UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

           [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 For the fiscal year ended December 31, 2004 or

         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                            COMMISSION FILE 000-18911

                              GLACIER BANCORP, INC.

         MONTANA                                         81-0519541
  (State of Incorporation)                  (IRS Employer Identification Number)

                      49 Commons Loop, Kalispell, MT 59901
                          (Address of Principal Office)

       Registrant's telephone number, including area code: (406) 756-4200

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value

Indicate by check mark whether the registrant (i) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (ii) has been subject to such filing
requirements for the past 90 days. [X]

Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined by Exchange Act Rule 12b-2). Yes [X] No [ ]

The aggregate market value of the voting common equity held by non-affiliates of
the Registrant at June 30, 2004 (the last business day of the most recent second
quarter), was $644,782,651 (based on the average bid and ask price as quoted on
the NASDAQ National Market at the close of business on that date).

As of March 2, 2005, there were issued and outstanding 24,630,415 shares of the
Registrant's common stock. No preferred shares are issued or outstanding.

DOCUMENT INCORPORATED BY REFERENCE

Portions of the 2005 Annual Meeting Proxy Statement dated March 23, 2005 are
incorporated by reference into Part III of this Form 10-K.

                      GLACIER BANCORP, INC.
                     FORM 10-K ANNUAL REPORT
              For the year ended December 31, 2004
                        TABLE OF CONTENTS

PART I.                                                                                       Page
                                                                                        
Item 1.              Business                                                                   3
Item 2.              Properties                                                                20
Item 3.              Legal Proceedings                                                         20
Item 4.              Submission of Matter to a Vote of Security Holders                        20

PART II.

Item 5.              Market for the Registrant's Common Equity, Related Stockholder
                                    Matters, and Issuer Purchase of Equity Securities          20
Item 6.              Selected Financial Data                                                   21
Item 7.              Management's Discussion and Analysis of Financial
                                    Condition and Results of Operations                        23
Item 7a.             Quantitative and Qualitative Disclosure about Market Risk                 33
Item 8.              Financial Statements and Supplementary Data                               33
Item 9.              Changes in and Disagreements with Accountants in Accounting
                                     and Financial Disclosures                                 66
Item 9a.             Controls and Procedures                                                   66
Item 9b.             Other Information                                                         66

PART III.

Item 10.             Directors and Executive Officers of the Registrant                        66
Item 11.             Executive Compensation                                                    67
Item 12.             Security Ownership of Certain Beneficial Owners
                                     and Management                                            67
Item 13.             Certain Relationships and Related Transactions                            67
Item 14              Principal Accountant Fees and Services                                    67

PART IV.

Item 15.             Exhibits and Financial Statement Schedules                                67

                                     PART I.

This Annual Report and Form 10-K may be deemed to include forward looking
statements, which management believes are a benefit to shareholders. These
forward looking statements describe management's expectations regarding future
events and developments such as future operating results, growth in loans and
deposits, continued success of the Company's style of banking and the strength
of the local economy. The words "will," "believe," "expect," "should," and
"anticipate" and words of similar construction are intended in part to help
identify forward looking statements. Future events are difficult to predict, and
the expectations described above are subject to risk and uncertainty that may
cause actual results to differ materially and adversely. In addition to
discussions about risks and uncertainties set forth from time to time in the
Company's filings with the SEC, factors that may cause actual results to differ
materially from those contemplated by such forward looking statements include,
among others, the following possibilities: (1) local, national, and
international economic conditions are less favorable than expected or have a
more direct and pronounced effect on the Company than expected and adversely
affect the Company's ability to continue its internal growth at historical rates
and maintain the quality of its earning assets; (2) changes in interest rates
reduce interest margins more than expected and negatively affect funding
sources; (3) projected business increases following strategic expansion or
opening or acquiring new branches are lower than expected; (4) costs or
difficulties related to the integration of acquisitions are greater than
expected; (5) competitive pressure among financial institutions increases
significantly; (6) legislation or regulatory requirements or changes adversely
affect the businesses in which the Company is engaged; and (7) the Company's
ability to realize the efficiencies it expects to receive from its investments
in personnel and infrastructure.

ITEM 1. BUSINESS

                         GENERAL DEVELOPMENT OF BUSINESS

Glacier Bancorp, Inc. headquartered in Kalispell, Montana (the "Company"), is a
Montana corporation incorporated in 2004 as a successor corporation to the
Delaware corporation originally incorporated in 1990. The Company is a regional
multi-bank holding company providing commercial banking services from 55 banking
offices in Montana, Idaho, Utah and Washington. The Company offers a wide range
of banking products and services, including transaction and savings deposits,
commercial, consumer, and real estate loans, mortgage origination services, and
retail brokerage services. The Company serves individuals, small to medium-sized
businesses, community organizations and public entities.

SUBSIDIARIES

The Company is the parent holding company of its nine wholly owned subsidiaries,
Glacier Bank ("Glacier"), First Security Bank of Missoula ("First Security"),
Western Security Bank ("Western"), Mountain West Bank in Idaho ("Mountain
West"), Big Sky Western Bank ("Big Sky"), Valley Bank of Helena ("Valley"),
Glacier Bank of Whitefish ("Whitefish"), Glacier Capital Trust I ("Glacier Trust
I"), and Glacier Capital Trust II ("Glacier Trust II").

The Company formed Glacier Trust II as a financing subsidiary on March 24, 2004.
Glacier Trust II issued 45,000 preferred securities at $1,000 per preferred
security. The purchase of the securities entitles the shareholder to receive
cumulative cash distributions at an annual interest of 5.788% for the first five
years and then converts to a three month LIBOR plus 2.75% rate from payments on
the junior subordinated debentures of Glacier Bancorp, Inc. The subordinated
debentures will mature and the preferred securities must be redeemed by April 7,
2034. In exchange for the Company's capital contribution, the Company owns all
of the outstanding common securities of Glacier Trust II.

The Company formed Glacier Capital Trust I as a financing subsidiary on December
18, 2000. On January 25, 2001, Glacier Trust issued 1,400,000 preferred
securities at $25 per preferred security. The purchase of the securities
entitles the shareholder to receive cumulative cash distributions at an annual
interest rate of 9.40% from payments on the junior subordinated debentures of
Glacier Bancorp, Inc. The subordinated debentures will mature and the preferred
securities must be redeemed by February 1, 2031. In exchange for the Company's
capital contribution, the Company owns all of the outstanding common securities
of Glacier Trust I.

The Company provides full service brokerage services (selling products such as
stocks, bonds, mutual funds, limited partnerships, annuities and other insurance
products) through Raymond James Financial Services, a non-affiliated company.
The Company shares in the commissions generated, without devoting significant
management and staff time to this portion of the business.

RECENT AND PENDING ACQUISITIONS

The Company's strategy has been to profitably grow its business through internal
growth and selective acquisitions. We continue to look for profitable expansion
opportunities in existing and contiguous markets. On November 22, 2004, Glacier
entered into a Plan and Agreement of Merger with First National Banks - West Co.
and its wholly owned subsidiary First National Bank - West,

                                                                               3

Evanston, Wyoming, whereby First National Banks - West Co. merged with and into
the Company. First National Bank - West operates as a separate wholly owned
subsidiary of the Company. First National Bank - West maintains seven branches,
its main and a second branch in Evanston, Wyoming, and five additional branches
in Afton, Alpine, Kemmerer, Pinedale, and Mountain View, Wyoming. This
transaction closed on February 28, 2005. On December 15, 2004, Glacier entered
into a Plan and Agreement of Merger with Citizens Bank Holding Company and its
wholly owned subsidiary Citizens Community Bank, Pocatello, Idaho, whereby
Citizens Bank Holding Company would merge with and into the Company, and
Citizens Community Bank will continue to operate as a wholly owned subsidiary of
the Company. Citizens Community Bank operates three branches, two in Pocatello,
and the other in Ammon, Idaho. This transaction is expected to close on March
31, 2005. On June 4, 2004, we acquired AmericanWest Bancorp.'s branch office in
Ione, Washington which became a branch of Mountain West Bank. On July 15, 2003,
we acquired Pend Oreille Bancorp and its branches also became additional
branches of Mountain West. On March 15, 2001, we acquired seven Wells Fargo &
Company and First Security Corporation branches located in Idaho and Utah. On
February 28, 2001, we acquired Western, through the purchase of WesterFed
Financial Corporation, its parent company. The acquisitions were accounted for
under the purchase method of accounting. Accordingly, the assets and liabilities
of the acquired banks were recorded by the Company at their respective fair
values at the date of the acquisition and the results of the banks operations
have been included with those of the Company since the date of acquisition. The
excess of the Company's purchase price over the net fair value of the assets
acquired and liabilities assumed, including identifiable intangible assets, was
recorded as goodwill.

Mountain West was acquired February 4, 2000. The acquisition was accounted for
using the pooling of interests method of accounting. Under this method,
financial information for each of the periods presented includes the combined
companies as though the merger had occurred prior to the earliest date
presented.

FDIC, FHLB AND FRB

The Federal Deposit Insurance Corporation ("FDIC") insures each subsidiary
bank's deposit accounts. Each subsidiary bank is a member of the Federal Home
Loan Bank of Seattle ("FHLB"), which is one of twelve banks which comprise the
Federal Home Loan Bank System and all subsidiaries, with the exception of
Mountain West, are members of the Federal Reserve Bank of Minneapolis ("FRB").

BANK LOCATIONS AT DECEMBER 31, 2004

Glacier Bancorp, Inc.'s office is located at 49 Commons Loop, Kalispell, MT
59901 and its telephone number is (406) 756-4200. Glacier's address is 202 Main
Street, Kalispell, MT 59901 (406) 756-4200, First Security's address is 1704
Dearborn, Missoula, MT 59801 (406) 728-3115, Western's address is 2929 3rd
Avenue North, Billings, MT 59101 (406) 252-3700, Mountain West's address is 125
Ironwood Drive, Coeur d'Alene, Idaho 83814 (208) 765-0284, Big Sky's address is
55 Lone Peak Drive, Big Sky, MT, 59716 (406) 995-2321, Valley's address is 3030
North Montana Avenue, Helena, MT 59601 (406) 495-2400, and Whitefish's address
is 319 East Second Street, Whitefish, MT 59937 (406) 863-6300. See "Item 2.
Properties."

The following abbreviated organizational chart illustrates the various existing
parent/subsidiary relationships at December 31, 2004:

                                      ------------------------
                                        Glacier Bancorp, Inc.
                                      (Parent Holding Company)
                                      ------------------------
                                           |                           
  -----------------------------------------------|-------------------------------------------------------
    Glacier Bank           First Security Bank   |        Western Security         Mountain West Bank
  (Commercial bank)            of Missoula       |              Bank                 of Coeur d'Alene
                          (Commercial bank)      |       (Commercial bank)          (Commercial bank)
  -----------------        -------------------   |       -----------------       ------------------------
                                                 |
  -------------------------------------------------------------------------------------------------------
       Big Sky                 Valley Bank                 Glacier Bank          Glacier Capital Trust I
    Western Bank                of Helena                   of Whitefish                  and
  (Commercial bank)         (Commercial bank)            (Commercial bank)       Glacier Capital Trust II
  -----------------        -------------------           -----------------       ------------------------

                      FINANCIAL INFORMATION ABOUT SEGMENTS

At December 31, 2004, the Company had seven wholly owned banking subsidiaries,
Glacier, First Security, Western, Mountain West, Big Sky, Valley, and Whitefish.
For information regarding the holding company, as separate from the
subsidiaries, see "Item 7 - Management's Discussion & Analysis" and footnote 16
to the Consolidated Financial Statements in "Item 8 - Financial Statements and
Supplementary Data".

                                                                               4

The business of the Company's subsidiaries (collectively referred to hereafter
as "Banks") consists primarily of attracting deposit accounts from the general
public and originating commercial, residential, installment and other loans. The
Banks' principal sources of income are interest on loans, loan origination fees,
fees on deposit accounts and interest and dividends on investment securities.
The principal expenses are interest on deposits, FHLB advances, repurchase
agreements, and subordinated debentures, as well as general and administrative
expenses.

BUSINESS SEGMENT RESULTS

The Company evaluates segment performance internally based on individual banking
subsidiaries, and thus the operating segments are so defined. The following
schedule provides selected financial data for the Company's operating segments.
Centrally provided services to the Banks are allocated based on estimated usage
of those services. The operating segment identified as "Other" includes the
Parent company, nonbank unit, and eliminations of transactions between segments.

(Dollars in thousands)                         Glacier               First Security                        Western
                                         2004     2003     2002      2004     2003    2002        2004      2003       2002
                                        -------  -------  -------  ------- --------  -------  ---------  ---------  ---------
Condensed Income Statements
                                                                                         
Net interest income                      24,541   22,565   22,787   24,372   22,246   20,596     15,663     13,670     13,699
Noninterest income                        8,652    8,184    7,554    3,684    4,392    3,880      3,583      4,043      2,782
                                        -------  -------  -------  ------- --------  -------  ---------  ---------  ---------
Total revenues                           33,193   30,749   30,341   28,056   26,638   24,476     19,246     17,713     16,481
Provision for loan losses                (1,075)    (375)  (1,080)    (600)  (1,250)  (1,800)         -          -       (325)
Core deposit intangible expense            (276)    (304)    (332)    (216)    (270)    (325)      (279)      (348)      (419)
Other noninterest expense               (14,980) (14,283) (12,913) (10,184)  (9,766)  (9,192)    (9,016)    (8,661)    (7,832)
                                        -------  -------  -------  ------- --------  -------  ---------  ---------  ---------
Pretax earnings                          16,862   15,787   16,016   17,056   15,352   13,159      9,951      8,704      7,905
Income tax expense                       (5,704)  (5,437)  (5,763)  (5,572)  (5,288)  (4,761)    (3,039)    (2,604)    (2,432)
                                        -------  -------  -------  ------- --------  -------  ---------  ---------  ---------
Net income                               11,158   10,350   10,253   11,484   10,064    8,398      6,912      6,100      5,473
                                        =======  =======  =======  ======= ========  =======  =========  =========  =========
Average Balance Sheet Data
Total assets                            631,213  534,774  477,195  602,407  528,791  455,039    453,151    427,786    397,277
Total loans                             366,627  336,978  320,774  317,793  305,209  324,638    213,487    199,607    216,238
Total deposits                          365,746  340,788  331,661  347,481  349,118  350,945    214,602    220,978    224,486
Stockholders' equity                     62,230   56,866   51,014   53,247   47,822   41,457     48,731     47,782     45,065
End of Year Balance Sheet Data
Total assets                            646,523  595,778  490,999  626,341  578,803  487,699    446,502    446,405    405,282
Net loans                               398,187  330,012  319,906  326,826  295,195  300,481    210,181    196,732    188,793
Total deposits                          393,655  358,600  327,018  359,918  340,650  352,805    207,711    219,950    226,482
Stockholders' equity                     64,207   58,703   53,492   56,004   49,334   44,678     49,095     47,242     46,647
Performance Ratios
Return on average assets                   1.77%    1.94%    2.15%    1.91%    1.90%    1.85%      1.53%      1.43%      1.38%
Return on average equity                  17.93%   18.20%   20.10%   21.57%   21.04%   20.26%     14.18%     12.77%     12.14%
Efficiency ratio                          45.96%   47.44%   43.65%   37.07%   37.68%   38.88%     48.30%     50.86%     50.06%
Regulatory Capital Ratios & Other
Tier I risk-based capital ratio           13.22%   13.75%   13.54%   12.47%   12.04%   11.06%     15.38%     15.04%     15.33%
Tier II risk-based capital ratio          14.35%   14.90%   14.79%   13.72%   13.29%   12.31%     16.63%     16.30%     16.61%
Leverage capital ratio                     8.90%    8.97%    9.48%    8.27%    7.80%    7.82%      9.67%      9.23%      9.83%
Full time equivalent employees              187      176      170      119      119      120        110        105        105
Locations                                    11       11       11        9        9        9          7          7          8
                                        -------  -------  -------  ------- --------  -------  ---------  ---------  ---------

                                                                               5

(Dollars in thousands)                          Mountain West               Big Sky                        Valley
                                         2004     2003     2002     2004      2003     2002       2004      2003       2002
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------
                                                                                         
Condensed Income Statements
Net interest income                      22,552   17,061   13,629    9,361    7,264    6,860      8,959      7,845      7,522
Noninterest income                       12,315   10,206    6,392    2,249    1,729    1,591      2,940      3,730      2,641
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------
Total revenues                           34,867   27,267   20,021   11,610    8,993    8,451     11,899     11,575     10,163
Provision for loan losses                (1,320)  (1,124)    (695)    (510)    (250)    (330)      (440)      (630)    (1,335)
Core deposit intangible expense            (210)    (205)    (224)     (33)     (41)     (49)       (60)       (75)       (90)
Other noninterest expense               (21,290) (17,958) (13,439)  (5,190)  (4,141)  (3,618)    (6,020)    (5,471)    (5,371)
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------
Pretax earnings                          12,047    7,980    5,663    5,877    4,561    4,454      5,379      5,399      3,367
Income tax expense                       (3,769)  (2,216)  (1,633)  (2,157)  (1,730)  (1,705)    (1,632)    (1,754)    (1,053)
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------
Net income                                8,278    5,764    4,030    3,720    2,831    2,749      3,747      3,645      2,314
                                        =======  =======  =======  =======  =======  =======  =========  =========  =========
Average Balance Sheet Data
Total assets                            582,923  464,464  366,254  224,968  190,745  170,000    229,243    201,702    173,785
Total loans                             347,718  264,418  186,233  146,579  121,080  111,911    110,228     96,045     96,471
Total deposits                          394,149  318,196  260,420  120,900  106,743   92,894    144,351    131,687    127,243
Stockholders' equity                     63,710   53,071   42,045   19,287   17,387   15,021     19,188     17,837     15,047
End of Year Balance Sheet Data
Total assets                            629,205  547,035  396,777  241,056  209,342  179,543    241,518    219,105    190,536
Net loans                               382,819  313,021  214,453  161,761  125,664  111,378    119,626     97,292     97,937
Total deposits                          431,662  372,936  275,809  132,853  115,496   95,897    146,660    134,405    126,418
Stockholders' equity                     67,002   61,031   44,429   20,567   17,882   16,439     20,052     18,176     17,038
Performance Ratios
Return on average assets                   1.42%    1.24%    1.10%    1.65%    1.48%    1.62%      1.63%      1.81%      1.33%
Return on average equity                  12.99%   10.86%    9.58%   19.29%   16.28%   18.30%     19.53%     20.44%     15.38%
Efficiency ratio                          61.66%   66.61%   68.24%   44.99%   46.50%   43.39%     51.10%     47.91%     53.73%
Regulatory Capital Ratios & Other
Tier I risk-based capital ratio           10.20%   10.48%    9.85%    9.22%   10.36%   10.77%     12.38%     13.25%     11.43%
Tier II risk-based capital ratio          11.39%   11.68%   10.85%   10.48%   11.61%   12.03%     13.62%     14.49%     12.45%
Leverage capital ratio                     7.16%    7.34%    6.71%    7.88%    7.82%    8.04%      7.58%      7.35%      7.54%
Full time equivalent employees              220      204      152       59       54       43         65         62         61
Locations                                    16       15       11        4        4        3          6          6          6
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------

(Dollars in thousands)                           Whitefish                   Other                  Consolidated
                                         2004     2003     2002      2004     2003     2002      2004      2003       2002
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------
                                                                                         
Condensed Income Statements
Net interest income                       6,393    5,194    4,901   (4,448)  (3,493)  (3,527)   107,393     92,352     86,467
Noninterest income                        1,419    1,273    1,096     (277)       5      (19)    34,565     33,562     25,917
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------
Total revenues                            7,812    6,467    5,997   (4,725)  (3,488)  (3,546)   141,958    125,914    112,384
Provision for loan losses                  (250)    (180)    (180)       -        -        -     (4,195)    (3,809)    (5,745)
Core deposit intangible expense               -        -        -        -        -        -     (1,074)    (1,243)    (1,439)
Other noninterest expense                (3,280)  (3,071)  (2,634)  (1,099)  (1,350)  (1,375)   (71,059)   (64,701)   (56,374)
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------
Pretax earnings                           4,282    3,216    3,183   (5,824)  (4,838)  (4,921)    65,630     56,161     48,826
Income tax (expense) benefit             (1,457)  (1,054)  (1,040)   2,316    1,930    1,963    (21,014)   (18,153)   (16,424)
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------
Net income                                2,825    2,162    2,143   (3,508)  (2,908)  (2,958)    44,616     38,008     32,402
                                        =======  =======  =======  =======  =======  =======  =========  =========  =========
Average Balance Sheet Data
Total assets                            161,364  139,516  121,757   11,847   (4,094)  (7,242) 2,897,116  2,483,684  2,154,065
Total loans                              88,614   72,206   63,676     (346)    (356)    (364) 1,590,700  1,395,187  1,319,577
Total deposits                           77,681   70,857   64,107  (21,615) (11,056)  (9,868) 1,643,295  1,527,311  1,441,888
Stockholders' equity                     13,129   11,652   10,080  (26,154) (26,407) (24,152)   253,368    226,010    195,577
End of Year Balance Sheet Data
Total assets                            169,411  149,531  129,255   10,181   (6,366)   1,253  3,010,737  2,739,633  2,281,344
Net loans                               102,746   72,800   68,066     (341)    (351)    (361) 1,701,805  1,430,365  1,300,653
Total deposits                           98,605   68,124   67,810  (41,356) (12,536) (12,316) 1,729,708  1,597,625  1,459,923
Stockholders' equity                     13,839   12,126   11,078  (20,582) (26,655) (21,552)   270,184    237,839    212,249
Performance Ratios
Return on average assets                   1.75%    1.55%    1.76%                                 1.54%      1.53%      1.50%
Return on average equity                  21.52%   18.55%   21.26%                                17.61%     16.82%     16.57%
Efficiency ratio                          41.99%   47.49%   43.92%                                50.81%     52.37%     51.44%
Regulatory Capital Ratios & Other
Tier I risk-based capital ratio           11.67%   12.32%   11.64%                                15.06%     12.98%     12.99%
Tier II risk-based capital ratio          12.91%   13.57%   12.88%                                16.31%     14.23%     14.24%
Leverage capital ratio                     7.75%    7.60%    8.09%                                10.16%      8.45%      8.95%
Full time equivalent employees               40       33       30       57       54       56        857        807        737
Locations                                     2        2        2                                    55         54         50
                                        -------  -------  -------  -------  -------  -------  ---------  ---------  ---------

                                                                               6

INTERNET ACCESS

Copies of the Company's Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 are available free of charge through the Company's website
(www.glacierbancorp.com) as soon as reasonably practicable after the Company has
filed the material with, or furnished it to, the Securities and Exchange
Commission.

MARKET AREA

The Company's primary market area includes the three northwest Montana counties
of Flathead, Lake, and Lincoln; the west central Montana counties of Missoula,
Silver Bow, Lewis & Clark, Gallatin, and Yellowstone; in Idaho, the Company's
primary market area includes Ada, Kootenai, Bonner and Blaine counties.
Kalispell, the location of its home office, is the county seat of Flathead
County, and is the primary trade center of what is known as the Flathead Basin.
Glacier has its main office and a branch office in Kalispell, branches in
Columbia Falls, Evergreen, Bigfork, Polson (the county seat of Lake County),
Libby (the county seat of Lincoln County), Anaconda (the county seat of Deer
Lodge County), and three branches in Butte (the county seat of Silver Bow
County). First Security's main office and seven of the branch locations are in
Missoula (the county seat of Missoula County) and its ninth branch is in
Hamilton (the county seat of Ravailli County). Western Security's main office
and five of its branches are located in Billings (the county seat of Yellowstone
County) and two branches are located in Laurel and Lewistown (the county seat of
Fergus County). Mountain West has twelve offices in Idaho, Coeur d'Alene, Post
Falls, Hayden Lake, Meridian, Nampa, Hailey, Ketchum, two offices in Sandpoint
and three offices in Boise, two offices in Utah, Brigham City and Park City, and
two offices in Washington, Newport and Ione. Big Sky's main office is in Big
Sky, with three branches in Bozeman (the county seat of Gallatin County).
Valley's main office and five branch locations are in Helena (the state capital
and the county seat of Lewis & Clark County). Whitefish's main office is located
in Whitefish with its one branch in Eureka.

Northwest Montana has a diversified economic base, primarily comprised of wood
products, primary metal manufacturing, medical services, agriculture, high-tech
related manufacturing and tourism. Tourism is heavily influenced by the close
proximity of Glacier National Park, which has in excess of 1.5 million visitors
per year. The area also contains the Big Mountain Ski Area, and Flathead Lake,
the largest natural freshwater lake west of the Mississippi. Missoula, the home
of the University of Montana, has a large population base with a diverse economy
comprised of government services, transportation, medical services, forestry,
technology, tourism, trade and education. Missoula is located on Interstate
Highway 90, and has good air service. Helena, the county seat of Lewis and Clark
County and the state capital, is highly dependent on state and federal
government, but also has tourism, trade, transportation, and education
contributing to its economy. Bozeman, the home of Montana State University, is
the gateway to Yellowstone National Park, which has in excess of 2.5 million
visitors per year, and the Big Sky ski resort, both of which are very active
tourist areas. Bozeman also has a high-tech center and is located on Interstate
90, and has good air service. Billings, the largest city in Montana, is located
on Interstate 90 and is the western termination point of Interstate 94, and has
very good air service. Agriculture, medical services, transportation, oil
related industries and education are the primary economical activities. Coeur
d'Alene, located in northern Idaho on Interstate 90, is one of the fastest
growing areas in the United States. Boise, the state capital located on
Interstate 84, is also growing rapidly, with much of the growth related to
high-tech manufacturing.

COMPETITION

Glacier and Whitefish comprise the largest financial institution group in terms
of total deposits in the three county area of northwest Montana, and have
approximately 24% of the total deposits in this area. Glacier's three Butte,
Montana offices have approximately 21% of the deposits in Silver Bow County and
Glacier's Anaconda office has 20% of the deposits in Deer Lodge County. First
Security has approximately 26% of the total deposits in Missoula County. Western
has approximately 11% of the deposits in Yellowstone and Fergus counties
combined. Big Sky has approximately 10% of Gallatin County's deposits and Valley
has approximately 21% of Lewis and Clark County's total deposits. In Idaho,
Mountain West has approximately 11% of the deposits in Kootenai and Blaine
counties, 7% in Bonner County, and 1% in Ada and Canyon counties. In Utah,
Mountain West has 5% of the deposits in the Box Elder and Summit counties
combined. In Washington, Mountain West has 63% of the deposits in Pend Oreille
County.

There are a large number of depository institutions including savings banks,
commercial banks, and credit unions in the counties in which the Company has
offices. The Banks, like other depository institutions, are operating in a
rapidly changing environment. Non-depository financial service institutions,
primarily in the securities and insurance industries, have become competitors
for retail savings and investment funds. Mortgage banking/brokerage firms are
actively competing for residential mortgage business. In addition to offering
competitive interest rates, the principal methods used by banking institutions
to attract deposits include the offering of a variety of services and convenient
office locations and business hours. The primary factors in competing for loans
are interest rates and rate adjustment provisions, loan maturities, loan fees,
and the quality of service to borrowers and brokers.

                                                                               7

          DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY

AVERAGE BALANCE SHEET

The following three-year schedule provides (i) the total dollar amount of
interest and dividend income of the Company for earning assets and the resultant
average yield; (ii) the total dollar amount of interest expense on
interest-bearing liabilities and the resultant average rate; (iii) net interest
and dividend income; (iv) interest rate spread; and (v) net interest margin.

AVERAGE BALANCE SHEET                             For the year ended 12-31-04       For the year ended 12-31-03
                                                --------------------------------  ---------------------------------
(Dollars in Thousands)                                        Interest   Average                 Interest   Average
                                                 Average        and       Yield/     Average       and      Yield/
ASSETS                                           Balance      Dividends   Rate       Balance    Dividends    Rate
                                                ------------  ---------  -------  ------------  ----------  --------
                                                                                          
   Residential First Mortgage                   $    346,575     22,942     6.62% $    336,494      23,883     7.10%
   Commercial Loans                                  924,798     57,312     6.20%      770,352      50,203     6.52%
   Consumer and Other Loans                          319,327     20,331     6.37%      288,341      20,013     6.94%
                                                ------------  ---------  -------  ------------  ----------
      Total Loans                                  1,590,700    100,585     6.32%    1,395,187      94,099     6.74%
   Tax-Exempt Investment Securities (1)              281,743     13,917     4.94%      226,971      11,410     5.03%
   Taxable Investment Securities                     844,051     32,783     3.88%      688,239      25,321     3.68%
                                                ------------  ---------  -------  ------------  ----------
      Total Earning Assets                         2,716,494    147,285     5.42%    2,310,397     130,830     5.66%
                                                              ---------                         ----------
   Non-Earning Assets                                180,622                           173,287
                                                ------------                      ------------
      TOTAL ASSETS                              $  2,897,116                      $  2,483,684
                                                ============                      ============
LIABILITIES
AND STOCKHOLDERS' EQUITY
  NOW Accounts                                  $    259,279        474     0.18% $    227,154         484     0.21%
  Savings Accounts                                   159,237        471     0.30%      139,958         500     0.36%
  Money Market Demand Accounts                       402,157      3,776     0.94%      375,402       3,840     1.02%
  Certificate Accounts                               422,342      9,333     2.21%      456,790      12,397     2.71%
  Advances from FHLB                                 791,245     18,540     2.34%      601,679      16,860     2.80%
  Securities Sold Under agreements to
    Reprchase and Other Borrowed Funds               181,461      7,298     4.02%      101,075       4,397     4.35%
                                                ------------  ---------  -------  ------------  ----------
     Total Interest Bearing Liabilities            2,215,721     39,892     1.80%    1,902,058      38,478     2.02%
                                                              ---------                         ----------
     Non-interest Bearing Deposits                   400,280                           328,007
     Other Liabilities                                27,747                            27,609
                                                ------------                      ------------
     Total Liabilities                             2,643,748                         2,257,674
                                                ------------                      ------------
 Common Stock                                            226                               186
 Paid-In Capital                                     225,065                           203,543
 Retained Earnings                                    22,804                            14,217
 Accumulated Other
    Comprehensive Earnings                             5,273                             8,064
                                                ------------                      ------------
    Total Stockholders' Equity                       253,368                           226,010
                                                ------------                      ------------
    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY                        $  2,897,116                      $  2,483,684
                                                ============                      ============
 NET INTEREST INCOME                                          $ 107,393                         $   92,352
                                                              =========                         ==========
 NET INTEREST SPREAD                                                        3.62%                              3.64%
 NET INTEREST MARGIN
    ON AVERAGE EARNING ASSETS (1)                                           3.95%                              4.00%
 RETURN ON AVERAGE ASSETS (2)                                               1.54%                              1.53%
 RETURN ON AVERAGE EQUITY (3)                                              17.61%                             16.82%
                                                                         -------                            -------

AVERAGE BALANCE SHEET                        For the year ended 12-31-02
                                           -------------------------------
(Dollars in Thousands)                                  Interest   Average
                                             Average       and     Yield/
ASSETS                                       Balance    Dividends   Rate
                                           -----------  ---------  -------
                                                          
   Residential First Mortgage              $   380,993     29,290     7.69%
   Commercial Loans                            649,665     47,013     7.24%
   Consumer and Other Loans                    288,919     22,559     7.81%
                                           -----------  ---------
      Total Loans                            1,319,577     98,862     7.49%
   Tax-Exempt Investment Securities (1)        156,315      8,074     5.17%
   Taxable Investment Securities               509,137     27,053     5.31%
                                           -----------  ---------
      Total Earning Assets                   1,985,029    133,989     6.75%
                                                        ---------
   Non-Earning Assets                          169,036
                                           -----------
      TOTAL ASSETS                         $ 2,154,065
                                           ===========
LIABILITIES
AND STOCKHOLDERS' EQUITY
  NOW Accounts                              $  206,410        723     0.35%
  Savings Accounts                             127,245        857     0.67%
  Money Market Demand Accounts                 355,211      6,771     1.91%
  Certificate Accounts                         495,951     17,917     3.61%
  Advances from FHLB                           409,168     16,959     4.15%
  Securities Sold Under agreements to
    Reprchase and Other Borrowed Funds          76,087      4,295     5.64%
                                           -----------  ---------
     Total Interest Bearing Liabilities      1,670,072     47,522     2.85%
                                                        ---------
     Non-interest Bearing Deposits             257,072
     Other Liabilities                          31,344
                                           -----------
     Total Liabilities                      1,958,488
                                           -----------
 Common Stock                                     171
 Paid-In Capital                              170,291
 Retained Earnings                             19,195
 Accumulated Other
    Comprehensive Earnings                      5,920
                                           -----------
    Total Stockholders' Equity                195,577
                                           -----------
    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY                   $ 2,154,065
                                           ===========
        NET INTEREST INCOME                             $  86,467
                                                        =========
        NET INTEREST SPREAD                                           3.90%
        NET INTEREST MARGIN
           ON AVERAGE EARNING ASSETS (1)                              4.36%
        RETURN ON AVERAGE ASSETS (2)                                  1.50%
        RETURN ON AVERAGE EQUITY (3)                                 16.57%
                                                                   -------

(1) Without tax effect on non-taxable securities income

(2) Net income divided by average total assets

(3) Net income divided by average equity

                                                                               8

RATE/VOLUME ANALYSIS

Net interest income can be evaluated from the perspective of relative dollars of
change in each period. Interest income and interest expense, which are the
components of net interest income, are shown in the following table on the basis
of the amount of any increases (or decreases) attributable to changes in the
dollar levels of the Company's interest-earning assets and interest-bearing
liabilities ("Volume") and the yields earned and rates paid on such assets and
liabilities ("Rate"). The change in interest income and interest expense
attributable to changes in both volume and rates has been allocated
proportionately to the change due to volume and the change due to rate.

                                          Years Ended December 31,     Years Ended December 31,
(Dollars in Thousands)                         2004 vs. 2003               2003 vs. 2002
                                      -----------------------------  ----------------------------
                                        Increase (Decrease) due to:  Increase (Decrease) due to:
                                      -----------------------------  ----------------------------
INTEREST INCOME                        Volume     Rate       Net      Volume     Rate      Net
                                      --------  --------   --------  --------  --------  --------
                                                                       
Real Estate Loans                     $    716  $ (1,657)  $   (941) $ (3,421) $ (1,986) $ (5,407)
Commercial Loans                        10,064    (2,955)     7,109     8,733    (5,543)    3,190
Consumer and Other Loans                 2,151    (1,833)       318       (45)   (2,501)   (2,546)
Investment Securities                    8,092     1,877      9,969    13,185   (11,581)    1,604
                                      --------  --------   --------  --------  --------  --------
     Total Interest Income              21,023    (4,568)    16,455    18,452   (21,611)   (3,159)
                                      --------  --------   --------  --------  --------  --------
INTEREST EXPENSE
NOW Accounts                                69       (79)       (10)       73      (312)     (239)
Savings Accounts                            69       (98)       (29)       86      (443)     (357)
Money Market Accounts                      274      (338)       (64)      385    (3,316)   (2,931)
Certificates of Deposit                   (935)   (2,129)    (3,064)   (1,415)   (4,105)   (5,520)
FHLB Advances                            5,312    (3,632)     1,680     7,979    (8,078)      (99)
Other Borrowings and
  Repurchase Agreements                  3,496      (595)     2,901     1,411    (1,309)      102
                                      --------  --------   --------  --------  --------  --------
   Total Interest Expense                8,285    (6,871)     1,414     8,519   (17,563)   (9,044)
                                      --------  --------   --------  --------  --------  --------
NET INTEREST INCOME                   $ 12,738  $  2,303   $ 15,041  $  9,933  $ (4,048) $  5,885
                                      ========  ========   ========  ========  ========  ========

Net interest income increased $15 million in 2004 over 2003. The increase was
primarily due to increases in volumes and the decrease in rates on deposits and
borrowings. For additional information see "Item 7 - Management's Discussion and
Analysis".

                             INVESTMENT ACTIVITIES

It has generally been the Company's policy to maintain a liquidity portfolio
only slightly above policy limits because higher yields can generally be
obtained from loan originations than from short-term deposits and investment
securities.

Liquidity levels may be increased or decreased depending upon yields on
investment alternatives and upon management's judgment as to the attractiveness
of the yields then available in relation to other opportunities and its
expectation of the level of yield that will be available in the future.

The Company's investment securities are generally classified as available for
sale and are carried at estimated fair value with unrealized gains or losses
reflected as an adjustment to stockholders' equity.

The Company uses an effective tax rate of 35% in calculating the tax equivalent
yield. Approximately $293 million of the investment portfolio is comprised of
tax exempt investments which is an increase of $14 million from the prior year.
The increase in tax exempt investments is the result of higher after tax yields
on tax exempt investment securities versus taxable investment securities.

For information about the Company's equity investment in the stock of the FHLB
of Seattle, see "Sources of Funds - Advances and Other Borrowings".

For additional information, see "Item 7 - Management's Discussion & Analysis"
and footnote 3 to the Consolidated Financial Statements in "Item 8 - Financial
Statements and Supplementary Data".

                                                                               9

                                LENDING ACTIVITY

GENERAL

The Banks focus their lending activity primarily on several types of loans: 1)
first-mortgage, conventional loans secured by residential properties,
particularly single-family, 2) installment lending for consumer purposes (e.g.,
auto, home equity, etc.), and 3) commercial lending that concentrates on
targeted businesses. "Item 7 - Management's Discussion & Analysis" and footnote
4 to the Consolidated Financial Statements in "Item 8 - Financial Statements and
Supplementary Data" contain more information about the lending portfolio.

LOAN PORTFOLIO COMPOSITION

The following table summarizes the Company's loan portfolio:

LOAN PORTFOLIO COMPOSITION

          (Dollars in Thousands)                   At                     At                     At
                                                12/31/04               12/31/03               12/31/02
    TYPE OF LOAN
    ------------
                                           Amount   Percent     Amount     Percent       Amount     Percent
                                        ----------  -------   ----------   -------    ----------    -------
                                                                                   
REAL ESTATE LOANS:
      Residential first mortgage        $  382,750    22.49%  $  305,372     21.35%   $  315,043      24.22%
      Held for sale                     $   14,476     0.85%  $   16,973      1.19%   $   51,987       4.00%
                                        ----------  -------   ----------   -------    ----------    -------
          Total                         $  397,226    23.34%  $  322,345     22.54%   $  367,030      28.22%
                                        ==========  =======   ==========   =======    ==========    =======
COMMERCIAL LOANS:
      Real estate                       $  526,455    30.94%  $  483,684     33.82%   $  397,803      30.58%
      Other commercial                  $  466,582    27.42%  $  359,030     25.10%   $  276,675      21.27%
                                        ----------  -------   ----------   -------    ----------    -------
          Total                         $  993,037    58.36%  $  842,714     58.92%   $  674,478      51.85%
                                        ==========  =======   ==========   =======    ==========    =======
INSTALLMENT AND OTHER LOANS:
      Consumer                          $   95,663     5.62%  $   95,739      6.69%   $  112,893       8.68%
      Home equity                       $  248,684    14.61%  $  199,693     13.96%   $  174,033      13.38%
                                        ----------  -------   ----------   -------    ----------    -------
          Total                         $  344,347    20.23%  $  295,432     20.65%   $  286,926      22.06%
                                        ==========  =======   ==========   =======    ==========    =======
      Net deferred loan fees, premiums
           and discounts               ($    6,313)   -0.37% ($    6,136)    -0.43%  ($    6,837)     -0.52%
      Allowance for loan losses        ($   26,492)   -1.56% ($   23,990)    -1.68%  ($   20,944)     -1.61%
LOANS RECEIVABLE, NET                   $1,701,805   100.00%  $1,430,365    100.00%   $1,300,653     100.00%
                                        ==========  =======   ==========   =======   ===========    =======

          (Dollars in Thousands)                   At                       At
                                                12/31/01                 12/31/00
            TYPE OF LOAN
           ------------
                                          Amount      Percent     Amount      Percent
                                        ----------  ----------   ----------   -------
                                                                  
REAL ESTATE LOANS:
      Residential first mortgage        $  401,133      30.33%   $  224,631     30.62%
      Held for sale                     $   27,403       2.07%   $    7,058      0.96%
                                        ----------  ---------    ----------   -------
          Total                         $  428,536      32.40%   $  231,689     31.58%
                                        ==========  =========    ==========   =======
COMMERCIAL LOANS:
      Real estate                       $  379,346      28.69%   $  198,414     27.05%
      Other commercial                  $  241,811      18.29%   $  142,519     19.43%
                                        ----------  ---------    ----------   -------
          Total                         $  621,157      46.98%   $  340,933     46.48%
                                        ----------  ---------    ----------   -------
INSTALLMENT AND OTHER LOANS:
      Consumer                          $  142,875      10.80%   $   86,336     11.77%
      Home equity                       $  156,140      11.81%   $   83,539     11.39%
                                        ----------  ---------    ----------   -------
          Total                         $  299,015      22.61%   $  169,875     23.16%
                                        ==========  =========    ==========   =======
      Net deferred loan fees, premiums
           and discounts               ($    7,727)     -0.58%  ($    1,137)    -0.16%
      Allowance for loan losses        ($   18,654)     -1.41%  ($    7,799)    -1.06%
LOANS RECEIVABLE, NET                   $1,322,327     100.00%   $  733,561    100.00%
                                       ===========  =========    ==========   =======

    (Dollars in Thousands)                Real Estate   Commercial   Consumer    Totals
    ----------------------                -----------   ----------   --------   --------
                                                                    
Variable Rate Maturing or Repricing in:
  One year or less                         $ 107,963      438,676     201,638     748,277
  One to five years                           89,651      307,172       7,676     404,499
  Thereafter                                   6,454       13,551           -      20,005
Fixed Rate Maturing or Repricing in:
  One year or less                            87,436       88,683      35,754     211,873
  One to five years                           79,629      118,170      79,889     277,688
  Thereafter                                  26,093       26,785      19,390      72,268
                                           ---------      -------     -------   ---------
    Totals                                 $ 397,226      993,037     344,347   1,734,610
                                           =========      =======     =======   =========

LOAN PORTFOLIO MATURITIES OR REPRICING TERM

The stated maturities or first repricing term (if applicable) for the loan
portfolio at December 31, 2004 was as follows:

REAL ESTATE LENDING

The Banks' lending activities consist of the origination of both construction
and permanent loans on residential and commercial real Estate. The Banks
actively solicit real estate loan applications from real estate brokers,
contractors, existing customers, customer

                                                                              10

referrals, and walk-ins to their offices. The Banks' lending policies generally
limit the maximum loan-to-value ratio on residential mortgage loans to 80% of
the lesser of the appraised value or purchase price or above 80% of the loan if
insured by a private mortgage insurance company. The Banks also provide interim
construction financing for single-family dwellings, and makes land acquisition
and development loans on properties intended for residential use.

