an interview. "And it looks like there's more and more stress, and more and more possibilities."

Jeffrey Rulis, a senior research analyst with D.A. Davidson & Co., said the count of struggling banks in Glacier's market — stretching from Montana into Idaho, eastern Washington, Utah, Wyoming and Colorado — has lagged other regions but started rising in the fourth quarter. A number of Glacier's competitors have already jumped on opportunities, he said.

"I'd be surprised if we don't see an announcement by the end of the year" from Glacier, he said.

Blodnick said any deal "would have to be one that we could fold into one of our existing banks." He also said Glacier would not look at deals "where we'd have to go and put in a new management team or build infrastructure."

Glacier operates 11 subsidiaries, eight of which are banks it has acquired since 2003. Analysts say the company is healthy enough to acquire failed banks — it has plenty of capital, and has made two acquisitions in the past 16 months. But Blodnick said the asking price on most deals is much higher than Glacier is willing to pay.

"I just think in this environment, it's just a lot more dicey trying to go out and get a whole-bank transaction done, when there appear to be deals available with the government backing," he said.

Glacier announced Monday that it raised $145.6 million of fresh capital, an increase from the $110 million offering announced March 15. It sold 10.2 million shares at $14.75 a share, a 2% discount to its March 15 closing price. The total shares sold in the offering include 1.3 million that the underwriters purchased to cover over-allotments.

Matthew Clark, a senior vice president in equity research at KBW Inc.'s Keefe, Bruyette & Woods Inc., said 77 banks of the 337 in Glacier's market have Texas ratios above 100%, a sign that a bank is in deep trouble.

Yet once the strugglers outside Glacier's immediate affiliate markets are subtracted, the number of possible deals assisted by the Federal Deposit Insurance Corp. is cut to eight to 10, Clark said. Of those, a few banks are in the $400 million to $800 million-asset range and would make sense for Glacier to acquire, but their failure isn't imminent, he added.

"So you're talking about only a handful of deals where some risk exists in your ability to win the bid," Clark said.

Rulis also pegged about eight deals that would be attractive to Glacier, mostly in Montana, Idaho and Utah.

Timothy Coffey, the vice president of East Coast research for FIG Partners LLC, said he expects Glacier to pursue a few smaller FDIC-assisted deals rather than one large deal, probably in the next 90 days.

But he said the company, whose earnings fell 44% in the fourth quarter from a year earlier, is starting to experience some problems with credit quality. Its nonperforming assets totaled $261.1 million as of Dec. 31, or 4.13% of total loans, compared with 1.46% at the end of 2008.

The plan to acquire failed banks likely helped Glacier raise as much capital as it did, Coffey said.

Blodnick says the company has plenty of existing capital to handle its asset-quality issues.

As of Dec. 31, Glacier was more than well capitalized, with a leverage ratio of 11.2%, Tier 1 risk-based capital of 14%, and total risk-based capital of 15.3%. Each of its subsidiaries had total risk-based capital ratios of at least 12.37%.

"Hopefully, and I underscore hopefully, in the second half of the year we could start to see a decrease" in nonperforming loans, Blodnick said.

The effort could boost Glacier's tangible common equity ratio to 10.5%, from 8.7%, a sign that it is serious about acquisitions, said Brett Rabatin, a senior analyst at Sterne, Agee & Leach Inc.

"That's a high level of capital for a bank that's got a solid pre-provisions earning power," Rabatin said. "If I were worried about credit quality alone, I don't think I would have raised as much money."

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