CONSUMER LENDING

The majority of all consumer loans are secured by real estate, automobiles, or
other assets. The Banks intend to continue lending for such loans because of
their short-term nature, generally between three months and five years, with an
average term of approximately two years. Moreover, interest rates on consumer
loans are generally higher than on mortgage loans. The Banks also originate
second mortgage and home equity loans, especially to its existing customers in
instances where the first and second mortgage loans are less than 80% of the
current appraised value of the property.

COMMERCIAL LENDING

The Banks make commercial loans of various types including operating loans,
equipment loans and a relatively small amount of unsecured loans. The Company's
credit risk management includes stringent credit policies, regular credit
examinations, management review of loans experiencing deterioration of credit
quality, individual loan approval limits, and committee approval of larger loan
requests. The Company has focused on increasing the mix of loans to include more
commercial loans. Commercial lenders at each of the banks are actively seeking
new and expanded lending relationships within their markets.

LOAN APPROVAL LIMITS

Individual loan approval limits have been established for each lender based on
the loan type and experience of the individual. Each subsidiary bank has an
Officer Loan Committee consisting of senior lenders and members of senior
management. The Officer Loan Committee has approval authority up to $500,000
($300,000 at Valley Bank of Helena, $1,000,000 at Western Security Bank and
$1,500,000 at Mountain West Bank). Loans between $500,000 and $2,000,000 (up to
$3,500,000 for Glacier Bank, First Security Bank of Missoula and Mountain West
Bank) go to the individual Bank's Board of Directors for approval. Loans over
these limits up to $5,000,000 are approved by the Executive Loan Committee of
the Company's Board of Directors. The membership of the Executive Loan Committee
consists of the bank's senior loan officers and the Company's Credit
Administrator. Loans greater than $5,000,000 are approved by the Company's Board
of Directors. Under banking laws loans to one borrower and related entities are
limited to a set percentage of the unimpaired capital and surplus of the bank.

LOAN PURCHASES AND SALES

Fixed-rate, long-term mortgage loans are generally sold in the secondary market.
The Banks have been active in the secondary market, primarily through the
origination of conventional FHA and VA residential mortgages for sale in whole,
or in part, to savings associations, banks and other purchasers in the secondary
market. The sale of loans in the secondary mortgage market reduces the Banks'
risk of increases in interest rates of holding long-term, fixed-rate loans in
the loan portfolio and allows the Banks to continue to make loans during periods
when deposit flows decline or funds are not otherwise available for lending
purposes. In connection with conventional loan sales, the Banks typically sell a
majority of mortgage loans originated, retaining servicing only on loans sold to
certain lenders. The Banks have also been very active in generating commercial
SBA loans, and other commercial loans, with a portion of those loans sold to
other investors. As of December 31, 2004, loans serviced for others aggregated
approximately $175 million.

LOAN ORIGINATION AND OTHER FEES

In addition to interest earned on loans, the Banks receive loan origination fees
for originating loans. Loan fees generally are a percentage of the principal
amount of the loan and are charged to the borrower, and are normally deducted
from the proceeds of the loan. Loan origination fees are generally 1.0% to 1.5%
on residential mortgages and .5% to 1.5% on commercial loans. Consumer loans
require a flat fee as well as a minimum interest amount. The Banks also receive
other fees and charges relating to existing loans, which include charges and
fees collected in connection with loan modifications and tax service fees.

NON-PERFORMING LOANS AND ASSET CLASSIFICATION

Loans are reviewed on a regular basis and are placed on a non-accrual status
when the collection of principal or interest is unlikely. The Banks typically
place loans on non-accrual when principal or interest is due and has remained
unpaid for 90 days or more unless the loan is secured by collateral having
realizable value sufficient to discharge the debt in full. Once a loan has been
classified as non-accrual previously accrued unpaid interest is reversed.
Interest accrued and unpaid at the time a loan is placed on non-accrual status
is charged against interest income. Subsequent payments are either applied to
the outstanding principal balance or recorded as interest income, depending on
the assessment of the ultimate repayment of the loan.

                                                                              11

The following table sets forth information regarding the Banks' non-performing
assets at the dates indicated:

NONPERFORMING ASSETS
(Dollars in Thousands)                         At       At        At        At        At
                                            12/31/04  12/31/03  12/31/02  12/31/01  12/31/00
                                            --------  --------  --------  --------  --------
                                                                     
NON-ACCRUAL LOANS:
  Mortgage loans                            $    847  $  1,129  $  2,476  $  4,044  $    687
  Commercial loans                             4,792     8,246     5,157     4,568       442
  Consumer loans                                 311       687       409       620        25
                                            --------  --------  --------  --------  --------
    Total                                      5,950    10,062     8,042     9,232     1,154
                                            --------  --------  --------  --------  --------
ACCRUING LOANS 90 DAYS OR MORE OVERDUE:
  Mortgage loans                                 179       379       846       818       576
  Commercial loans                             1,067     1,798       968       376        91
  Consumer loans                                 396       242       184       243        83
                                            --------  --------  --------  --------  --------
    Total                                      1,642     2,419     1,998     1,437       750
                                            --------  --------  --------  --------  --------
Real estate and other assets owned, net        2,016       587     1,542       593       291
                                            --------  --------  --------  --------  --------
TOTAL NON-PERFORMING LOANS AND REAL
  ESTATE AND OTHER ASSETS OWNED, NET           9,608    13,068    11,582  $ 11,262  $  2,195
                                            --------  --------  --------  --------  --------
  AS A PERCENTAGE OF TOTAL ASSETS               0.32%     0.48%     0.51%     0.53%     0.21%
                                            --------  --------  --------  --------  --------
Interest Income (1)                         $    372  $    665  $    596  $    658  $    101
                                            --------  --------  --------  --------  --------

(1) This is the amount of interest that would have been recorded on loans
accounted for on a non-performing basis as of the end of each period if such
loans had been current for the entire period.

Non-performing assets as a percentage of total assets at December 31, 2004 were
..32 percent versus .48 percent at the same time last year, which compares
favorably to the Peer Group average of .49 percent at September 30, 2004, the
most recent information available. The reserve for loan losses was 276 percent
of non-performing assets at December 31, 2004, up from 184 percent a year ago.

With the continuing change in loan mix from residential real estate to
commercial and consumer loans, which historically have greater credit risk, the
Company has increased the balance in the reserve for loan losses account. The
reserve balance has increased $2,502,000, or 10 percent, to $26,492,000, which
is 1.53 percent of total loans outstanding, down from 1.65 percent of loans at
December 31, 2003.

ALLOWANCE FOR LOAN LOSSES

The Allowance for Loan Losses ("ALL") is maintained at a level that allows for
the absorption of loan losses inherent within the bank's loan portfolios. The
Company is committed to the early recognition of problem loans and to a strong
conservative allowance.

Determining the adequacy of the ALL involves a high degree of judgment and is
inevitably imprecise. Accordingly, the ALL is maintained within a range based
upon a best estimate. The adequacy of the ALL is based on management's current
judgment about the credit quality of the loan portfolio and considers all known
relevant internal and external factors that affect loan losses. An evaluation of
the adequacy of the ALL is conducted at a minimum on a quarterly basis and is
documented and approved by the subsidiary Banks' Boards of Directors.

The primary responsibility for credit risk assessment and identification of
problem loans rests with the loan officer of account. This continuous process,
utilizing the bank's credit risk rating process, is necessary to support
management's evaluation of adequacy of the ALL. An independent loan review
function verifying loan risk ratings validates the loan officer and management's
evaluation about the credit quality of the loan portfolio. The loan review
function also assesses the evaluation process and provides an independent
analysis of the adequacy of the ALL.

The ALL methodology is designed to reasonably estimate the probable loan and
lease loss within the Bank's loan portfolios. The methodology is based upon a
process of estimating general, specific, and other allowance allocations.

      -     General allocations are estimated by applying loan loss rates to
            groups of loans as defined by Financial Accounting Standards Board
            (FASB) Statement No. 5 Accounting for Contingencies.

                                                                              12

      -     Specific allocations are estimated for loans that are impaired or
            have been selected for individual review as defined by FASB
            Statement No. 114 Accounting by Creditors for Impairment of a
            Loan--an amendment of FASB Statements No. 5 and 15.

      -     Allocations that include other factors that warrant an increase or
            decrease in the ALL balance.

At a minimum, the process includes the following elements:

      -     Is well documented with clear explanations of the supporting
            analyses

      -     Includes an analysis of the loan portfolio whether on an individual
            or group basis

      -     Considers all known relevant internal and external factors that may
            affect loan losses

      -     Applies procedures consistently but, when appropriate, is modified
            for new factors

      -     Ensures the ALL balance is recorded in accordance with U.S.
            generally accepted accounting principals

The Banks' charge-off policy is generally consistent with bank regulatory
standards. Consumer loans generally are charged off when the loan becomes over
120 days delinquent. Real estate acquired as a result of foreclosure or by
deed-in-lieu of foreclosure is classified as real estate owned until such time
as it is sold. When such property is acquired, it is recorded at the lower of
the unpaid principal balance or estimated fair value, not to exceed estimated
net realizable value. Any write-down at the time of recording real estate owned
is charged to the allowance for loan losses. Any subsequent write-downs are a
charge to current expenses.

LOAN LOSS EXPERIENCE

                                                   Years ended December 31,
                                      -----------------------------------------------
       (Dollars in Thousands)           2004       2003      2002      2001     2000
                                      --------    ------    ------    ------    -----
                                                                 
BALANCE AT BEGINNING OF PERIOD        $ 23,990    20,944    18,654     7,799    6,722
    CHARGE OFFS:
      Residential real estate             (419)     (416)     (887)     (677)     (98)
      Commercial loans                  (1,150)     (912)   (2,522)     (723)    (450)
      Consumer loans                      (776)   (1,078)   (1,328)   (2,029)    (424)
                                      --------    ------    ------    ------    -----
        Total charge offs             $ (2,345)   (2,406)   (4,737)   (3,429)    (972)
                                      --------    ------    ------    ------    -----

    RECOVERIES:
      Residential real estate              171       126       276        33        5
      Commercial loans                     120       274       326       266       43
      Consumer loans                       361       284       680       567      137
                                      --------    ------    ------    ------    -----
        Total recoveries              $    652       684     1,282       866      185
                                      --------    ------    ------    ------    -----

    CHARGEOFFS, NET OF RECOVERIES       (1,693)   (1,722)   (3,455)   (2,563)    (787)
    Acquisitions (1)                         -       959         -     8,893        -
    PROVISION                            4,195     3,809     5,745     4,525    1,864
                                      --------    ------    ------    ------    -----
BALANCE AT END OF PERIOD              $ 26,492    23,990    20,944    18,654    7,799
                                      ========    ======    ======    ======    =====

Ratio of net charge offs to average
loans outstanding during the period       0.10%     0.12%     0.26%     0.20%    0.11%

(1) Acquisition of Pend Oreille Bank, WesterFed Financial Corporation and
several branches

                                                                              13

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSS

                                    2004                    2003                      2002
                            ---------------------   ----------------------  ----------------------
                                         Percent                 Percent                 Percent
                                       of loans in             of loans in             of loans in
(Dollars in thousands)      Allowance    category   Allowance    category   Allowance    category
- ----------------------      ---------  -----------  ---------  -----------  ---------  -----------
                                                                     
Residential first mortgage
  and loans held for sale    $ 2,693      22.9%        2,147      21.8%        2,334      27.4%
Commercial real estate         9,222      30.3%        7,464      33.2%        7,088      30.1%
Other commercial               9,836      26.9%        9,951      24.7%        7,670      20.9%
Consumer                       4,741      19.9%        4,428      20.3%        3,852      21.6%
                             -------     -----        ------     -----        ------     -----
   Totals                    $26,492     100.0%       23,990     100.0%       20,944     100.0%
                             =======     =====        ======     =====        ======     =====

                                     2001                        2000
                             ----------------------      ---------------------
                                          Percent                    Percent
                                        of loans in                of loans in
(Dollars in thousands)       Allowance    category       Allowance   category
- ----------------------       ---------  -----------      --------- -----------
                                                       
Residential first mortgage
  and loans held for sale       2,722      31.5%           1,227       31.2%
Commercial real estate          5,906      28.3%           2,300       26.7%
Other commercial                6,225      18.0%           2,586       19.2%
Consumer                        3,801      22.2%           1,686       22.9%
                               ------     -----            -----      -----
   Totals                      18,654     100.0%           7,799      100.0%
                               ======     =====            =====      =====

                                SOURCES OF FUNDS

GENERAL

Deposits are the most important source of the Banks' funds for lending and other
business purposes. In addition, the Banks derive funds from loan repayments,
advances from the FHLB of Seattle, repurchase agreements, and loan sales. Loan
repayments are a relatively stable source of funds, while interest bearing
deposit inflows and outflows are significantly influenced by general interest
rate levels and money market conditions. Borrowings and advances may be used on
a short-term basis to compensate for reductions in normal sources of funds such
as deposit inflows at less than projected levels. They also may be used on a
long-term basis to support expanded activities and to match maturities of
longer-term assets. Deposits obtained through the Banks have traditionally been
the principal source of funds for use in lending and other business purposes.
Currently, the Banks have a number of different deposit programs designed to
attract both short-term and long-term deposits from the general public by
providing a wide selection of accounts and rates. These programs include regular
statement savings, interest-bearing checking, money market deposit accounts,
fixed rate certificates of deposit with maturities ranging form three months to
five years, negotiated-rate jumbo certificates, non-interest demand accounts,
and individual retirement accounts.

"Item 7 - Management's Discussion and Analysis" contains information relating to
changes in the overall deposit portfolio.

Deposits are obtained primarily from individual and business residents of the
Banks' market area. The Banks issue negotiated-rate certificate accounts with
balances of $100,000, or more, and have paid a limited amount of fees to brokers
to obtain deposits. The following table illustrates the amounts outstanding for
deposits greater than $100,000, according to the time remaining to maturity:

                                    Certificate Demand
      (Dollars in thousands)        Accounts  Deposits     Totals
- -----------------------------       --------  --------     -------
                                                  
Within three months.............    $ 32,013    612,673    644,686
Three months to six months......      11,096         --     11,096
Seven months to twelve months...      19,026         --     19,026
Over twelve months..............      24,258         --     24,258
                                    --------    -------    -------
   Totals                           $ 86,393    612,673    699,066
                                    ========    =======    =======

For additional information, see "Item 7 - Management's Discussion & Analysis"
and footnote 7 to the Consolidated Financial Statements in "Item 8 - Financial
Statements and Supplementary Data".

In addition to funds obtained in the ordinary course of business, the Company
formed Glacier Trust I and Glacier trust II as financing subsidiaries. Glacier
Trust II issued 45,000 preferred securities at $1,000 per preferred security.
The purchase of the securities entitles the shareholder to receive cumulative
cash distributions at an annual interest of 5.788% for the first five years and
then converts to a three month LIBOR plus 2.75% rate from payments on the junior
subordinated debentures of Glacier Bancorp, Inc. The subordinated debentures
will mature and the preferred securities must be redeemed by April 7, 2034. In
exchange for the Company's capital contribution, the Company owns all of the
outstanding common securities of Glacier Trust II. The proceeds were used for
general corporate purposes. Glacier Trust I issued 1,400,000 preferred
securities at $25 per preferred security. The purchase of the securities
entitles the shareholder to receive cumulative cash distributions at an annual
interest rate of 9.40% from payments on the junior subordinated debentures of
Glacier Bancorp, Inc. The subordinated debentures will mature and the preferred
securities must be redeemed by February 1, 2031. In exchange for the Company's
capital contribution, the Company owns all of the outstanding common securities
of the trust. The purpose of the issuance of the securities was to finance the
acquisition of WesterFed Financial

                                                                              14

Corporation and seven Wells Fargo & Company and First Security Corporation
branches in 2001. For additional information regarding the subordinated
debentures, see Note 10 to the Consolidated Financial Statements "Item 8 -
Financial Statements and Supplementary Data".

ADVANCES AND OTHER BORROWINGS

As a member of the Federal Home Loan Bank of Seattle ("FHLB"), the Banks may
borrow from the FHLB on the security of stock which it is required to own in
that bank and certain of its home mortgages and other assets (principally,
securities which are obligations of, or guaranteed by, the United States),
provided certain standards related to credit-worthiness have been met. Advances
are made pursuant to several different credit programs, each of which has its
own interest rate and range of maturities. Depending on the program, limitations
on the amount of advances are based either on a fixed percentage of an
institution's capital or on the FHLB's assessment of the institution's
credit-worthiness. FHLB advances have been used from time to time to meet
seasonal and other withdrawals of savings accounts and to expand lending by
matching a portion of the estimated amortization and prepayments of retained
fixed rate mortgages. All of the Banks are members in the FHLB.

From time to time, primarily as a short-term financing arrangement for
investment or liquidity purposes, the Banks have made use of repurchase
agreements with various securities dealers. This process involves the "selling"
of one or more of the securities in the Banks' portfolio and by entering into an
agreement to "repurchase" that same security at an agreed upon later date. A
rate of interest is paid to the dealer for the subject period of time. In
addition, although the Banks have offered retail repurchase agreements to its
retail customers, the Government Securities Act of 1986 imposed confirmation and
other requirements which generally made it impractical for financial
institutions to offer such investments on a broad basis. Through policies
adopted by the Board of Directors, the Banks enter into repurchase agreements
with local municipalities, and large balance customers, and have adopted
procedures designed to ensure proper transfer of title and safekeeping of the
underlying securities.

The following chart illustrates the average balances and the maximum outstanding
month-end balances for FHLB advances and repurchase agreements:

(Dollars in thousands)                          For the year ended December 31,
                                                -------------------------------
                                                  2004        2003       2002
                                                --------    -------    -------
                                                              
FHLB Advances
  Amount outstanding at end of period.......    $818,933    777,294    483,660
  Average balance...........................    $791,245    601,679    409,168
  Maximum outstanding at any month-end......    $862,136    777,294    483,660
  Weighted average interest rate............        2.34%      2.80%      4.15%

Repurchase Agreements:
  Amount outstanding at end of period.......    $ 76,158     56,968     46,206
  Average balance...........................    $ 69,480     61,609     35,479
  Maximum outstanding at any month-end......    $ 80,265     74,808     46,206
  Weighted average interest rate............        1.25%      1.09%      1.46%

For additional information concerning the Company's advances and repurchase
agreements, see footnotes 8 and 9 to the Consolidated Financial Statements in
"Item 8 - Financial Statements and Supplementary Data".

                                   EMPLOYEES

As of December 31, 2004, the Company employed 935 persons, 776 of who were full
time, none of whom were represented by a collective bargaining group. The
Company provides its with a comprehensive benefit program, including medical
insurance, dental plan, life and accident insurance, long-term disability
coverage, sick leave, profit sharing plan and employee stock options. Prior to
2002, the Company had a noncontributory defined contribution retirement plan and
an employee savings plan; however as of January 1, 2002, both plans were merged
into the new profit sharing plan. The Company considers its employee relations
to be excellent. See Note 13 in the Consolidated Financial Statements in "Item 8
- - Financial Statements and Supplementary Data" for detailed information
regarding profit sharing plan costs and eligibility.

                                                                              15

                           SUPERVISION AND REGULATION

INTRODUCTION

Banking is a highly regulated industry. Banking laws and regulations are
primarily intended to protect depositors, not shareholders. The following
discussion identifies some of the more significant state and federal laws and
regulations affecting the banking industry. It is intended to provide a brief
summary of these laws and regulations and, therefore, is not complete and is
qualified by the statutes and regulations referenced in the discussion.

BANK HOLDING COMPANY REGULATION

General. The Company is a bank holding company as defined in the Bank Holding
Company Act of 1956, as amended, because of its ownership of Glacier Bank,
Glacier Bank of Whitefish, Valley Bank of Helena, First Security Bank of
Missoula, Big Sky Western Bank, Western Security Bank and Mountain West Bank,
all of which are Montana-state chartered commercial banks (with the exception of
Mountain West Bank, an Idaho state-chartered bank), and all of which are members
of the Federal Reserve (with the exception of Mountain West Bank, a non-Fed
member FDIC-insured bank). As a bank holding company, the Company is subject to
regulation, supervision and examination by the Federal Reserve. In general, the
Bank Holding Company Act limits the business of bank holding companies to owning
or controlling banks and engaging in other activities closely related to
banking. The Company must also file reports and provide additional information
with the Federal Reserve. Under the Financial Services Modernization Act of
1999, a bank holding company may apply to the Federal Reserve to become a
financial holding company, and thereby engage (directly or through a subsidiary)
in certain expanded activities deemed financial in nature, such as securities
brokerage and insurance underwriting.

Holding Company Bank Ownership. The Bank Holding Company Act requires every bank
holding company to obtain the prior approval of the Federal Reserve before (1)
acquiring, directly or indirectly, ownership or control of any voting shares of
another bank or bank holding company if, after such acquisition, it would own or
control more than 5% of such shares, (2) acquiring all or substantially all of
the assets of another bank or bank holding company, or (3) merging or
consolidating with another bank holding company.

Holding Company Control of Nonbanks. With some exceptions, the Bank Holding
Company Act also prohibits a bank holding company from acquiring or retaining
direct or indirect ownership or control of more than 5% of the voting shares of
any company which is not a bank or bank holding company, or from engaging
directly or indirectly in activities other than those of banking, managing or
controlling banks or providing services for its subsidiaries. The principal
exceptions to these prohibitions involve certain non-bank activities which, by
statute or by Federal Reserve regulation or order, have been identified as
activities closely related to the business of banking or of managing or
controlling banks.

Transactions with Affiliates. Subsidiary banks of a bank holding company are
subject to restrictions imposed by the Federal Reserve Act on extensions of
credit to the holding company or its subsidiaries, on investments in their
securities, and on the use of their securities as collateral for loans to any
borrower. These regulations and restrictions may limit the Company's ability to
obtain funds from the Bank for its cash needs, including funds for payment of
dividends, interest and operational expenses.

Tying Arrangements. We are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, sale or lease of
property or furnishing of services. For example, with certain exceptions,
neither the Company nor its subsidiaries may condition an extension of credit to
a customer on either (1) a requirement that the customer obtain additional
services provided by us or (2) an agreement by the customer to refrain from
obtaining other services from a competitor.

Support of Subsidiary Banks. Under Federal Reserve policy, the Company is
expected to act as a source of financial and managerial strength to the Bank.
This means that the Company is required to commit, as necessary, resources to
support the Bank. Any capital loans a bank holding company makes to its
subsidiary banks are subordinate to deposits and to certain other indebtedness
of those subsidiary banks.

State Law Restrictions. As a Montana corporation, the Company is subject to
certain limitations and restrictions under applicable Montana corporate law. For
example, state law restrictions in Montana include limitations and restrictions
relating to indemnification of directors, distributions to shareholders,
transactions involving directors, officers or interested shareholders,
maintenance of books, records, and minutes, and observance of certain corporate
formalities.

THE SUBSIDIARIES

With the exception of Mountain West Bank, the Company's subsidiaries are subject
to extensive regulation and supervision by the Montana Department of Commerce's
Banking and Financial Institutions Division and the FRB as a result of their
membership in the Federal Reserve System. Mountain West Bank is subject to
regulation the Idaho Department of Finance and by the FDIC as a state non-member
commercial

                                                                              16

bank. In addition, Mountain West's Utah and Washington branches are primarily
regulated by the Utah Department of Financial Institutions and the Washington
Department of Financial Institutions, respectively.

The federal laws that apply to the Banks regulate, among other things, the scope
of their business, their investments, their reserves against deposits, the
timing of the availability of deposited funds and the nature and amount of and
collateral for loans. Federal laws also regulate community reinvestment and
insider credit transactions and impose safety and soundness standards.

Community Reinvestment. The Community Reinvestment Act requires that, in
connection with examinations of financial institutions within their
jurisdiction, federal bank regulators must evaluate the record of financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe and sound
operation of those banks. These factors are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility.

Insider Credit Transactions. Banks are also subject to certain restrictions on
extensions of credit to insiders--executive officers, directors, principal
shareholders, and their related interests. Extensions of credit to insiders must
be made on substantially the same terms, including interest rates and
collateral, and follow credit underwriting procedures that are not less
stringent than those prevailing at the time for comparable transactions with
non-insiders. Also, extensions of credit to insiders must not involve more than
the normal risk of repayment or present other unfavorable features.

Safety and Soundness Standards. Federal law imposes upon banks certain
non-capital safety and soundness standards. These standards cover, among other
things, internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation and benefits. Additional standards apply to asset quality, earnings
and stock valuation. An institution that fails to meet these standards must
develop a plan acceptable to its regulators, specifying the steps that the
institution will take to meet the standards. Failure to submit or implement such
a plan may subject the institution to regulatory sanctions.

INTERSTATE BANKING AND BRANCHING

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Act") permits nationwide interstate banking and branching under
certain circumstances. This legislation generally authorizes interstate
branching and relaxes federal law restrictions on interstate banking. Currently,
bank holding companies may purchase banks in any state, and states may not
prohibit such purchases. Additionally, banks are permitted to merge with banks
in other states as long as the home state of neither merging bank has opted out.
The Interstate Act requires regulators to consult with community organizations
before permitting an interstate institution to close a branch in a low-income
area.

Federal bank regulations prohibit banks from using their interstate branches
primarily for deposit production and have implemented a loan-to-deposit ratio
screen to ensure compliance with this prohibition.

With regard to interstate bank mergers, Montana "opted-out" of the Interstate
Act. Subject to certain conditions, an in-state bank that has been in existence
for at least 5 years may merge with an out-of-state bank. Banks, bank holding
companies, and their respective subsidiaries cannot acquire control of a bank
located in Montana if, after the acquisition, the acquiring institution,
together with its affiliates, would directly or indirectly control more than 22%
of the total deposits of insured depository institutions and credit unions
located in Montana. Montana law does not authorize the establishment of a branch
bank in Montana by an out-of-state bank.

Idaho has enacted "opting in" legislation in accordance with the Interstate Act
provisions allowing banks to engage in interstate merger transactions subject to
certain "aging" requirements. Branches may not be acquired or opened separately
in Idaho by an out-of-state bank, but once an out-of-state bank has acquired a
bank within Idaho, either through merger or acquisition of all or substantially
all of the bank's assets, the out-of-state bank may open additional branches
within Idaho.

Utah and Washington have each enacted "opting in" legislation similar in certain
respects to that enacted by Idaho, allowing banks to engage in interstate merger
transactions subject to certain aging requirements. De novo branching by an out
of state bank is generally prohibited; however, once an out of state bank has
acquired a Utah or Washington branch, that bank may establish additional
branches within that state.

DEPOSIT INSURANCE

The deposits of the Banks are currently insured to a maximum of $100,000 per
depositor through the Bank Insurance Fund ("BIF") administered by the FDIC. All
insured banks are subject to semi-annual deposit insurance premium assessments
by the FDIC. The FDIC has implemented a risk-based insurance premium system
under which banks are assessed insurance premiums based on how much risk they
present to the Bank Insurance Fund. Banks with higher levels of capital and a
low degree of supervisory concern are assessed lower premiums than banks with
lower levels of capital or a higher degree of supervisory concern.

                                                                              17

DIVIDENDS

The principal source of the Company's cash revenues is dividends received from
the Company's subsidiary Banks. The payment of dividends is subject to
government regulation, in that regulatory authorities may prohibit banks and
bank holding companies from paying dividends which would constitute an unsafe or
unsound banking practice. In addition, a bank may not pay cash dividends if that
payment could reduce the amount of its capital below that necessary to meet
minimum applicable regulatory capital requirements. State laws also limit a
bank's ability to pay dividends.

CAPITAL ADEQUACY

Regulatory Capital Guidelines. Federal bank regulatory agencies use capital
adequacy guidelines in the examination and regulation of bank holding companies
and banks. The guidelines are "risk-based," meaning that they are designed to
make capital requirements more sensitive to differences in risk profiles among
banks and bank holding companies.

Tier I and Tier II Capital. Under the guidelines, an institution's capital is
divided into two broad categories, Tier I capital and Tier II capital. Tier I
capital generally consists of common shareholders' equity, surplus and undivided
profits. Tier II capital generally consists of the allowance for loan losses,
hybrid capital instruments, and subordinated debt. The sum of Tier I capital and
Tier II capital represents an institution's total capital. The guidelines
require that at least 50% of an institution's total capital consist of Tier I
capital.

Risk-based Capital Ratios. The adequacy of an institution's capital is gauged
primarily with reference to the institution's risk-weighted assets. The
guidelines assign risk weightings to an institution's assets in an effort to
quantify the relative risk of each asset and to determine the minimum capital
required to support that risk. An institution's risk-weighted assets are then
compared with its Tier I capital and total capital to arrive at a Tier I
risk-based ratio and a total risk-based ratio, respectively. The guidelines
provide that an institution must have a minimum Tier I risk-based ratio of 4%
and a minimum total risk-based ratio of 8%.

Leverage Ratio. The guidelines also employ a leverage ratio, which is Tier I
capital as a percentage of total assets, less intangibles. The principal
objective of the leverage ratio is to constrain the maximum degree to which a
bank holding company may leverage its equity capital base. The minimum leverage
ratio is 3%; however, for all but the most highly rated bank holding companies
and for bank holding companies seeking to expand, regulators expect an
additional cushion of at least 1% to 2%.

Prompt Corrective Action. Under the guidelines, an institution is assigned to
one of five capital categories depending on its total risk-based capital ratio,
Tier I risk-based capital ratio, and leverage ratio, together with certain
subjective factors. The categories range from "well capitalized" to "critically
undercapitalized." Institutions that are "undercapitalized" or lower are subject
to certain mandatory supervisory corrective actions.

CORPORATE GOVERNANCE AND ACCOUNTING LEGISLATION

Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 (the "Act") addresses
corporate and accounting fraud. The Act establishes a new accounting oversight
board to enforce auditing standards and restricts the scope of services that
accounting firms may provide to their public company audit clients. Among other
things, the Act also (i) requires chief executive officers and chief financial
officers to certify to the accuracy of periodic reports filed with the
Securities and Exchange Commission (the "SEC"); (ii) imposes new disclosure
requirements regarding internal controls, off-balance-sheet transactions, and
pro forma (non-GAAP) disclosures; (iii) accelerates the time frame for reporting
of insider transactions and periodic disclosures by public companies; and (iv)
requires companies to disclose whether or not they have adopted a code of ethics
for senior financial officers and whether the audit committee includes at least
one "audit committee financial expert."

The Act also requires the SEC, based on certain enumerated factors, to regularly
and systematically review corporate filings. To deter wrongdoing, the Act: (i)
subjects bonuses issued to top executives to disgorgement if a restatement of a
company's financial statements was due to corporate misconduct; (ii) prohibits
an officer or director from misleading or coercing an auditor; (iii) prohibits
insider trades during pension fund "blackout periods"; (iv) imposes new criminal
penalties for fraud and other wrongful acts; and (v) extends the period during
which certain securities fraud lawsuits can be brought against a company or its
officers.

As a publicly reporting company, we are subject to the requirements of the Act
and related rules and regulations issued by the SEC and NASDAQ. We anticipate
that we will incur additional expense, including ongoing compliance with Section
404, as a result of the Act, but we do not expect that such compliance will have
a material impact on our business.

ANTI-TERRORISM LEGISLATION

The Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 ("USA Patriot Act") is intended to
combat terrorism. Among other things, the USA Patriot Act (1) prohibits banks
from providing
                                                                              18

correspondent accounts directly to foreign shell banks; (2) imposes due
diligence requirements on banks opening or holding accounts for foreign
financial institutions or wealthy foreign individuals (3) requires financial
institutions to establish an anti-money-laundering compliance program, and (4)
generally eliminates civil liability for persons who file suspicious activity
reports. The Act also increases governmental powers to investigate terrorism,
including expanded government access to account records. The Department of the
Treasury is empowered to administer and make rules to implement the Act. While
the USA Patriot Act may, to some degree, affect the Company's record-keeping and
reporting expenses, the Company does not believe that the Act will have a
material adverse effect on its business and operations.

FINANCIAL SERVICES MODERNIZATION

Gramm-Leach-Bliley Act of 1999. The Financial Services Modernization Act of
1999, also known as the Gramm-Leach-Bliley Act, brought about significant
changes to the laws affecting banks and bank holding companies. Generally, the
Act (i) repealed the historical restrictions on preventing banks from
affiliating with securities firms, (ii) provided a uniform framework for the
activities of banks, savings institutions and their holding companies, (iii)
broadened the activities that may be conducted by national banks and banking
subsidiaries of bank holding companies, (iv) provided an enhanced framework for
protecting the privacy of consumer information and (v) addressed a variety of
other legal and regulatory issues affecting both day-to-day operations and
long-term activities of financial institutions.

Bank holding companies that qualify and elect to become financial holding
companies can engage in a wider variety of financial activities than permitted
under previous law, particularly with respect to insurance and securities
underwriting activities. In addition, in a change from previous law, bank
holding companies will be in a position to be owned, controlled or acquired by
any company engaged in financially related activities, so long as the company
meets certain regulatory requirements. The act also permits national banks (and,
in states with wildcard statutes, certain state banks), either directly or
through operating subsidiaries, to engage in certain non-banking financial
activities.

We do not believe that the act will negatively affect our operations in the
short term. However, to the extent the legislation permits banks, securities
firms and insurance companies to affiliate, the financial services industry may
experience further consolidation. This consolidation could result in a growing
number of larger financial institutions that offer a wider variety of financial
services than we currently offer, and these companies may be able to
aggressively compete in the markets we currently serve.

EFFECTS OF GOVERNMENT MONETARY POLICY

The Company's earnings and growth are affected by general economic conditions,
and by the fiscal and monetary policies of the federal government, particularly
the Federal Reserve. The Federal Reserve implements a national monetary policy
for such purposes as curbing inflation and combating recession, but its open
market operations in U.S. government securities, control of the discount rate
applicable to borrowings from the Federal Reserve, and establishment of reserve
requirements against certain deposits, influence the growth of bank loans,
investments and deposits, and also affect interest rates charged on loans or
paid on deposits. The Company cannot predict with certainty the nature and
impact of future changes in monetary policies and their impact on the Company or
its subsidiary Banks.

                                    TAXATION

FEDERAL TAXATION

The Company files consolidated federal, Montana, Idaho, and Utah income tax
returns, using the accrual method of accounting. All required tax returns have
been filed.

Financial institutions are subject to the provisions of the Internal Revenue
Code of 1986, as amended in the same general manner as other corporations. See
note 12 to the Consolidated Financial Statements in "Item 8 - Financial
Statements and Supplementary Data" for additional information.

                                                                              19

STATE TAXATION

Under Montana, Idaho and Utah law, financial institutions are subject to a
corporation license tax, which incorporates or is substantially similar to
applicable provisions of the Internal Revenue Code. The corporation license tax
is imposed on federal taxable income, subject to certain adjustments. State
taxes are incurred at the rate of 6.75% in Montana, 7.6% in Idaho, and 5% in
Utah.

ITEM 2. PROPERTIES

At December 31, 2004, the Company owned 42 of its 55 offices, including its
headquarters and other property having an aggregate book value of approximately
$43 million, and leased the remaining branches. 8 offices are leased in Montana,
3 offices are leased in Idaho, 1 office is leased in Utah, and 1 office is
leased in Washington. The following schedule provides property information for
the Company's operating segments as of December 31, 2004.

                                Properties  Properties  Net Book
(dollars in thousands)            Leased      Owned      Value
- ---------------------           ----------  ----------  --------
                                               
Glacier                                  2           9  $  7,806
First Security                           3           6     6,493
Western                                  1           6     4,835
Mountain West                            5          11    12,308
Big Sky                                  1           3     6,452
Valley                                   1           5     3,201
Whitefish                                -           2     1,485
                                ----------  ----------  --------
                                        13          42  $ 42,580
                                ==========  ==========  ========

The Company believes that all of its facilities are well maintained, adequate
and suitable for the current operations of its business, as well as fully
utilized.

For additional information concerning the Company's premises and equipment and
lease obligations, see Note 5 and 19 to the Consolidated Financial Statements in
"Item 8 - Financial Statements and Supplementary Data".

ITEM 3. LEGAL PROCEEDINGS

The Company and its subsidiaries are parties to various claims, legal actions
and complaints in the ordinary course of their businesses. In the Company's
opinion, all such matters are adequately covered by insurance, are without merit
or are of such kind, or involve such amounts, that unfavorable disposition would
not have a material adverse effect on the consolidated financial position or
results of operations of the Company.

ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders in the fourth quarter of
2004.

                                     PART II

      ITEM 5. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY,
      RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASE OF EQUITY SECURITIES

The Company's stock trades on the NASDAQ National Market under the symbol: GBCI.
The primary market makers are: D.A. Davidson & Company, Goldman, Sachs & Co.,
Keefe, Bruyette & Woods, Inc., Knight Equity Markets, L.P., Morgan Stanley &
Co., Inc., and Piper Jaffray Companies.

The market range of high and low bid prices for the Company's common stock for
the periods indicated are shown below. The sale price information has been
adjusted retroactively for all stock dividends and splits previously issued. As
of December 31, 2004, there were approximately 9,570 shareholders of Company
common stock. Following is a schedule of quarterly common stock price ranges:

                          2004                  2003
                   ------------------    ------------------
    Quarter         High        Low       High        Low
- ---------------    -------    -------    -------    -------
                                        
First..........    $ 27.04    $ 23.60    $ 21.59    $ 17.00
Second.........    $ 28.25    $ 24.49    $ 20.96    $ 18.36
Third..........    $ 30.35    $ 25.75    $ 23.72    $ 19.56
Fourth.........    $ 35.89    $ 28.90    $ 26.40    $ 21.54

The Company paid cash dividends on its common stock of $.68 and $.60 per share
for the years ended December 31, 2004 and 2003, respectively.

UNREGISTERED SECURITIES

There have been no securities of the Company sold within the last three years
which were not registered under the Securities Act.

ISSUER STOCK PURCHASES

The Company made no stock repurchases during the fourth quarter of 2004.

EQUITY COMPENSATION PLAN INFORMATION

We currently maintain two compensation plans that provide for the issuance of
the Company's common stock to officers and other employees, directors and
consultants. These consist of the 1994 Director Stock Option Plan, amended, and
the 1995 Employee Stock Option Plan, as amended, each of which have been
approved by the shareholders. The following table sets forth information
regarding outstanding options and shares reserved for future issuance under the
foregoing plans as of December 31, 2004:

                                                                                 Number of shares remaining
                                Number of shares to be                             available for future
                                issued upon exercise of     Weighted-average     issuance under equity
                                 outstanding options,       exercise price of     compensation plans
                                 warrants, and rights     outstanding options,     (excluding shares
                                         (a)              warrants, and rights   reflected in column (a))
Plan Category                          (1) (2)                    (b)                    (c) (1)
- -----------------------------   -----------------------   --------------------   --------------------------
                                                                        
Equity compensation plans
approved by the shareholders          1,208,505                $ 18.315                1,792,215

Equity compensation plans not
approved by shareholders                      -                $      0                        -

(1)   Includes shares to be issued upon exercise of options under plans of
      Mountain West Bank and WesterFed, which were assumed as a result of their
      acquisitions.

(2)   Consists of shares that are outstanding, and shares available for
      future issuance, under the respective plans. The material features of the
      plans are described above.

ITEM  6. SELECTED FINANCIAL DATA

The following financial data of the Company are derived from the Company's
historical audited financial statements and related footnotes. The information
set forth below should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the financial
statements and related footnotes contained elsewhere in this report.

                                                                              21

                SUMMARY OF OPERATIONS AND SELECTED FINANCIAL DATA

                                                                                 At December 31,
                                                                                 ---------------
 (dollars in thousands, except per share data)               2004         2003         2002          2001         2000
 ---------------------------------------------           -----------    ---------    ---------     ---------    ---------
                                                                                                 
SUMMARY OF FINANCIAL CONDITION:
       Total assets ..............................       $ 3,010,737    2,739,633    2,281,344     2,085,747    1,056,712
       Investment securities, available for sale..         1,085,626    1,096,954      782,825       545,585      229,986
       Loans receivable, net .....................         1,701,805    1,430,365    1,300,653     1,322,327      733,561
       Allowance for loan losses .................           (26,492)     (23,990)     (20,944)      (18,654)      (7,799)
       Intangibles ...............................            42,315       42,816       40,011        41,771        6,493
       Deposits ..................................         1,729,708    1,597,625    1,459,923     1,446,064      720,570
       Advances from Federal Home Loan Bank ......           818,933      777,294      483,660       367,295      196,791
       Securities sold under agreements to
          repurchase and other borrowed funds ....            81,215       64,986       61,293        32,585       29,529
       Stockholders' equity ......................           270,184      237,839      212,249       176,983       98,113
       Equity per common share* ..................             11.01         9.83         8.93          7.63         6.23
       Equity as a percentage of total assets ....              8.97%        8.68%        9.30%         8.49%        9.28%

                                                                      Years ended December 31,
                                                                      ------------------------
(dollars in thousands, except per share data)         2004           2003          2002          2001       2000
- ------------------------------------------------   -----------      -------      -------       -------     ------
                                                                                            
SUMMARY OF OPERATIONS:
       Interest income .........................   $   147,285      130,830      133,989       137,920     78,837
       Interest expense ........................        39,892       38,478       47,522        65,546     37,357
                                                   -----------      -------      -------       -------     ------
         Net interest income ...................       107,393       92,352       86,467        72,374     41,480
       Provision for loan losses ...............         4,195        3,809        5,745         4,525      1,864
       Non-interest income .....................        34,565       33,562       25,917        23,251     13,294
       Non-interest expense ....................        72,133       65,944       57,813        57,385     31,327
                                                   -----------      -------      -------       -------     ------
         Earnings before income taxes ..........        65,630       56,161       48,826        33,715     21,583
       Income taxes ............................        21,014       18,153       16,424        12,026      7,580
                                                   -----------      -------      -------       -------     ------
         Net earnings ..........................        44,616       38,008       32,402        21,689     14,003
                                                   ===========      =======      =======       =======     ======
         Basic earnings per common share* ......          1.82         1.58         1.37          1.00       0.89
         Diluted earnings per common share* ....          1.79         1.55         1.35          0.97       0.88
         Dividends declared per share* .........          0.68         0.60         0.49          0.44       0.43

                                                                At or for the years ended December 31,
                                                                --------------------------------------
                                                          2004        2003          2002          2001      2000
                                                         -----        -----        -----         -----      -----
                                                                                             
RATIOS:
Net earnings as a percent of
       average assets ............................        1.54%        1.53%        1.50%         1.10%      1.39%
       average stockholders' equity ..............       17.61%       16.82%       16.57%        13.49%     15.83%
Dividend payout ratio ............................       37.36%       38.07%       35.45%        43.48%     48.36%
Average equity to average asset ratio ............        8.75%        9.10%        9.08%         8.26%      8.78%
Net interest margin on average earning assets.....
         (tax equivalent) ........................        4.15%        4.20%        4.51%         4.08%      4.48%
Allowance for loan losses as a percent of loans...        1.53%        1.65%        1.58%         1.39%      1.05%
Allowance for loan losses as a percent of
        nonperforming assets .....................         276%         184%         181%          165%       372%

                                                                 At or for the years ended December 31,
                                                                 --------------------------------------
        (dollars in thousands)                         2004         2003         2002           2001       2000
        ----------------------                     -----------    ---------    ---------       -------    -------
                                                                                           
OTHER DATA:
       Loans originated and purchased ...........  $ 1,543,595    1,509,850    1,204,852       994,527    570,652
       Loans serviced for others ................  $   174,805      189,601      253,063       286,996    146,534
       Number of full time equivalent employees..          857          807          737           728        423
       Number of offices ........................           55           54           50            51         30
       Number of shareholders of record .........        1,784        1,763        1,586         1,645      1,228

*revised for stock splits and dividends

All amounts have been restated to include mergers using the poolinf interests
accounting method. Acquisitions using the purchase method of accounting include
the operations since the acquisition date.

                                                                              22

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS YEAR ENDED DECEMBER 31, 2004 COMPARED TO DECEMBER 31, 2003

The following discussion is intended to provide a more comprehensive review of
the Company's operating results and financial condition than can be obtained
from reading the Consolidated Financial Statements alone. The discussion should
be read in conjunction with the audited financial statements and the notes
thereto included later in this report. All numbers, except per share data, are
expressed in thousands of dollars.

HIGHLIGHTS AND OVERVIEW

This past year the Company experienced strong loan growth with total loans
outstanding increasing by $274 million, or 19 percent from the prior year. All
loan classifications experienced increases with commercial loan growth leading
the way with an increase of $150 million, or 18 percent. The low interest rates
for real estate loans continued through 2004 however the pace of home loan
refinancing slowed substantially from the 2003 level. The slowing of refinance
activity combined with a renewed focus on shorter term, and variable rate loans
resulted in an increase in real estate loans of $75 million, or 24 percent,
during the year. Consumer loans, primarily home equity loans, increased by $49
million, or 17 percent. The average interest rate on loans continued to decline
as repayments on higher rate loans continued to occur and new loans were booked
at reduced rates. Increases in targeted interest rates by the Federal Reserve
Board during 2004 and into 2005 should help reverse this trend. The increased
volume of loans more than offset the lower rates so that loan interest income
increased from 2003. Because of the increased loan balances which used available
funding, and reduced spreads on funding costs versus investment returns, total
investments declined from the prior year. With the reduction in refinancing of
home loans, prepayments on mortgage backed securities were substantially reduced
resulting in a lower level of premium amortization which increased the earnings
on investments. Maturing higher rate certificates of deposit and borrowed funds
reduced average interest rates paid from the prior year, however, increased
borrowed funds by the subsidiary banks and the issuance of $45 million in
subordinated debentures by the parent company, resulted in increased interest
expense.

Non-interest bearing deposits increased 25% during the year providing a stable
low-cost funding source for a portion of the asset growth. Interest bearing
deposits also ended the year with increased totals. Asset growth that exceeded
the increase in deposits was funded with Federal Home Loan Bank advances and
other borrowed funds.

With the reduction in mortgage loan refinance activity, the origination of
residential loans decreased by 17 percent from 2003; however the gain-on-sale of
loans declined 25 percent, the result of retaining more of the loans originated.
Service charges and fee income increased nicely in 2004, primarily the result of
increased account volumes. The net gain on the sale of securities of $1 million
during 2003 was not repeated in 2004 with a net of zero for the year.

Total revenue from net interest income and non-interest income increased $16
million, or 13%, over the prior year, the cumulative effect of the above
described items.

Non-interest expense increased $6 million, or 9%, from last year with the
largest increase occurring in compensation and benefits. Additional locations
and related staffing and merit increases were the primary reasons for this
increase. Other operating expenses also increased reflecting the increased
volume of activities in loan and deposit operations.

Looking forward, our future performance will depend on many factors including
economic conditions, interest rate changes, increasing competition for deposits
and quality loans, and regulatory burden. Increasing interest rates slow the
volume of real estate loan originations which reduces the fee income from that
activity while at the same time reducing commission expense for loan
originators. Increasing rates result in increased earnings on assets, however,
the cost of interest bearing funds also increases. The Company goal of asset and
liability management practices is to maintain or increase the level of net
interest income within an acceptable level of interest rate risk.

Regulatory burden seems to be never-ending as additional regulations continue to
add cost. The Sarbanes-Oxley Act (SOX) resulted in substantial increases in
audit and consulting fees during 2004, and a major diversion of internal staff
time from normal duties, primarily to satisfy the internal control requirements
of Section 404 of SOX. Costs to assure compliance in future years, including
ongoing compliance with SOX, are projected to remain high.

                                                                              23

FINANCIAL CONDITION
ASSETS

The following table summarizes the asset balances as of December 31, 2004 and
2003, the amount of change, and percentage change during 2004:

                                                            December 31,
                                                     --------------------------
          ASSETS  ($ IN THOUSANDS)                      2004            2003        $ change      % change
                                                     -----------    -----------    -----------    --------
                                                                                      
Cash on hand and in banks                            $    79,300    $    77,093    $     2,207        3%
Investment securities, FHLB and FRB stock,
   and interest bearing deposits                       1,098,633      1,106,001         (7,368)      -1%
Loans:
   Real estate                                           393,141        317,774         75,367       24%
   Commercial                                            991,081        841,305        149,776       18%
   Consumer                                              344,075        295,276         48,799       17%
                                                     -----------    -----------    -----------       --
      Total loans                                      1,728,297      1,454,355        273,942       19%
   Allowance for loan losses                             (26,492)       (23,990)        (2,502)      10%
                                                     -----------    -----------    -----------       --
      Total loans net of allowance for loan losses     1,701,805      1,430,365        271,440       19%
                                                     -----------    -----------    -----------       --
Other assets                                             130,999        126,174          4,825        4%
                                                     -----------    -----------    -----------       --
   Total Assets                                      $ 3,010,737    $ 2,739,633    $   271,104       10%
                                                     ===========    ===========    ===========       ==

At December 31, 2004 total assets were $3.011 billion which is $271 million
greater than the December 31, 2003 assets of $2.740 billion, an increase of 10
percent.

Total loans have increased $274 million from December 31, 2003, an increase of
19 percent, with the growth occurring in all loan categories. Commercial loans
increased $150 million, or 18 percent, real estate loans gained $75 million, or
24 percent, and consumer loans grew by $49 million, or 17 percent. Loan volume
continues to be very strong with loans increasing $43 million during the fourth
quarter which has historically been a slow quarter for loan growth.

Investment securities, including interest bearing deposits in other financial
institutions, have decreased $7 million from December 31, 2003. Without the
approximately $18 million of proceeds of the March 2004 issuance of Trust
Preferred Securities that are invested in investment securities, total
investments would have declined $25 million from last year. Some of the cash
flow from investment maturities is now being used to fund the significant growth
in loans.

The following table summarizes the major asset components as a percentage of
total assets as of December 31, 2004, 2003, and 2002:

                                                                                 December 31,
                                                                      ----------------------------------
                                                                       2004         2003           2002
                                                                      -----        -----          -----
                                                                                         
ASSETS:
      Cash, and cash equivalents, investment securities, FHLB
        and Federal Reserve stock.................................     39.1%        43.2%          37.8%
      Real estate loans and loans held for sale...................     13.0%        11.5%          15.7%
      Commercial loans............................................     32.3%        30.1%          28.9%
      Consumer loans..............................................     11.3%        10.6%          12.4%
      Other assets................................................      4.3%         4.6%           5.2%
                                                                      -----        -----          -----
                                                                      100.0%       100.0%         100.0%
                                                                      =====        =====          =====

The percentage of assets held as cash, and cash equivalents, investment
securities, FHLB and Federal Reserve stock has decreased from 43.2 percent at
December 31, 2003 to 39.1 percent at December 31, 2004. The decrease is
attributed to a $14 million reduction in investment securities during 2004 and
the increase in total assets resulting from the large increase in loans
outstanding. Strong economic activity in the markets served by the Company,
combined with excellent customer service, made the loan growth possible. The
Company continues to focus on quality loan growth of all types.

                                                                              24

LIABILITIES

The following table summarizes the liability balances as of December 31, 2004
and 2003, the amount of change, and percentage change during 2004:

                                              December 31,
                                        -----------------------
    LIABILITIES  ($ IN THOUSANDS)          2004         2003       $ change    % change
                                        ----------   ----------   ----------   --------
                                                                   
Non-interest bearing deposits           $  460,059   $  369,052   $   91,007       25%
Interest-bearing deposits                1,269,649    1,228,573       41,076        3%
Advances from Federal Home Loan Bank       818,933      777,294       41,639        5%
Securities sold under agreements to
  repurchase and other borrowed funds       81,215       64,986       16,229       25%
Other liabilities                           30,697       26,889        3,808       14%
Subordinated debentures                     80,000       35,000       45,000      129%
                                        ----------   ----------   ----------      ---
     Total liabilities                  $2,740,553   $2,501,794   $  238,759       10%
                                        ==========   ==========   ==========      ===

Non-interest bearing deposits have increased $91 million, or 25 percent, since
December 31, 2003. This continues to be a primary focus of our banks and the
programs we have initiated this past year continue to gain momentum. Total
deposits have increased $132 million from December 31, 2003. This growth in
deposits, a low cost stable funding source, gives us increased flexibility in
managing our asset mix. Federal Home Loan Bank advances have also increased, $42
million from December 31, 2003, as we continue to take advantage of the
flexibility of that funding source. In addition, repurchase agreements and other
borrowed funds have increased from the prior year as we continue to use these
cost effective sources of funding. On March 24, 2004, subordinated debentures in
the form of trust preferred securities of $45 million, with an interest rate of
5.79 percent, were issued. The proceeds will be used to fund the pending
acquisitions.

                                                              December 31,
                                                    ---------------------------
                                                     2004       2003       2002
                                                    -----      -----      -----
                                                                 
LIABILITIES AND STOCKHOLDER'S EQUITY:
   Deposit accounts ............................     57.4%      58.3%      64.0%
   FHLB advances ...............................     27.2%      28.4%      21.2%
   Other borrowings and repurchase agreements...      2.7%       2.4%       2.7%
   Other liabilities ...........................      3.7%       2.2%       2.8%
   Stockholders' equity ........................      9.0%       8.7%       9.3%
                                                    -----      -----      -----
                                                    100.0%     100.0%     100.0%
                                                    =====      =====      =====

With a $32 million increase in stockholders' equity and the $45 million increase
in subordinated debentures included in the other liabilities line above, the
percentage of assets funded by deposits decreased even with the substantial
increase in deposit balances.

                                                        December 31,
      STOCKHOLDERS' EQUITY                       ------------------------
($ IN THOUSANDS EXCEPT PER SHARE DATA)              2004           2003         $ change    % change
                                                 ---------      ---------       --------    --------
                                                                                
Common equity                                    $ 264,250      $ 231,223       $ 33,027       14%
Accumulated other comprehensive income               5,934          6,616           (682)     -10%
                                                 ---------      ---------       --------
   Total stockholders' equity                    $ 270,184      $ 237,839       $ 32,345       14%
                                                 =========      =========       ========

Stockholders' equity to total assets                  8.97%          8.68%
Book value per common share                      $   11.01      $    9.83       $   1.18       12%
Market price per share at end of quarter         $   34.04      $   25.98       $   8.06       31%

STOCKHOLDERS' EQUITY

Total equity and book value per share amounts have increased substantially from
the prior year, primarily the result of earnings retention, and stock options
exercised. Accumulated other comprehensive income, representing net unrealized
gains on securities available for sale of $6 million at December 31, 2004 is
slightly less than the $7 million at year end 2003, with the decline primarily a
function of interest rate changes.

                                                                              25

RESULTS OF OPERATIONS

Operating results include amounts related to the operation of the three branches
acquired with the Pend Oreille Bank as of July 15, 2003 and the Ione, Washington
branch as of June 4, 2004.

                                                            Years ended December 31,
           REVENUE SUMMARY                      ---------------------------------------------
           ($ IN THOUSANDS)                       2004        2003      $ change     % change
                                                --------    --------    --------     --------
                                                                         
Net interest income                             $107,393    $ 92,352    $ 15,041         16%

Fees and other revenue:
   Service charges, loan fees, and other fees     24,260      19,756       4,504         23%
   Gain on sale of loans                           8,015      10,674      (2,659)       -25%
   Gain on sale of investments,
      net of impairment charge                         -       1,253      (1,253)      -100%
   Other income                                    2,290       1,879         411         22%
                                                --------    --------    --------       ----
      Total non-interest income                   34,565      33,562       1,003          3%
                                                --------    --------    --------       ----
                                                $141,958    $125,914    $ 16,044         13%
                                                ========    ========    ========       ====

Tax equivalent net interest margin                  4.15%       4.20%
                                                ========    ========

NET INTEREST INCOME

Net interest income increased $15.041 million, or 16 percent, over 2003. Total
interest income was $16.455 million, or 13 percent higher than 2003, while total
interest expense was $1.414 million, or 4 percent higher. The investment
portfolio generated approximately 61 percent of the increase in interest income.
Additional interest income from the large increase in loans outstanding was
partially offset by lower rates on the loan portfolio due to refinancing, and
re-pricing of existing loans. The increase in interest expense is attributed to
the increase in the subordinated debentures which increased interest expense by
$2.004 million. Interest expense on deposits declined $3.167 million, or 18
percent, from reductions in rates on maturing fixed term interest bearing
deposits. Interest on Federal Home Loan Bank borrowings and other borrowed funds
increased $2.577 million, or 15 percent, from increased volumes and increasing
interest rates. The net interest margin as a percentage of earning assets, on a
tax equivalent basis, was 4.15 percent which was a decrease from 4.20 percent
for 2003.

NON-INTEREST INCOME

Fee income increased $4.504 million, or 23 percent, over last year, driven
primarily by an increased number of loan and deposit accounts and the fee income
associated with this growth in accounts. Gain on sale of loans decreased $2.659
million, or 25 percent, from last year, because of greatly reduced refinance
activity. Loan origination activity for housing, especially new construction,
remains quite strong in our markets. In 2003 gains on sale of investments, net
of impairment charge, of $1.253 million were recorded and zero gains were
realized in 2004.

                                                 Years ended December 31,
  NON-INTEREST EXPENSE SUMMARY          --------------------------------------
     ($ IN THOUSANDS)                     2004       2003   $ change   % change
                                        -------   -------  --------   --------
                                                          
Compensation and employee
    benefits and related expense        $39,955   $36,173   $ 3,782       10%
Occupancy and equipment expense          10,797     9,931       866        9%
Outsourced data processing                1,551     1,650       (99)      -6%
Core deposit intangibles amortization     1,074     1,243      (169)     -14%
Other expenses                           18,756    16,947     1,809       11%
                                        -------   -------   -------      ---
      Total non-interest expense        $72,133   $65,944   $ 6,189        9%
                                        =======   =======   =======      ===

                                                                              26

NON-INTEREST EXPENSE

Non-interest expense increased by $6.189 million, or 9 percent, from 2003
including expenses from the acquisitions, two additional branches in Boise,
Idaho, and a new branch in downtown Bozeman, Montana. Compensation and benefit
expense increased $3.782 million, or 10 percent, with the additional bank
branches, normal compensation increases for job performance and increased cost
for benefits tied to Company performance, accounting for the majority of the
increase. Occupancy and equipment expense increased $866 thousand, or 9 percent,
reflecting the cost of the additional locations and facility upgrades. Other
expenses increased $1.809 million, or 11 percent, primarily from start up
expenses on implementing the High Performance Checking program at the four banks
not previously on the program, additional advertising expense, $700 thousand
increase in audit and consulting expenses, and costs associated with new branch
offices and the acquisitions. The efficiency ratio (non-interest expense/net
interest income + non-interest income) was 51 percent, improving slightly from
the 53 percent in 2003, excluding the gain on sale of securities.

                                                         December 31,   December 31,
          CREDIT QUALITY INFORMATION                     ------------   ------------
              ($ IN THOUSANDS)                               2004          2003
                                                         ------------   ------------
                                                                  
Allowance for loan losses                                  $ 26,492       $ 23,990

Non-performing assets                                         9,608         13,068

Allowance as a percentage of non performing assets              276%           184%

Non-performing assets as a percentage of total assets          0.32%          0.48%

Allowance as a percentage of total loans                       1.53%          1.65%

Net charge-offs as a percentage of loans                      0.098%         0.118%

PROVISION FOR LOAN LOSSES - Non-performing assets as a percentage of total
assets at December 31, 2004 were at .32 percent, a decrease from .48 percent at
December 31, 2003. This compares favorably to the Federal Reserve Bank Peer
Group average of .49 percent at September 30, 2004, the most recent information
available. The allowance for loan losses was 276 percent of non-performing
assets at December 31, 2004, compared to 184 percent a year ago. The allowance
has increased $2.502 million, or 10 percent, from a year ago to $26.492 million,
which is 1.53 percent of December 31, 2004 total loans outstanding, down
slightly from the 1.65 percent a year ago. The fourth quarter provision for loan
losses expense was $1.200 million, an increase of $504 thousand from the same
quarter in 2003.

EFFECT OF INFLATION AND CHANGING PRICES

Generally accepted accounting principles require the measurement of financial
position and operating results in terms of historical dollars, without
consideration for change in relative purchasing power over time due to
inflation. Virtually all assets of a financial institution are monetary in
nature; therefore, interest rates generally have a more significant impact on a
company's performance than does the effect of inflation.

COMMITMENTS

In the normal course of business, there are various outstanding commitments to
extend credit, such as letter of credit and un-advanced loan commitments, which
are not reflected in the accompanying consolidated financial statements.
Management does not anticipate any material losses as a result of these
transactions. The Company has outstanding debt maturities, the largest of which
are the advances from the Federal Home Loan Bank. See footnote 8 for the
maturity schedule of the advances. The following table represents our
contractual obligations as of December 31, 2004:

                                                                      Payments Due by Period
                             ------------------------------------------------------------------------------------------------
                                         Indeterminate
  (dollars in thousands)        Total     Maturity (1)      2005        2006        2007       2008        2009    Thereafter
- ---------------------------  ----------  -------------    -------     -------     -------     ------      -----    ----------
                                                                                           
Deposits...................  $1,729,708    1,322,681      287,641      59,368      43,768      7,298      8,875           77
Advances from the FHLB.....     818,933            -      480,222     110,419     124,919     21,302         48       82,023
Repurchase agreements......      76,158            -       76,158           -           -          -          -            -
Subordinated debentures....      80,000            -            -           -           -          -          -       80,000
Capital lease obligations..       1,682            -           81          83          84         87         89        1,258
Operating lease
  obligations..............       7,487            -        1,171       1,050         861        770        685        2,950
                             ----------    ---------      -------     -------     -------     ------      -----      -------
                             $2,713,968    1,322,681      845,273     170,920     169,632     29,457      9,697      166,308
                             ==========    =========      =======     =======     =======     ======      =====      =======

(1) Represents interest and non-interest bearing checking, money market, and
savings accounts

                                                                              27

MARKET RISK

Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/prices such as interest rates, foreign currency exchange
rates, commodity prices, and equity prices. The Company's primary market risk
exposure is interest rate risk. The ongoing monitoring and management of this
risk is an important component of the Company's asset/liability management
process which is governed by policies established by its Board of Directors that
are reviewed and approved annually. The Board of Directors delegates
responsibility for carrying out the asset/liability management policies to the
Asset/Liability Committee (ALCO). In this capacity ALCO develops guidelines and
strategies impacting the Company's asset/liability management related activities
based upon estimated market risk sensitivity, policy limits and overall market
interest rate levels/trends.

INTEREST RATE RISK

The objective of interest rate risk management is to contain the risks
associated with interest rate fluctuations. The process involves identification
and management of the sensitivity of net interest income to changing interest
rates. Managing interest rate risk is not an exact science. The interval between
repricing of interest rates of assets and liabilities changes from day to day as
the assets and liabilities change. For some assets and liabilities contractual
maturity and the actual cash flows experienced are not the same. A good example
is residential mortgages that have long term contractual maturities but may be
repaid well in advance of the maturity when current prevailing interest rates
become lower than the contractual rate. Interest-bearing deposits without a
stated maturity could be withdrawn after seven days, however, the Bank's
experience indicates that these funding pools have a much longer duration and
are not as sensitive to interest rate changes as other financial instruments.
Prime based loans generally have rate changes when the Federal Reserve Bank
changes short term interest rates, however, depending on the magnitude of the
rate change and the relationship of the current rates to rate floors and rate
ceilings that may be in place on the loans, the loan rate may not change.

GAP ANALYSIS

The following table gives a description of our GAP position for various time
periods. As of December 31, 2004, we had a negative GAP position at six months
and a positive GAP position at twelve months. The cumulative GAP as a percentage
of total assets for six months is a negative 5.55% which compares to a negative
4.00% at December 31, 2003 and a negative 2.77% at December 31, 2002. The table
also shows the GAP earnings sensitivity, and earnings sensitivity ratio, along
with a brief description as to how they are calculated. The methodology used to
compile this GAP information is based on our mix of assets and liabilities and
the historical experience accumulated regarding their rate sensitivity.

                                                                     Projected maturity or repricing
                                                 -----------------------------------------------------------------
                                                     0-6          6-12          1 - 5      More than
             (dollars in thousands)                Months        Months         years       5 years        Total
- -----------------------------------------------  -----------    ----------   ---------   ------------  -----------
                                                                                        
ASSETS:
     Interest bearing deposits.................  $    12,722           285           -            -         13,007
     Investment securities.....................        3,786         2,233      83,524      231,691        321,234
     Mortgage-backed securities................      153,565       123,199     402,362       35,463        714,589
     FHLB stock and FRB stock..................       44,004             -           -        5,799         49,803
     Floating rate loans.......................      661,054        87,222     404,500       20,005      1,172,781
     Fixed rate loans..........................      126,667        85,207     277,687       72,268        561,829
                                                 -----------    ----------   ---------      -------      ---------
TOTAL INTEREST BEARING ASSETS..................  $ 1,001,798       298,146   1,168,073      365,226      2,833,243
                                                 ===========    ==========   =========      =======      =========

LIABILITIES:
     Interest-bearing deposits.................      646,057        87,230     112,518      423,844      1,269,649
     FHLB advances.............................      431,695        41,040     262,476       83,722        818,933

     Repurchase agreements and other
       borrowed funds..........................       81,215             -           -            -         81,215
                                                 -----------    ----------   ---------      -------      ---------
TOTAL INTEREST BEARING LIABILITIES.............  $ 1,158,967       128,270     374,994      507,566      2,169,797
                                                 ===========    ==========   =========      =======      =========

Repricing gap..................................  $  (157,169)      169,876     793,079     (142,340)       663,446
Cumulative repricing gap.......................  $  (157,169)       12,707     805,786      663,446
Cumulative gap as a % of total assets..........        -5.55%         0.45%      28.44%       23.42%

Gap Earnings Sensitivity (1)...................                 $       78

Gap Earnings Sensitivity Ratio (2).............                       0.17%

(1) Gap Earnings Sensitivity is the estimated effect on income, after taxes of
39%, of a 1% increase or decrease in interest rates (1%

                                                                              28

    of ($12,707 - $4,956))

(2) Gap Earnings Sensitivity Ratio is Gap Earnings Sensitivity divided by the
estimated yearly earnings of $44,616. A 1% increase in interest rates has this
estimated percentage increase effect on annual income.

This table estimates the repricing maturities of the Company's assets and
liabilities, based upon the Company's assessment of the repricing
characteristics of the various instruments. Interest-bearing checking and
regular savings are included in the more than 5 years category. Money market
balances are included in the less than 6 months category. Mortgage-backed
securities are at the anticipated principal payments based on the
weighted-average-life.

NET INTEREST INCOME SIMULATION

The traditional one-dimensional view of GAP is not sufficient to show a bank's
ability to withstand interest rate changes. Because of limitations in GAP
modeling the Asset/Liability Management Committee (ALCO) of the Company uses a
detailed and dynamic simulation model to quantify the estimated exposure of net
interest income (NII) to sustained interest rate changes. While ALCO routinely
monitors simulated NII sensitivity over a rolling two-year horizon, it also
utilizes additional tools to monitor potential longer-term interest rate risk.
The simulation model captures the impact of changing interest rates on the
interest income received and interest expense paid on all assets and liabilities
reflected on the Company's statement of financial condition. This sensitivity
analysis is compared to ALCO policy limits which specify a maximum tolerance
level for NII exposure over a one year horizon, assuming no balance sheet
growth, given a 200 or 100 basis point (bp) upward and downward shift in
interest rates. A parallel and pro rata shift in rates over a 12-month period is
assumed as a benchmark. Other non-parallel rate movement scenarios are also
modeled to determine the potential impact on net interest income. The following
reflects the Company's NII sensitivity analysis as of December 31, 2004 and 2003
as compared to the 10% Board approved policy limit.

                                                     2004           2003
                                                     ----           ----
                                                            
                 +200 bp
Estimated sensitivity..........................      -3.47%        -4.57%
Estimated decrease in net interest income          $(3,727)       (4,220)

                 -100 bp
Estimated sensitivity..........................       0.38%         1.28%
Estimated increase in net interest income          $   408         1,182

The preceding sensitivity analysis does not represent a forecast and should not
be relied upon as being indicative of expected operating results. These
hypothetical estimates are based upon numerous assumptions including: the nature
and timing of interest rate levels including yield curve shape, prepayments on
loans and securities, deposit decay rates, pricing decisions on loans and
deposits, reinvestment/replacement of assets and liability cash flows, and
others. While assumptions are developed based upon current economic and local
market conditions, the Company cannot make any assurances as to the predictive
nature of these assumptions including how customer preferences or competitor
influences might change. Also, as market conditions vary from those assumed in
the sensitivity analysis, actual results will also differ due to
prepayment/refinancing levels likely deviating from those assumed, the varying
impact of interest rate change caps or floors on adjustable rate assets, the
potential effect of changing debt service levels on customers with adjustable
rate loans, depositor early withdrawals and product preference changes, and
other internal/external variables. Furthermore, the sensitivity analysis does
not reflect actions that ALCO might take in responding to or anticipating
changes in interest rates.

LIQUIDITY RISK

Liquidity risk is the possibility that the Company will not be able to fund
present and future obligations. The objective of liquidity management is to
maintain cash flows adequate to meet current and future needs for credit demand,
deposit withdrawals, maturing liabilities and corporate operating expenses. Core
deposits, FHLB credit lines, available-for-sale investment securities, and net
income are the key elements in meeting these objectives. All seven subsidiaries
are members of the FHLB. This membership provides for established lines of
credit in the form of advances that are a supplemental source of funds for
lending and other general business purposes. As of year ended December 31, 2004,
the Company had $1,139 million of available FHLB line of which $819 million was
utilized. Accordingly, management of the Company has a wide range of versatility
in managing the liquidity and asset/liability mix for each individual
institution as well as the Company as a whole. During 2004, all seven financial
institutions maintained liquidity levels in excess of regulatory requirements
and deemed sufficient to meet operating cash needs.

CAPITAL RESOURCES AND ADEQUACY

Maintaining capital strength has been a long term objective. Ample capital is
necessary to sustain growth, provide protection against

                                                                              29

unanticipated declines in asset values, and to safeguard the funds of
depositors. Capital also is a source of funds for loan demand and enables the
Company to effectively manage its assets and liabilities. Shareholders' equity
increased $32.345 million during 2004, or 14 percent the net result of earnings
of $44.616 million, less cash dividend payments and a decline of $682 thousand
in the net unrealized gains on available-for-sale investment securities. For
additional information see footnote 11 in the Consolidated Financial Statements.
Dividend payments were increased by $.08 per share, or 13 percent in 2004. The
payment of dividends is subject to government regulation, in that regulatory
authorities may prohibit banks and bank holding companies from paying dividends
which would constitute an unsafe or unsound banking practice.

CRITICAL ACCOUNTING POLICIES

Companies may apply certain critical accounting policies requiring management to
make subjective or complex judgments, often as a result of the need to estimate
the effect of matters that are inherently uncertain. The Company considers its
only material critical accounting policy to be the allowance for loan losses.
The allowance for loan losses is established through a provision for loan losses
charged against earnings. The balance of allowance for loan losses is maintained
at the amount management believes will be adequate to absorb known and inherent
losses in the loan portfolio. The appropriate balance of allowance for loan
losses is determined by applying estimated loss factors to the credit exposure
from outstanding loans. Estimated loss factors are based on subjective
measurements including management's assessment of the internal risk
classifications, changes in the nature of the loan portfolio, industry
concentrations and the impact of current local, regional and national economic
factors on the quality of the loan portfolio. Changes in these estimates and
assumptions are reasonably possible and may have a material impact on the
Company's consolidated financial statements, results of operations or liquidity.
For additional information regarding the allowance for loan losses, its relation
to the provision for loans losses and risk related to asset quality, see Note 4
to the Consolidated Financial Statements in "Item 8 - Financial Statements and
Supplementary Data".

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2003, the AICPA issued Statement of Position 03-3, Accounting for
Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3) which
addresses the accounting for certain acquired loans or debt securities that have
experienced a deterioration of credit quality between the loan origination date
and the date the loan is acquired by an investor, and for which it is probable,
at acquisition, that the investor will be unable to collect all contractually
required payments on the loan. When loans within the scope of this SOP are
acquired by the completion of a transfer, it is not appropriate at acquisition
to establish an allowance for loan losses related to those acquired loans. The
purchase price represents the fair value of the loans on the date of acquisition
and an allowance for loan losses should be recorded by the investor only to the
extent there is a change in the estimate of credit losses subsequent to
acquisition of the loan (and only to the extent of losses incurred subsequent to
acquisition). Likewise, loans within the scope of this SOP that are acquired in
a purchase business combination should be recognized initially at the present
value of amounts expected to be received and no allowance for loan losses should
be carried over related to these loans at acquisition. SOP 03-3 requires initial
application for loans acquired in fiscal years beginning after December 15,
2004.

In December 2004, the Financial Accounting Standards Board issued a revised
version of SFAS No. 123 Share-Based Payment, mandating that companies measure
the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award (with limited
exceptions). The intrinsic value method of accounting for such awards, as
previously elected by the company and provided for in APB Opinion No. 25,
Accounting for Stock Issued to Employees will no longer acceptable under GAAP
for public companies effective for accounting periods ending after June 15,
2005. If no comparable market values are available, the grant-date fair value of
employee share options and similar instruments is to be estimated using
option-pricing models adjusted for the unique characteristics of those
instruments.

Under the previous provisions of SFAS No. 123, Accounting for Stock Based
Compensation companies using the intrinsic value method were required to
disclose in a footnote to their financial statements the effect on net income of
using the intrinsic value rather than the grant-date fair value method. The
company has continued to use the intrinsic value method, with appropriate
disclosures, in its financial statements through December 31, 2004 (See Stock
Based Compensation under Note 1 to the company's consolidated financial
statements). The company expects to adopt SFAS No. 123 (Revised) effective with
its reporting for the third quarter of 2005.

                                                                              30

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
           YEAR ENDED DECEMBER 31, 2003 COMPARED TO DECEMBER 31, 2002

RESULTS OF OPERATIONS

Operating results include amounts related to the operation of the three branches
acquired in the Pend Oreille acquisition as of July 15, 2003.

REVENUE SUMMARY
($ IN THOUSANDS)                                        Years ended December 31,
                                               -----------------------------------------
                                                 2003       2002     $ change   % change
                                               ---------  ---------  ---------  --------
                                                                    
Net interest income                            $ 92,352   $ 86,467   $  5,885        7%

Fees and other revenue:
   Service charges, loan fees, and other fees    19,756     17,954      1,802       10%
   Gain on sale of loans                         10,674      5,709      4,965       87%
   Gain on sale of investments,
       net of impairment charge                   1,253        238      1,015      426%
   Other income                                   1,879      2,016       (137)     -7%
                                               --------   --------   --------      ---
      Total non-interest income                  33,562     25,917      7,645       29%
                                               --------   --------   --------      ---
   Total revenue                               $125,914   $112,384   $ 13,530       12%
                                               ========   ========   ========      ===
Tax equivalent net interest margin                 4.20%      4.51%
                                               ========   ========

Net income of $38.008 million was a $5.606 million increase over the $32.402
million for the year ended December 31, 2002, an increase of 17 percent. The
following narrative provides additional information on those results.

INTEREST INCOME -Historical low interest rates during most of the year resulted
in a $3 million reduction in interest income even though the earning assets of
the Company increased significantly. With the sustained low rates throughout the
year many loans of all types were refinanced with the rate on the new loans
substantially lower than the prepaid loans. New loans also were at much lower
rates than the average rates earned on the existing loans. Mortgage related
investment securities experienced much of the same results as the loan
portfolio. Investments were prepaid which negatively impacted interest income in
two ways: 1) securities that were purchased at a premium that experienced
prepayments had an acceleration of the amortization of the premium which reduced
the income; 2) reinvestment of the proceeds was at a lower rate than previously
enjoyed on the amounts invested. The weighted average yield on earning assets
(tax free income adjusted for tax effects) decreased from 6.91 percent for the
year 2002 to 5.86 percent in 2003. Increased balances in earning assets offset
much of the rate impact.

INTEREST EXPENSE - Interest expense decreased even more with total interest
expense $9 million, or 19 percent, lower in 2003. Most of the expense reduction
came from deposits as rates continued to decline during the year. In addition
higher rate certificates of deposits matured which further reduced interest
expense. These rate reductions coupled with increasing balances in non-interest
bearing deposits resulted in the deposit expense reduction. The balance in FHLB
advances increased $294 million during the year, however, with a combination of
maturing higher cost advances and lower rates on new advances the interest
expense on total advances decreased by $99,000 from the prior year. The weighted
average rate on advances decreased from 4.15 percent for 2002 to 2.80 for 2003.
The weighted rate on total advances outstanding at December 31, 2003 was 2.19
percent.

The prolonged low interest rates have resulted in a reduction in the net
interest margin (ratio of net interest income divided by average earning assets)
from 4.51 percent in 2002 to 4.20 percent in 2003 with the third quarter of 2003
being the lowest level at 4.12 percent. The ratio increased to 4.17 percent in
the fourth quarter of 2003 primarily due to increased earnings on investments.
With the low interest rates many real estate loans have either been refinanced
which lowers the future earnings rate on the loans that are retained, or the
loan is paid off which also lowers future earnings. To remain competitive it has
become necessary to reduce rates to market levels on all loan types which
reduces interest income on those loans. Investment income also is lower on
securities purchased during this low rate period than on securities previously
held in the portfolio. Prepayment of mortgage-backed securities also has
occurred as underlying mortgage loans have been prepaid. This prepayment not
only reduced the level of assets with higher rates but also resulted in much
faster amortization of premiums associated with the securities further reducing
interest income. To offset the reduction in interest income, rates on interest
bearing deposits have been reduced and matured borrowings have been renewed at
lower rates. The

                                                                              31

increased level of non-interest bearing deposits has reduced the need for
additional borrowings which also has resulted in lower interest expense.

NON-INTEREST INCOME - Total non-interest income increased $8 million, or 29
percent over the prior year. $2 million of the increase was from increased
volumes in loan and deposit activity and the resulting fees. $1 million of the
increase was contributed by net gains on sale of investment securities. The
largest portion of the increase was from a $5 million increase in the gain on
sale of loans, the majority of which was from residential real estate loans. The
low interest rates during 2003 resulted in a very large increase in the number
of loans being refinanced to obtain low long term financing, and an increase in
new home loans because of affordable monthly payments.

Increasing rates affect the level of fee income created from the origination and
sale of mortgage loans as the refinance of loans is substantially reduced or
eliminated. Purchases of homes can also be affected because of reduced
affordability due to higher monthly payments with higher interest rates. The
subsidiary banks are located in areas of robust population growth which somewhat
mitigates the risk of significant reduction in home purchases. Reduction in
refinance activity also reduces the variable expenses such as commissions for
loan origination and could result in additional reductions in expense.

NON-INTEREST EXPENSE SUMMARY
($ IN THOUSANDS)                               Years ended December 31,
                                        ---------------------------------------
                                          2003      2002    $ change   % change
                                        --------  --------  --------   --------
                                                           
Compensation and employee benefits      $36,173   $30,448   $ 5,725       19%
Occupancy and equipment expense           9,931     9,591       340        4%
Outsourced data processing                1,650     2,048      (398)     -19%
Core deposit intangibles amortization     1,243     1,439      (196)     -14%
Other expenses                           16,947    14,287     2,660       19%
                                        -------   -------   -------       --
      Total non-interest expense        $65,944   $57,813   $ 8,131       14%
                                        =======   =======   =======       ==

NON-INTEREST EXPENSE - Non-interest expense also increased $8 million, a 14
percent increase, with $6 million of the increase in the compensation and
benefits classification. The Pend Oreille acquisition, additional branches in
the Boise and Bozeman markets, commissions paid to mortgage loan originators,
normal increases for job performance, and some benefits that are tied to the
Company stock price performance account for the majority of the increase.
Advertising and marketing, start up expenses for the High Performance Checking
program, and other volume related expenses made up most of the remainder of the
increased expense.

The efficiency ratio, which measures the cost per dollar of revenue generated,
increased from 51 percent in 2002 to 52 percent in 2003. Although this increased
from the prior year it is still significantly less than the 61 percent average
of similar sized banking companies.

CREDIT QUALITY INFORMATION                              December 31,  December 31,
                                                        ------------  ------------
($ IN THOUSANDS)                                             2003        2002
                                                        ------------  ------------
                                                                
Allowance for loan losses                                 $ 23,990      $ 20,944

Non-performing assets                                       13,068        11,582

Allowance as a percentage of non performing assets             184%          181%

Non-performing assets as a percentage of total assets         0.48%         0.51%

Allowance as a percentage of total loans                      1.65%         1.58%

Net charge-offs as a percentage of loans                     0.118%        0.261%

PROVISION FOR LOAN LOSSES - The provision for loan losses was $3.809 million in
2003 which was a reduction of $1.936 million from 2002. Charged off loans, net
of recoveries of loans previously charged off, were $1.733 million lower in 2003
than the prior year. The balance in the allowance for loan losses increased
$3.046 million from the prior year end. At December 31, 2003 non-performing
assets (non-accrual loans, accruing loans 90 days or more overdue, real estate
acquired by foreclosure, and repossessed personal property) totaled $13.068
million, or .48 percent of total assets; compared to $11.582 million, or .51
percent at December 31,

                                                                              32

2002. The peer group average according to the Federal Reserve Bank Performance
Report as of September 30, 2003, the most recent information available, for
banking companies similar to our size was .65 percent of total assets. The
allowance for loan losses was 184 percent of non-performing assets, and 1.65
percent of total loans as of December 31, 2003 which compares to 181 percent and
1.58 percent, respectively, at December 31, 2002.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information regarding "Quantitative and Qualitative Disclosures about Market
Risk" is set fourth under "Item 7 - Management's Discussion and Analysis".

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                              33

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Glacier Bancorp, Inc.:

We have audited management's assessment, included in the accompanying Report of
Management, that Glacier Bancorp, Inc. and subsidiaries (the Company) maintained
effective internal control over financial reporting as of December 31, 2004
based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Glacier Bancorp, Inc. and subsidiaries' management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the Company's internal control over financial
reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that Glacier Bancorp, Inc. and
subsidiaries maintained effective internal control

                                                                              34

over financial reporting as of December 31, 2004 is fairly stated, in all
material respects, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Also, in our opinion, Glacier Bancorp, Inc. and
subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2004 based on criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated statements of
financial condition of Glacier Bancorp, Inc. and subsidiaries as of December 31,
2004 and 2003, and the related consolidated statements of operations,
stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended December 31, 2004, and our report dated
March 15, 2005 expressed an unqualified opinion on those consolidated financial
statements.

/s/ KPMG

March 15, 2005

                                                                              35

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Glacier Bancorp, Inc.:

We have audited the accompanying consolidated statements of financial condition
of Glacier Bancorp, Inc. and subsidiaries as of December 31, 2004 and 2003 and
the related consolidated statements of operations, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2004. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Glacier Bancorp,
Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Glacier
Bancorp, Inc.'s internal control over financial reporting as of December 31,
2004, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organization of the Treadway Commission
(COSO), and our report dated March 15, 2005 expressed an unqualified opinion on
management's assessment of, and the effective operation of, internal control
over financial reporting.

/s/ KPMG

Billings, Montana
March 15, 2005

                                                                              36

                             GLACIER BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                                                      December 31,
                                                                                -----------------------
                (dollars in thousands, except per share data)                      2004         2003
- -----------------------------------------------------------------------------   ----------   ----------
                                                                                       
ASSETS:
     Cash on hand and in banks ..............................................   $   79,300       77,093
     Interest bearing cash deposits .........................................       13,007        9,047
                                                                                ----------   ----------
          Cash and cash equivalents .........................................       92,307       86,140
     Investment securities, available-for-sale ..............................    1,085,626    1,096,954
     Loans receivable, net of allowance for loan losses of $26,492
        and $23,990 at December 31, 2004, and 2003, respectively ............    1,687,329    1,413,392
     Loans held for sale ....................................................       14,476       16,973
     Premises and equipment, net ............................................       55,732       53,251
     Real estate and other assets owned, net ................................        2,016          587
     Accrued interest receivable ............................................       15,637       14,941
     Core deposit intangible, net of accumulated amortization of $5,331
        and $4,257 at December 31, 2004, and 2003, respectively .............        4,939        5,865
     Goodwill ...............................................................       37,376       36,951
     Other assets ...........................................................       15,299       14,579
                                                                                ----------   ----------
                                                                                $3,010,737    2,739,633
                                                                                ==========   ==========
LIABILITIES:
     Non-interest bearing deposits ..........................................   $  460,059      369,052
     Interest bearing deposits ..............................................    1,269,649    1,228,573
     Advances from Federal Home Loan Bank of Seattle ........................      818,933      777,294
     Securities sold under agreements to repurchase .........................       76,158       56,968
     Other borrowed funds ...................................................        5,057        8,018
     Accrued interest payable ...............................................        4,864        4,353
     Deferred tax liability .................................................        8,392        7,369
     Subordinated debentures ................................................       80,000       35,000
     Other liabilities ......................................................       17,441       15,167
                                                                                ----------   ----------
     Total liabilities ......................................................    2,740,553    2,501,794

 STOCKHOLDERS' EQUITY:
     Preferred shares, 1,000,000 shares authorized. None outstanding
        at December 31, 2004 and 2003 .......................................           --           --
     Common stock, $.01 par value per share. 62,500,000 shares authorized,
          24,549,410 and 24,203,338 issued and outstanding at December 31,
          2004 and 2003,
     respectively ...........................................................          245          242
     Paid-in capital ........................................................      227,614      222,588
     Retained earnings - substantially restricted ...........................       36,391        8,393
     Accumulated other comprehensive income .................................        5,934        6,616
                                                                                ----------   ----------
          Total stockholders' equity ........................................      270,184      237,839
                                                                                ----------   ----------
                                                                                $3,010,737    2,739,633
                                                                                ==========   ==========

See accompanying notes to consolidated financial statements.

                                                                              37

                             GLACIER BANCORP, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                                               Years ended December 31,
                                                             ----------------------------
       (dollars in thousands, except per share data)           2004      2003      2002
- ----------------------------------------------------------   --------   -------   -------
                                                                         
INTEREST INCOME:
     Real estate loans ...................................   $ 22,942    23,883    29,290
     Commercial loans ....................................     57,312    50,203    47,013
     Consumer and other loans ............................     20,331    20,013    22,559
     Investment securities and other .....................     46,700    36,731    35,127
                                                             --------   -------   -------
       Total Interest Income .............................    147,285   130,830   133,989
                                                             --------   -------   -------
INTEREST EXPENSE:
     Deposits ............................................     14,054    17,221    26,268
     Federal Home Loan Bank of Seattle advances ..........     18,540    16,860    16,959
     Securities sold under agreements to repurchase ......        873       673       591
     Subordinated debentures .............................      5,619     3,615     3,616
     Other borrowed funds ................................        806       109        88
                                                             --------   -------   -------
       Total Interest Expense ............................     39,892    38,478    47,522
                                                             --------   -------   -------
       NET INTEREST INCOME ...............................    107,393    92,352    86,467
     Provision for loan losses ...........................      4,195     3,809     5,745
                                                             --------   -------   -------
       Net interest income after provision
        for loan losses ..................................    103,198    88,543    80,722
NON-INTEREST INCOME:
     Service charges and other fees ......................     19,550    15,458    14,011
     Miscellaneous loan fees and charges .................      4,710     4,298     3,943
     Gain on sale of loans ...............................      8,015    10,674     5,709
     Gain on sale of investments, net of impairment charge         --     1,253       238
     Other income ........................................      2,290     1,879     2,016
                                                             --------   -------   -------
       Total Non-Interest Income .........................     34,565    33,562    25,917
                                                             --------   -------   -------
NON-INTEREST EXPENSE:
     Compensation, employee benefits and related expense..     39,955    36,173    30,448
     Occupancy and equipment expense .....................     10,797     9,931     9,591
     Outsourced data processing expense ..................      1,551     1,650     2,048
     Core deposit intangibles amortization ...............      1,074     1,243     1,439
     Other expense .......................................     18,756    16,947    14,287
                                                             --------   -------   -------
       Total Non-Interest Expense ........................     72,133    65,944    57,813
                                                             --------   -------   -------
EARNINGS BEFORE INCOME TAXES .............................     65,630    56,161    48,826
   Federal and state income tax expense ..................     21,014    18,153    16,424
                                                             --------   -------   -------
NET EARNINGS .............................................   $ 44,616    38,008    32,402
                                                             ========   =======   =======

     BASIC EARNINGS PER SHARE ............................   $   1.82      1.58      1.37
     DILUTED EARNINGS PER SHARE ..........................   $   1.79      1.55      1.35

See accompanying notes to consolidated financial statements.

                                                                              38

                             GLACIER BANCORP, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                 YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002

                                                                                         Retained
                                                                                         earnings
                                                                                       (accumulated   Accumulated    Total
                                                                                         deficit)     other comp-    stock-
                                                          Common Stock       Paid-in   substantially   rehensive    holders'
     (Dollars in thousands, except per share data)      Shares     Amount    capital     restricted     income       equity
- ---------------------------------------------------  ------------  -------  ---------  -------------  -----------  ---------
                                                                                                 
Balance at December 31, 2001                         23,202,330    $ 232     210,892     (35,897)        1,756      176,983
Comprehensive income:                                        --       --          --      32,402            --       32,402
     Net earnings                                            --       --          --          --         8,355        8,355
                                                                                                                    -------
     Unrealized gain on securities, net of
       reclassification adjustment                           --       --          --          --            --       40,757
Total comprehensive income                                                                                          -------
Cash dividends declared ($.49 per share)                     --       --          --     (11,532)           --      (11,532)
Stock options exercised                                 565,670        6       4,955          --            --        4,961
Tax benefit from stock related compensation                  --       --       1,080          --            --        1,080
                                                     ----------    -----     -------     -------        ------      -------
Balance at December 31, 2002                         23,768,000    $ 238     216,927     (15,027)       10,111      212,249
Comprehensive income:
     Net earnings                                            --       --          --      38,008            --       38,008
     Unrealized loss on securities, net of
       reclassification adjustment                           --       --          --          --        (3,495)      (3,495)
                                                                                                                    -------
Total comprehensive income                                   --       --          --          --            --       34,513
                                                                                                                    -------

Cash dividends declared ($.60 per share)                     --       --          --     (14,573)           --      (14,573)
Stock options exercised                                 435,338        4       4,670          --            --        4,674
Acquisition of fractional shares                             --       --          --         (15)           --          (15)
Tax benefit from stock related compensation                  --       --         991          --            --          991
Balance at December 31, 2003                         24,203,338    $ 242     222,588       8,393         6,616      237,839
                                                     ----------    -----     -------     -------        ------      -------

Comprehensive income:
     Net earnings                                            --       --          --      44,616            --       44,616
     Unrealized loss on securities, net
       of reclassification adjustment                        --       --          --          --          (682)        (682)
                                                                                                                    -------
Total comprehensive income                                   --       --          --          --            --       43,934
                                                                                                                    -------

Cash dividends declared ($.68 per share)                     --       --          --     (16,618)           --      (16,618)
Stock options exercised                                 417,322        4       5,435          --            --        5,439
Repurchase and retirement of stock                      (71,250)      (1)     (1,804)         --            --       (1,805)
Acquisition of fractional shares                             --       --          (9)         --            --           (9)
Tax benefit from stock related compensation                  --       --       1,404          --            --        1,404
                                                     ----------    -----     -------     -------        ------      -------
Balance at December 31, 2004                         24,549,410    $ 245     227,614      36,391         5,934      270,184
                                                     ==========    =====     =======     =======        ======      =======

                                                                                  Year ended December 31,
                                                                               -----------------------------
Disclosure of reclassification amount:                                           2004      2003       2002
                                                                               --------  --------  ---------
                                                                                          
    Unrealized and realized holding (loss) gain arising during the year ...    $(1,124)   (2,225)    13,980
    Tax benefit (expense) .................................................        442       866     (5,480)
                                                                               -------   -------   --------
     Net after tax ........................................................       (682)   (1,359)     8,500
                                                                               -------   -------   --------
   Reclassification adjustment for net gains included in net income .......         --    (3,502)      (238)
    Tax expense ...........................................................         --     1,366         93
                                                                               -------   -------   --------
     Net after tax ........................................................         --    (2,136)      (145)
                                                                               -------   -------   --------
      Net change in unrealized (loss) gain on available-for-sale
securities ................................................................    $  (682)   (3,495)     8,355
                                                                               =======   =======   ========

See accompanying notes to consolidated financial statements.

                                                                              39

                             GLACIER BANCORP, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                   Years ended December 31,
                                                                              ----------------------------------
                 (dollars in thousands)                                          2004        2003        2002
- ---------------------------------------------------------------------------   ----------  ----------  ----------
                                                                                             
OPERATING ACTIVITIES :
    Net earnings ..........................................................   $  44,616      38,008      32,402
    Adjustments to reconcile net earnings to net cash provided by (used in)
    operating activities:
      Mortgage loans held for sale originated or acquired .................    (292,017)   (521,323)   (409,481)
      Proceeds from sales of mortgage loans held for sale .................     302,529     567,010     390,353
      Provision for loan losses ...........................................       4,195       3,809       5,745
      Depreciation of premises and equipment ..............................       4,567       4,283       4,178
      Amortization of core deposit intangible .............................       1,074       1,243       1,439
      Gain on sale of investments, net of impairment charge ...............          --      (1,253)       (238)
      Gain on sale of loans ...............................................      (8,015)    (10,674)     (5,709)
      Amortization of investment securities premiums and discounts, net ...      11,263      14,360       5,640
      Federal Home Loan Bank of Seattle stock dividends ...................      (1,218)     (2,179)     (2,170)
      Deferred tax expense ................................................         284         722       1,466
      Tax benefit from stock related compensation .........................       1,404         991       1,080
      Net increase in accrued interest receivable .........................        (696)     (1,270)     (1,012)
      Net increase (decrease) in accrued interest payable .................         495      (1,795)     (3,089)
      Net increase (decrease) in current income taxes .....................       1,201       1,645        (915)
      Net (increase) decrease in other assets .............................      (2,145)      1,808      (1,041)
      Net increase (decrease) in other liabilities ........................       2,253         (99)     (1,205)
                                                                              ---------    --------    --------
         NET CASH PROVIDED BY OPERATING ACTIVITIES ........................      69,790      95,286      17,443
                                                                              ---------    --------    --------
INVESTING ACTIVITIES:
      Proceeds from  sales, maturities and prepayments of investment
        securities available-for-sale .....................................     317,273     389,400     206,554
      Purchases of investment securities available-for-sale ...............    (315,172)   (715,454)   (429,596)
      Principal collected on installment and commercial loans .............     677,004     566,245     576,109
      Installment and commercial loans originated or acquired .............    (875,539)   (705,249)   (617,200)
      Principal collections on mortgage loans .............................     296,482     303,251     260,027
      Mortgage loans originated or acquired ...............................    (376,039)   (283,278)   (178,171)
      Net purchase of FHLB and FRB stock ..................................      (1,942)       (973)     (3,687)
      Acquisition of Ione branch and Pend Oreille Bank ....................      14,524        (243)         --
      Net addition of premises and equipment ..............................      (7,032)     (7,579)       (828)
                                                                              ---------    --------    --------
         NET CASH USED IN INVESTING ACTIVITIES ............................    (270,441)   (453,880)   (186,792)
                                                                              ---------    --------    --------
FINANCING ACTIVITIES:
      Net increase in deposits ............................................     116,943      77,943      13,859
      Net increase in FHLB advances .......................................      41,639     293,634     116,364
      Net increase in securities sold under repurchase agreements .........      19,190      10,762      13,621
      Net (decrease) increase in other borrowed funds .....................      (2,961)     (7,069)     14,027
      Proceeds from issuance of subordinated debentures ...................      45,000          --          --
      Cash dividends paid .................................................     (16,618)    (14,572)    (11,532)
      Proceeds from exercise of stock options and other stock issued ......       5,439       4,674       4,961
      Repurchase and retirement of stock ..................................      (1,805)         --          --
      Cash paid for stock dividends .......................................          (9)        (15)         --
                                                                              ---------    --------    --------
        NET CASH PROVIDED BY FINANCING  ACTIVITIES ........................     206,818     365,357     151,300
                                                                              ---------    --------    --------
      NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................       6,167       6,763     (18,049)
      CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ......................      86,140      79,377      97,426
                                                                              ---------    --------    --------
      CASH AND CASH EQUIVALENTS AT END OF YEAR ............................   $  92,307      86,140      79,377
                                                                              =========    ========    ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

      Cash paid during the year for interest ..............................   $  39,382      40,219      62,762
      Cash paid during the year for income taxes ..........................   $  18,424      14,721      14,793

See accompanying notes to consolidated financial statements.

                                                                              40

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) GENERAL

Glacier Bancorp, Inc. (the "Company"), is a Montana corporation incorporated in
2004 as a successor corporation to the Delaware corporation incorporated in
1990. The Company is a multi-bank holding company that provides a full range of
banking services to individual and corporate customers in Montana, Idaho, Utah
and Washington through its subsidiary banks. The subsidiary banks are subject to
competition from other financial service providers. The subsidiary banks are
also subject to the regulations of certain government agencies and undergo
periodic examinations by those regulatory authorities.

The accounting and consolidated financial statement reporting policies of the
Company conform with accounting principles generally accepted in the United
States of America. In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported and disclosed amounts of assets and liabilities as of the date of the
statement of financial condition and income and expenses for the period. Actual
results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the subsidiary banks' allowance
for loan losses. Such agencies may require the subsidiary banks to recognize
additions to the allowance based on their judgments about information available
to them at the time of their examination.

(b) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its nine wholly owned operating subsidiaries, Glacier Bank ("Glacier"), First
Security Bank of Missoula ("First Security"), Western Security Bank ("Western"),
Mountain West Bank in Idaho, ("Mountain West"), Big Sky Western Bank, ("Big
Sky"), Valley Bank of Helena ("Valley"), Glacier Bank of Whitefish
("Whitefish"), Glacier Capital Trust I ("Glacier Trust I"), and Glacier Capital
Trust II ("Glacier Trust II"). All significant inter-company transactions have
been eliminated in consolidation.

On June 4, 2004, AmericanWest Bancorp.'s branch office in Ione, Washington was
acquired and became a branch of Mountain West Bank. Pend Oreille Bancorp was
acquired July 15, 2003 and its branches became additional branches of Mountain
West. The acquisitions were accounted for using the purchase method of
accounting. Accordingly, the financial information presented includes the
operations since the date of the acquisitions. See footnote 20 for additional
information related to these transactions.

(c) CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, cash held as demand deposits at
various banks and regulatory agencies, interest bearing deposits and federal
funds sold with original maturities of three months or less.

(d) INVESTMENT SECURITIES

Debt securities for which the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity and are stated at amortized
cost. Debt and equity securities held primarily for the purpose of selling in
the near term are classified as trading securities and are reported at fair
market value, with unrealized gains and losses included in income. Debt and
equity securities not classified as held-to-maturity or trading are classified
as available-for-sale and are reported at fair value with unrealized gains and
losses, net of income taxes, shown as a separate component of stockholders'
equity. Currently, the Company only holds available-for-sale securities.

Premiums and discounts on investment securities are amortized or accreted into
income using a method that approximates the level-yield interest method. The
cost of any investment, if sold, is determined by specific identification.
Declines in the fair value of securities below carrying value that are other
than temporary are charged to expense as realized losses and the related
carrying value is reduced to fair value.

The Company holds stock in the Federal Home Loan Bank of Seattle (FHLB) and the
Federal Reserve Bank (FRB). FHLB and FRB stocks are restricted because they may
only be sold to another member institution or the FHLB or FRB at their par
values. Due to restrictive terms, and the lack of a readily determinable market
value, FHLB and FRB stocks are carried at cost.

                                                                              41

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES . . . CONTINUED

(e) LOANS RECEIVABLE

Loans that are intended to be held to maturity are reported at their unpaid
principal balance less charge-offs, specific valuation accounts, and any
deferred fees or costs on originated loans. Purchased loans are reported net of
unamortized premiums or discounts. Discounts and premiums on purchased loans and
net loan fees on originated loans are amortized over the expected life of loans
using methods that approximate the effective interest method.

Loans on which the accrual of interest has been discontinued are designated as
nonaccrual loans. Accrual of interest on loans is discontinued either when
reasonable doubt exists as to the full, timely collection of interest or
principal or when a loan becomes contractually past due by ninety days or more
with respect to interest or principal unless such past due loan is well secured
and in the process of collection. When a loan is placed on nonaccrual status,
interest previously accrued but not collected is reversed against current period
interest income. Interest accruals are resumed on such loans only when they are
brought fully current with respect to interest and principal and when, in the
judgment of management, the loans are estimated to be fully collectible as to
both principal and interest.

(f) LOANS HELD FOR SALE

Mortgage and commercial loans originated and intended for sale in the secondary
market are carried at the lower of cost or estimated market value in the
aggregate. Net unrealized losses are recognized by charges to income. A sale is
recognized when the Company surrenders control of the loan and consideration,
other than beneficial interests in the loan, is received in exchange. A gain is
recognized to the extent the selling price exceeds the carrying value.

(g) ALLOWANCE FOR LOAN LOSSES

Management's periodic evaluation of the adequacy of the allowance is based on
factors such as the Company's past loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral, current
economic conditions, and independent appraisals.

The Company also provides an allowance for losses on impaired loans. Groups of
small balance homogeneous loans (generally consumer and residential real estate
loans) are evaluated for impairment collectively. A loan is considered impaired
when, based upon current information and events, it is probable that the Company
will be unable to collect, on a timely basis, all principal and interest
according to the contractual terms of the loan's original agreement. When a
specific loan is determined to be impaired, the allowance for loan losses is
increased through a charge to expense for the amount of the impairment. The
amount of the impairment is measured using cash flows discounted at the loan's
effective interest rate, except when it is determined that the sole source of
repayment for the loan is the operations or liquidation of the underlying
collateral. In such cases, impairment is measured by determining the current
value of the collateral, reduced by anticipated selling costs. The Company
recognizes interest income on impaired loans only to the extent the cash
payments are received.

(h) PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less depreciation. Depreciation is
computed on a straight-line method over the estimated useful lives or the term
of the related lease. The estimated useful life for office building is 15-40
years and the estimated useful life for furniture, fixtures, and equipment is
3-10 years.

(i) REAL ESTATE OWNED

Property acquired by foreclosure or deed in lieu of foreclosure is carried at
the lower of cost or estimated fair value, less selling costs. Costs, excluding
interest, relating to the improvement of property are capitalized, whereas those
relating to holding the property are charged to expense. Fair value is
determined as the amount that could be reasonably expected in a current sale
(other than a forced or liquidation sale) between a willing buyer and a willing
seller. If the fair value of the asset minus the estimated cost to sell is less
than the cost of the property, a loss is recognized and the asset carrying value
is reduced.

(j) GOODWILL

On an annual basis, as required by Financial Accounting Standards Board (FASB)
Statement 142, Goodwill and Other Intangible Assets, the Company tests goodwill
for impairment at the subsidiary level during the third quarter. In addition,
goodwill is tested for impairment on an interim basis if an event or
circumstance indicates that it is more likely than not that an impairment loss
has occurred.

                                                                              42

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ... CONTINUED

(k) CORE DEPOSIT INTANGIBLES

Core deposit intangibles represent the intangible value of depositor
relationships resulting from deposit liabilities assumed in acquisitions and are
amortized using an accelerated method based on an estimated runoff of the
related deposits, not exceeding 10 years. The useful life of the core deposit
intangible is reevaluated on an annual basis, with any changes in estimated
useful life being accounted for prospectively over the revised remaining life.

(l) INCOME TAXES

Deferred tax assets and liabilities are recognized for estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

(m) STOCK-BASED COMPENSATION

Compensation cost for stock-based compensation to employees is measured at the
grant date using the intrinsic value method. Under the intrinsic value method,
compensation cost is the excess of the market price of the stock at the grant
date over the amount an employee must pay to ultimately acquire the stock and is
recognized over any related service period.

The per share weighted-average fair value of stock options granted during 2004,
2003 and 2002 was $1.59, $2.12, and $3.26, respectively, on the date of grant
using the Black Scholes option-pricing model with the following assumptions:
2004 - expected dividend yield of 2.44%, risk-free interest rate of 2.82%,
volatility ratio of 19%, and expected life of 4.8 years: 2003 - expected
dividend yield of 3.01%, risk-free interest rate of 2.78%, volatility ratio of
21%, and expected life of 4.8 years: 2002 - expected dividend yield of 3.02%,
risk-free interest rate of 2.73%, volatility ratio of 23%, and expected life of
4.8 years.

The exercise price of all options granted has been equal to the fair market
value of the underlying stock at the date of grant and, accordingly, no
compensation cost has been recognized for its stock options in the financial
statements. Had the Company determined compensation cost based on the fair value
of the option itself at the grant date for its stock options under SFAS 123,
Accounting for Stock-Based Compensation, the Company's net income would have
been reduced to the pro forma amounts indicated below:

                                                      Years ended December 31,
                                                 -----------------------------------
                                                    2004         2003        2002
                                                 ----------   ---------   ---------
                                                                 
Net earnings (in thousands):  As reported        $   44,616      38,008      32,402
                              Compensation cost        (685)       (752)       (577)
                                                 ----------   ---------   ---------
                              Pro forma              43,931      37,256      31,825
                                                 ==========   =========   =========

Basic earnings per share:     As reported              1.82        1.58        1.37
                              Compensation cost       (0.02)      (0.03)      (0.02)
                                                 ----------   ---------   ---------
                              Pro forma                1.80        1.55        1.35
                                                 ==========   =========   =========

Diluted earnings per share:   As reported              1.79        1.55        1.35
                              Compensation cost       (0.03)      (0.03)      (0.02)
                                                 ----------   ---------   ---------
                              Pro forma                1.76        1.52        1.33
                                                 ==========   =========   =========

In December 2004, the Financial Accounting Standards Board issued a revised
version of SFAS No. 123 Share-Based Payment (SFAS 123R), which replaces SFAS 123
and supersedes APB 25. The Company is required to apply SFAS 123R as of the
first interim or annual reporting period that begins after June 15, 2005. SFAS
123R requires the recognition of compensation cost related to share-based
payment plans to be recognized in the financial statements based on the fair
value of the equity or liability instruments issued. The company expects to
adopt SFAS No. 123 (Revised) effective with its reporting for the third quarter
of 2005.

(n) LONG-LIVED ASSETS

Long-lived assets, including core deposit intangibles, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An asset is deemed impaired
if the sum of the expected future cash flows is less than the carrying amount of
the asset. If impaired, an impairment loss is recognized to reduce the carrying
value of the asset to fair value. At December 31, 2004 and 2003 there were no
assets that were considered impaired.

                                                                              43

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ... CONTINUED

(o) MORTGAGE SERVICING RIGHTS

The Company recognizes the rights to service mortgage loans for others, whether
acquired or internally originated. Loan servicing rights are initially recorded
at fair value based on comparable market quotes and are amortized as other
expense in proportion to and over the period of estimated net servicing income.
Loan servicing rights are evaluated quarterly for impairment by discounting the
expected future cash flows, taking into consideration the estimated level of
prepayments based on current industry expectations and the predominant risk
characteristics of the underlying loans including loan type, note rate and loan
term. Impairment adjustments, if any, are recorded through a valuation
allowance.

As of December 31, 2004 and 2003 the carrying value of servicing rights was
approximately $1,241,000 and $1,388,000, respectively. Amortization expense of
$328,000, $729,000, and $480,000 was recognized in the years ended December 31,
2004, 2003, and 2002, respectively. The servicing rights are included in other
assets on the balance sheet and are amortized over the period of estimated net
servicing income. There was no impairment of carrying value at December 31, 2004
or 2003. At December 31, 2004, the fair value of mortgage servicing rights was
approximately $1,621,000.

(p) EARNINGS PER SHARE

Basic earnings per share is computed by dividing net earnings available to
common stockholders by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per share is computed by dividing
such net earnings by the weighted average number of common shares used to
compute basic EPS plus the incremental amount of potential common stock
determined by the treasury stock method. Previous period amounts are restated
for the effect of stock dividends and splits.

(q) STOCK SPLIT AND STOCK DIVIDEND

On April 28, 2004 the Board of Directors declared a five-for-four stock split,
payable to shareholders of record on May 11, 2004, payable May 20, 2004. On
April 30, 2003, the Board of Directors declared a 10 percent stock dividend,
payable in common stock of the Company to shareholders of record on May 13,
2003, payable on May 22, 2003. All prior period amounts have been restated to
reflect the stock split and dividend.

(r) COMPREHENSIVE INCOME

Comprehensive income includes net income, as well as other changes in
stockholders' equity that result from transactions and economic events other
than those with stockholders. The Company's only significant element of other
comprehensive income is unrealized gains and losses on available-for-sale
securities.

(s) RECLASSIFICATIONS

Certain reclassifications have been made to the 2003 and 2002 financial
statements to conform to the 2004 presentation.

2. CASH ON HAND AND IN BANKS

The subsidiary banks are required to maintain an average reserve balance with
either the Federal Reserve Bank or in the form of cash on hand. The amount of
this required reserve balance at December 31, 2004 was $8,290,000.

                                                                              44

3. INVESTMENT SECURITIES, AVAILABLE FOR SALE

A comparison of the amortized cost and estimated fair value of the Company's
investment securities, available for sale, is as follows.

                      INVESTMENTS AS OF DECEMBER 31, 2004

                                                                                                              Estimated
                                                                 Weighted   Amortized     Gross   Unrealized    Fair
                   (Dollars in thousands)                         Yield        Cost       Gains     Losses      Value
                   ----------------------                         -----        ----       -----     ------      -------
                                                                                               
U.S. GOVERNMENT AND FEDERAL AGENCIES
  maturing within one year...............................           1.29%   $      251          -        -          251
  maturing five years through ten years..................           4.62%          350          6        -          356
  maturing after ten years...............................           3.08%          481          2       (1)         482
                                                                            ----------   --------   ------    ---------
                                                                    3.16%        1,082          8       (1)       1,089
                                                                            ----------   --------   ------    ---------
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
  maturing within one year...............................           5.30%          518          8        -          526
  maturing one year through five years...................           5.37%        1,205         64        -        1,269
  maturing five years through ten years..................           4.69%        6,514        324        -        6,838
  maturing after ten years...............................           5.13%      292,102     12,971   (1,098)     303,975
                                                                            ----------   --------   ------    ---------
                                                                    5.12%      300,339     13,367   (1,098)     312,608
                                                                            ----------   --------   ------    ---------

MORTGAGE-BACKED SECURITIES...............................           4.99%       56,629        919     (503)      57,045

REAL ESTATE MORTGAGE INVESTMENT CONDUITS.................           3.77%      660,389      1,624   (4,469)     657,544

FHLMC AND FNMA STOCK.....................................           5.74%        7,593          -      (56)       7,537

FHLB AND FRB STOCK, AT COST..............................           3.22%       49,803          -        -       49,803

                                                                            ----------   --------   ------    ---------
     TOTAL INVESTMENTS                                              4.20%   $1,075,835     15,918   (6,127)   1,085,626
                                                                            ==========   ========   ======    =========

                       INVESTMENTS AS OF DECEMBER 31, 2003

                                                                                                              Estimated
                                                                 Weighted   Amortized    Gross    Unrealized    Fair
                   (Dollars in thousands)                         Yield        Cost       Gains     Losses      Value
                   ----------------------                         -----        ----       -----     ------      -------
                                                                                               
U.S. GOVERNMENT AND FEDERAL AGENCIES
  maturing within one year...............................           0.85%.  $      352          -         -         352
  maturing one year through five years...................           1.29%          259          -        (1)        258
  maturing after ten years...............................           2.97%          957         15        (1)        971
                                                                            ----------   --------   -------   ---------
                                                                    2.22%        1,568         15        (2)      1,581
                                                                            ----------   --------   -------   ---------
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
  maturing within one year...............................           5.69%        4,346         41         -       4,387
  maturing one year through five years...................           4.30%        5,485         84      (102)      5,467
  maturing five years through ten years..................           5.35%        4,910        197         -       5,107
  maturing after ten years...............................           5.11%      288,644     10,106    (1,683)    297,067
                                                                            ----------   --------   -------   ---------
                                                                    5.11%      303,385     10,428    (1,785)    312,028
                                                                            ----------   --------   -------   ---------

MORTGAGE-BACKED SECURITIES...............................           4.30%       64,123      1,465      (342)     65,246

REAL ESTATE MORTGAGE INVESTMENT CONDUITS.................           4.03%      662,727      4,983    (3,911)    663,799

FHLMC AND FNMA STOCK.....................................           5.74%        7,593         64         -       7,657

FHLB AND FRB STOCK, AT COST..............................           5.34%       46,643          -         -      46,643

                                                                            ----------   --------   -------   ---------
     TOTAL INVESTMENTS                                              4.41%   $1,086,039     16,955    (6,040)  1,096,954
                                                                            ==========   ========   =======   =========

                                                                              45

3.  INVESTMENT SECURITIES, AVAILABLE FOR SALE...CONTINUED

Maturities of securities do not reflect repricing opportunities present in
adjustable rate securities, nor do they reflect expected shorter maturities
based upon early prepayment of principal. Weighted yields on tax-exempt
investment securities exclude the tax effect. The Real Estate Mortgage
Investment Conduits are backed by the FNMA, GNMA, or FHLMC.

The book value of securities was as follows at:

                                                         December 31,
               (dollars in thousands)                        2002
               ----------------------                        --------
                                                      
U.S. Government and Federal Agencies..................     $  1,086
State and Local Governments and Other Issues..........      244,665
Mortgage-Backed Securities............................       81,043
Real Estate Mortgage Investment Conduits..............      388,927
FHLMC and FNMA stock..................................        7,593
FHLB and FRB stock....................................       42,864
                                                           --------
                                                           $766,178
                                                           ========

Investments with an unrealized loss position at December 31, 2004:

                                                            Less than 12 months    12 months or more            Total
                                                           --------------------   --------------------   --------------------
                                                             Fair    Unrealized     Fair    Unrealized     Fair    Unrealized
                 (dollars in thousands)                      Value      Loss       Value       Loss       Value       Loss
                 ----------------------                    -------   ----------   -------   ----------   -------   ----------
                                                                                                 
U.S. Government and Federal Agencies.....................      136          1         314          1         450         2
State and Local Governments and other issues.............   18,767        260      18,409        838      37,176     1,098
FHLMC stock..............................................    7,444         56           -          -       7,444        56
Mortgage-Backed Securities...............................   18,867        193      13,256        310      32,123       503
Real Estate Mortgage Investment Conduits.................  381,196      2,994      73,086      1,474     454,282     4,468
                                                           -------   --------     -------   --------     -------   -------
Total temporarily impaired securities                      426,410      3,504     105,065      2,623     531,475     6,127
                                                           =======   ========     =======   ========     =======   =======

Most of the unrealized loss is the result of changing market values due to
changes in intermediate and long term (10 year) interest rates. The value of
real estate mortgage investment conduits and mortgage-backed securities is also
affected by the level of mortgage refinancing activity and resulting prepayment
of the underlying mortgages. During periods of rapid prepayments, values decline
because of shortening of the expected maturity and reduced earning potential.
During periods of increasing rates, values decline due to the opportunity to
invest at current rates which are higher than the rates on the investments held.
The ten year U.S. Treasury rates have seen significant volatility during 2004
with rates ranging from a low of 3.76% in March to a high of 4.84% in June and
ending the year at 4.24%. The Company anticipates the unrealized losses to be
temporary and therefore an impairment charge is not required as of December 31,
2004.

Interest Income includes tax-exempt interest for the years ended December 31,
2004, 2003, and 2002 of $13,917,000, $11,410,000, and $8,074,000, respectively.

Gross proceeds from sales of investment securities for the years ended December
31, 2004, 2003, and 2002 were approximately $66,910,000, $19,603,000 and
$31,695,000 respectively, resulting in gross gains of approximately $304,000,
$3,502,000 and $451,000 and gross losses of approximately $304,000, $0 and
$213,000, respectively. The cost of any investment sold is determined by
specific identification.

At December 31, 2004, the Company had investment securities with carrying values
of approximately $194,795,000 pledged as security for deposits of several local
government units, securities sold under agreements to repurchase, and as
collateral for treasury tax and loan borrowings.

                                                                              46

4. LOANS RECEIVABLE, NET AND LOANS HELD FOR SALE

The following is a summary of loans receivable, net and loans held for sale at:

                                                                     December 31,
                                                              -----------------------
        (dollars in thousands)                                    2004        2003
        ----------------------                                -----------   ---------
                                                                      
Residential first mortgage .........................          $   382,750     305,372
Loans held for sale ................................               14,476      16,973
Commercial real estate..............................              526,455     483,684
Other commercial....................................              466,582     359,030
Consumer  ..........................................               95,663      95,739
Home equity  .......................................              248,684     199,693
                                                                ---------   ---------
                                                                1,734,610   1,460,491
Net deferred loan fees, premiums and discounts......               (6,313)     (6,136)
Allowance for loan losses...........................              (26,492)    (23,990)
                                                                ---------   --------
                                                              $ 1,701,805   1,430,365
                                                              ===========   =========

The following is a summary of activity in allowance for losses on loans:

                                                              Years ended December 31,
                                                             -------------------------
   (dollars in thousands)                                     2004      2003      2002
   ----------------------                                    -------   ------   ------
                                                                       
Balance, beginning of period .......................         $23,990   20,944   18,654
Acquisitions........................................              --      959       --
Net charge offs.....................................          (1,693)  (1,722)  (3,455)
Provision ..........................................           4,195    3,809    5,745
                                                             -------   ------   ------
Balance, end of period .............................         $26,492   23,990   20,944
                                                             =======   ======   ======

The following is the allocation of allowance for loan losses and percent of
loans in each category at:

                                                                DECEMBER 31, 2004      December 31, 2003
                                                             ---------------------  ----------------------
                                                                        PERCENT OF              Percent of
                                                                       OF LOANS IN              of loans in
                (dollars in thousands)                        AMOUNT    CATEGORY      Amount     category
                ----------------------                       --------  -----------  ----------  -----------

Residential first mortgage and loans held for sale......     $  2,693       22.9%   $   2,147      21.8%
Commercial real estate..................................        9,222       30.4%       7,464      33.2%
Other commercial .......................................        9,836       26.9%       9,951      24.7%
Consumer................................................        2,083        5.5%       2,220       6.6%
Home equity ............................................        2,658       14.3%   $   2,208      13.7%
                                                             --------    -------    ---------     -----
                                                             $ 26,492      100.0%      23,990     100.0%
                                                             ========    =======    =========     =====

Substantially all of the Company's loan receivables are with customers within
the Company's market area. Although the Company has a diversified loan
portfolio, a substantial portion of its customers' ability to honor their
contracts is dependent upon the economic performance in the Company's market
areas. At December 31, 2004, no individual borrower had outstanding loans or
commitments exceeding 10% of the Company's consolidated stockholders' equity.

                                                                              47

4.  LOANS RECEIVABLE, NET AND LOANS HELD FOR SALE ... CONTINUED

Impaired loans, which consists of those reported as non-accrual, for the years
ended December 31, 2004, 2003, and 2002 were approximately $5,950,000,
$10,062,000, and $8,042,000, respectively, of which no impairment allowance was
deemed necessary. The average recorded investment in impaired loans for the
years ended December 31, 2004, 2003, and 2002 was approximately $8,733,000,
$8,620,000, and $8,275,000, respectively. Interest income that would have been
recorded on impaired loans if such loans had been current for the entire period
would have been approximately $372,000, $665,000, and $596,000 for the years
ended December 31, 2004, 2003, and 2002, respectively. Interest income
recognized on impaired loans for the years ended December 31, 2004, 2003, and
2002 was not significant. Loans ninety days overdue and still accruing interest
for the years ended December 31, 2004, 2003, and 2002 were approximately
$1,642,000, $2,419,000, and $1,998,000, respectively.

The weighted average interest rate on loans was 6.32% and 6.74% at December 31,
2004 and 2003, respectively.

At December 31, 2004, 2003 and 2002 loans sold and serviced for others were
$174,805,000, $189,601,000, and $253,063,000, respectively.

At December 31, 2004 the Company had $1,172,781,000 in variable rate loans and
$561,829,000 in fixed rate loans.

The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and letters of
credit, and involve, to varying degrees, elements of credit risk. The Company's
exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments. The Company did not have any outstanding
commitments on impaired loans as of December 31, 2004.

The Company had outstanding commitments as follows:

                                                                      December 31,
                                                                -----------------------
        (dollars in thousands)                                      2004         2003
        ----------------------                                  ------------    -------
                                                                          
Loans and loans in process..................................     $  367,388     258,350
Unused consumer lines of credit.............................        169,286     118,691
Letters of credit...........................................         18,842      13,636
                                                                 ----------     -------
                                                                 $  555,516     390,677
                                                                 ==========     =======

Substantially all of the loans held for sale at December 31, 2004 and 2003 were
committed to be sold.

The Company has entered into transactions with its executive officers,
directors, significant shareholders, and their affiliates. The aggregate amount
of loans to such related parties at December 31, 2004 and 2003 was approximately
$33,180,000 and $27,313,000. During 2004 and 2003, new loans to such related
parties were approximately $22,847,000 and $24,652,000, respectively, and
repayments were approximately $16,980,000 and $18,525,000, respectively.

                                                                              48

5. PREMISES AND EQUIPMENT, NET

Premises and equipment, net consist of the following at:

                                                                  December 31,
                                                           ----------------------
      (dollars in thousands)                                   2004        2003
      ----------------------                               ------------   -------
                                                                    
Land ................................................      $     12,053    11,487
Office buildings and construction in progress........            45,079    41,279
Furniture, fixtures and equipment....................            25,656    24,533
Leasehold improvements...............................             2,827     2,590
Accumulated depreciation ............................           (29,883)  (26,638)
                                                           ------------   -------
                                                           $     55,732    53,251
                                                           ============   =======

6. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table sets forth information regarding the Company's core deposit
intangibles and mortgage servicing rights:

                                              Core Deposit        Mortgage
            (Dollars in thousands)             Intangible   Servicing Rights (1)   Total
            ----------------------            ------------  --------------------   -----
                                                                          
AS OF DECEMBER 31, 2004
    Gross carrying value                      $    10,270
    Accumulated Amortization                       (5,331)
                                              -----------
    Net carrying value                        $     4,939          1,241           6,180
                                              ===========

AS OF DECEMBER 31, 2003
    Gross carrying value                      $    10,122
    Accumulated Amortization                       (4,257)
                                              -----------
    Net carrying value                        $     5,865          1,388           7,253
                                              ===========

WEIGHTED-AVERAGE AMORTIZATION PERIOD
    (Period in years)                                10.0            9.6             9.9

AGGREGATE AMORTIZATION EXPENSE
    For the year ended December 31, 2004      $     1,074            328           1,402
    For the year ended December 31, 2003            1,243            729           1,972

ESTIMATED AMORTIZATION EXPENSE
    For the year ended December 31, 2005              917             85           1,002
    For the year ended December 31, 2006              841             83             924
    For the year ended December 31, 2007              820             81             901
    For the year ended December 31, 2008              807             78             885
    For the year ended December 31, 2009              756             75             831

(1) Gross carrying value and accumulated amortization are not readily available

                                                                              49

6. GOODWILL AND OTHER INTANGIBLE ASSETS ... CONTINUED

On June 4, 2004, the Company completed the acquisition of American West Bancorp,
Inc.'s branch office in Ione, Washington. A portion of the purchase was
allocated to core deposit intangible of $148 thousand and goodwill of $425
thousand. The following is a summary of activity in goodwill.

         (Dollars in thousands)              Goodwill
         ----------------------              --------
                                          
Balance as of December 31, 2003               36,951
Acquisition of Ione branch                       425
                                              ------
Balance as of December 31, 2004               37,376
                                              ======

7. DEPOSITS

Deposits consist of the following at:

                                                              DECEMBER 31, 2004              December 31, 2003
                                                  ------------------------------------   ------------------------
                                                    Weighted
           (dollars in thousands)                 Average Rate      AMOUNT     PERCENT       Amount       Percent
           ----------------------                 ------------   -----------   -------   --------------   -------
                                                                                           
Demand accounts...............................        0.0%       $   460,059     26.6%   $      369,052    23.1%

NOW accounts..................................        0.2%           280,455     16.2%          249,838    15.6%
Savings accounts..............................        0.3%           166,350      9.6%          150,367     9.4%
Money market demand accounts..................        0.9%           415,817     24.0%          390,344    24.4%
Certificate accounts:
     1.00% and lower..........................                        52,056      3.0%           75,908     4.8%
     1.01% to 2.00%...........................                       177,172     10.2%          176,839    11.1%
     2.01% to 3.00%...........................                       100,566      5.8%           85,289     5.3%
     3.01% to 4.00%...........................                        33,934      2.0%           39,536     2.5%
     4.01% to 5.00%. .........................                        21,216      1.2%           27,351     1.7%
     5.01% to 6.00%...........................                        11,936      0.8%           19,897     1.3%
     6.01% to 7.00%...........................                         9,643      0.6%           12,691     0.8%
     7.01% and higher.........................                           504      0.0%              513     0.0%
                                                                 -----------   ------    --------------   -----
            Total certificate accounts........        2.2%           407,027     23.6%          438,024    27.5%
                                                                 -----------   ------    --------------   -----
Total interest bearing deposits...............        1.1%         1,269,649     73.4%        1,228,573    76.9%
                                                                 -----------   ------    --------------   -----
Total deposits................................        0.9%       $ 1,729,708    100.0%        1,597,625   100.0%
                                                                 -----------   ------    --------------   -----
Deposits with a balance in excess of $100,000                    $   699,066             $      577,423
                                                                 ===========             ==============

                                                                              50

7. DEPOSITS ... CONTINUED

At December 31, 2004, scheduled maturities of certificate accounts are as
follows:

                                                  Years ending December 31,
                              ----------------------------------------------------------------
(dollars in thousands)            Total         2005      2006      2007      2008  Thereafter
- ----------------------------  ------------    -------    ------    ------    -----  ----------
                                                                  
1.00% and lower.............  $     52,056     51,913       143         -        -        -
1.01% to 2.00%..............       177,172    158,363    16,785     1,970       54        -
2.01% to 3.00%..............       100,566     54,368    29,772    12,784    2,639    1,003
3.01% to 4.00%..............        33,934      8,367     3,316    10,379    4,529    7,343

4.01% to 5.00%..............        21,216      4,599     4,398    11,613        -      606
5.01% to 6.00%..............
                                    11,936      2,241     2,687     7,008        -       -
6.01% to 7.00%                       9,643      7,286     2,267        14       76       -
7.01% and higher............  $        504        504         -         -        -       -
                              ------------    -------    ------    ------    -----    -----
                                   407,027    287,641    59,368    43,768    7,298    8,952
                              ============    =======    ======    ======    =====    =====

Interest expense on deposits is summarized as follows:

                          Years ended December 31,
                        ---------------------------
(dollars in thousands)    2004       2003     2002
- ----------------------  -------    ------    ------
                                    
NOW accounts .......    $   474       484       723

Savings accounts ...        471       500       857
Money market demand
accounts ...........      3,776     3,840     6,771
Certificate accounts      9,333    12,397    17,917
                        -------    ------    ------
                        $14,054    17,221    26,268
                        =======    ======    ======

8. ADVANCES FROM FEDERAL HOME LOAN BANK OF SEATTLE

Advances from the Federal Home Loan Bank of Seattle (FHLB) consist of the
following:

                                                                                                      Totals as of
                                             Maturing in years ending December 31,                    December 31,
                                  --------------------------------------------------------------   ------------------
(dollars in thousands)               2005       2006       2007      2008       2009   2010-2012     2004      2003
- --------------------------------  --------    -------    -------    ------      ----   ---------   -------    -------
                                                                                      
1.00% to 2.00%..................         -     40,000          -         -         -          -     40,000    445,870
2.01% to 3.00%..................   437,942     69,500    110,500         -         -          -    617,942    132,500
3.01% to 4.00%..................    41,350          -     13,000     3,000         -     40,000     97,350    116,600
4.01% to 5.00%..................         -          -          -         -         -     42,000     42,000     47,500
5.01% to 6.00%..................       145        145        145    18,128         1          -     18,564     31,217
6.01% to 7.00%..................       574        274        974        74        47         23      1,966      2,256
7.01% to 8.00%..................       211        500        300       100         -          -      1,111      1,251
8.01% to 9.00%..................         -         --          -         -         -          -          -        100
                                  --------    -------    -------    ------      ----   ---------   -------    -------
                                  $480,222    110,419    124,919    21,302        48     82,023    818,933    777,294
                                  ========    =======    =======    ======      ====   =========   =======    =======

These advances are collateralized by the FHLB stock held by the Company and a
blanket assignment of the Bank's unpledged qualifying real estate loans and
investments. The total amount of advances available, subject to collateral
availability, as of December 31, 2004 was approximately $320,062,000.

The weighted average interest rate on these advances was 2.72% and 2.80% at
December 31, 2004 and 2003, respectively.

                                                                              51

8. ADVANCES FROM FEDERAL HOME LOAN BANK OF SEATTLE . . . CONTINUED

The Federal Home Loan Bank of Seattle holds callable options, which may be
exercised after a predetermined time as shown below as of December 31, 2004:

                                                                     Interest                    Earliest
             (dollars in thousands)                      Amount        Rate        Maturity        Call
- --------------------------------------------------      --------   ------------    --------      --------
                                                                                     
Call Terms
   Quarterly at FHLB option .........................     13,000           2.88%    2007           2005
   Quarterly at FHLB option .........................     10,000           2.97%    2007           2005
   Quarterly at FHLB option .........................      3,000           5.37%    2008           2005
   Quarterly at FHLB option .........................     15,000           5.52%    2008           2005
   If three month LIBOR is greater than 8% on
     quarterly measurement date after initial
     term ...........................................     82,000   3.49% - 4.83%    2012           2005
                                                        --------
                                                        $123,000
                                                        ========

9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED FUNDS

Securities sold under agreements to repurchase consist of the following at:

                                                                                   BOOK             MARKET
       (DOLLARS IN THOUSANDS)                                     WEIGHTED        VALUE OF          VALUE OF
- ------------------------------------       REPURCHASE              AVERAGE       UNDERLYING        UNDERLYING
         December 31, 2004                   AMOUNT                 RATE          ASSETS             ASSETS
- ------------------------------------    -----------------         --------       ----------        ----------
                                                                                       
SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE WITHIN:

 1-30 DAYS..........................               76,158           1.87%           126,671         129,340
                                        -----------------           ----         ----------         -------
                                        $          76,158           1.87%        $  126,671         129,340
                                        =================           ====         ==========         =======
         December 31, 2003:
Securities sold under agreements to
repurchase within:

 1-30 days..........................               56,968           1.06%            98,120         101,280
                                        -----------------         ------         ----------         -------
                                        $          56,968           1.06%        $   98,120         101,280
                                        =================         ======         ==========         =======

The securities, consisting of agency issued or guaranteed mortgage backed
securities, underlying agreements to repurchase entered into by the Company are
for the same securities originally sold, and are held in a custody account by a
third party. For the year ended December 31, 2004 and 2003 securities sold under
agreements to repurchase averaged approximately $69,480,000 and $61,609,000,
respectively, and the maximum outstanding at any month end during the year was
approximately $80,265,000 and $74,808,000, respectively.

The Company also has a treasury tax and loan account note option program which
provides short term funding with no fixed maturity date up to $19,500,000 at
federal funds rates minus 25 basis points. At December 31, 2004 and 2003 the
outstanding balance under this program was approximately $4,354,000 and
$7,309,000. The borrowings are secured with investment securities with a par
value of approximately $26,635,000 and a market value of approximately
$28,568,000. For the year ended December 31, 2004, the maximum outstanding at
any month end was approximately $13,345,000 and the average balance was
approximately $3,954,000.

                                                                              52

10. SUBORDINATED DEBENTURES

On March 24, 2004, 45,000 shares of trust preferred shares were issued by
Glacier Trust II whose common equity is wholly owned by the Company. The Trust
Preferred Securities bear a cumulative fixed interest rate of 5.788% for the
first five years and then converts to a three month LIBOR plus 2.75% rate for
the remaining term until maturity on April 7, 2034. Interest distributions are
payable quarterly. The Trust Preferred Securities are subject to mandatory
redemption upon repayment of the Subordinated Debentures of $45,000,000 at their
stated maturity date or their earlier redemption in an amount equal to their
liquidation amount plus accumulated and unpaid distributions to the date of
redemption.

On January 25, 2001, 1,400,000 shares of trust preferred shares were issued by
Glacier Trust I whose common equity is wholly owned by the Company. The Trust
Preferred Securities bear a cumulative fixed interest rate of 9.40% and mature
on February 1, 2031. Interest distributions are payable quarterly. The Trust
Preferred Securities are subject to mandatory redemption upon repayment of the
Subordinated Debentures of $35,000,000 at their stated maturity date or their
earlier redemption in an amount equal to their liquidation amount plus
accumulated and unpaid distributions to the date of redemption.

The Company guaranteed the payment of distributions and payments for redemption
or liquidation of the Trust Preferred Securities to the extent of funds held by
Glacier Trust I and Glacier Trust II. The obligations of the Company under the
Subordinated Debentures together with the guarantee and other back-up
obligations, in the aggregate, constitute a full and unconditional guarantee by
the Company of the obligations of both trusts under the Trust Preferred
Securities.

As a result of the adoption of FIN 46R on December 31, 2003, the Company
deconsolidated Glacier Trust I. The $35,000,000 of subordinated debentures
issued by the Company to Glacier Trust I are reflected in the consolidated
balance sheets as of December 31, 2004 and 2003. The $45,000,000 of subordinated
debentures issued by the Company to Glacier Trust II are reflected in the
consolidated balance sheet as of December 31, 2004.

The Subordinated Debentures with Glacier Trust I are unsecured, bear interest at
a rate of 9.40% per annum and mature on February 1, 2031. The Subordinated
Debentures with Glacier Trust II are unsecured, bear interest at a rate of
5.788% per annum for the first five years and then converts to a three month
LIBOR plus 2.75% rate for the remaining term until maturity on April 7, 2034.
Interest is payable quarterly for all Subordinated Debentures. The Company may
defer the payment of interest at any time from time to time for a period not
exceeding 20 consecutive quarters provided that the deferral period does not
extend past the stated maturity. During any such deferral period, distributions
on the Trust Preferred Securities will also be deferred and the Company's
ability to pay dividends on its common shares will be restricted.

Subject to approval by the Federal Reserve Bank, the Trust Preferred Securities
may be redeemed at par prior to maturity at the Company's option on or after
February 1, 2006 for Glacier Trust I and April 7, 2009 for Glacier Trust II. The
Trust Preferred Securities may also be redeemed at any time in whole (but not in
part) for either Trust in the event of unfavorable changes in laws or
regulations that result in (1) Glacier Trust I or Glacier Trust II becoming
subject to federal income tax on income received on the Subordinated Debentures,
(2) interest payable by Parent Company on the Subordinated Debentures becoming
non-deductible for federal tax purposes, (3) the requirement for either trust to
register under the Investment Company Act of 1940, as amended, or (4) loss of
the ability to treat the Trust Preferred Securities as "Tier 1 Capital" under
the Federal Reserve capital adequacy guidelines.

                                                                              53

11. REGULATORY CAPITAL

The Federal Reserve Board has adopted capital adequacy guidelines pursuant to
which it assesses the adequacy of capital in supervising a bank holding company.
The following table illustrates the Federal Reserve Board's adequacy guidelines
and the Company's compliance with those guidelines as of December 31, 2004:

                                                                             Minimum capital      Well capitalized
                                                          Actual               requirement           requirement
                                                  ---------------------   -------------------   --------------------
                                                  Amount          Ratio   Amount        Ratio    Amount        Ratio
                                                  -------         -----   ------        -----   -------        -----
                                                                                             
Tier 1 (core) capital to risk weighted assets
  Consolidated ..............................     300,475         15.06%  79,800         4.00%  119,700         6.00%
  Glacier ...................................      57,244         13.22%  17,318         4.00%   25,977         6.00%
  First Security.............................      49,798         12.47%  15,978         4.00%   23,967         6.00%
  Western ...................................      43,151         15.38%  11,224         4.00%   16,835         6.00%
  Mountain West .............................      42,992         10.20%  16,861         4.00%   25,292         6.00%
  Big Sky....................................      18,547          9.22%   8,043         4.00%   12,065         6.00%
  Valley.....................................      17,674         12.38%   5,711         4.00%    8,567         6.00%
  Whitefish .................................      12,945         11.67%   4,439         4.00%    6,658         6.00%

Tier 2 (total) capital to risk weighted assets
  Consolidated ...............................    325,432         16.31%  159,601         8.00%  199,501         10.00%
  Glacier ....................................     62,128         14.35%   34,636         8.00%   43,295         10.00%
  First Security                                   54,800         13.72%   31,956         8.00%   39,945         10.00%
  Western ....................................     46,675         16.63%   22,447         8.00%   28,059         10.00%
  Mountain West ..............................     48,005         11.39%   33,722         8.00%   42,153         10.00%
  Big Sky ....................................     21,064         10.48%   16,087         8.00%   20,108         10.00%
  Valley .....................................     19,453         13.62%   11,423         8.00%   14,279         10.00%
  Whitefish ..................................     14,325         12.91%    8,877         8.00%   11,097         10.00%

Leverage capital to total average assets
  Consolidated ...............................    300,475         10.16%  118,271         4.00%  147,839          5.00%
  Glacier ....................................     57,244          8.90%   25,723         4.00%   32,154          5.00%
  First Security .............................     49,798          8.27%   24,093         4.00%   30,117          5.00%
  Western ....................................     43,151          9.67%   17,854         4.00%   22,317          5.00%
  Mountain West ..............................     42,992          7.16%   24,027         4.00%   30,033          5.00%
  Big Sky ....................................     18,547          7.88%    9,413         4.00%   11,767          5.00%
  Valley .....................................     17,674          7.58%    9,325         4.00%   11,656          5.00%
  Whitefish...................................     12,945          7.75%    6,684         4.00%    8,355          5.00%

                                                                              54

11. REGULATORY CAPITAL. . . CONTINUED

The following table illustrates the Federal Reserve Board's adequacy guidelines
and the Company's compliance with those guidelines as of December 31, 2003:

                                                                              Minimum capital   Well capitalized
                                                           Actual               requirement        requirement
                                               -------------------------  --------------------  ----------------
                                                  Amount          Ratio    Amount        Ratio    Amount  Ratio
                                               -----------        ------  --------     -------  --------  -----
                                                                                        
Tier 1 (core) capital to risk weighted assets
  Consolidated ...............................     223,423        12.98%    68,864        4.00%  103,296   6.00%
  Glacier ....................................      51,010        13.75%    14,838        4.00%   22,256   6.00%
  First Security..............................      42,897        12.04%    14,252        4.00%   21,378   6.00%
  Western ....................................      40,796        15.04%    10,850        4.00%   16,275   6.00%
  Mountain West ..............................      37,695        10.48%    14,382        4.00%   21,573   6.00%
  Big Sky.....................................      15,695        10.36%     6,062        4.00%    9,094   6.00%
  Valley......................................      15,866        13.25%     4,789        4.00%    7,184   6.00%
  Whitefish ..................................      11,119        12.32%     3,609        4.00%    5,414   6.00%

Tier 2 (total) capital to risk weighted assets
  Consolidated ...............................     245,006        14.23%   137,729        8.00%  172,161  10.00%
  Glacier ....................................      55,281        14.90%    29,675        8.00%   37,094  10.00%
  First Security..............................      47,363        13.29%    28,504        8.00%   35,630  10.00%
  Western ....................................      44,225        16.30%    21,700        8.00%   27,125  10.00%
  Mountain West ..............................      41,995        11.68%    28,764        8.00%   35,955  10.00%
  Big Sky.....................................      17,595        11.61%    12,125        8.00%   15,156  10.00%
  Valley......................................      17,350        14.49%     9,578        8.00%   11,973  10.00%
  Whitefish ..................................      12,248        13.57%     7,218        8.00%    9,023  10.00%

Leverage capital to total average assets
  Consolidated ...............................     223,423         8.45%   105,707        4.00%  132,134   5.00%
  Glacier ....................................      51,010         8.97%    22,734        4.00%   28,418   5.00%
  First Security..............................      42,897         7.80%    22,007        4.00%   27,509   5.00%
  Western ....................................      40,796         9.23%    17,676        4.00%   22,095   5.00%
  Mountain West ..............................      37,695         7.34%    20,531        4.00%   25,664   5.00%
  Big Sky ....................................      15,695         7.82%     8,032        4.00%   10,040   5.00%
  Valley .....................................      15,866         7.35%     8,637        4.00%   10,796   5.00%
  Whitefish ..................................      11,119         7.60%     5,855        4.00%    7,319   5.00%

The Federal Deposit Insurance Corporation Improvement Act generally restricts a
depository institution from making any capital distribution (including payment
of a dividend) or paying any management fee to its holding Company if the
institution would thereafter be capitalized at less than 8% of total risk-based
capital, 4% of Tier I capital, or a 4% leverage ratio. At December 31, 2004 and
2003, the subsidiary banks' capital measures exceed the highest supervisory
threshold, which requires total Tier II capital of at least 10%, Tier I capital
of at least 6%, and a leverage ratio of at least 5%. Each of the subsidiaries
was considered well capitalized by the respective regulator as of December 31,
2004 and 2003.

                                                                              55

12. FEDERAL AND STATE INCOME TAXES

The following is a summary of consolidated income tax expense for:

         (dollars in thousands)                        2004              2003         2002
- -----------------------------------------          -------------       ---------     ------
                                                                            
Current:
     Federal.............................          $      16,361        13,741       11,925
     State...............................                  4,369         3,690        3,033
                                                   -------------        ------       ------
           Total current tax expense                      20,730        17,431       14,958
                                                   -------------        ------       ------

Deferred:
     Federal.............................                    238           554        1,139
     State...............................                     46           168          327
                                                   -------------        ------       ------
         Total deferred tax expense                          284           722        1,466
                                                   -------------        ------       ------
                 Total income tax expense          $      21,014        18,153       16,424
                                                   =============        ======       ======

Federal and state income tax expense differs from that computed at the federal
statutory corporate tax rate as follows for:

                                                                     Years ended December 31,
                                                                ----------------------------------
                                                                 2004           2003         2002
                                                                -----           ----         ----
                                                                                    
Federal statutory rate..................................         35.0%          35.0%        35.0%
State taxes, net of federal income tax benefit..........          4.4%           4.4%         4.4%
Tax-exempt interest income..............................         -7.2%          -6.8%        -5.4%
Other, net..............................................         -0.2%          -0.3%        -0.4%
                                                                 ----           ----         ----
                                                                 32.0%          32.3%        33.6%
                                                                 ====           ====         ====

The tax effect of temporary differences which give rise to a significant portion
of deferred tax assets and deferred tax liabilities are as follows:

                                                                      December 31,
- --------------------------------------------------------        -----------------------
                  (dollars in thousands)                           2004          2003
- --------------------------------------------------------        ----------      -------
                                                                          
Deferred tax assets:
  Allowance for losses on loans.........................        $   10,879        9,484
  Deferred compensation.................................             1,795        1,390
  Other.................................................               650          730
                                                                ----------      -------
          Total gross deferred tax assets                           13,324       11,604
                                                                ----------      -------

Deferred tax liabilities:
   Federal Home Loan Bank stock dividends...............           (10,270)      (9,223)
   Fixed assets, due to differences in depreciation.....            (2,676)      (2,585)
   Deferred loan costs..................................            (1,602)         (72)
   Available-for-sale securities fair value adjustment..            (3,858)      (4,300)
   Other................................................            (3,310)      (2,793)
                                                                ----------      -------
           Total gross deferred tax liabilities                    (21,716)     (18,973)
                                                                ----------      -------
           Net deferred tax liability                           $   (8,392)      (7,369)
                                                                ----------      -------

There is no valuation allowance at December 31, 2004 and 2003 because management
believes that it is more likely than not that the Company's deferred tax assets
will be realized by offsetting future taxable income from reversing taxable
temporary differences and anticipated future taxable income.

12. FEDERAL AND STATE INCOME TAXES...CONTINUED

                                                                              56

Retained earnings at December 31, 2004 includes approximately $3,600,000 for
which no provision for Federal income tax has been made. This amount represents
the base year bad debt reserve, which is essentially an allocation of earnings
to pre-1988 bad debt deductions for income tax purposes only. This amount is
treated as a permanent difference and deferred taxes are not recognized unless
it appears that this reserve will be reduced and thereby result in taxable
income in the foreseeable future. The Company is not currently contemplating any
changes in its business or operations which would result in a recapture of this
federal bad debt reserve into taxable income.

13. EMPLOYEE BENEFIT PLANS

The Company has a profit sharing plan that has a 3% "safe harbor" provision
which is a non-elective contribution by the Company. In addition, elective
contributions, depending on the Company's profitability, are made to the plan.
Participants are at all times fully vested in all contributions. The total plan
expense for the years ended December 31, 2004, 2003, and 2002 was approximately
$3,181,000, $3,072,000 and $2,691,000 respectively.

The Company also has an employees' savings plan. The plan allows eligible
employees to contribute up to 60%, 25% prior to October 1, 2004, of their
monthly salaries. The Company matches an amount equal to 50% of the employee's
contribution, up to 6% of the employee's total pay. Participants are at all
times fully vested in all contributions. The Company's contribution to the
savings plan for the years ended December 31, 2004, 2003 and 2002 was
approximately $750,000, $693,000, and $577,000, respectively.

The Company has a Supplemental Executive Retirement Plan (SERP) which provides
retirement benefits at the savings and retirement plan levels, for amounts that
are limited by IRS regulations under those plans. The Company's contribution to
the SERP for the years ended December 31, 2004, 2003 and 2002 was approximately
$63,000, $53,000, and $28,000, respectively.

The Company has a non-funded deferred compensation plan for directors and senior
officers. The plan provides for the deferral of cash payments of up to 25% of a
participants' salary, and for 100% of bonuses and directors fees, at the
election of the participant. The total amount deferred was approximately
$402,000, $236,000, and $67,000, for the years ending December 31, 2004, 2003,
and 2002, respectively. The participant receives an earnings credit at a one
year certificate of deposit rate, or at the total return rate on Company stock,
on the amount deferred, as elected by the participant at the time of the
deferral election. The total earnings for the years ended 2004, 2003, and 2002
were approximately $437,000, $364,000, and $72,000, respectively. In connection
with an acquisition in 2001, the Company assumed the obligations of a deferred
compensation plan for certain key employees. The plan provides predetermined
periodic payments over 10 to 15 years upon retirement or death. As of December
31, 2004, the liability related to the obligation was approximately $1,780,000
and was included in other liabilities of the Consolidated Statements of
Financial Condition. The amount expensed related to the obligation during 2004
was insignificant.

The Company has entered into employment contracts with ten senior officers that
provide benefits under certain conditions following a change in control of the
Company.

                                                                              57

14. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

                                                                         For the Years Ended December 31,
                                                                -----------------------------------------------
                                                                     2004               2003            2002
                                                                --------------       ----------      ----------
                                                                                            
Net earnings available to common
   stockholders, basic and diluted......................        $   44,616,000       38,008,000      32,402,000

Average outstanding shares - basic......................            24,452,573       24,088,290      23,583,669
Add:  Dilutive stock options............................               462,682          437,283         402,498
                                                                --------------       ----------      ----------
Average outstanding shares - diluted....................            24,915,255       24,525,573      23,986,167
                                                                ==============       ==========      ==========

Basic earnings per share................................        $         1.82             1.58            1.37
                                                                ==============       ==========      ==========
Diluted earnings per share..............................        $         1.79             1.55            1.35
                                                                ==============       ==========      ==========

There were approximately 1,400 options excluded from the diluted share
calculation for December 31, 2004, due the option exercise price exceeding the
market price. There were no options excluded from the diluted share calculation
for December 31, 2003 and 2002 because the market price exceeded the option
exercise price as of the end of the year.

15. STOCK OPTION PLANS

In the year ended June 30, 1990, Incentive Stock Option Plans were approved
which provided for the grant of options limited to 29,445 shares to outside
Directors and 166,860 shares to certain full time employees of the Company. In
the year ended December 31, 1994 a Stock Option Plan was approved which provided
for the grant of options to outside Directors of the Company, limited to 50,000
shares. In the year ended December 31, 1995 a Stock Option Plan was approved
which provided for the grant of options limited to 279,768 shares to certain
full-time employees of the Company. In April 1999 the Directors 1994 Stock
Option Plan, and the Employees 1995 Stock Option Plan, were amended to provide
100,000 and 600,000 additional shares for the Directors and Employees Plans,
respectively. In April, 2002, the Directors 1994 Stock Option Plan and the
Employees 1995 Stock Option Plan were amended to provide 500,000 and 1,000,000
additional shares to the director's and employee's plans, respectively. The
option price at which the Company's common stock may be purchased upon exercise
of options granted under the plans must be at least equal to the per share
market value of such stock at the date the option is granted.

The fiscal 1990 and 1995 plans also contain provisions authorizing the grant of
limited stock rights, which permit the optionee, upon a change in control of the
Company, to surrender his or her options for cancellation and receive cash or
common stock equal to the difference between the exercise price and the fair
market value of the shares on the date of the grant. All option shares are
adjusted for stock splits and stock dividends. The term of the options may not
exceed five years from the date the options are granted. The employee options
vest over a period of two years and the director options vest over a period of
six months.

                                                                              58

15. STOCK OPTION PLANS...CONTINUED

At December 31, 2004, total shares available for option grants to employees and
directors are 1,792,215. Changes in shares granted for stock options for the
years ended December 31, 2004, 2003, and 2002, are summarized as follows:

                                                      Options outstanding            Options exercisable
                                                  ---------------------------    ----------------------------
                                                                 Weighted                        Weighted
                                                                  average                         average
                                                   Shares      exercise price      Shares      exercise price
                                                  ---------    --------------    ---------     --------------
                                                                                   
Balance, December 31, 2001....................    1,575,294     $      9.92      1,136,069      $     9.66
Canceled......................................      (27,718)          13.73         (4,835)          12.09
Granted.......................................      273,621           15.92
Became exercisable............................                                     170,340           10.37
Exercised.....................................     (565,670)           8.84       (565,670)           8.84
                                                  ---------                      ---------
Balance, December 31, 2002....................    1,255,527           11.64        735,904           10.44

Canceled......................................      (40,940)          14.19         (7,199)           9.23
Granted.......................................      446,933           17.70
Became exercisable............................                                     348,496           13.10
Exercised.....................................     (435,338)          10.73       (435,338)          10.73
                                                  ---------     -----------      ---------
Balance, December 31, 2003....................    1,226,182           14.10        641,863           11.47

Canceled......................................      (50,613)          18.26        (15,167)          10.69
Granted.......................................      450,258           24.90
Became exercisable............................                                     353,039           17.95
Exercised.....................................     (417,322)          13.03       (417,322)          13.03
                                                  ---------                      ---------
Balance, December 31, 2004....................    1,208,505           18.31        562,413           14.51
                                                  =========                      =========

The range of exercise prices on options outstanding at December 31, 2004 is as
follows:

                                        average             average                             average
  Price range          Shares       exercise price      life of options        Shares      exercise price
- ---------------      ---------      --------------      ---------------       --------     --------------
                                                                            
$ 6.49 - $8.73          98,450        $7.84                 2.9 years           98,450         $  7.84
$ 9.41 - $11.42        117,287        10.11                 1.0 years          117,287           10.11
$12.73 - $14.25         52,563        12.82                 2.4 years           52,563           12.82
$15.06 - $16.50        145,329        15.87                 2.1 years          145,329           15.87
$17.59 - $20.70        385,177        17.84                 3.1 years           74,253           18.26
$21.58 - $25.11        398,699        25.03                 4.1 years           74,531           25.07
$25.95 - $35.44         11,000        31.49                 7.8 years               --              --
                     ---------                                                 -------
                     1,208,505        18.31                 3.2 years          562,413           14.51
                     =========                                                 =======

The options exercised during the year ended December 31, 2004 were at prices
from $4.11 to $25.11.

                                                                              59

16. PARENT COMPANY INFORMATION (CONDENSED)

The following condensed financial information is the unconsolidated (parent
company only) information for Glacier Bancorp, Inc.:

            STATEMENTS OF FINANCIAL CONDITION                               December 31,
- ------------------------------------------------------------         -------------------------
                (dollars in thousands)                                  2004            2003
- ------------------------------------------------------------         -----------       -------
                                                                                 
Assets:
    Cash....................................................         $     3,500         3,011
    Interest bearing cash deposits..........................              40,088         7,152
                                                                     -----------       -------
          Cash and cash equivalents                                       43,588        10,163
    Investment securities, available-for-sale...............              19,337         1,360
    Other assets ...........................................               3,427         4,057
    Investment in subsidiaries..............................             290,765       264,494
                                                                     -----------       -------
                                                                     $   357,117       280,074
                                                                     ===========       =======
Liabilities and Stockholders' Equity:
    Dividends payable.......................................         $     4,176         3,878
    Subordinated debentures.................................              80,000        35,000
    Other liabilities.......................................               2,757         3,357
                                                                     -----------       -------
          Total liabilities.................................              86,933        42,235

    Common stock ...........................................                 245           242
    Paid-in capital.........................................             227,614       222,588
    Retained earnings.......................................              36,391         8,393
    Accumulated other comprehensive income..................               5,934         6,616
                                                                     -----------       -------
          Total stockholders' equity........................             270,184       237,839
                                                                     -----------       -------
                                                                     $   357,117       280,074
                                                                     ===========       =======

                           STATEMENTS OF OPERATIONS                                Years ended December 31,
- -------------------------------------------------------------------------     ----------     -------     ------
                            (dollars in thousands)                               2004          2003       2002
- -------------------------------------------------------------------------     ----------     -------     ------
                                                                                                
Revenues
    Dividends from subsidiaries..........................................     $   21,300      17,400     13,232
    Other income ........................................................          1,088         288        178
    Intercompany charges for services....................................          7,406       6,652      5,381
                                                                              ----------      ------     ------
         Total revenues..................................................         29,794      24,340     18,791

Expenses
    Employee compensation and benefits...................................          4,517       4,223      3,755
    Other operating expenses.............................................          9,803       7,573      6,778
                                                                              ----------      ------     ------
         Total expenses..................................................         14,320      11,796     10,533

    Earnings before income tax benefit and equity in undistributed
          earnings of subsidiaries.......................................         15,474      12,544      8,258
    Income tax benefit...................................................         (2,316)     (1,937)    (1,984)
                                                                              ----------      ------     ------
    Income before equity in undistributed earnings of subsidiaries.......         17,790      14,481     10,242
    Subsidiary earnings in excess of dividends distributed...............         26,826      23,527     22,160
                                                                              ----------      ------     ------
Net earnings.............................................................     $   44,616      38,008     32,402
                                                                              ==========      ======     ======

                                                                              60

16. PARENT COMPANY INFORMATION (CONDENSED)...CONTINUED

                     STATEMENTS OF CASH FLOWS                                          Years ended December 31,
- --------------------------------------------------------------------------      ------------------------------------
                      (dollars in thousands)                                       2004          2003          2002
- --------------------------------------------------------------------------      ----------      -------      -------
                                                                                                    
Operating Activities
    Net earnings..........................................................      $   44,616       38,008       32,402
    Adjustments to reconcile net earnings to net cash
        provided by operating activities:
    Loss on sale of investments available-for-sale........................             274           --           43
    Subsidiary earnings in excess of dividends distributed................         (26,826)     (23,527)     (22,160)
    Net increase in other assets and other liabilities....................           2,359        4,973        1,761
                                                                                ----------       ------       ------
Net cash provided by operating activities.................................          20,423       19,454       12,046
                                                                                ----------       ------       ------
Investing activities
    Purchases of investment securities available-for-sale.................         (35,802)          --       (1,261)
    Proceeds from sales, maturities and prepayments of securities
          available-for-sale..............................................          17,227           54          234
    Equity contribution to subsidiary.....................................              --      (10,377)      (1,000)
    Net addition of premises and equipment................................            (430)        (863)        (700)
                                                                                ----------       ------       ------
Net cash used by investing activities.....................................         (19,005)     (11,186)      (2,727)
                                                                                ----------       ------       ------

Financing activities
    Proceeds from issuance of subordinated debentures.....................          45,000           --           --
    Cash dividends paid...................................................         (16,618)     (14,572)     (11,532)
    Proceeds from exercise of stock options and other stock issued........           5,439        5,665        6,041
    Repurchase and retirement of stock....................................          (1,805)          --           --
    Cash paid for stock dividends.........................................              (9)         (15)          --
                                                                                ----------       ------       ------
Net cash provided (used) by financing activities..........................          32,007       (8,922)      (5,491)
                                                                                ----------       ------       ------

Net increase (decrease) in cash and cash equivalents......................          33,425         (654)       3,828
Cash and cash equivalents at beginning of year............................          10,163       10,817        6,989
                                                                                ----------       ------       ------
Cash and cash equivalents at end of year..................................      $   43,588       10,163       10,817
                                                                                ==========       ======       ======

17. UNAUDITED QUARTERLY FINANCIAL DATA

Summarized unaudited quarterly financial data is as follows (in thousands except
per share amounts):

                                                                     QUARTERS ENDED, 2004
                                           ---------------------------------------------------------------------
                                              MARCH 31            JUNE 30         SEPTEMBER 30      DECEMBER 31
                                           -------------       -------------     -------------     -------------
                                                                                       
Interest income......................      $      35,465              35,441            37,640            38,739
Interest expense.....................              9,076               9,662            10,255            10,899
                                           -------------       -------------     -------------     -------------
Net interest income..................             26,389              25,779            27,385            27,840
Provision for loan losses............                830                 965             1,200             1,200
Income before income taxes...........             15,544              15,654            17,333            17,099
Net earnings.........................             10,610              10,763            11,680            11,563
Basic earnings per share.............               0.43                0.44              0.48              0.47
Diluted earnings per share...........               0.43                0.43              0.47              0.46
Dividends per share..................               0.17                0.17              0.17              0.17
Market range high-low................      $27.04-$23.60       $28.25-$24.49     $30.35-$25.75     $35.89-$28.90

                                                                              61

17. UNAUDITED QUARTERLY FINANCIAL DATA...CONTINUED

                                                                    Quarters Ended, 2003
                                           ---------------------------------------------------------------------
                                              March 31            June 30         September 30      December 31
                                           -------------       -------------     -------------     -------------
                                                                                       
Interest income......................      $      32,062              31,613            33,103            34,052
Interest expense.....................             10,230               9,644             9,439             9,165
                                           -------------       -------------     -------------     -------------
Net interest income..................             21,832              21,969            23,664            24,887
Provision for loan losses............                841               1,051             1,221               696
Income before income taxes...........             13,121              14,906            14,309            13,825
Net earnings.........................              8,848               9,932             9,697             9,531
Basic earnings per share.............               0.37                0.42              0.40              0.39
Diluted earnings per share...........               0.37                0.41              0.39              0.38
Dividends per share..................               0.13                0.15              0.16              0.16
Market range high-low................      $21.59-$17.00       $20.96-$18.36     $23.72-$19.56     $26.40-$21.54

18. FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments have been defined to generally mean cash or a contract
that implies an obligation to deliver cash or another financial instrument to
another entity. For purposes of the Company's Consolidated Statement of
Financial Condition, this includes the following items:

                                                                       2004                            2003
                                                           ----------------------------      -------------------------
             (dollars in thousands)                          AMOUNT         FAIR VALUE         Amount       Fair Value
- -----------------------------------------------------      -----------      -----------      ---------      ----------
                                                                                                
Financial Assets:
Cash on hand and in banks............................      $    79,300          79,300          77,093          77,093
Interest bearing cash deposits ......................           13,007          13,007           9,047           9,047
Investment securities ...............................          321,234         321,234         321,266         321,266
Mortgage-backed securities ..........................          714,589         714,589         729,045         729,045
FHLB and FRB stock ..................................           49,803          49,803          46,643          46,643
Loans receivable, net................................        1,701,805       1,704,351       1,430,365       1,450,052

Financial Liabilities:
Deposits ............................................      $ 1,729,708       1,731,843       1,597,625       1,602,619
Advances from the FHLB of Seattle....................          818,933         811,837         777,294         780,647
Repurchase agreements and other borrowed funds.......           76,158          76,158          64,986          64,986
Subordinated debentures..............................           80,000          81,502          35,000          37,660

Financial assets and financial liabilities other than securities are not traded
in active markets. The above estimates of fair value require subjective
judgments and are approximate. Changes in the following methodologies and
assumptions could significantly affect the estimates. These estimates may also
vary significantly from the amounts that could be realized in actual
transactions.

Financial Assets - The estimated fair value is the book value of cash and
interest bearing cash deposits. For investment and mortgage-backed securities,
the fair value is based on quoted market prices. The fair value of Federal Home
Loan Bank of Seattle and Federal Reserve Bank stock is the book value, due to
the stocks being restricted because they may only be sold to another member
institution or the FHLB or FRB at their par values. The fair value of loans is
estimated by discounting future cash flows using current rates at which similar
loans would be made.

Financial Liabilities - The estimated fair value of demand and savings deposits
is the book value since rates are periodically adjusted to market rates.
Certificate accounts fair value is estimated by discounting the future cash
flows using current rates for similar deposits. Advances from the Federal Home
Loan Bank of Seattle fair value is estimated by discounting future cash flows
using current rates for advances with similar weighted average maturities.
Repurchase agreements and other borrowed funds have variable interest rates, or
are short term, so book value approximates fair value. The subordinated
debentures' fair value is based on quoted market prices or comparison pricing to
a similar product issued at year-end.

18. FAIR VALUE OF FINANCIAL INSTRUMENTS...CONTINUED

                                                                              62

Off-balance sheet financial instruments - Commitments to extend credit and
letters of credit represent the principal categories of off-balance sheet
financial instruments. Rates for these commitments are set at time of loan
closing, so no adjustment is necessary to reflect these commitments at market
value. See Note 4 to consolidated financial statements.

19. CONTINGENCIES AND COMMITMENTS

The company leases certain land, premises and equipment from third parties under
operating and capital leases. Total rent expense for the years ended December
31, 2004, 2003, and 2002 was approximately $1,151,000 $1,025,000, and $926,000,
respectively. The total future minimum rental commitments required under
operating and capital leases that have initial or remaining noncancelable lease
terms in excess of one year at December 31, 2004 are as follows (Dollars in
thousands):

                                                Capital        Operating
        Years ended December 31,                Leases           Leases         Total
- ---------------------------------------         -------        ---------        -----
                                                                       
2005                                            $    81          1,171          1,252
2006                                                 83          1,050          1,133
2007                                                 84            861            945
2008                                                 87            770            857
2009                                                 89            685            774
Thereafter                                        1,258          2,950          4,208
                                                -------          -----          -----
Total minimum lease payments                    $ 1,682          7,487          9,169
                                                                 =====          =====

Less:  Amounts representing interest                978
                                                -------
Present Value of minimum lease payments             704
Less:  Current portion of
    obligations under capital leases                  3
                                                -------
Long-term portion of
    obligations under capital leases                701
                                                =======

The Company is a defendant in legal proceedings arising in the normal course of
business. In the opinion of management, the disposition of pending litigation
will not have a material effect on the Company's consolidated financial
position, results of operations or liquidity.

20. ACQUISITIONS

On June 4, 2004, the Company completed the acquisition of the AmericanWest
Bancorp.'s branch office in Ione, Washington. The branch had approximately $15
million in deposits, and became a branch of Mountain West Bank, the Company's
Idaho banking subsidiary. In consideration for the assumption of liabilities,
the Company received $14.5 million in cash. A portion of the purchase price was
allocated to core deposit intangible of $148 thousand and goodwill of $425
thousand.

On July 15, 2003, the Company completed the acquisition of Pend Oreille Bancorp,
and its subsidiary Pend Oreille Bank which operates from two locations in
Sandpoint, Idaho and one location in Newport, Washington. The locations became
additional branches of Mountain West Bank. The bank has approximately $66
million in total assets with deposits of $59 million and gross loans of $50
million. The Company paid $10.4 million and recorded $286 thousand in core
deposit intangible and $3.8 million in goodwill.

The two acquisitions were accounted for under the purchase method of accounting.
Accordingly, the assets and liabilities of the acquired branches were recorded
by the Company at their respective fair values at the date of the acquisition
and the results of operations have been included with those of the Company since
the date of acquisition. The excess of the Company's purchase price over the net
fair value of the assets acquired and liabilities assumed, including
identifiable intangible assets, was recorded as goodwill.

                                                                              63

21. OPERATING SEGMENT INFORMATION

FASB Statement 131, Financial Reporting for Segments of a Business Enterprise,
requires that a public business enterprise report financial and descriptive
information about its reportable operating segments. According to the statement,
operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance.

The Company evaluates segment performance internally based on individual bank
charter, and thus the operating segments are so defined. All segments, except
for the segment defined as "other," are based on commercial banking operations.
The operating segment defined as "other" includes the Parent company, non-bank
operating units, and eliminations of transactions between segments.

The accounting policies of the individual operating segments are the same as
those of the Company described in note 1. Transactions between operating
segments are primarily conducted at fair value, resulting in profits that are
eliminated for reporting consolidated results of operations. Expenses for
centrally provided services are allocated based on the estimated usage of those
services.

The following is a summary of selected operating segment information for the
years ended and as of December 31, 2004, 2003, and 2002.

           (Dollars in thousands)
                                                      First             Mountain
                  2004                    Glacier    Security  Western    West    Big Sky   Valley  Whitefish   Other   Consolidated
                                         ---------   --------  -------  -------- --------  -------  ---------  -------  ------------
                                                                                             
Net interest income....................  $  24,541    24,372    15,663   22,552    9,361     8,959    6,393     (4,448)    107,393
Provision for loan losses..............     (1,075)     (600)        -   (1,320)    (510)     (440)    (250)         -      (4,195)
                                         ---------   -------   -------  -------  -------   -------  -------    -------   ---------
Net interest income after
  provision for loan losses............     23,466    23,772    15,663   21,232    8,851     8,519    6,143     (4,448)    103,198
Noninterest income.....................      8,652     3,684     3,583   12,315    2,249     2,940    1,419       (277)     34,565
Core deposit amortization..............       (276)     (216)     (279)    (210)     (33)      (60)       -          -      (1,074)
Other noninterest expense..............    (14,980)  (10,184)   (9,016) (21,290)  (5,190)   (6,020)  (3,280)    (1,099)    (71,059)
                                         ---------   -------   -------  -------  -------   -------  -------    -------   ---------
Income before income taxes ............     16,862    17,056     9,951   12,047    5,877     5,379    4,282     (5,824)     65,630
Income tax (expense) benefit...........     (5,704)   (5,572)   (3,039)  (3,769)  (2,157)   (1,632)  (1,457)     2,316     (21,014)
                                         ---------   -------   -------  -------  -------   -------  -------    -------   ---------
Net income.............................  $  11,158    11,484     6,912    8,278    3,720     3,747    2,825     (3,508)     44,616
                                         =========   =======   =======  =======  =======   =======  =======    =======   =========
Assets.................................  $ 646,523   626,341   446,502  629,205  241,056   241,518  169,411     10,181   3,010,737
Net loans..............................    398,187   326,826   210,181  382,819  161,761   119,626  102,746       (341)  1,701,805
Goodwill...............................      4,084     4,657     3,848   21,005    1,752     1,770      260          -      37,376
Deposits...............................    393,655   359,918   207,711  431,662  132,853   146,660   98,605    (41,356)  1,729,708
Stockholders' equity...................     64,207    56,004    49,095   67,002   20,567    20,052   13,839    (20,582)    270,184

           (Dollars in thousands)
                                                      First             Mountain
                  2003                    Glacier    Security  Western    West    Big Sky   Valley  Whitefish   Other   Consolidated
                                         ---------   --------  -------  -------- --------  -------  ---------  -------  ------------
                                                                                             
Net interest income....................  $  22,565     22,246   13,670   17,061    7,264     7,845     5,194    (3,493)     92,352
Provision for loan losses..............       (375)    (1,250)       -   (1,124)    (250)     (630)     (180)        -      (3,809)
                                         ---------    -------  -------  -------  -------   -------   -------    ------   ---------
Net interest income after
  provision for loan losses............     22,190     20,996   13,670   15,937    7,014     7,215     5,014    (3,493)     88,543
Noninterest income.....................      8,184      4,392    4,043   10,206    1,729     3,730     1,273         5      33,562
Core deposit amortization..............       (304)      (270)    (348)    (205)     (41)      (75)        -         -      (1,243)
Other noninterest expense..............    (14,283)    (9,766)  (8,661) (17,958)  (4,141)   (5,471)   (3,071)   (1,350)    (64,701)
                                         ---------    -------  -------  -------  -------   -------   -------    ------   ---------
Income before income taxes.............     15,787     15,352    8,704    7,980    4,561     5,399     3,216    (4,838)     56,161
Income tax (expense) benefit...........     (5,437)    (5,288)  (2,604)  (2,216)  (1,730)   (1,754)   (1,054)    1,930     (18,153)
                                         ---------    -------  -------  -------  -------   -------   -------    ------   ---------
Net income.............................  $  10,350     10,064    6,100    5,764    2,831     3,645     2,162    (2,908)     38,008
                                         =========    =======  =======  =======  =======   =======   =======    ======   =========
Assets.................................  $ 595,778    578,803  446,405  547,035  209,342   219,105   149,531    (6,366)  2,739,633
Net loans..............................    330,012    295,195  196,732  313,021  125,664    97,292    72,800      (351)  1,430,365
Goodwill...............................      4,084      4,657    3,848   20,580    1,752     1,770       260         -      36,951
Deposits...............................    358,600    340,650  219,950  372,936  115,496   134,405    68,124   (12,536)  1,597,625
Stockholders' equity...................     58,703     49,334   47,242   61,031   17,882    18,176    12,126   (26,655)    237,839

                                                                            64

21. OPERATING SEGMENT INFORMATION . . . CONTINUED

               (Dollars in thousands)
                                                        First           Mountain
                  2003                    Glacier    Security  Western    West    Big Sky   Valley  Whitefish   Other   Consolidated
                                         ---------   --------  -------  -------  --------  -------  ---------  -------  ------------
                                                                                             
Net interest income....................  $  22,787     20,596   13,699   13,629     6,860    7,522     4,901    (3,527)     86,467
Provision for loan losses..............     (1,080)    (1,800)    (325)    (695)     (330)  (1,335)     (180)        -      (5,745)
                                         ---------    -------  -------  -------   -------  -------   -------    ------   ---------
Net interest income after
  provision for loan losses............     21,707     18,796   13,374   12,934     6,530    6,187     4,721    (3,527)     80,722
Noninterest income.....................      7,554      3,880    2,782    6,392     1,591    2,641     1,096       (19)     25,917
Core deposit amortization..............       (332)      (325)    (419)    (224)      (49)     (90)        -         -      (1,439)
Other noninterest expense..............    (12,913)    (9,192)  (7,832) (13,439)   (3,618)  (5,371)   (2,634)   (1,375)    (56,374)
                                         ---------    -------  -------  -------   -------  -------   -------    ------   ---------
Income before income taxes.............     16,016     13,159    7,905    5,663     4,454    3,367     3,183    (4,921)     48,826
Income tax (expense) benefit...........     (5,763)    (4,761)  (2,432)  (1,633)   (1,705)  (1,053)   (1,040)    1,963     (16,424)
                                         ---------    -------  -------  -------   -------  -------   -------    ------   ---------
Net income.............................  $  10,253      8,398    5,473    4,030     2,749    2,314     2,143    (2,958)     32,402
                                         =========    =======  =======  =======   =======  =======   =======    ======   =========
Assets.................................  $ 490,999    487,699  405,282  396,777   179,543  190,536   129,255     1,253   2,281,344
Net loans..............................    319,906    300,481  188,793  214,453   111,378   97,937    68,066      (361)  1,300,653
Goodwill...............................      4,084      4,657    3,848   16,818     1,752    1,770       260         -      33,189
Deposits...............................    327,018    352,805  226,482  275,809    95,897  126,418    67,810   (12,316)  1,459,923
Stockholders' equity...................     53,492     44,678   46,647   44,429    16,439   17,038    11,078   (21,552)    212,249

22. SUBSEQUENT EVENTS

On November 22, 2004, the Company entered into a merger agreement to acquire
First National Banks - West Co. in an all cash transaction of $40.7 million. The
merger was completed on February 28, 2005 and is being accounted for under the
purchase method of accounting. Accordingly, the assets and liabilities of the
acquired bank are recorded by the Company at their respective fair values at the
date of the acquisition. The results of operations after February 28, 2005 will
be included with those of the Company. The excess of the Company's purchase
price over the net fair value of the assets acquired and liabilities assumed,
including identifiable intangible assets, is recorded as goodwill.

In addition to the completed acquisition, the Company has entered into a merger
agreement to acquire Citizens Bank Holding Company in Pocatello, Idaho, which is
expected to be completed by the end of the first quarter of 2005. The Company
has also entered into an agreement to acquire Zions First National Bank's office
in Bonners Ferry, Idaho, which is expected to be completed by the end of May
2005.

                                                                              65

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no changes in or disagreements with accountants on accounting
and financial disclosure.

ITEM 9A. DISCLOSURE OF CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. An evaluation was carried out
under the supervision and with the participation of the Company's management,
including the Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"), of the effectiveness of our disclosure controls and procedures. Based
on that evaluation, the CEO and CFO have concluded that as of the end of the
period covered by this report, our disclosure controls and procedures are
effective to provide reasonable assurance that information required to be
disclosed by us in reports that we file or submit under the Securities Exchange
Act of 1934 is recorded, processed, summarized and timely reported as provided
in the SEC's rules and forms. As a result of this evaluation, there were no
significant changes in our internal control over financial reporting during the
three months ended December 31, 2004 that have materially affected, or are
reasonable likely to materially affect, our internal control over financial
reporting.

Management's Report on Internal Control Over Financial Reporting Management is
responsible for establishing and maintaining effective internal control over
financial reporting as it relates to its financial statements presented in
conformity with U.S. generally accepted accounting principles. Glacier's
internal control system was designed to provide reasonable assurance to the
Company's management and Board of Directors regarding the preparation and fair
presentation of published financial statements in accordance with U.S. generally
accepted accounting principles. Internal control over financial reporting
includes self monitoring mechanisms and actions taken to correct deficiencies as
they are identified.

There are inherent limitations in any internal control, no matter how well
designed, misstatements due to error or fraud may occur and not be detected,
including the possibility of circumvention or overriding of controls.
Accordingly, even an effective internal control system can provide only
reasonable assurance with respect to financial statement preparation. Further,
because of changes in conditions, the effectiveness of an internal control
system may vary over time.

Management assessed its internal control structure over financial reporting as
of December 31, 2004. This assessment was based on criteria for effective
internal control over financial reporting described in "Internal Control -
Integrated Framework" issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this assessment, management asserts that Glacier
Bancorp, Inc. and subsidiaries maintained effective internal control over
financial reporting as it relates to its financial statements presented in
conformity with U.S. generally accepted accounting principles generally accepted
in the Unites States.

The registered public accounting firm that audited the financial statements,
KPMG LLP, included in the annual report has issued an attestation report on
management's assessment of the company's internal control over financial
reporting, which expresses unqualified opinions on management's assessment and
on the effectiveness of the Company's internal control over financial reporting
as of December 31, 2004.

ITEM 9 B. OTHER INFORMATION

None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding "Directors and Executive Officers of the Registrant" is
set forth under the headings "Business of the Meeting - Election of Directors -
Information with Respect to Nominees and Other Directors - Background of
Directors" and "Security Ownership of Certain Beneficial Owners and Management -
Executive Officers who are not Directors" of the Company's 2005 Annual Meeting
Proxy Statement ("Proxy Statement") and is incorporated herein by reference.

Information regarding "Compliance with Section 16(a) of the Exchange Act" is set
forth under the section "Compliance with Section 16 (a) Filing Requirements" of
the Company's Proxy Statement and is incorporated herein by reference.

Information regarding the Company's audit committee financial expert is set
forth under the heading "Meetings and Committees of

                                                                              66

Board of Directors-Committee Membership" in our Proxy Statement and is
incorporated by reference.

On February 25, 2004, consistent with the requirements of Sarbanes-Oxley, the
Company adopted a Code of Ethics applicable to senior financial officers
including the principal executive officer. The Code of Ethics was filed as
Exhibit 99 to our 2003 Annual Report and can be accessed electronically by
visiting the Company's website at www.glacierbancorp.com.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding "Executive Compensation" is set forth under the headings
"Meetings and Committees of the Board of Directors - Compensation of Directors"
and "Executive Compensation" of the Company's Proxy Statement and is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding "Security Ownership of Certain Beneficial Owners and
Management" is set forth under the headings "Information with Respect to
Nominees and Other Directors," "Security Ownership of Certain Beneficial Owners
and Management - Executive Officers who are not Directors" and "Beneficial
Owners" of the Company's Proxy Statement and is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding "Certain Relationships and Related Transactions" is set
forth under the heading "Transactions with Management" of the Company's Proxy
Statement and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information regarding "Principal Accounting Fees and Services" is set forth
under the heading "Auditors" of the Company's Proxy Statement and is
incorporated herein by reference.

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) and (2) Financial Statements and Financial Statement Schedules

The financial statements and related documents listed in the index set forth in
Item 8 of this report are filed as part of this report.

All other schedules to the consolidated financial statements required by
Regulation S-X are omitted because they are not applicable, not material or
because the information is included in the consolidated financial statements or
related notes.

                                                                              67

(1)   The following exhibits are included as part of this Form 10-K:

EXHIBIT NO.                         EXHIBIT
- -----------                         -------
              
  3(a)           Amended and Restated Certificate of Incorporation (1)

  3(b)           Amended and Restated Bylaws (2)

  10(a)          1989 Incentive Stock Option Plan (3)

  10(b)          Employment Agreement dated January 1, 2005 between the Company, Glacier
                 Bancorp, Inc. and Michael J. Blodnick

  10(c)          Employment Agreement dated January 1, 2005 between the Company, Glacier Bancorp,
                 Inc. and James H. Strosahl

  10(d)          Employment  Agreement  dated  January 1, 2005  between  First  Security Bank of Missoula
                 and William L. Bouchee

  10(e)          1994 Director Stock Option Plan and related agreements (4)

  10(f)          1995 Employee Stock Option Plan and related agreements (4)

  10(g)          Deferred Compensation Plan effective January 1, 2005

  10(h)          Supplemental Executive Retirement Agreement

  10(i)          Employment  agreement  dated  January 1, 2005,  between  Mountain  West Bank and Jon
                 W. Hippler

  14             Code of Ethics (5)

  21             Subsidiaries of the Company (See item 1, "Subsidiaries")

  23             Consent of KPMG LLP

  31.1           Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                 Act of 2002

  31.2           Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                 Act of 2002

  32             Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18
                 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of
                 2002

  (1)            Incorporated  by reference to exhibit  3.i.1 and 3.i.2
                 included in the Company's  Quarterly  Report on form 10-Q for
                 the  quarter  ended  June 30, 2004.

  (2)            Incorporated  by reference to Exhibit  3.ii  included in the
                 Company's Quarterly Report on form 10-Q for the quarter ended
                 June 30, 2004.

  (3)            Incorporated by reference to exhibit 10 (a) included in the
                 Company's Registration  Statement on Form S-4 (No. 33-37025),
                 declared effective on October 4, 1990.

  (4)            Incorporated  by  reference  to  Exhibit  99.1  of  the
                 Company's  S-8 Registration Statement (No. 333-105995).

  (5)            Incorporated  by  reference  to Exhibit 14,  included in the
                 Company's Form 10-K for the year ended December 31, 2003.

  (6)            Exhibit intentionally omitted.

                                       68

                                   SIGNATURES

PURSUANT to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 15, 2005.

                                              GLACIER BANCORP, INC.

                                              By: /s/ Michael J. Blodnick
                                              ----------------------------------
                                              Michael J. Blodnick
                                              President/CEO/Director

PURSUANT to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 15, 2005, by the following persons in the
capacities indicated.

/s/ Michael J. Blodnick                President, CEO, and Director
- -----------------------
Michael J. Blodnick                    (Principal Executive Officer)

/s/James H. Strosahl                   Executive Vice President and CFO
- --------------------
James H. Strosahl                       (Principal Financial/Accounting Officer)

Majority of the Board of Directors

/s/ John S. MacMillan                  Chairman
- ---------------------
John S. MacMillan

/s/ William L. Bouchee                 Director
- ----------------------
William L. Bouchee

/s/ James M. English                   Director
- --------------------
James M. English

/s/ Allen Fetscher                     Director
- ------------------
Allen J. Fetscher

/s/ Fred J. Flanders                   Director
- --------------------
Fred J. Flanders

/s/ Jon W. Hippler                     Director
- ------------------
Jon W. Hippler

/s/ L. Peter Larson                    Director
 ------------------
L. Peter Larson

/s/ Everit A. Sliter                   Director
- --------------------
Everit A. Sliter

                                       69

                                                                   EXHIBIT 10(b)

                              EMPLOYMENT AGREEMENT

      AGREEMENT between Glacier Bancorp, Inc., hereinafter called "Company", and
Michael J. Blodnick, hereinafter called "Executive",

                                    RECITALS

A.    Executive has served as President and Chief Executive Officer of the
      Company.

B.    The Company desires Executive to continue his employment at the Company
      under the terms and conditions of this Agreement.

C.    Executive desires to continue his employment at the Company under the
      terms and conditions of this Agreement.

                                    AGREEMENT

1.    EMPLOYMENT. The Company agrees to employ Executive and Executive accepts
      employment by the Company on the terms and conditions set forth in this
      Agreement. Executive's title will be President and Chief Executive Officer
      of the Company. During the term of this Agreement, Executive will serve as
      a director of the Company and of the Banks.

2.    TERM. The term of this Agreement ("Term") is one year, beginning on
      January 1, 2005.

3.    DUTIES. The Company will employ Executive as its President and Chief
      Executive Officer. Executive will faithfully and diligently perform his
      assigned duties, which are as follows:

      (a)   Company Performance. Executive will be responsible for all aspects
            of the Company's performance, including without limitation,
            directing that daily operational and managerial matters are
            performed in a manner consistent with the Company's policies.

      (b)   Development and Preservation of Business. Executive will be
            responsible for the development and preservation of banking
            relationships and other business development efforts (including
            appropriate civic and community activities).

      (c)   Report to Board. Executive will report directly to the Company's
            board of directors. The Company's board of directors may, from time
            to time, modify Executive's title or add, delete, or modify
            Executive's performance responsibilities to accommodate management
            succession, as well as any other management objectives of the
            Company. Executive will assume any additional positions, duties and
            responsibilities as may reasonably be requested of him with or
            without additional compensation, as appropriate and consistent with
            Sections 3(a) and 3(b) of this Agreement.

4.    EXTENT OF SERVICES. Executive will devote all of his working time,
      attention and skill to the duties and responsibilities set forth in
      Section 3. To the extent that such activities do not interfere with his
      duties under Section 3, Executive may participate in other businesses as a
      passive investor, but (a) Executive may not actively participate in the
      operation or management of those businesses, and (b) Executive may not,
      without the Company's prior written consent, make or maintain any
      investment in a business with which the

      Company or its subsidiaries has an existing competitive or commercial
      relationship.

5.    COMPANY BOARD. During the term, the Company will use its best efforts to
      nominate and recommend Executive for election to the Company's board of
      directors.

6.    SALARY. Executive will receive an annual salary of $259,375.00, to be paid
      in accordance with the Company's regular payroll schedule. Subsequent
      salary increases are subject to the Company's annual review of Executive's
      compensation and performance.

7.    INCENTIVE COMPENSATION. During the Term, the Company's board of directors
      will determine the amount of bonus to be paid by the Company to Executive
      for that year. In making this determination, the Company's board of
      directors will consider factors such as Executive's performance of his
      duties and the safety, soundness and profitability of the Company.
      Executive's bonus will reflect Executive's contribution to the performance
      of the Company during the year, also taking into account the nature and
      extent of incentive bonuses paid to comparable senior officers at the
      Company. This bonus will be paid to Executive no later than January 31 of
      the year following the year in which the bonus is earned by Executive.

8.    INCOME DEFERRAL. Executive will be eligible to participate in any program
      available to the Company's senior management for income deferral, for the
      purpose of deferring receipt of any or all of the compensation he may
      become entitled to under this Agreement.

9.    VACATION AND BENEFITS.

      (a)   Vacation and Holidays. Executive will receive four weeks of paid
            vacation each year in addition to all holidays observed by the
            Company and its subsidiaries. Executive may carry over, in the
            aggregate, up to four weeks of unused vacation to a subsequent year.
            Any unused vacation time in excess of four weeks will not accumulate
            or carry over from one calendar year to the next. Each calendar
            year, Executive shall take not less than one (1) week vacation.

      (b)   Benefits. Executive will be entitled to participate in any group
            life insurance, disability, health and accident insurance plans,
            profit sharing and pension plans and in other employee fringe
            benefit programs the Company may have in effect from time to time
            for its similarly situated employees, in accordance with and subject
            to any policies adopted by the Company's board of directors with
            respect to the plans or programs, including without limitation, any
            incentive or employee stock option plan, deferred compensation plan,
            401(k) plan, and Supplemental Executive Retirement Plan (SERP). The
            Company through this Agreement does not obligate itself to make any
            particular benefits available to its employees.

      (c)   Business Expenses. The Company will reimburse Executive for ordinary
            and necessary expenses which are consistent with past practice at
            the Company (including, without limitation, travel, entertainment,
            and similar expenses) and which are incurred in performing and
            promoting the Company's business. Executive will present from time
            to time itemized accounts of these expenses, subject to any limits
            of the Company policy or the rules and regulations of the Internal
            Revenue Service.

10.   TERMINATION OF EMPLOYMENT.

      (a)   Termination by the Company for Cause. If the Company terminates
            Executive's employment for Cause (defined below) before this
            Agreement terminates, the Company will pay Executive the salary
            earned and expenses reimbursable under this Agreement incurred
            through the date of his termination. Executive will have no right to
            receive compensation or other benefits for any period after
            termination under this Section 10(a).

      (b)   Other Termination by the Company. If the Company terminates
            Executive's employment without Cause before this Agreement
            terminates, or Executive terminates his employment for Good Reason

            (defined below), the Company will pay Executive for the remainder of
            the Term the compensation and other benefits he would have been
            entitled to if his employment had not terminated.

      (c)   Death or Disability. This Agreement terminates (1) if Executive dies
            or (2) if Executive is unable to perform his duties and obligations
            under this Agreement for a period of 90 consecutive days as a result
            of a physical or mental disability arising at any time during the
            term of this Agreement, unless with reasonable accommodation
            Executive could continue to perform his duties under this Agreement
            and making these accommodations would not pose an undue hardship on
            the Company. If termination occurs under this Section 10(c),
            Executive or his estate will be entitled to receive all compensation
            and benefits earned and expenses reimbursable through the date
            Executive's employment terminated.

      (d)   Termination Related to a Change in Control.

            (1)   Termination by Company. If the Company, or its successor in
                  interest by merger, or its transferee in the event of a
                  purchase in an assumption transaction (for reasons other than
                  Executive's death, disability, or Cause) (1) terminates
                  Executive's employment within 3 years following a Change in
                  Control (as defined below), or (2) terminates Executive's
                  employment before the Change in Control but on or after the
                  date that any party either announces or is required by law to
                  announce any prospective Change in Control transaction and a
                  Change in Control occurs within six months after the
                  termination, the Bank will provide Executive with the payment
                  and benefits described in Section 10(d)(3) below.

            (2)   Termination by Executive. If Executive terminates Executive's
                  employment, with or without Good Reason, within three years
                  following a Change in Control, the Company will provide
                  Executive with the payment and benefits described in Section
                  10(d)(3) below.

            (3)   Payments. If Section 10(d)(1) or (2) is triggered in
                  accordance with its terms, the Company will: (i) pay Executive
                  in 36 monthly installments in an amount equal to 2.99 times
                  the Executive's annual salary (determined as of the day before
                  the date Executive's employment was terminated) and (ii)
                  maintain and provide for 2.99 years following Executive's
                  termination, at no cost to Executive, the benefits described
                  in Section 9(b) to which Executive is entitled (determined as
                  of the day before the date of such termination); but if
                  Executive's participation in any such benefit is thereafter
                  barred or not feasible, or discontinued or materially reduced,
                  the Company will arrange to provide Executive with either
                  benefits substantially similar to those benefits or a cash
                  payment of substantially similar value in lieu of the
                  benefits.

      (e)   Limitations on Payments Related to Change in Control. The following
            apply notwithstanding any other provision of this Agreement:

            (1)   the total of the payments and benefits described in Section
                  10(d)(3) will be less than the amount that would cause them to
                  be a "parachute payment" within the meaning of Section
                  280G(b)(2)(A) of the Internal Revenue Code;

            (2)   the payment and benefits described in Section 10(d)(3) will be
                  reduced by any compensation (in the form of cash or other
                  benefits) received by Executive from the Company or its
                  successor after the Change in Control; and

            (3)   Executive's right to receive the payments and benefits
                  described in Section 10(d)(3) terminates (i) immediately if
                  before the Change in Control transaction closes, Executive
                  terminates his employment without Good Reason, or the Company
                  terminates Executive's employment for Cause, or (ii) three
                  years after a Change of Control occurs.

      (f)   Return of Bank Property. If and when Executive ceases, for any
            reason, to be employed by the Company, Executive must return to the
            Company all keys, pass cards, identification cards and any other
            property of the Company. At the same time, Executive also must
            return to the Company all originals and copies (whether in
            memoranda, designs, devices, diskettes, tapes, manuals, and

            specifications) which constitute proprietary information or material
            of the Company and its subsidiaries. The obligations in this
            paragraph include the return of documents and other materials which
            may be in his desk at work, in his car, in place of residence, or in
            any other location under his control.

      (g)   Cause. "Cause" means any one or more of the following:

            (1)   Willful misfeasance or gross negligence in the performance of
                  Executive's duties;

            (2)   Conviction of a crime in connection with his duties;

            (3)   Conduct demonstrably and significantly harmful to the Company,
                  as reasonably determined on the advice of legal counsel by the
                  Company's board of directors; or

            (4)   Permanent disability, meaning a physical or mental impairment
                  which renders Executive incapable of substantially performing
                  the duties required under this Agreement, and which is
                  expected to continue rendering Executive so incapable for the
                  reasonably foreseeable future.

      (h)   Good Reason. "Good Reason" means only any one or more of the
            following:

            (1)   Reduction of Executive's salary or reduction or elimination of
                  any compensation or benefit plan benefiting Executive, unless
                  the reduction or elimination is generally applicable to
                  substantially all Company employees (or employees of a
                  successor or controlling entity of the Company) formerly
                  benefited;

            (2)   The assignment to Executive without his consent of any
                  authority or duties materially inconsistent with Executive's
                  position as of the date of this Agreement;

            (3)   The material breach of this Agreement by the Company, or

            (4)   A relocation or transfer of Executive's principal place of
                  employment outside Flathead County, Montana.

      (i)   Change in Control. "Change in Control" means a change "in the
            ownership or effective control" or "in the ownership of a
            substantial portion of the assets" of the Company, within the
            meaning of Section 280G of the Internal Revenue Code.

11.   CONFIDENTIALITY. Executive will not, after the date this Agreement was
      signed, including during and after its Term, use for his own purposes or
      disclose to any other person or entity any confidential business
      information concerning the Company or its business operations or that of
      its subsidiaries, unless (1) the Company consents to the use or disclosure
      of confidential information; (2) the use or disclosure is consistent with
      Executive's duties under this Agreement, or (3) disclosure is required by
      law or court order. For purposes of this Agreement, confidential business
      information includes, without limitation, trade secrets (as defined under
      the Montana Uniform Trade Secrets Act, Montana Code Section 30-14-402),
      various confidential information on investment management practices,
      marketing plans, pricing structure and technology of either the Company or
      its subsidiaries. Executive will also treat the terms of this Agreement as
      confidential business information.

12.   NONCOMPETITION. During the Term of this Agreement and for a period of
      three years after Executive's employment with the Company has terminated,
      Executive will not, directly or indirectly, as a shareholder, director,
      officer, employee, partner, agent, consultant, lessor, creditor or
      otherwise:

      (a)   provide management, supervisory or other similar services to any
            person or entity engaged in any business in counties in which the
            Company or its subsidiaries may have a presence which is competitive
            with the business of the Company or a subsidiary as conducted during
            the term of this Agreement or as conducted as of the date of
            termination of employment, including any preliminary steps
            associated with the formation of a new bank.

      (b)   persuade or entice, or attempt to persuade or entice any employee of
            the Company or a subsidiary to terminate his/her employment with the
            Company or a subsidiary.

      (c)   persuade or entice or attempt to persuade or entice any person or
            entity to terminate, cancel, rescind or revoke its business or
            contractual relationships with the Company or its subsidiaries.

13.   ENFORCEMENT.

      (a)   The Company and Executive stipulate that, in light of all of the
            facts and circumstances of the relationship between Executive and
            the Company, the agreements referred to in Sections 11 and 12
            (including without limitation their scope, duration and geographic
            extent) are fair and reasonably necessary for the protection of the
            Company and its subsidiaries confidential information, goodwill and
            other protectable interests. If a court of competent jurisdiction
            should decline to enforce any of those covenants and agreements,
            Executive and the Company request the court to reform these
            provisions to restrict Executive's use of confidential information
            and Executive's ability to compete with the Company to the maximum
            extent, in time, scope of activities and geography, the court finds
            enforceable.

      (b)   Executive acknowledges the Company will suffer immediate and
            irreparable harm that will not be compensable by damages alone if
            Executive repudiates or breaches any of the provisions of Sections
            11 or 12 or threatens or attempts to do so. For this reason, under
            these circumstances, the Company, in addition to and without
            limitation of any other rights, remedies or damages available to it
            at law or in equity, will be entitled to obtain temporary,
            preliminary and permanent injunctions in order to prevent or
            restrain the breach, and the Company will not be required to post a
            bond as a condition for the granting of this relief.

14.   COVENANTS. Executive specifically acknowledges the receipt of adequate
      consideration for the covenants contained in Sections 11 and 12 and that
      the Company is entitled to require him to comply with these Sections.
      These Sections will survive termination of this Agreement. Executive
      represents that if his employment is terminated, whether voluntarily or
      involuntarily, Executive has experience and capabilities sufficient to
      enable Executive to obtain employment in areas which do not violate this
      Agreement and that the Company's enforcement of a remedy by way of
      injunction will not prevent Executive from earning a livelihood.

15.   ARBITRATION.

      (a)   Arbitration. At either party's request, the parties must submit any
            dispute, controversy or claim arising out of or in connection with,
            or relating to, this Agreement or any breach or alleged breach of
            this Agreement, to arbitration under the American Arbitration
            Association's rules then in effect (or under any other form of
            arbitration mutually acceptable to the parties). A single arbitrator
            agreed on by the parties will conduct the arbitration. If the
            parties cannot agree on a single arbitrator, each party must select
            one arbitrator and those two arbitrators will select a third
            arbitrator. This third arbitrator will hear the dispute. The
            arbitrator's decision is final (except as otherwise specifically
            provided by law) and binds the parties, and either party may request
            any court having jurisdiction to enter a judgment and to enforce the
            arbitrator's decision. The arbitrator will provide the parties with
            a written decision naming the substantially prevailing party in the
            action. This prevailing party is entitled to reimbursement from the
            other party for its costs and expenses, including reasonable
            attorneys' fees.

      (b)   Governing Law. All proceedings will be held at a place designated by
            the arbitrator in Flathead County, Montana. The arbitrator, in
            rendering a decision as to any state law claims, will apply Montana
            law.

      (c)   Exception to Arbitration. Notwithstanding the above, if Executive
            violates Section 11 or 12, the Company will have the right to
            initiate the court proceedings described in Section 13(b), in lieu
            of an arbitration proceeding under this Section 15.

16.   MISCELLANEOUS PROVISIONS.

      (a)   Entire Agreement. This Agreement constitutes the entire
            understanding and agreement between the parties concerning its
            subject matter and supersedes all prior agreements, correspondence,
            representations, or understandings between the parties relating to
            its subject matter.

      (b)   Binding Effect. This Agreement will bind and inure to the benefit of
            the Company's, its subsidiaries' and Executive's heirs, legal
            representatives, successors and assigns.

      (c)   Litigation Expenses. If either party successfully seeks to enforce
            any provision of this Agreement or to collect any amount claimed to
            be due under it, this party will be entitled to reimbursement from
            the other party for any and all of its out-of-pocket expenses and
            costs including, without limitation, reasonable attorneys' fees and
            costs incurred in connection with the enforcement or collection.

      (d)   Waiver. Any waiver by a party of its rights under this Agreement
            must be written and signed by the party waiving its rights. A
            party's waiver of the other party's breach of any provision of this
            Agreement will not operate as a waiver of any other breach by the
            breaching party.

      (e)   Assignment. The services to be rendered by Executive under this
            Agreement are unique and personal. Accordingly, Executive may not
            assign any of his rights or duties under this Agreement.

      (f)   Amendment. This Agreement may be modified only through a written
            instrument signed by both parties.

      (g)   Severability. The provisions of this Agreement are severable. The
            invalidity of any provision will not affect the validity of other
            provisions of this Agreement.

      (h)   Governing Law and Venue. This Agreement will be governed by and
            construed in accordance with Montana law, except to the extent that
            certain regulatory matters may be governed by federal law. The
            parties must bring any legal proceeding arising out of this
            Agreement in Flathead County, Montana.

      (i)   Counterparts. This Agreement may be executed in one or more
            counterparts, each of which shall be deemed to be an original, but
            all of which taken together will constitute one and the same
            instrument.

      Signed this 26th day of January, 2005.

                                          GLACIER BANCORP, INC.

                                          /s/ John S. MacMillan
                                          --------------------------
                                          John S. MacMillan, Chairman

Attest:

/s/ James H. Strosahl
- --------------------------
James H. Strosahl, Secretary

                                          EXECUTIVE

                                          /s/ Michael J. Blodnick
                                          ------------------------
                                          Michael J. Blodnick

                                                                   EXHIBIT 10(c)

                              EMPLOYMENT AGREEMENT

      AGREEMENT between Glacier Bancorp, Inc., hereinafter called "Company", and
James H. Strosahl, hereinafter called "Executive"

                                    RECITALS

A.    Executive has served as Chief Financial Officer and Secretary/Treasurer
      and is willing also to serve as Executive Vice President of the Company.

B.    The Company desires Executive to continue his employment at the Company
      under the terms and conditions of this Agreement.

C.    Executive desires to continue his employment at the Company under the
      terms and conditions of this Agreement.

                                    AGREEMENT

1.    EMPLOYMENT. The Company agrees to employ Executive and Executive accepts
      employment by the Company on the terms and conditions set forth in this
      Agreement. Executive's title will be Executive Vice President, Chief
      Financial Officer and Secretary/Treasurer of the Company.

2.    TERM. The term of this Agreement ("Term") is one year, beginning on
      January 1, 2005.

3.    DUTIES. The Company will employ Executive as its Executive Vice President,
      Chief Financial Officer and Secretary/Treasurer. Executive will faithfully
      and diligently perform his assigned duties, which are as follows:

      (a)   Executive Vice President. Duties and responsibilities as set forth
            in the document annexed, entitled "Executive Vice President".

      (b)   Chief Financial Officer - Secretary/Treasurer. Duties and
            responsibilities as set forth in. the documents annexed, entitled
            "Chief Financial Officer" and "Secretary/Treasurer".

      (c)   Report to Board. Executive will report directly to the Company's
            President and Chief Executive Officer. The Company's board of
            directors may, from time to time, modify Executive's title or add,
            delete, or modify Executive's performance responsibilities to
            accommodate management succession, as well as any other management
            objectives of the Company. Executive will assume any additional
            positions, duties and responsibilities as may reasonably be
            requested of him with or without additional compensation, as
            appropriate and consistent with Sections 3(a) and 3(b) of this
            Agreement.

4.    EXTENT OF SERVICES. Executive will devote all of his working time,
      attention and skill to the duties and responsibilities set forth in
      Section 3. To the extent that such activities do not interfere with his
      duties under Section 3, Executive may participate in other businesses as a
      passive investor, but (a) Executive may not actively participate in the
      operation or management of those businesses, and (b) Executive may not,
      without the Company's prior written consent, make or maintain any
      investment in a business with which the Company or its subsidiaries has an
      existing competitive or commercial relationship.

5.    SALARY. Executive will receive an annual salary of $194,494.30, to be paid
      in accordance with the Company's

      regular payroll schedule. Subsequent salary increases are subject to the
      Company's annual review of Executive's compensation and performance.

6.    INCENTIVE COMPENSATION. During the Term, the Company's board of directors
      will determine the amount of bonus to be paid by the Company to Executive
      for that year. In making this determination, the Company's board of
      directors will consider factors such as Executive's performance of his
      duties and the safety, soundness and profitability of the Company.
      Executive's bonus will reflect Executive's contribution to the performance
      of the Company during the year. This bonus will be paid to Executive no
      later than January 31 of the year following the year in which the bonus is
      earned by Executive.

7.    INCOME DEFERRAL. Executive will be eligible to participate in any program
      available to the Company's senior management for income deferral, for the
      purpose of deferring receipt of any or all of the compensation he may
      become entitled to under this Agreement.

8.    VACATION AND BENEFITS.

      (a)   Vacation and Holidays. Executive will receive four weeks of paid
            vacation each year in addition to all holidays observed by the
            Company and its subsidiaries. Executive may carry over, in the
            aggregate, up to four weeks of unused vacation to a subsequent year.
            Any unused vacation time in excess of four weeks will not accumulate
            or carry over from one calendar year to the next. Each calendar
            year, Executive shall take not less than one (1) week vacation.

      (b)   Benefits. Executive will be entitled to participate in any group
            life insurance, disability, health and accident insurance plans,
            profit sharing and pension plans and in other employee fringe
            benefit programs the Company may have in effect from time to time
            for its similarly situated employees, in accordance with and subject
            to any policies adopted by the Company's board of directors with
            respect to the plans or programs, including without limitation, any
            incentive or employee stock option plan, deferred compensation plan,
            401(k) plan, and Supplemental Executive Retirement Plan (SERP). The
            Company through this Agreement does not obligate itself to make any
            particular benefits available to its employees.

      (c)   Business Expenses. The Company will reimburse Executive for ordinary
            and necessary expenses which are consistent with past practice at
            the Company (including, without limitation, travel, entertainment,
            and similar expenses) and which are incurred in performing and
            promoting the Company's business. Executive will present from time
            to time itemized accounts of these expenses, subject to any limits
            of the Company policy or the rules and regulations of the Internal
            Revenue Service.

9.    TERMINATION OF EMPLOYMENT.

      (a)   Termination by the Company for Cause. If the Company terminates
            Executive's employment for Cause (defined below) before this
            Agreement terminates, the Company will pay Executive the salary
            earned and expenses reimbursable under this Agreement incurred
            through the date of his termination. Executive will have no right to
            receive compensation or other benefits for any period after
            termination under this Section 9(a).

      (b)   Other Termination by the Company. If the Company terminates
            Executive's employment without Cause before this Agreement
            terminates, or Executive terminates his employment for Good Reason
            (defined below), the Company will pay Executive for the remainder of
            the Term the compensation and other benefits he would have been
            entitled to if his employment had not terminated.

      (c)   Death or Disability. This Agreement terminates (1) if Executive dies
            or (2) if Executive is unable to perform his duties and obligations
            under this Agreement for a period of 90 consecutive days as a result
            of a physical or mental disability arising at any time during the
            term of this Agreement, unless with reasonable accommodation
            Executive could continue to perform his duties under this

            Agreement and making these accommodations would not pose an undue
            hardship on the Company. If termination occurs under this Section
            9(c), Executive or his estate will be entitled to receive all
            compensation and benefits earned and expenses reimbursable through
            the date Executive's employment terminated.

      (d)   Termination Related to a Change in Control.

            (1)   Termination by Company. If the Company, or its successor in
                  interest by merger, or its transferee in the event of a
                  purchase in an assumption transaction (for reasons other than
                  Executive's death, disability, or Cause) (1) terminates
                  Executive's employment within 3 years following a Change in
                  Control (as defined below), or (2) terminates Executive's
                  employment before the Change in Control but on or after the
                  date that any party either announces or is required by law to
                  announce any prospective Change in Control transaction and a
                  Change in Control occurs within six months after the
                  termination, the Bank will provide Executive with the payment
                  and benefits described in Section 9(d)(3) below.

            (2)   Termination by Executive. If Executive terminates Executive's
                  employment, with or without Good Reason, within two years
                  following a Change in Control, the Company will provide
                  Executive with the payment and benefits described in Section
                  9(d)(3).

            (3)   Payments. If Section 9(d)(1) or (2) is triggered in accordance
                  with its terms, the Company will: (i) pay Executive in 24
                  monthly installments in an amount equal to two times the
                  Executive's annual salary (determined as of the day before the
                  date Executive's employment was terminated) and (ii) maintain
                  and provide for 2 years following Executive's termination, at
                  no cost to Executive, the benefits described in Section 8(b)
                  to which Executive is entitled (determined as of the day
                  before the date of such termination); but if Executive's
                  participation in any such benefit is thereafter barred or not
                  feasible, or discontinued or materially reduced, the Company
                  will arrange to provide Executive with either benefits
                  substantially similar to those benefits or a cash payment of
                  substantially similar value in lieu of the benefits.

      (e)   Limitations on Payments Related to Change in Control. The following
            apply notwithstanding any other provision of this Agreement:

            (1)   the total of the payments and benefits described in Section
                  9(d)(3) will be less than the amount that would cause them to
                  be a "parachute payment" within the meaning of Section
                  280G(b)(2)(A) of the Internal Revenue Code;

            (2)   the payment and benefits described in Section 9(d)(3) will be
                  reduced by any compensation (in the form of cash or other
                  benefits) received by Executive from the Company or its
                  successor after the Change in Control; and

            (3)   Executive's right to receive the payments and benefits
                  described in Section 9(d)(3) terminates (i) immediately if
                  before the Change in Control transaction closes, Executive
                  terminates his employment without Good Reason, or the Company
                  terminates Executive's employment for Cause, or (ii) two years
                  after a Change of Control occurs.

      (f)   Return of Bank Property. If and when Executive ceases, for any
            reason, to be employed by the Company, Executive must return to the
            Company all keys, pass cards, identification cards and any other
            property of the Company. At the same time, Executive also must
            return to the Company all originals and copies (whether in
            memoranda, designs, devices, diskettes, tapes, manuals, and
            specifications) which constitute proprietary information or material
            of the Company and its subsidiaries. The obligations in this
            paragraph include the return of documents and other materials which
            may be in his desk at work, in his car, in place of residence, or in
            any other location under his control.

      (g)   Cause. "Cause" means any one or more of the following:

            (1)   Willful misfeasance or gross negligence in the performance of
                  Executive's duties;

            (2)   Conviction of a crime in connection with his duties;

            (3)   Conduct demonstrably and significantly harmful to the Company,
                  as reasonably determined on the advice of legal counsel by the
                  Company's board of directors; or

            (4)   Permanent disability, meaning a physical or mental impairment
                  which renders Executive incapable of substantially performing
                  the duties required under this Agreement, and which is
                  expected to continue rendering Executive so incapable for the
                  reasonably foreseeable future.

      (h)   Good Reason. "Good Reason" means only any one or more of the
            following

            (1)   Reduction of Executive's salary or reduction or elimination of
                  any compensation or benefit plan benefiting Executive, unless
                  the reduction or elimination is generally applicable to
                  substantially all Company employees (or employees of a
                  successor or controlling entity of the Company) formerly
                  benefitted;

            (2)   The assignment to Executive without his consent of any
                  authority or duties materially inconsistent with Executive's
                  position as of the date of this Agreement;

            (3)   The material breach of this Agreement by the Company, or

            (4)   A relocation or transfer of Executive's principal place of
                  employment outside Flathead County, Montana.

      (i)   Change in Control. "Change in Control" means a change "in the
            ownership or effective control" or "in the ownership of a
            substantial portion of the assets" of the Company, within the
            meaning of Section 280G of the Internal Revenue Code.

10.   CONFIDENTIALITY. Executive will not, after the date this Agreement was
      signed, including during and after its Term, use for his own purposes or
      disclose to any other person or entity any confidential business
      information concerning the Company or its business operations or that of
      its subsidiaries, unless (1) the Company consents to the use or disclosure
      of confidential information; (2) the use or disclosure is consistent with
      Executive's duties under this Agreement, or (3) disclosure is required by
      law or court order. For purposes of this Agreement, confidential business
      information includes, without limitation, trade secrets (as defined under
      the Montana Uniform Trade Secrets Act, Montana Code Section 30-14-402),
      various confidential information on investment management practices,
      marketing plans, pricing structure and technology of either the Company or
      its subsidiaries. Executive will also treat the terms of this Agreement as
      confidential business information.

11.   NONCOMPETITION. During the Term of this Agreement and for a period of two
      years after Executive's employment with the Company has terminated,
      Executive will not, directly or indirectly, as a shareholder, director,
      officer, employee, partner, agent, consultant, lessor, creditor or
      otherwise:

      (a)   provide management, supervisory or other similar services to any
            person or entity engaged in any business in counties in which the
            Company or its subsidiaries may have a presence which is competitive
            with the business of the Company or a subsidiary as conducted during
            the term of this Agreement or as conducted as of the date of
            termination of employment, including any preliminary steps
            associated with the formation of a new bank.

      (b)   persuade or entice, or attempt to persuade or entice any employee of
            the Company or a subsidiary to terminate his/her employment with the
            Company or a subsidiary.

      (c)   persuade or entice or attempt to persuade or entice any person or
            entity to terminate, cancel, rescind or revoke its business or
            contractual relationships with the Company or its subsidiaries.

12.   ENFORCEMENT.

      (a)   The Company and Executive stipulate that, in light of all of the
            facts and circumstances of the relationship between Executive and
            the Company, the agreements referred to in Sections 10 and 11
            (including without limitation their scope, duration and geographic
            extent) are fair and reasonably necessary for the protection of the
            Company and its subsidiaries confidential information, goodwill and
            other protectable interests. If a court of competent jurisdiction
            should decline to enforce any of those covenants and agreements,
            Executive and the Company request the court to reform these
            provisions to restrict Executive's use of confidential information
            and Executive's ability to compete with the Company to the maximum
            extent, in time, scope of activities and geography, the court finds
            enforceable.

      (b)   Executive acknowledges the Company will suffer immediate and
            irreparable harm that will not be compensable by damages alone if
            Executive repudiates or breaches any of the provisions of Sections
            10 or 11 or threatens or attempts to do so. For this reason, under
            these circumstances, the Company, in addition to and without
            limitation of any other rights, remedies or damages available to it
            at law or in equity, will be entitled to obtain temporary,
            preliminary and permanent injunctions in order to prevent or
            restrain the breach, and the Company will not be required to post a
            bond as a condition for the granting of this relief.

13.   COVENANTS. Executive specifically acknowledges the receipt of adequate
      consideration for the covenants contained in Sections 10 and 11 and that
      the Company is entitled to require him to comply with these Sections.
      These Sections will survive termination of this Agreement. Executive
      represents that if his employment is terminated, whether voluntarily or
      involuntarily, Executive has experience and capabilities sufficient to
      enable Executive to obtain employment in areas which do not violate this
      Agreement and that the Company's enforcement of a remedy by way of
      injunction will not prevent Executive from earning a livelihood.

14.   ARBITRATION.

      (a)   Arbitration. At either party's request, the parties must submit any
            dispute, controversy or claim arising out of or in connection with,
            or relating to, this Agreement or any breach or alleged breach of
            this Agreement, to arbitration under the American Arbitration
            Association's rules then in effect (or under any other form of
            arbitration mutually acceptable to the parties). A single arbitrator
            agreed on by the parties will conduct the arbitration. If the
            parties cannot agree on a single arbitrator, each party must select
            one arbitrator and those two arbitrators will select a third
            arbitrator. This third arbitrator will hear the dispute. The
            arbitrator's decision is final (except as otherwise specifically
            provided by law) and binds the parties, and either party may request
            any court having jurisdiction to enter a judgment and to enforce the
            arbitrator's decision. The arbitrator will provide the parties with
            a written decision naming the substantially prevailing party in the
            action. This prevailing party is entitled to reimbursement from the
            other party for its costs and expenses, including reasonable
            attorneys' fees.

      (b)   Governing Law. All proceedings will be held at a place designated by
            the arbitrator in Flathead County, Montana. The arbitrator, in
            rendering a decision as to any state law claims, will apply Montana
            law.

      (c)   Exception to Arbitration. Notwithstanding the above, if Executive
            violates Section 10 or 11, the Company will have the right to
            initiate the court proceedings described in Section 12(b), in lieu
            of an arbitration proceeding under this Section 14.

15.   MISCELLANEOUS PROVISIONS.

      (a)   Entire Agreement. This Agreement constitutes the entire
            understanding and agreement between the parties concerning its
            subject matter and supersedes all prior agreements, correspondence,
            representations, or understandings between the parties relating to
            its subject matter.

      (b)   Binding Effect. This Agreement will bind and inure to the benefit of
            the Company's, its subsidiaries' and Executive's heirs, legal
            representatives, successors and assigns.

      (c)   Litigation Expenses. If either party successfully seeks to enforce
            any provision of this Agreement or to collect any amount claimed to
            be due under it, this party will be entitled to reimbursement from
            the other party for any and all of its out-of-pocket expenses and
            costs including, without limitation, reasonable attorneys' fees and
            costs incurred in connection with the enforcement or collection.

      (d)   Waiver. Any waiver by a party of its rights under this Agreement
            must be written and signed by the party waiving its rights. A
            party's waiver of the other party's breach of any provision of this
            Agreement will not operate as a waiver of any other breach by the
            breaching party.

      (e)   Assignment. The services to be rendered by Executive under this
            Agreement are unique and personal. Accordingly, Executive may not
            assign any of his rights or duties under this Agreement.

      (f)   Amendment. This Agreement may be modified only through a written
            instrument signed by both parties.

      (g)   Severability. The provisions of this Agreement are severable. The
            invalidity of any provision will not affect the validity of other
            provisions of this Agreement.

      (h)   Governing Law and Venue. This Agreement will be governed by and
            construed in accordance with Montana law, except to the extent that
            certain regulatory matters may be governed by federal law. The
            parties must bring any legal proceeding arising out of this
            Agreement in Flathead County, Montana.

      (i)   Counterparts. This Agreement may be executed in one or more
            counterparts, each of which shall be deemed to be an original, but
            all of which taken together will constitute one and the same
            instrument.

Signed this 28th day of January, 2005.

                                             GLACIER BANCORP, INC.

                                             /s/ Michael J. Blodnick
                                             ------------------------
                                             Michael J. Blodnick
                                             President/CEO

Attest:

/s/ LeeAnn Wardinsky
- --------------------
LeeAnn Wardinsky
Assistant Secretary

                                             EXECUTIVE

                                             /s/ James H. Strosahl
                                             ----------------------
                                             James H. Strosahl

                                                                   EXHIBIT 10(d)

                              EMPLOYMENT AGREEMENT

          AGREEMENT between First Security Bank of Missoula, ("Bank"),
         and William L. Bouchee, ("Executive"), and ratified by Glacier
                           Bancorp, Inc. ("Company"),

                                    RECITALS

A.    First Security Bank of Missoula, ("Bank"), is a wholly owned subsidiary of
      Glacier Bancorp, Inc., ("Company").

B.    Executive is the Chief Executive Officer of the Bank and a director of the
      Bank.

C.    The Bank desires Executive to continue his employment at the Bank under
      the terms and conditions of this Agreement.

D.    Executive desires to continue his employment at the Bank under the terms
      and conditions of this Agreement.

                                    AGREEMENT

1.    EMPLOYMENT. The Bank agrees to employ Executive and Executive accepts
      employment by the Bank on the terms and conditions set forth in this
      Agreement. Executive's title will be the Chief Executive Officer of the
      Bank. During the term of this Agreement, Executive will serve as a
      director of the Bank.

2.    TERM. The term of this Agreement is for one year beginning January 1,
      2005.

3.    DUTIES. The Bank will employ Executive as its Chief Executive Officer.
      Executive will faithfully and diligently perform his assigned duties,
      which are as follows:

      (a)   Bank Performance. Executive will be responsible for all aspects of
            the Bank's performance, including without limitation, directing that
            daily operational and managerial matters are performed in a manner
            consistent with the Bank's and Company's policies.

      (b)   Development and Preservation of Business. Executive will be
            responsible for the development and preservation of banking
            relationships and other business development efforts (including
            appropriate civic and community activities) in Missoula County.

      (c)   Report to Board. Executive will report directly to the Bank's board
            of directors and to the Chief Executive Officer of the Company. The
            Bank's board of directors may, from time to time, modify Executive's
            title or add, delete, or modify Executive's performance
            responsibilities to accommodate management succession, as well as
            any other management objectives of the Bank or of the Company.
            Executive will assume any additional positions, duties and
            responsibilities as may reasonably be requested of him with or
            without additional compensation, as appropriate and consistent with
            Sections 3(a) and 3(b) of this Agreement.

4.    EXTENT OF SERVICES. Executive will devote all of his working time,
      attention and skill to the duties and responsibilities set forth in
      Section 3. To the extent that such activities do not interfere with his
      duties under Section 3, Executive may participate in other businesses as a
      passive investor, but (a) Executive may not actively participate in the
      operation or management of those businesses, and (b) Executive may not,
      without the Bank's prior written consent, make or maintain any investment
      in a business with which the Bank or Company has an existing competitive
      or commercial relationship.

5.    SALARY. Executive will receive an annual salary of $138,000.00 to be paid
      in accordance with the Bank's regular payroll schedule.

6.    INCENTIVE COMPENSATION. During the Term, the Bank's board of directors,
      subject to ratification by Company's board of directors, will determine
      the amount of bonus to be paid by the Bank to Executive for that year. In
      making this determination, the Bank's board of directors will consider
      factors such as Executive's performance of his duties and the safety,
      soundness and profitability of the Bank. Executive's bonus will reflect
      Executive's contribution to the performance of the Bank during the year.
      This bonus will be paid to Executive no later than January 31 of the year
      following the year in which the bonus is earned by Executive.

7.    INCOME DEFERRAL. Executive will be eligible to participate in any program
      available to the Bank's and Company's senior management for income
      deferral, for the purpose of deferring receipt of any or all of the
      compensation he may become entitled to under this Agreement.

8.    VACATION AND BENEFITS.

      (a)   Vacation and Holidays. Executive will receive four weeks of paid
            vacation each year in addition to all holidays observed by the Bank.
            Executive may carry over, in the aggregate, up to four weeks of
            unused vacation to a subsequent year. Any unused vacation time in
            excess of four weeks will not accumulate or carry over from one
            calendar year to the next. Each calendar year Executive shall take
            not less than one (1) week vacation.

      (b)   Benefits. Executive will be entitled to participate in any group
            life insurance, disability, health and accident insurance plans,
            profit sharing and pension plans and in other employee fringe
            benefit programs the Bank or Company may have in effect from time to
            time for its similarly situated employees, in accordance with and
            subject to any policies adopted by the Bank's board of directors
            with respect to the plans or programs, including without limitation,
            any incentive or employee stock option plan, deferred compensation
            plan, 401(k) plan, and Supplemental Executive Retirement Plan
            (SERP). Neither the Bank nor Company, through this Agreement,
            obligate itself to make any particular benefits available to its
            employees.

      (c)   Business Expenses. The Bank will reimburse Executive for ordinary
            and necessary expenses which are consistent with past practice at
            the Bank (including, without limitation, travel, entertainment, and
            similar expenses) and which are incurred in performing and promoting
            the Bank's business. Executive will present from time to time
            itemized accounts of these expenses, subject to any limits of the
            Bank policy or the rules and regulations of the Internal Revenue
            Service.

9.    TERMINATION OF EMPLOYMENT.

      (a)   Termination by the Bank for Cause. If the Bank terminates
            Executive's employment for Cause (defined below) before this
            Agreement terminates, the Bank will pay Executive the salary earned
            and expenses reimbursable under this Agreement incurred through the
            date of his termination. Executive will have no right to receive
            compensation or other benefits for any period after termination
            under this Section 9(a).

      (b)   Other Termination by the Bank. If the Bank terminates Executive's
            employment without Cause before this Agreement terminates, or
            Executive terminates his employment for Good Reason (defined below),
            the Bank will pay Executive for the remainder of the Term the
            compensation and other benefits he would have been entitled to if
            his employment had not terminated.

      (c)   Death or Disability. This Agreement terminates (1) if Executive dies
            or (2) if Executive is unable to perform his duties and obligations
            under this Agreement for a period of 90 consecutive days as a result
            of a physical or mental disability arising at any time during the
            term of this Agreement, unless with reasonable accommodation
            Executive could continue to perform his duties under this Agreement
            and making these accommodations would not pose an undue hardship on
            the Bank. If termination occurs under this Section 9(c), Executive
            or his estate will be entitled to receive all compensation and
            benefits earned and expenses reimbursable through the date
            Executive's

            employment terminated.

      (d)   Termination Related to a Change in Control.

            (1)   Termination by Bank. If the Bank, or its successor in interest
                  by merger, or its transferee in the event of a purchase in an
                  assumption transaction (for reasons other than Executive's
                  death, disability, or Cause) (1) terminates Executive's
                  employment within one year following a Change in Control (as
                  defined below), or (2) terminates Executive's employment
                  before the Change in Control but on or after the date that any
                  party either announces or is required by law to announce any
                  prospective Change in Control transaction and a Change in
                  Control occurs within six months after the termination, the
                  Bank will provide Executive with the payment and benefits
                  described in Section 9(d)(3) below.

            (2)   Termination by Executive. If Executive terminates Executive's
                  employment, with or without Good Reason, within one year
                  following a Change in Control, the Bank will provide Executive
                  with the payment and benefits described in Section 9(d)(3).

            (3)   Payments. If Section 9(d)(1) or (2) is triggered in accordance
                  with its terms, the Bank will: (i) pay Executive in 12 monthly
                  installments in an amount equal to the Executive's annual
                  salary (determined as of the day before the date Executive's
                  employment was terminated) and (ii) maintain and provide for
                  one year following Executive's termination, at no cost to
                  Executive, the benefits described in Section 8(b) to which
                  Executive is entitled (determined as of the day before the
                  date of such termination); but if Executive's participation in
                  any such benefit is thereafter barred or not feasible, or
                  discontinued or materially reduced, the Bank will arrange to
                  provide Executive with either benefits substantially similar
                  to those benefits or a cash payment of substantially similar
                  value in lieu of the benefits.

      (e)   Limitations on Payments Related to Change in Control. The following
            apply notwithstanding any other provision of this Agreement:

            (1)   the total of the payments and benefits described in Section
                  9(d)(3) will be less than the amount that would cause them to
                  be a "parachute payment" within the meaning of Section
                  280G(b)(2)(A) of the Internal Revenue Code;

            (2)   the payment and benefits described in Section 9(d)(3) will be
                  reduced by any compensation (in the form of cash or other
                  benefits) received by Executive from the Bank or its successor
                  after the Change in Control; and

            (3)   Executive's right to receive the payments and benefits
                  described in Section 9(d)(3) terminates (i) immediately if
                  before the Change in Control transaction closes, Executive
                  terminates his employment without Good Reason, or the Bank
                  terminates Executive's employment for Cause, or (ii) one year
                  after a Change of Control occurs.

      (f)   Return of Bank Property. If and when Executive ceases, for any
            reason, to be employed by the Bank, Executive must return to the
            Bank all keys, pass cards, identification cards and any other
            property of the Bank. At the same time, Executive also must return
            to the Bank all originals and copies (whether in memoranda, designs,
            devices, diskettes, tapes, manuals, and specifications) which
            constitute proprietary information or material of the Bank. The
            obligations in this paragraph include the return of documents and
            other materials which may be in his desk at work, in his car, in
            place of residence, or in any other location under his control.

      (g)   Cause. "Cause" means any one or more of the following:

            (1)   Willful misfeasance or gross negligence in the performance of
                  Executive's duties;

            (2)   Conviction of a crime in connection with his duties;

            (3)   Conduct demonstrably and significantly harmful to the Bank, as
                  reasonably determined on the advice of legal counsel by the
                  Bank's board of directors; or

            (4)   Permanent disability, meaning a physical or mental impairment
                  which renders Executive incapable of substantially performing
                  the duties required under this Agreement, and which is
                  expected to continue rendering Executive so incapable for the
                  reasonably foreseeable future.

      (h)   Good Reason. "Good Reason" means only any one or more of the
            following:

            (1)   Reduction of Executive's salary or reduction or elimination of
                  any compensation or benefit plan benefiting Executive, unless
                  the reduction or elimination is generally applicable to other
                  executive officers within the Company (or executive officers
                  of a successor or controlling entity of the Bank) formerly
                  benefitted;

            (2)   The assignment to Executive without his consent of any
                  authority or duties materially inconsistent with Executive's
                  position as of the date of this Agreement;

            (3)   The material breach of this Agreement by the Bank, or

            (4)   A relocation or transfer of Executive's principal place of
                  employment outside Missoula County, Montana.

      (i)   Change in Control. "Change in Control" means a change "in the
            ownership or effective control" or "in the ownership of a
            substantial portion of the assets" of the Bank, within the meaning
            of Section 280G of the Internal Revenue Code.

10.   CONFIDENTIALITY. Executive will not, after the date this Agreement was
      signed, including during and after its Term, use for his own purposes or
      disclose to any other person or entity any confidential business
      information concerning the Bank or its business operations, unless (1) the
      Bank consents to the use or disclosure of confidential information; (2)
      the use or disclosure is consistent with Executive's duties under this
      Agreement, or (3) disclosure is required by law or court order. For
      purposes of this Agreement, confidential business information includes,
      without limitation, trade secrets (as defined under the Montana Uniform
      Trade Secrets Act, Montana Code Section 30-14-402), various confidential
      information on investment management practices, marketing plans, pricing
      structure and technology of either the Bank or Company. Executive will
      also treat the terms of this Agreement as confidential business
      information.

11.   NONCOMPETITION. During the Term and the terms of any extensions or
      renewals of this Agreement and for a period equal to one year after
      Executive's employment with the Bank and Company has terminated, Executive
      will not, directly or indirectly, as a shareholder, director, officer,
      employee, partner, agent, consultant, lessor, creditor or otherwise:

      (a)   provide management, supervisory or other similar services to any
            person or entity engaged in any business in counties in which the
            Bank or Company may have a presence which is competitive with the
            business of the Bank or Company or a subsidiary as conducted during
            the term of this Agreement or as conducted as of the date of
            termination of employment, including any preliminary steps
            associated with the formation of a new bank.

      (b)   persuade or entice, or attempt to persuade or entice any employee of
            the Bank or Company or a subsidiary to terminate his/her employment
            with the Bank or a subsidiary.

      (c)   persuade or entice or attempt to persuade or entice any person or
            entity to terminate, cancel, rescind or revoke its business or
            contractual relationships with the Bank or Company.

12.   ENFORCEMENT.

      (a)   The Bank and Executive stipulate that, in light of all of the facts
            and circumstances of the relationship between Executive and the
            Bank, the agreements referred to in Sections 10 and 11 (including
            without limitation their scope, duration and geographic extent) are
            fair and reasonably necessary for the protection of the Bank's and
            Company's confidential information, goodwill and other protectable
            interests. If a court of competent jurisdiction should decline to
            enforce any of those covenants and agreements, Executive and the
            Bank request the court to reform these provisions to restrict
            Executive's use of confidential information and Executive's ability
            to compete with the Bank and Company to the maximum extent, in time,
            scope of activities and geography, the court finds enforceable.

      (b)   Executive acknowledges the Bank and Company will suffer immediate
            and irreparable harm that will not be compensable by damages alone
            if Executive repudiates or breaches any of the provisions of
            Sections 10 or 11 or threatens or attempts to do so. For this
            reason, under these circumstances, the Bank, in addition to and
            without limitation of any other rights, remedies or damages
            available to it at law or in equity, will be entitled to obtain
            temporary, preliminary and permanent injunctions in order to prevent
            or restrain the breach, and the Bank will not be required to post a
            bond as a condition for the granting of this relief.

13.   COVENANTS. Executive specifically acknowledges the receipt of adequate
      consideration for the covenants contained in Sections 10 or 11 and that
      the Bank is entitled to require him to comply with these Sections. These
      Sections will survive termination of this Agreement. Executive represents
      that if his employment is terminated, whether voluntarily or
      involuntarily, Executive has experience and capabilities sufficient to
      enable Executive to obtain employment in areas which do not violate this
      Agreement and that the Bank's enforcement of a remedy by way of injunction
      will not prevent Executive from earning a livelihood.

14.   ARBITRATION.

      (a)   Arbitration. At either party's request, the parties must submit any
            dispute, controversy or claim arising out of or in connection with,
            or relating to, this Agreement or any breach or alleged breach of
            this Agreement, to arbitration under the American Arbitration
            Association's rules then in effect (or under any other form of
            arbitration mutually acceptable to the parties). A single arbitrator
            agreed on by the parties will conduct the arbitration. If the
            parties cannot agree on a single arbitrator, each party must select
            one arbitrator and those two arbitrators will select a third
            arbitrator. This third arbitrator will hear the dispute. The
            arbitrator's decision is final (except as otherwise specifically
            provided by law) and binds the parties, and either party may request
            any court having jurisdiction to enter a judgment and to enforce the
            arbitrator's decision. The arbitrator will provide the parties with
            a written decision naming the substantially prevailing party in the
            action. This prevailing party is entitled to reimbursement from the
            other party for its costs and expenses, including reasonable
            attorneys' fees.

      (b)   Governing Law. All proceedings will be held at a place designated by
            the arbitrator in Flathead County, Montana. The arbitrator, in
            rendering a decision as to any state law claims, will apply Montana
            law.

      (c)   Exception to Arbitration. Notwithstanding the above, if Executive
            violates Section 10 or 11, the Bank will have the right to initiate
            the court proceedings described in Section 12(b), in lieu of an
            arbitration proceeding under this Section 14.

15.   MISCELLANEOUS PROVISIONS.

      (a)   Entire Agreement. This Agreement constitutes the entire
            understanding and agreement between the parties concerning its
            subject matter and supersedes all prior agreements, correspondence,
            representations, or understandings between the parties relating to
            its subject matter.

      (b)   Binding Effect. This Agreement will bind and inure to the benefit of
            the Bank's and Executive's

            heirs, legal representatives, successors and assigns.

      (c)   Litigation Expenses. If either party successfully seeks to enforce
            any provision of this Agreement or to collect any amount claimed to
            be due under it, this party will be entitled to reimbursement from
            the other party for any and all of its out-of-pocket expenses and
            costs including, without limitation, reasonable attorneys' fees and
            costs incurred in connection with the enforcement or collection.

      (d)   Waiver. Any waiver by a party of its rights under this Agreement
            must be written and signed by the party waiving its rights. A
            party's waiver of the other party's breach of any provision of this
            Agreement will not operate as a waiver of any other breach by the
            breaching party.

      (e)   Assignment. The services to be rendered by Executive under this
            Agreement are unique and personal. Accordingly, Executive may not
            assign any of his rights or duties under this Agreement.

      (f)   Amendment. This Agreement may be modified only through a written
            instrument signed by both parties and ratified by the Company.

      (g)   Severability. The provisions of this Agreement are severable. The
            invalidity of any provision will not affect the validity of other
            provisions of this Agreement.

      (h)   Governing Law and Venue. This Agreement will be governed by and
            construed in accordance with Montana law, except to the extent that
            certain regulatory matters may be governed by federal law. The
            parties must bring any legal proceeding arising out of this
            Agreement in Flathead County, Montana.

      (i)   Counterparts. This Agreement may be executed in one or more
            counterparts, each of which shall be deemed to be an original, but
            all of which taken together will constitute one and the same
            instrument.

      Signed this 17th day of February, 2005.

                                                FIRST SECURITY BANK OF MISSOULA

                                                /s/ Allen J. Fetscher
                                                -----------------------
                                                Allen J. Fetscher, Chairman

Attest By:

/s/ Harold Fraser
- -----------------
Harold Fraser, Secretary

                                                EXECUTIVE

                                                /s/ William L. Bouchee
                                                -----------------------
                                                William L. Bouchee

Ratified
GLACIER BANCORP, INC.

/s/ Michael J. Blodnick
- -----------------------
Michael J. Blodnick
President/CEO

                                                                   EXHIBIT 10(g)

                              GLACIER BANCORP, INC.
                           DEFERRED COMPENSATION PLAN
               (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005)

      Glacier Bancorp, Inc. (the "Company"), a Montana corporation, by
resolution of its Board of Directors dated ______________, 2005, hereby amends
and restates its Deferred Compensation Plan (the "Plan"), effective January 1,
2005,for a determined class (the "Class") consisting of its directors and
certain other officers and key employees, as herein provided. This Plan is a
nonqualified deferred compensation plan which is unfunded and is maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees and non-employee directors of the
Company.

                   ARTICLE I - DESIGNATED CLASS; PARTICIPATION

      The Class eligible to participate in the Plan shall be limited to members
of the Board of Directors ("Board") of the Company (including the Chairman), the
Company's President, and such other officers or key employees of the Company as
the Board may identify by resolution as being eligible for participation in the
Plan. However, an individual within the Class shall become a "Participant" in
the Plan only if the individual first enters into a properly completed "Deferral
Election Form" (substantially in the form attached hereto as Exhibit A), and
"Distribution Election Form" (substantially in the form attached hereto as
Exhibit B). These election forms shall be subject to any revisions that the
Board may approve in its discretion from time to time for use, after written
notice to Participants, on a prospective basis for future elections.

                          ARTICLE II - DEFERRED AMOUNTS

      Deferred amounts shall be credited by the Company at the end of each
calendar quarter beginning after 2004, in accordance with the terms of the Plan
as amended and restated herein, and the Deferral Election Form entered into
between Participants and the Company, as provided for in Article I hereof. The
funds so deferred quarter-annually shall be credited by the Company to a
bookkeeping account ("Account") in the name of each Participant, according to
the terms of the Participant's Deferral Election Form. Each Participant's
Account shall be credited as of January 1, 2005, with the balance credited to
the Participant's Account as of December 31, 2004 (pursuant to the terms of the
Plan prior to this amendment and restatement).

      In addition to the amounts credited to each Participant's Account as of
January 1, 2005, and quarter-annually thereafter, the Company shall adjust each
Participant's Account as of the end of each calendar year beginning after 2004
to reflect a rate of return (positive or negative) equal to fifty (50%) percent
of return-on-average equity of common stock issued by Glacier Bancorp, Inc. as
of December 31 of the Company's most recently-completed fiscal year.

      The value of each Participant's Account as determined as of a given date
under this Article, plus any amounts subsequently allocated thereto under this
Article, and less any amounts distributed or withdrawn under Article IV shall
remain the value thereof for all purposes of the Plan until the Account is
revalued hereunder.

                 ARTICLE III - ANTI-ALIENATION; PARTICIPANTS TO
                               BE UNSECURED CREDITORS

      (a) A Participant's interest in the Plan shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge; and the Company shall not be obligated to make any
payments to persons other than as specifically provided in the Plan. Such
payments shall be made in the regular course of business from the general funds
of the Company as they become due, except that such payments may be made from
any trust ("Trust") that the Company may establish in its discretion in
accordance with the terms of Article VII below.

      (b) Neither the Participants, nor their beneficiaries, nor any other
person or persons having or claiming a right to payments hereunder or to any
interest in the Plan shall have a secured claim against the assets of the
Company, and such persons shall rely solely on the unsecured promise of the
Company for the payment of any benefits pursuant to the Plan. Nothing herein
shall be construed to give any person any right, title, interest, or claim in or
to any specific asset, fund, reserve, account, or property of any kind
whatsoever owned by them or in which it may have any right, title or interest
now or in the future; but such persons shall have the right to enforce his or
her claim against the Company in the same manner as any unsecured creditor.

                      ARTICLE IV - PAYMENTS TO PARTICIPANTS

      (a) A Participant's Account shall be paid in accordance with the elections
made in the particular Distribution Election Form or Forms applicable to the
deferred amounts. Each distribution election shall be made on or before the
effective date of the Deferral Election Form to which the Distribution Election
Form relates. A Participant may change one or more distribution elections by -

            (i) providing the Board with a new Distribution Election Form at
      least one year before the date on which distributions are otherwise
      scheduled to commence pursuant to the Participant's otherwise applicable
      election from the choices set forth under Article IV(b) hereof, and

            (ii) selecting a new distribution schedule that is allowable under
      Article IV(b) hereof, that specifies the portion of the Participant's
      Account to which it relates, and that defers the commencement of
      distributions by at least five years from the originally scheduled
      commencement date.

      (b) A Participant may elect in his or her Distribution Election Form to
have the amounts deferred pursuant to the Participant's Deferral Election Form,
and any earnings credited thereto pursuant to Article II above, distributed
beginning during the first 15 days of January of the first to occur of either --

                  (i) the calendar year immediately following the year in which
            the Participant ceases service with the Company, or

                  (ii) the later of (I) the calendar year immediately following
            the year in which the Participant ceases service with the Company,
            and (II) a specified date designated by the Participant, but not
            later than the year in which the Participant will attain age 72); or

                  (iii) the year in which the Participant attains age 72; or

                  (iv) the ___ (not more than fifth) anniversary of the date on
            which the Participant ceases service with the Company; or

                  (v) a Change in Control.

Notwithstanding a Participant's election from the above choices, the Company
shall suspend payments until the date six (6) months after the date on which the
Participant terminates service with the Company if the Board (acting without
voting or participation by the Participant) determines that earlier payment
would violate Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as
amended (the "Code").

      (c) A Participant may further elect in his or her Distribution Election
Form to have the amounts deferred pursuant to the associated Deferral Election
Form, and any earnings credited thereto pursuant to Article II above,
distributed either --

            (i) in a lump sum; or

            (ii) in substantially equal annual payments over period of ___ years
            (not to exceed 10 years from the date the Participant ceases service
            with the Company).

      (d) If a Participant should die before receiving all deferred compensation
benefits payable hereunder, then such payment(s) shall be made to the
beneficiary designated by the Participant in his or her Agreement. If the
beneficiary has predeceased the Participant or survives the Participant but then
dies before all benefits payable hereunder have been paid, then the aggregate
benefits then unpaid shall be paid over to the beneficiary's estate, in a lump
sum, on the 90th day following the date of the Participant's death.

                   ARTICLE V - AMOUNT OF DEFERRED COMPENSATION

      A Participant who is a member of the Board and who is not an employee of
the Company may elect on a Deferral Election Form to have any portion of his or
her director's fees deferred under this Plan. Any other Participant may elect on
a Deferral Election Form to defer annually under the Plan up to 50% of his or
her salary to be earned in the calendar year and otherwise become payable in
cash from the Company, and up to 100% of any such cash bonuses. Any election
made with respect to the amount to be deferred, and the timing and method of
payment of benefits hereunder, shall be made prior to the beginning of the
calendar year in which the services giving rise to the amounts deferred are
earned, and shall take effect on the January 1st following such election;
provided that (i) a Participant may at any time elect to cease future deferrals;
and (ii) an individual who first becomes eligible to participate in the Plan
during a calendar year may deliver to the Board his or her executed Deferral
Election Form and Distribution Election Form within thirty (30) days of becoming
eligible for Plan participation, in which event the Participant's elections
shall apply only to compensation that would otherwise be payable for services
performed during the remainder of such calendar year.

                       ARTICLE VI - CHANGES TO AGREEMENTS

      Except as otherwise specifically provided in Article IV(a) relating to
changes to

distribution elections and Article V relating to the cessation of deferrals, all
elections made under this Plan shall be irrevocable with respect to amounts
deferred pursuant to the terms and conditions of Deferral Election Forms and
Distribution Election Forms. A Participant may nevertheless at any time and from
time to time change the beneficiary designated in paragraph 4 of the
Distribution Election Form. A Participant may at any time file election forms
which supersede prior election forms as to amounts deferred on or after the
January 1st that follows execution of the superseding election forms, provided
that the prior election forms shall nevertheless continue in full force and
effect, and be irrevocable, with respect to the time and manner of payment of
amounts deferred prior to the effective date of the superseding election forms.

                         ARTICLE VII - CHANGE IN CONTROL

      At any time before, but not more than five business days after, a Change
in Control (as defined under the Company's 2005 Stock Incentive Plan), the
Company shall contribute to a Trust associated with the Plan an amount
equivalent to the aggregate amount payable to Participants, which amount would
then be used to assist the Company in making eventual payment to Participants
under the terms and conditions of the Plan. The Trust and any assets held
therein to assist the Company in meeting its obligations under the Plan and
shall conform to the provisions of the model trust, as described in Revenue
Procedure 92-64 (or any successor thereto). It is the intention of the parties
that the Plan and the arrangements associated therewith (including the Trust) be
unfunded for tax purposes and for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended.

                     ARTICLE VIII - MISCELLANEOUS PROVISIONS

      (a) The Board shall be responsible for the management and control of the
operation and administration of the Plan, including any and all interpretations
and decisions pertaining to the granting or denial of benefits, claims, and any
and all interpretations and decisions pertaining to the review or denial of
benefit claims. The Plan shall inure to the benefit of the Participants and
shall be binding upon the Company, its successors and assigns. The Board shall
have discretion to amend or terminate the Plan at any time and from time to
time, provided that no change in the Plan which adversely affects any
Participant (or beneficiary collecting benefits) shall be made without the
written consent of the Participant (or beneficiary) so affected.

      (b) All references herein to "the Company" shall be deemed to refer with
equal force and effect both to any wholly-owned subsidiary of the Company, and
to any corporate or other successor of the Company which shall acquire, directly
or indirectly, by merger, consolidation, purchase, or otherwise, all or
substantially all of the assets of the Company.

      (c) In the event any parts of the Plan are found to be void, the remaining
provisions of this Plan shall, nevertheless, be binding with the same effect as
though the void parts were deleted.

      (d) The Secretary of the Company shall maintain a copy of the Plan and any
amendments thereto.

      (e) All distributions under the Plan shall be subject to reduction by the
Company for all amounts that the Company is required to withhold under federal,
state or local tax law.

      (f) PARTICIPANTS ARE SOLELY RESPONSIBLE AND LIABLE FOR THE SATISFACTION OF
ALL TAXES AND

PENALTIES (INCLUDING ANY TAXES ARISING UNDER SECTION 409A OF THE CODE) THAT MAY
ARISE IN CONNECTION WITH THEIR PLAN PARTICIPATION AND COLLECTION OF PAYMENTS
FROM THEIR ACCOUNTS. THE COMPANY SHALL NOT HAVE ANY OBLIGATION TO INDEMNIFY OR
OTHERWISE HOLD ANY PARTICIPANT HARMLESS FROM ANY OR ALL OF SUCH TAXES. THE BOARD
SHALL, HOWEVER, SHALL HAVE THE DISCRETION TO ADMINISTER THE PLAN, TO MODIFY
DEFERRAL AND DISTRIBUTION ELECTION FORMS, AND TO UNILATERALLY MODIFY ANY SUCH
FORM IN A MANNER THAT (i) CONFORMS IT WITH THE REQUIREMENTS OF SECTION 409A OF
THE CODE, OR (ii) VOIDS ANY PARTICIPANT'S ELECTION, OR PROVISION WITHIN AN
ELECTION, TO THE EXTENT IT WOULD VIOLATE SECTION 409A OF THE CODE.

      IN ADDITION, IF THE BOARD DETERMINES THAT A PAYMENT OF PLAN BENEFITS TO A
PARTICIPANT WOULD VIOLATE SECTION 409A OF THE CODE, THE BOARD SHALL MAKE SUCH
PAYMENT ONLY AND AUTOMATICALLY UPON THE EARLIEST DISTRIBUTION EVENT THAT IS
PERMISSIBLE UNDER SECTION 409A OF THE CODE, SUBJECT TO ANY VALID SECOND ELECTION
TO DEFER THAT A PARTICIPANT MAKES PURSUANT to Article IV(a) OF THE PLAN. THE
ADMINISTRATOR SHALL HAVE THE SOLE DISCRETION TO INTERPRET THE REQUIREMENTS OF
THE CODE, INCLUDING SECTION 409A, FOR PURPOSES OF THE PLAN.

                     ARTICLE IX - SPECIAL ELECTION FOR 2005

      For calendar year 2005, any Participant with a positive Account as of
December 31, 2004 may make either or both of the following elections using the
form attached hereto as Exhibit C:

      (a) to terminate participation in the Plan with respect to all or part of
the value of the Participant's Account on December 31, 2004; and/or

      (b) to cancel a deferral election that would otherwise be effective in
2005 with regard to amounts deferred or to be deferred in 2005.

      Any amounts subject to an election on Exhibit C shall be paid to the
Participant in 2005 and shall be includible in income of the Participant for
2005.

                           ARTICLE X - EFFECTIVE DATE

      The amended and restated Plan shall become effective January 1, 2005.

                                    EXHIBIT A
                              GLACIER BANCORP, INC.
                         2005 DEFERRED COMPENSATION PLAN

                             ----------------------

                             DEFERRAL ELECTION FORM

                             ----------------------

      AGREEMENT, made this __ day of ________, ____, by and between me,
(_______________), in my individual capacity as a participant or potential
participant in the Glacier Bancorp, Inc. 2005 Deferred Compensation Plan (the
"Plan"), and Glacier Bancorp, Inc. (the "Company"), in its settlor capacity as
sponsor of the Plan. The parties agree that any term that begins herein with
initial capital letters shall have the special meaning defined in the plan,
unless the context clearly requires otherwise.

      WHEREAS, I understand that terms herein that begin with initial capital
letters will have the defined meaning set forth in the Plan (unless the context
clearly indicates a different meaning).

      NOW THEREFORE, it is mutually agreed as follows:

      1. By the execution hereof, I agree to participate in the Plan upon the
terms and conditions set forth therein, and, in accordance therewith, make the
elections set forth herein effective -

      ___   on the January 1st that follows the Board's acceptance of my
            Deferral Election Form and Distribution Election Form.

      ___   on the first day of the next calendar month, but only if the Board
            accepts my Deferral Election Form and Distribution Election Form
            within the 30-day period after I first become eligible for Plan
            participation.

      2. For the duration of this election (as determined under Section 3
below), I hereby elect to defer the receipt of the following percentage of cash
bonus and director fees that the Company will withhold and credit to my Account
pursuant to the Plan:

      ___%  of any salary that I receive.

      ___%  of any cash bonuses that I receive.

      ___%  of any director fees that I receive.

      3. I recognize and agree that this election will remain in effect
indefinitely, until the earlier of (a) the date on which my service with the
Company terminates, (b) the date on which the Board receives a written notice in
which I terminate this election, and (c) the effective date of a superseding
election made using election forms acceptable to the Board.

      4. By the execution hereof, I further recognize and agree to participate
in the Plan upon the terms and conditions set forth therein, including but not
limited to the following terms:

      (a)   This election is irrevocable with respect to any cash bonus,
            director fee or salary that is deferred during the term of this
            agreement.

      (b)   Unless made in bad faith, any decisions of the Administrator with
            respect to the operation, interpretation, or administration of the
            Plan or my Account will be final and binding on me and all other
            interested parties.

      IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.

Witnessed by:                         PARTICIPANT

___________________________           ________________________________

Witnessed by:                         GLACIER BANCORP, INC.

__________________________            By_____________________________________
                                        A member of the Board of Directors

                                    EXHIBIT B
                              GLACIER BANCORP, INC.
                         2005 DEFERRED COMPENSATION PLAN

                           --------------------------

                           DISTRIBUTION ELECTION FORM

                           --------------------------

      AGREEMENT, made this __ day of ________, ____, by and between me,
(_______________), in my individual capacity as a participant or potential
participant in the Glacier Bancorp, Inc. 2005 Deferred Compensation Plan (the
"Plan"), and Glacier Bancorp, Inc. (the "Company"), in its settlor capacity as
sponsor of the Plan. The parties agree that any term that begins herein with
initial capital letters shall have the special meaning defined in the plan,
unless the context clearly requires otherwise.

      NOW THEREFORE, it is mutually agreed as follows:

      1. Timing of Payment. If I elected to receive my Accounts in substantially
equal annual payments in Section 1, I direct that my Accounts begin to be
distributed to me as follows (but not earlier than six (6) months after I cease
service with the Company):

            [ ]   on the January 1st that next follows the date that is ___
                  years (not more than 10) after I cease service service with
                  the Company.

            [ ]   on the ____ (not more than 5th) anniversary after I cease
                  service with the Company.

            [ ]   on the first date of the month next following my 72nd
                  birthday.

            [ ]   the later of (I) the calendar year immediately following the
                  year in which I cease service with the Company, and (II) the
                  following date: ___________ ___, _____ (not later than the
                  date on which the Participant will attain age 72).

            [ ]   On the date of a Change in Control.

I recognize and agree that notwithstanding my election above, I shall not
receive any distribution from the Plan within the six-month period following the
date on which I cease service with the Company if the Board acting without my
voting or participation determines that earlier payment would violate Section
409A(a)(2)(B)(i) of the Code.

      2. Form of Payment Generally. By the execution hereof, I agree to
participate in the Plan, upon the terms and conditions set forth therein, and,
in accordance therewith, elect to have my Account distributed in cash or in the
form of a check as follows:

            [ ]   in a lump sum.

            [ ]   in substantially equal annual payments over a period of ___
                  years (not to exceed 10 years from the date my service with
                  the Company terminates).

      3. Form of Payment to Beneficiary. In the event of my death, my Account
shall be distributed --

            [ ]   in one lump sum payment within ninety (90) days following my
                  death.

            [ ]   in accordance with the payment schedule selected in Sections 1
                  and 2 hereof (with payments made as though I survived to
                  collect all benefits, and as though I terminated service on
                  the date of my death, if payments had not already begun).

      4. Designation of Beneficiary. In the event of my death before I have
collected all of the benefits payable under the Plan, I hereby direct that any
remaining benefits payable under the Plan be distributed to the beneficiary or
beneficiaries designated under subparagraphs a and b of this Section 4 in the
manner elected pursuant to Section 3 above:

      a. Primary Beneficiary. I hereby designate the person(s) named below to be
my primary beneficiary and to receive the balance of any unpaid benefits under
the Plan.

      Name of           Social Security                       Percentage of
Primary Beneficiary         Number         Mailing Address    Death Benefit
- -------------------     ---------------    ---------------    -------------
                                                     
                                                                    %

                                                                    %

      b. Contingent Beneficiary. In the event that the primary beneficiary or
beneficiaries named above are not living at the time of my death, I hereby
designate the following person(s) to be my contingent beneficiary for purposes
of the Plan:

        Name of         Social Security                       Percentage of
Contingent Beneficiary      Number         Mailing Address    Death Benefit
- ----------------------  ---------------    ---------------    -------------
                                                     
                                                                    %

                                                                    %

      5.    Effect of Election. The elections made in paragraphs 1 and 2 hereof
            shall apply -

            [ ]   to any deferred compensation that is deferred pursuant to the
                  deferral election to which this election relates.

            [ ]   to the entire value of my Account, provided that these
                  elections may only be changed at least one year in advance of
                  the earliest date on which payments would otherwise commence
                  pursuant to paragraph 2 hereof, and may only

                  be changed pursuant to an election that conforms with the
                  requirements set forth in Article IV(a) of the Plan.

      With respect to the elections in paragraphs 3 and 4 hereof, I recognize
that I may, by submitting an effective superseding Distribution Election Form at
any time and from time to time, prospectively change the beneficiary designation
and the manner of payment to a Beneficiary. Such elections shall, however,
become irrevocable upon my death.

      6. Mutual Commitments. The Company agrees to make payment of all amounts
due to me in accordance with the terms of the Plan and the elections I make
herein. I agree to be bound by the terms of the Plan, as in effect on the date
hereof or properly amended hereafter.

      7. Tax Responsibility. I recognize and agree that I am solely responsible
for the satisfaction of any taxes that may arise under the Plan, (including any
taxes arising under Sections 409A or 4999 of the Code), and that neither the
Company nor any of its employees, officers, directors, or service providers has
any right or obligation to provide me with tax planning advice, or to structure
the terms of the Plan or any payments to me in a manner that mitigates my tax
liability. It being understood that I should seek and rely on personal,
professional tax advice with respect to the Plan and its tax consequences to me,
I agree to hold each and every one of them harmless against all loss of any kind
(including attorneys fees they incur) with respect to any claim that I make with
respect to my participation in the Plan and my collection of benefits from the
Plan.

      IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.

Witnessed by:                          PARTICIPANT

________________________________       ________________________________

Witnessed by:                          GLACIER BANCORP, INC.

________________________________       By____________________________________
                                         A member of the Board of Directors

                                    EXHIBIT C
                              GLACIER BANCORP, INC.
                         2005 DEFERRED COMPENSATION PLAN

                   -------------------------------------------

                   SPECIAL DISTRIBUTION ELECTION FORM FOR 2005

                   -------------------------------------------

      AGREEMENT, made effective this __ day of ____________, 2005, by and
between me, (_______________________), in my individual capacity as a
participant or potential participant in the Glacier Bancorp, Inc. 2005 Deferred
Compensation Plan (the "Plan"), and Glacier Bancorp, Inc. (the "Company"), in
its settlor capacity as sponsor of the Plan. The parties agree that any term
that begins herein with initial capital letters shall have the special meaning
defined in the plan, unless the context clearly requires otherwise.

      WHEREAS, I participated in the Plan prior to January 1, 2005, had a
positive Account as of December 31, 2004, and am currently a participant in the
Plan;

      WHEREAS, value of my Account was $___________ as of _______________ ___,
2005;

      WHEREAS, in accordance with Article IX of the Plan, I desire to collect
the amount of my Account designated below, and I understand the terms,
conditions, and tax consequences arising from my election herein;

      WHEREAS, I recognize and agree that, by making this election, the entire
value of my Account will become subject to the terms, conditions, and potential
imposition of taxes that are provided for in Section 409A of the Code.

      NOW THEREFORE, it is mutually agreed as follows:

      1. Form of Payment Generally. By the execution hereof, I elect volntarily
to terminate participation in the Plan with respect $_______________ that is
currently credited to my Account.

      2. Taxable Income in 2005. I recognize and agree that the payment that the
Company makes to me pursuant to Section 1 above will be made in 2005, will
reduce the value of my Account, and will be reported to me as taxable income for
services rendered in 2005, and will be subject to applicable employment taxes
and tax withholding.

      3. Tax Responsibility. I recognize and agree that I am solely responsible
for the satisfaction of any federal, state, or local taxes that may arise under
the Plan, (including any taxes arising under Sections 409A or 4999 of the Code),
and that neither the Company nor any of its employees, officers, directors, or
service providers has any right or obligation to provide me with tax planning
advice, or to structure the terms of the Plan or any payments to me in a manner
that mitigates my tax liability.

      It being understood that I should seek and rely on personal, professional
tax advice with respect to the Plan and its tax consequences to me, I agree to
hold each and every one of them harmless against all loss of any kind (including
attorneys fees they incur) with respect to any claim that I make with

respect to my participation in the Plan and my collection of benefits from the
Plan.

      4. I further understand that the representations, covenants, and
commitments set forth herein are irrevocable and binding, and that this
Agreement, and the Plan, set forth the entire agreement between the parties with
respect to any subject matter covered herein.

    ACCEPTED AND AGREED TO this ________ day of ______________, 20___.

                      Participant's Signature: __________________________

                      Participant's Name (printed): _________________________

    ACCEPTED AND AGREED TO this ________ day of ______________, 20___.

                      Glacier Bancorp, Inc.

                      By __________________________________________________
                      A duly authorized Member of the Board of Directors

                                                                   EXHIBIT 10(h)

                              GLACIER BANCORP, INC.
                   SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
                  (AMENDED AND RESTATED AS OF JANUARY 1, 2005)

      This Agreement entered into as of this _____day of ____________, 20____ by
and between Glacier Bancorp, Inc. (the "Company")
and _____________________________________________________________________ (the
"Executive"), shall constitute the entire agreement between the parties
identified hereto, and shall supersede and nullify the Supplemental Executive
Retirement Agreement dated _________ ___, 19__ between the Company and the
Executive.

            WHEREAS, the Executive currently is employed as a senior executive
      officer of the Company, is expected to continue in this capacity, and is
      subject to having his or her annual allocations under the Company's tax
      qualified retirement plans reduced due to (i) applicable federal tax laws,
      and/or (ii) his participation in the Company's 2005 Deferred Compensation
      Plan; and

                  WHEREAS, the Company desires to retain the services of the
      Executive to the Company and its subsidiaries ("Glacier"), and as such
      wishes to provide the Executive with supplemental retirement income as a
      means to restore lost accruals under Glacier's tax-qualified retirement
      plans.

                  NOW, THEREFORE, in consideration of the foregoing, the mutual
      covenants and agreements hereinafter contained, and other good and
      valuable consideration, receipt of which is hereby acknowledged, the
      parties hereto agree to this Agreement as follows:

                                    ARTICLE I
                                   DEFINITIONS

                  "Account" shall mean the bookkeeping account maintained by the
      Company to which annual contributions by the Company will be credited
      according to the terms of this Agreement.

                  "Agreement" shall mean this agreement between the Executive
      and the Company.

                  "Annual Addition" shall have the meaning set forth in Section
      415 of the Code and any regulations thereunder.

                  "Beneficiary" shall mean the person or persons designated by
      the Executive to receive any benefits payable under the Agreement in the
      event of the Executive's death. Such person or persons shall be designated
      in writing on an Election Form provided for this purpose by the Company's
      Board of Directors, and may be changed from time to time by similar
      written notice. In the absence of a written designation, the Beneficiary
      shall be the Participant's surviving spouse, if any or if none, his
      estate.

                  "Benefits" shall mean, collectively, the benefits payable
      under Articles II

      and III of the Agreement.

                  "Change in Control" is defined in the Employment Agreement,
      and shall be defined in the same manner for purposes of this Agreement.
      Any amendment to said Employment Agreement that modifies this definition
      shall be deemed to apply with equal force, effect, and timing to the
      definition of Change in Control for purposes of this Agreement, except
      that a modification that may adversely affect a Participant shall be
      ineffectual as to the Executive unless he consents in writing to be bound
      by the modification.

                  "Code" shall mean the Internal Revenue Code of 1986, as
      amended.

                  "Company" shall mean Glacier Bancorp, Inc.

                  "Compensation" shall mean the amount of W-2 earnings paid to
      the Executive by the Company (plus any amounts withheld from the Executive
      under a 401(k) Plan or cafeteria plan sponsored by the Company) within a
      Plan Year

                  "Deferred Compensation Plan" shall mean the Company's 2005
      Deferred Compensation Plan, as such plan may be amended from time to time.

                  "Disability" shall have the meaning set forth in, and be
      determined in accordance with, Section 9(b) of the Employment Agreement.

      "Election Form" shall mean the Supplemental Executive Retirement Agreement
Election Form (substantially in the form attached hereto as Exhibit A). by which
the Executive identifies a Beneficiary and method of distribution of the balance
of the Executive's Account described herein. In the absence, at any time, of a
duly executed Election Form, the distribution election form applicable to the
Executive's account under the Deferred Compensation Plan shall apply to the
Executive's Account under this Agreement (to the extent such election is
reasonably applicable).

                  "Employment Agreement" shall mean the Executive's employment
      agreement with the Company, as such agreement may be amended from time to
      time.

                  "Executive" shall mean _______________________________.

                  "Just Cause" shall have the meaning set forth in, and be
      determined in accordance with the Employment Agreement.

      "Plan Year" shall mean the calendar year, with the first Plan Year of the
restated Plan being calendar year 2005.

                  "Tax-qualified Plan" shall mean any plan that is both
      maintained by the Company or a member of its controlled group and intended
      to qualify under Section 401 of the Code (whether or not the plan so
      qualifies).

                                   ARTICLE II
                      RETIREMENT BENEFITS FOR THE EXECUTIVE

                  As of the close of each Plan Year, the Company will credit to
      the Executive's Account an amount equal to the difference between -

      (i)   the employer contributions that would have been allocated to the
            Executive's accounts under the Tax-qualified Plans if not for either
            the limitations imposed by Section 401 of the Code or the
            Executive's participation in the Deferred Compensation Plan, and

      (ii)  the Annual Additions actually credited to the Executive under the
            Tax-qualified Plans.

                  For each Plan Year ending before 2005, the amount credited to
      the Executive's Account shall appreciate or depreciate in accordance with
      the investment measure selected by the Executive in an Election Form,
      executed in a Plan Year ending before 2005.

                  As of the end of each Plan Year ending after 2004, the
      Executive's Account shall be credited with a rate of return (which may be
      positive or negative) equal to fifty percent (50%) of the
      return-on-average-equity of common stock issued by Glacier Bancorp, Inc.,
      as of December 31 of the Company's most recently-completed fiscal year.

                  The Executive's Account balance shall be paid to the Executive
      in five substantially equal annual installments, with the first
      installment due on the first day of the second month after he leaves
      employment, unless during 2005 and before the Executive leaves employment
      with the Company for any reason, the Executive has elected an alternative
      form for distribution pursuant to an Election Form executed and accepted
      by the Company, in which case the Executive shall be paid in cash or in
      the form of a check as follows:

      1.    in a lump sum; or

      2.    in substantially equal annual payments over a period of ___years
            (not to exceed 10 years from the date the Executive ceases service
            with the Company).

                  Notwithstanding the foregoing, but only to the extent required
      under federal banking law, the amount payable hereunder shall be reduced
      to the extent that on the date of the Executive's termination of
      employment such reduction is necessary to avoid subjecting the Company to
      liability under Section 280G of the Code. In addition, any payments made
      to the Executive pursuant to this Agreement, or otherwise, are subject to
      and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and
      any regulations promulgated thereunder.

                                   ARTICLE III
                                 DEATH BENEFITS

                  Unless otherwise elected by the Executive in an Election Form
      filed in 2005 and before the Executive terminates employment with the
      Company for any reason, in the event that the Executive dies before
      receiving all benefit payments provided under Article II hereof, the
      Company shall pay to the Executive's Beneficiary a lump sum payment,
      within 60 days following the Executive's death, in an amount equal to the
      balance of the Executive's Account.

                                   ARTICLE IV

                               SOURCE OF BENEFITS

                  The primary source of Benefits shall be the general assets of
      the Company. However, the Company may establish and fund an irrevocable
      trust (subject to Article VIII and having terms consistent therewith),
      whereby assets of the Company will be held by such trust pursuant to such
      Trust Agreement, subject to claims by general creditors of the Company by
      appropriate judicial action as provided by such Trust. Any insurance
      policy or any other asset acquired or held by the Company in connection
      with the liabilities assumed by it hereunder, shall not be deemed to be
      held under any trust for the benefit of the Executive or his surviving of
      the Company, but shall be, and remain, a general, unpledged, unrestricted
      asset of the Company. Neither Executive nor his Beneficiary shall be named
      as owner of any insurance policy, if any, held in connection with the
      liabilities hereunder.

                  The trustee of the trust established hereunder shall inform
      the Board annually prior to the commencement of each fiscal year as to the
      manner in which trust assets shall be invested. In the event that funds
      from the trust are at any time insufficient to pay Benefits, the
      obligation to pay Benefits shall constitute an unfunded, unsecured promise
      by the Company to provide such payments as and to the extent such Benefits
      become payable. In such case, Benefits shall be paid from the general
      assets of the Company, and no person shall, by virtue of this Agreement,
      have any interest in such assets (other than as an unsecured creditor of
      the Company).

                                    ARTICLE V
                                   ASSIGNMENT

                  Except as otherwise is provided by this Agreement, it is
      agreed that neither the Executive nor any Beneficiary of the Executive
      shall have any right to commute, sell, assign, transfer, encumber and
      pledge or otherwise convey the right to receive any Benefits hereunder,
      which Benefits and the rights thereto are expressly declared to be
      nonassignable and nontransferable.

                                   ARTICLE VI
                            NO RETENTION OF SERVICES

      The Benefits payable under this Agreement shall be independent of, and in
addition to, any other employment agreement that may exist from time to time
between the parties hereto, or any other compensation payable by the Company to
the Executive, whether salary, bonus, retirement income under employee benefit
plans sponsored or maintained by the Company, or otherwise. This Agreement shall
not restrict the right of the Company to terminate the Executive's employment,
or restrict the right of the Executive to terminate employment.

                                   ARTICLE VII
                        UNSECURED RIGHTS OF THE EXECUTIVE

      The rights of the Executive and of his Beneficiary under this Agreement
shall be solely those of an

unsecured creditor of the Company.

                                  ARTICLE VIII
                               CHANGE IN CONTROL;
                          OR TERMINATION FOR JUST CAUSE

      The provisions of this Article shall supersede any provisions of this
Agreement to the contrary. At any time before but not more than five business
days after a Change in Control, the Company shall contribute to Trust associated
with the Agreement (the "Trust") an amount equivalent to the aggregate amount
payable to the Executive pursuant to this Agreement, which amount would then be
used to assist the Company in making eventual payment to the Executive under the
terms and conditions of the Agreement. The Trust and any assets held therein to
assist the Company in meeting its obligations under the Agreement will conform
to the provisions of the model trust, as described in Revenue Procedure 92-64
(or any successor thereto). It is the intention of the parties that the
Agreement be unfunded for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended. Subsequent to the
Change in Control, the Company shall continue to be obligated to provide for
Benefits pursuant to Article II hereof, which additional Benefits shall be
payable pursuant to Articles II and III hereof.

      In the event of the Executive's termination of employment for Just Cause,
no Benefits shall be payable hereunder, and the Company shall have no further
obligations hereunder, unless and to the extent that the Company determines, in
its sole and absolute discretion, to the contrary.

                                   ARTICLE IX
                                 REORGANIZATION

      The Company agrees that it will not merge or consolidate with any other
corporation organization, or permit its business activities to be taken over by
any other organization, unless and until the succeeding or continuing
corporation or other organization shall expressly assume the rights and
obligations of the Company herein set forth. The Company further agrees that it
will not cease its business activities or terminate its existence, other than as
heretofore set forth in this paragraph, without having made adequate provision
for the fulfillment of its obligation hereunder.

                                    ARTICLE X
                                   AMENDMENTS

This Agreement may be revoked or be amended in whole or in part only by a
writing signed by all of the parties hereto.

                                   ARTICLE XI
                                    STATE LAW

This Agreement shall be construed and governed in all respects under and by the
laws of the State of Montana, except to the extent preempted by federal law. If
any provision of this Agreement shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall

continue to be fully effective.

                                   ARTICLE XII
                                    HEADINGS

Heading and subheadings in this Agreement are inserted for convenience and
reference only and constitute no part of this Agreement.

                                  ARTICLE XIII
                                  COUNTERPARTS

This Agreement may be executed in an original and any number of counterparts,
each of which shall constitute an original of one and the same instrument.

                           ARTICLE XIV EFFECTIVE DATE

This Agreement shall become effective on the date identified in the Preamble
hereto, subject to such changes as the Company's Board of Directors may in its
discretion deem to be necessary or proper. Unless terminated earlier in
accordance with Article XVII, this Agreement shall remain in effect during the
term of employment of the Executive and until all benefits payable hereunder
have been made.

                                   ARTICLE XV
                         INTERPRETATION OF THE AGREEMENT

The Board of Directors of the Company shall have sole and absolute discretion to
administer, construe, and interpret the Agreement, and the decisions of the
Board shall be conclusive and binding on all affected parties (unless such
decisions are arbitrary and capricious).

                                   ARTICLE XVI
                             ARBITRATION OF DISPUTES

In the event that any dispute arises between the Executive and the Company as to
the terms or interpretation of this Agreement, said dispute shall be referred to
the American Arbitration Company, and the parties expressly consent to submit
said dispute to be so arbitrated. The decision of the American Arbitration
Company shall be final and binding on all the parties, and there shall be no
appeal therefrom.

                                  ARTICLE XVII
                            TERMINATION OF AGREEMENT

The Company and the Executive (or his Beneficiary, if the Executive is deceased)
may terminate this Agreement at any time in a writing executed by the parties.

                  IN WITNESS WHEREOF, the Company has caused this Agreement to
      be signed in its corporate name by its duly authorized officer, impressed
      with its corporate seal, and properly attested to, and the Executive has
      hereto set his hand, all on the day and year first above written.

Witnessed by:                          EXECUTIVE

__________________________________     _________________________

Witnessed by:                          GLACIER BANCORP, INC.

________________________________       By____________________________________
                                         A member of the Board of Directors

                              GLACIER BANCORP, INC.
                2005 SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

                                  -------------

                                  ELECTION FORM

                                  -------------

      ELECTION, executed this __ day of ________, ____, by and between me,
(_______________), in my individual capacity as an Executive, and Glacier
Bancorp, Inc. (the "Company"), in its capacity as an Employer. This Election is
made pursuant to, and accordance with the provisions of the Supplemental
Executive Retirement Agreement, as amended and restated as of January 1, 2005,
(the "Agreement") that I executed with an authorized representative of the
Company on _______________ ___, 2005. The parties to this Election agree that
any term that begins herein with initial capital letters shall have the special
meaning defined in the Agreement, unless the context clearly requires otherwise.

      NOW THEREFORE, it is mutually agreed as follows:

      3. Timing of Payment. Subject to Section 7 below, I direct that the
Company commence distribute from my Account to me --

            [ ]   on the January 1st that next follows the date that is ___
                  years (not more than 5) after I cease service service with the
                  Company.

            [ ]   on the ____ (not more than 5th) anniversary after I cease
                  service with the Company.

            [ ]   on the first date of the month next following my 72nd
                  birthday.

            [ ]   the later of (I) the calendar year immediately following the
                  year in which I cease service with the Company, and (II) the
                  following date: ___________ ___, _____ (not later than the
                  date on which the Participant will attain age 72).

            [ ]   On the date of a Change in Control.

      2. Form of Payment Generally. By the execution hereof and in accordance
with the provisions of the Agreement, I elect to have my Account distributed in
cash or in the form of a check as follows:

            [ ]   in a lump sum.

            [ ]   in substantially equal annual payments over a period of ___
                  years (not to exceed 10 years from the date I cease service
                  with the Company).

         3. Form of Payment to Beneficiary. In the event of my death, my Account
shall be distributed as follows --

            [ ]   in one lump sum payment within sixty (60) days following my
                  death.

            [ ]   in accordance with the payment schedule selected in Sections 1
                  and 2 hereof (with payments made as though I survived to
                  collect all benefits, and as though I terminated service on
                  the date of my death, if payments had not already begun).

      4. Designation of Beneficiary. In the event of my death before I have
collected all of the benefits payable under the Agreement, I hereby direct that
any remaining benefits payable under the Agreement be distributed to the
beneficiary or beneficiaries designated under subparagraphs a and b of this
Section 4 in the manner elected pursuant to Section 3 above:

      c. Primary Beneficiary. I hereby designate the person(s) named below to be
my primary beneficiary and to receive the balance of any unpaid benefits under
the Agreement.

     Name of             Social Security                           Percentage of
Primary Beneficiary           Number        Mailing Address        Death Benefit
- -------------------      ---------------    ---------------        -------------
                                                          
                                                                         %

                                                                         %

      d. Contingent Beneficiary. In the event that the primary beneficiary or
beneficiaries named above are not living at the time of my death, I hereby
designate the following person(s) to be my contingent beneficiary for purposes
of the Agreement.

     Name of             Social Security                         Percentage of
Contingent Beneficiary       Number         Mailing Address      Death Benefit
- ----------------------   ---------------    ---------------      -------------
                                                        
                                                                       %

                                                                       %

      5. Effect of Election. The elections made in paragraphs 1 and 2 hereof
shall apply -

            [ ]   only to any amounts included in my Account to which the
                  Agreement relates.

            [ ]   to the entire value of my Account, provided that these
                  elections may only be changed at least one year in advance of
                  the earliest date on which payments would otherwise commence
                  pursuant to paragraph 2 hereof, and may only be changed
                  pursuant to an election that conforms with the requirements
                  set forth in Article IV(a) of the Plan.

      With respect to the elections in paragraphs 3 and 4 hereof, I recognize
that I may, by submitting an effective superseding Election Form at any time and
from time to time, prospectively change the beneficiary designation and the
manner of payment to a Beneficiary. Such elections shall, however, become
irrevocable upon my death.

      6. Mutual Commitments. The Company agrees to make payment of all amounts
due to me in accordance with the terms of the and the elections I make herein. I
agree to be bound by the terms of the Agreement, as in effect on the date
therein or properly amended hereafter.

      7. Tax Responsibility. I recognize and agree that notwithstanding my
elections above, the Board shall have the discretion to administer any
distribution pursuant to this Election, and to unilaterally modify any such
Election, in a manner that the Board reasonably determines to be necessary in
order to conform my distribution election with the requirements of Section 409A
of the Code. I recognize

and agree, however, that I am solely responsible for the satisfaction of any
federal, state, or local taxes of any kind that may arise under the Agreement,
(including any taxes arising under Sections 409A or 4999 of the Code), and that
neither the Company nor any of its employees, officers, directors, or service
providers has any right or obligation to provide me with tax planning advice, or
to structure the terms of the Agreement or any payments to me in a manner that
mitigates my tax liability. It being understood that I should seek and rely on
personal, professional tax advice with respect to the Agreement and its tax
consequences to me, I agree to hold each and every one of them harmless against
all loss of any kind (including attorneys fees they incur) with respect to any
claim that I make with respect to the Agreement, my elections herein, and my
collection of benefits pursuant to the Agreement.

      IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.

Witnessed by:                         EXECUTIVE

_______________________________       ________________________________

Witnessed by:                         GLACIER BANCORP, INC.

________________________________      By__________________________________
                                        A member of the Board of Directors

                                                                   EXHIBIT 10(i)

                              EMPLOYMENT AGREEMENT

           AGREEMENT between Mountain West Bank, ("Bank"), and Jon W.
         Hippler, ("Executive"), and ratified by Glacier Bancorp, Inc.
                                  ("Company"),

                                    RECITALS

A.    Mountain West Bank, ("Bank"), is a wholly owned subsidiary of Glacier
      Bancorp, Inc., ("Company").

B.    Executive is the President and Chief Executive Officer of the Bank and a
      director of the Bank.

C.    The Bank desires Executive to continue his employment at the Bank under
      the terms and conditions of this Agreement.
- -
D.    Executive desires to continue his employment at the Bank under the terms
      and conditions of this Agreement.

                                    AGREEMENT

1.    EMPLOYMENT. The Bank agrees to employ Executive and Executive accepts
      employment by the Bank on the terms and conditions set forth in this
      Agreement. Executive's title will be President and Chief Executive Officer
      of the Bank. During the term of this Agreement, Executive will serve as a
      director of the Bank.

2.    TERM. The term of this Agreement is for one year beginning January 1,
      2005.

3.    DUTIES. The Bank will employ Executive as its President and Chief
      Executive Officer. Executive will faithfully and diligently perform his
      assigned duties, which are as follows:

      (a)   Bank Performance. Executive will be responsible for all aspects of
            the Bank's performance, including without limitation, directing that
            daily operational and managerial matters are performed in a manner
            consistent with the Bank's and Company's policies.

      (b)   Development and Preservation of Business. Executive will be
            responsible for the development and preservation of banking
            relationships and other business development efforts (including
            appropriate civic and community activities) in Kootenai County.

      (c)   Report to Board. Executive will report directly to the Bank's board
            of directors and to the Chief Executive Officer of the Company. The
            Bank's board of directors may, from time to time, modify Executive's
            title or add, delete, or modify Executive's performance
            responsibilities to accommodate management succession, as well as
            any other management objectives of the Bank or of the Company.
            Executive will assume any additional positions, duties and
            responsibilities as may reasonably be requested of him with or
            without additional compensation, as appropriate and consistent with
            Sections 3(a) and 3(b) of this Agreement.

4.    EXTENT OF SERVICES. Executive will devote all of his working time,
      attention and skill to the duties and responsibilities set forth in
      Section 3. To the extent that such activities do not interfere with his
      duties under Section 3, Executive may participate in other businesses as a
      passive investor, but (a) Executive may not actively participate in the
      operation or management of those businesses, and (b) Executive may not,
      without the Bank's prior written consent, make or maintain any investment
      in a business with which the Bank or Company has an existing competitive
      or commercial relationship.

5.    SALARY. Executive will receive an annual salary of $190,000.00 to be paid
      in accordance with the Bank's regular payroll schedule.

6.    INCENTIVE COMPENSATION. During the Term, the Bank's board of directors,
      subject to ratification by Company's board of directors, will determine
      the amount of bonus to be paid by the Bank to Executive for that year. In
      making this determination, the Bank's board of directors will consider
      factors such as Executive's performance of his duties and the safety,
      soundness and profitability of the Bank. Executive's bonus will reflect
      Executive's contribution to the performance of the Bank during the year.
      This bonus will be paid to Executive no later than January 31 of the year
      following the year in which the bonus is earned by Executive.

7.    INCOME DEFERRAL. Executive will be eligible to participate in any program
      available to the Bank's and Company's senior management for income
      deferral, for the purpose of deferring receipt of any or all of the
      compensation he may become entitled to under this Agreement.

8.    VACATION AND BENEFITS.

      (a)   Vacation and Holidays. Executive will receive four weeks of paid
            vacation each year in addition to all holidays observed by the Bank.
            Executive may carry over, in the aggregate, up to four weeks of
            unused vacation to a subsequent year. Any unused vacation time in
            excess of four weeks will not accumulate or carry over from one
            calendar year to the next. Each calendar year Executive shall take
            not less than one (1) week vacation.

      (b)   Benefits. Executive will be entitled to participate in any group
            life insurance, disability, health and accident insurance plans,
            profit sharing and pension plans and in other employee fringe
            benefit programs the Bank or Company may have in effect from time to
            time for its similarly situated employees, in accordance with and
            subject to any policies adopted by the Bank's board of directors
            with respect to the plans or programs, including without limitation,
            any incentive or employee stock option plan, deferred compensation
            plan, 401(k) plan, and Supplemental Executive Retirement Plan
            (SERP). Neither the Bank nor Company, through this Agreement,
            obligate itself to make any particular benefits available to its
            employees.

      (c)   Business Expenses. The Bank will reimburse Executive for ordinary
            and necessary expenses which are consistent with past practice at
            the Bank (including, without limitation, travel, entertainment, and
            similar expenses) and which are incurred in performing and promoting
            the Bank's business. Executive will present from time to time
            itemized accounts of these expenses, subject to any limits of the
            Bank policy or the rules and regulations of the Internal Revenue
            Service.

9.    TERMINATION OF EMPLOYMENT.

      (a)   Termination by the Bank for Cause. If the Bank terminates
            Executive's employment for Cause (defined below) before this
            Agreement terminates, the Bank will pay Executive the salary earned
            and expenses reimbursable under this Agreement incurred through the
            date of his termination. Executive will have no right to receive
            compensation or other benefits for any period after termination
            under this Section 9(a).

      (b)   Other Termination by the Bank. If the Bank terminates Executive's
            employment without Cause before this Agreement terminates, or
            Executive terminates his employment for Good Reason (defined below),
            the Bank will pay Executive for the remainder of the Term the
            compensation and other benefits he would have been entitled to if
            his employment had not terminated.

      (c)   Death or Disability. This Agreement terminates (1) if Executive dies
            or (2) if Executive is unable to perform his duties and obligations
            under this Agreement for a period of 90 consecutive days as a result
            of a physical or mental disability arising at any time during the
            term of this Agreement, unless with reasonable accommodation
            Executive could continue to perform his duties under this Agreement
            and making these accommodations would not pose an undue hardship on
            the Bank. If termination occurs

            under this Section 9(c), Executive or his estate will be entitled to
            receive all compensation and benefits earned and expenses
            reimbursable through the date Executive's employment terminated.

      (d)   Termination Related to a Change in Control.

            (1)   Termination by Bank. If the Bank, or its successor in interest
                  by merger, or its transferee in the event of a purchase in an
                  assumption transaction (for reasons other than Executive's
                  death, disability, or Cause) (1) terminates Executive's
                  employment within one year following a Change in Control (as
                  defined below), or (2) terminates Executive's employment
                  before the Change in Control but on or after the date that any
                  party either announces or is required by law to announce any
                  prospective Change in Control transaction and a Change in
                  Control occurs within six months after the termination, the
                  Bank will provide Executive with the payment and benefits
                  described in Section 9(d)(3) below.

            (2)   Termination by Executive. If Executive terminates Executive's
                  employment, with or without Good Reason, within one year
                  following a Change in Control, the Bank will provide Executive
                  with the payment and benefits described in Section 9(d)(3).

            (3)   Payments. If Section 9(d)(1) or (2) is triggered in accordance
                  with its terms, the Bank will: (i) pay Executive in 12 monthly
                  installments in an amount equal to the Executive's annual
                  salary (determined as of the day before the date Executive's
                  employment was terminated) and (ii) maintain and provide for
                  one year following Executive's termination, at no cost to
                  Executive, the benefits described in Section 8(b) to which
                  Executive is entitled (determined as of the day before the
                  date of such termination); but if Executive's participation in
                  any such benefit is thereafter barred or not feasible, or
                  discontinued or materially reduced, the Bank will arrange to
                  provide Executive with either benefits substantially similar
                  to those benefits or a cash payment of substantially similar
                  value in lieu of the benefits.

      (e)   Limitations on Payments Related to Change in Control. The following
            apply notwithstanding any other provision of this Agreement:

            (1)   the total of the payments and benefits described in Section
                  9(d)(3) will be less than the amount that would cause them to
                  be a "parachute payment" within the meaning of Section
                  280G(b)(2)(A) of the Internal Revenue Code;

            (2)   the payment and benefits described in Section 9(d)(3) will be
                  reduced by any compensation (in the form of cash or other
                  benefits) received by Executive from the Bank or its successor
                  after the Change in Control; and

            (3)   Executive's right to receive the payments and benefits
                  described in Section 9(d)(3) terminates (i) immediately if
                  before the Change in Control transaction closes, Executive
                  terminates his employment without Good Reason, or the Bank
                  terminates Executive's employment for Cause, or (ii) one year
                  after a Change of Control occurs.

      (f)   Return of Bank Property. If and when Executive ceases, for any
            reason, to be employed by the Bank, Executive must return to the
            Bank all keys, pass cards, identification cards and any other
            property of the Bank. At the same time, Executive also must return
            to the Bank all originals and copies (whether in memoranda, designs,
            devices, diskettes, tapes, manuals, and specifications) which
            constitute proprietary information or material of the Bank. The
            obligations in this paragraph include the return of documents and
            other materials which may be in his desk at work, in his car, in
            place of residence, or in any other location under his control.

      (g)   Cause. "Cause" means any one or more of the following:

            (1)   Willful misfeasance or gross negligence in the performance of
                  Executive's duties;

            (2)   Conviction of a crime in connection with his duties;

            (3)   Conduct demonstrably and significantly harmful to the Bank, as
                  reasonably determined on the advice of legal counsel by the
                  Bank's board of directors; or

            (4)   Permanent disability, meaning a physical or mental impairment
                  which renders Executive incapable of substantially performing
                  the duties required under this Agreement, and which is
                  expected to continue rendering Executive so incapable for the
                  reasonably foreseeable future.

      (h)   Good Reason. "Good Reason" means only any one or more of the
            following:

            (1)   Reduction of Executive's salary or reduction or elimination of
                  any compensation or benefit plan benefiting Executive, unless
                  the reduction or elimination is generally applicable to other
                  executive officers within the Company (or executive officers
                  of a successor or controlling entity of the Bank) formerly
                  benefitted;

            (2)   The assignment to Executive without his consent of any
                  authority or duties materially inconsistent with Executive's
                  position as of the date of this Agreement;

            (3)   The material breach of this Agreement by the Bank, or

            (4)   A relocation or transfer of Executive's principal place of
                  employment outside Kootenai County, Idaho.

      (i)   Change in Control. "Change in Control" means a change "in the
            ownership or effective control" or "in the ownership of a
            substantial portion of the assets" of the Bank, within the meaning
            of Section 280G of the Internal Revenue Code.

10.   CONFIDENTIALITY. Executive will not, after the date this Agreement was
      signed, including during and after its Term, use for his own purposes or
      disclose to any other person or entity any confidential business
      information concerning the Bank or its business operations, unless (1) the
      Bank consents to the use or disclosure of confidential information; (2)
      the use or disclosure is consistent with Executive's duties under this
      Agreement, or (3) disclosure is required by law or court order. For
      purposes of this Agreement, confidential business information includes,
      without limitation, trade secrets (as defined under the Montana Uniform
      Trade Secrets Act, Montana CodeSection 30-14-402), various confidential
      information on investment management practices, marketing plans, pricing
      structure and technology of either the Bank or Company. Executive will
      also treat the terms of this Agreement as confidential business
      information.

11.   NONCOMPETITION. During the Term and the terms of any extensions or
      renewals of this Agreement and for a period equal to one year after
      Executive's employment with the Bank and Company has terminated, Executive
      will not, directly or indirectly, as a shareholder, director, officer,
      employee, partner, agent, consultant, lessor, creditor or otherwise:

      (a)   provide management, supervisory or other similar services to any
            person or entity engaged in any business in counties in which the
            Bank or Company may have a presence which is competitive with the
            business of the Bank or Company or a subsidiary as conducted during
            the term of this Agreement or as conducted as of the date of
            termination of employment, including any preliminary steps
            associated with the formation of a new bank.

      (b)   persuade or entice, or attempt to persuade or entice any employee of
            the Bank or Company or a subsidiary to terminate his/her employment
            with the Bank or a subsidiary.

      (c)   persuade or entice or attempt to persuade or entice any person or
            entity to terminate, cancel, rescind or revoke its business or
            contractual relationships with the Bank or Company.

12.   ENFORCEMENT.

      (a)   The Bank and Executive stipulate that, in light of all of the facts
            and circumstances of the relationship between Executive and the
            Bank, the agreements referred to in Sections 10 and 11 (including
            without limitation their scope, duration and geographic extent) are
            fair and reasonably necessary for the protection of the Bank's and
            Company's confidential information, goodwill and other protectable
            interests. If a court of competent jurisdiction should decline to
            enforce any of those covenants and agreements, Executive and the
            Bank request the court to reform these provisions to restrict
            Executive's use of confidential information and Executive's ability
            to compete with the Bank and Company to the maximum extent, in time,
            scope of activities and geography, the court finds enforceable.

      (b)   Executive acknowledges the Bank and Company will suffer immediate
            and irreparable harm that will not be compensable by damages alone
            if Executive repudiates or breaches any of the provisions of
            Sections 10 or 11 or threatens or attempts to do so. For this
            reason, under these circumstances, the Bank, in addition to and
            without limitation of any other rights, remedies or damages
            available to it at law or in equity, will be entitled to obtain
            temporary, preliminary and permanent injunctions in order to prevent
            or restrain the breach, and the Bank will not be required to post a
            bond as a condition for the granting of this relief.

13.   COVENANTS. Executive specifically acknowledges the receipt of adequate
      consideration for the covenants contained in Sections 10 or 11 and that
      the Bank is entitled to require him to comply with these Sections. These
      Sections will survive termination of this Agreement. Executive represents
      that if his employment is terminated, whether voluntarily or
      involuntarily, Executive has experience and capabilities sufficient to
      enable Executive to obtain employment in areas which do not violate this
      Agreement and that the Bank's enforcement of a remedy by way of injunction
      will not prevent Executive from earning a livelihood.

14.   ARBITRATION.

      (a)   Arbitration. At either party's request, the parties must submit any
            dispute, controversy or claim arising out of or in connection with,
            or relating to, this Agreement or any breach or alleged breach of
            this Agreement, to arbitration under the American Arbitration
            Association's rules then in effect (or under any other form of
            arbitration mutually acceptable to the parties). A single arbitrator
            agreed on by the parties will conduct the arbitration. If the
            parties cannot agree on a single arbitrator, each party must select
            one arbitrator and those two arbitrators will select a third
            arbitrator. This third arbitrator will hear the dispute. The
            arbitrator's decision is final (except as otherwise specifically
            provided by law) and binds the parties, and either party may request
            any court having jurisdiction to enter a judgment and to enforce the
            arbitrator's decision. The arbitrator will provide the parties with
            a written decision naming the substantially prevailing party in the
            action. This prevailing party is entitled to reimbursement from the
            other party for its costs and expenses, including reasonable
            attorneys' fees.

      (b)   Governing Law. All proceedings will be held at a place designated by
            the arbitrator in Flathead County, Montana. The arbitrator, in
            rendering a decision as to any state law claims, will apply Montana
            law.

      (c)   Exception to Arbitration. Notwithstanding the above, if Executive
            violates Section 10 or 11, the Bank will have the right to initiate
            the court proceedings described in Section 12(b), in lieu of an
            arbitration proceeding under this Section 14.

15.   MISCELLANEOUS PROVISIONS.

      (a)   Entire Agreement. This Agreement constitutes the entire
            understanding and agreement between the parties concerning its
            subject matter and supersedes all prior agreements, correspondence,
            representations, or understandings between the parties relating to
            its subject matter.

      (b)   Binding Effect. This Agreement will bind and inure to the benefit of
            the Bank's and Executive's heirs,

            legal representatives, successors and assigns.

      (c)   Litigation Expenses. If either party successfully seeks to enforce
            any provision of this Agreement or to collect any amount claimed to
            be due under it, this party will be entitled to reimbursement from
            the other party for any and all of its out-of-pocket expenses and
            costs including, without limitation, reasonable attorneys' fees and
            costs incurred in connection with the enforcement or collection.

      (d)   Waiver. Any waiver by a party of its rights under this Agreement
            must be written and signed by the party waiving its rights. A
            party's waiver of the other party's breach of any provision of this
            Agreement will not operate as a waiver of any other breach by the
            breaching party.

      (e)   Assignment. The services to be rendered by Executive under this
            Agreement are unique and personal. Accordingly, Executive may not
            assign any of his rights or duties under this Agreement.

      (f)   Amendment. This Agreement may be modified only through a written
            instrument signed by both parties and ratified by the Company.

      (g)   Severability. The provisions of this Agreement are severable. The
            invalidity of any provision will not affect the validity of other
            provisions of this Agreement.

      (h)   Governing Law and Venue. This Agreement will be governed by and
            construed in accordance with Montana law, except to the extent that
            certain regulatory matters may be governed by federal law. The
            parties must bring any legal proceeding arising out of this
            Agreement in Flathead County, Montana.

      (i)   Counterparts. This Agreement may be executed in one or more
            counterparts, each of which shall be deemed to be an original, but
            all of which taken together will constitute one and the same
            instrument.

      Signed this 21st day of January, 2005.

                                                MOUNTAIN WEST BANK

                                                /s/ Charles R. Nipp
                                                --------------------------
                                                Charles R. Nipp, Chairman

Attest: By:

/s/ Kim Jacklin
- -----------------------
Kim Jacklin, Secretary

                                                EXECUTIVE

                                                /s/ Jon W. Hippler
                                                ----------------------
                                                Jon W. Hippler

GLACIER BANCORP, INC.

/s/ Michael J. Blodnick
- ------------------------
Michael J. Blodnick
President/CEO

                                                                      EXHIBIT 23

            Consent of Independent Registered Public Accounting Firm

The Board of Directors
Glacier Bancorp, Inc.:

We consent to incorporation by reference in the registration statements
(No. 333-36514, No. 333-105995, No. 333-52498 and No.333-64924) on Forms
S-8 of our reports dated March 15, 2005 relating to the consolidated statements
of financial condition of Glacier Bancorp, Inc. and subsidiaries as of
December 31, 2004 and 2003 and the related consolidated statements of
operations, stockholders' equity and comprehensive income, and cash flows for
each of the years in the three-year period ended December 31, 2004, management's
assessment of the effectiveness of internal control over financial reporting as
of December 31, 2004 and the effectiveness of internal control over financial
reporting as of December 31, 2004 which reports appear in the December 31, 2004
annual report on Form 10-K of Glacier Bancorp, Inc.

/s/ KPMG

Billings, Montana
March 15, 2005

                                                                    EXHIBIT 31.1

I, Michael J. Blodnick, certify that:

1.    I have reviewed this annual report on Form 10-K of Glacier Bancorp, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

      (c)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      (d)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the registrant's auditors and the audit committee of the registrant's
      board of directors (or persons performing the equivalent functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

                                                March 15, 2005

                                                /s/ Michael J. Blodnick
                                                ------------------------
                                                Michael J. Blodnick
                                                President/CEO

                                                                    EXHIBIT 31.2

I, James H. Strosahl, certify that:

1.    I have reviewed this annual report on Form 10-K of Glacier Bancorp, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

      (c)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      (d)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the registrant's auditors and the audit committee of the registrant's
      board of directors (or persons performing the equivalent functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

                                                March 15, 2005

                                                /s/ James H. Strosahl
                                                ----------------------------
                                                James H. Strosahl
                                                Executive Vice President/CFO

                                                                      EXHIBIT 32

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Glacier Bancorp, Inc. (the "Company") on
form 10-K for the period ended December 31, 2004, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), we, Michael J.
Blodnick, President and Chief Executive Officer, and James H. Strosahl,
Executive Vice President and Chief Financial Officer, of Glacier Bancorp, Inc.,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

      (1)   The Report fully complies with the requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
            78o(d)); and

      (2)   The information contained in the Report fairly presents, in all
            material respects, the financial condition and results of operations
            of the Company.

A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.

                                                March 15, 2005

                                                /s/ Michael J. Blodnick
                                                --------------------------
                                                Michael J. Blodnick
                                                President/CEO

                                                /s/ James H. Strosahl
                                                --------------------------
                                                James H. Strosahl
                                                Executive Vice President/CFO