Table of Contents
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20522 
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, 2002 or 
 	 	 	
[ ]	 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934	
COMMISSION FILE 000-18911 
GLACIER BANCORP, INC. 
 	 	 	
DELAWARE
(State of Incorporation)	 	81-0519541
(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. [ ] 
As of March 10, 2003, there were issued and outstanding 17,441,105 shares of the Registrant’s common stock. No preferred shares are issued or outstanding. 
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 28, 2002 (the last business day of the most recent second quarter), was $388,474,401 (based on the average bid and ask price as quoted on the Nasdaq National Market at the close of business on that date). 
Document Incorporated by Reference 
Portions of the 2003 Annual Meeting Proxy Statement dated March 28, 2003 are incorporated by reference into Part III of this Form 10-K. 
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TABLE OF CONTENTS
									
PART I.	
	Item 1. Business	
	Item 2. Properties	
	Item 3. Legal Proceedings	
	Item 4. Submission of Matter to a Vote of Security Holders	
PART II	
	Item 5. Market Price of and Dividends on Registrant’s Common Equity & Related Stockholder Matters	
	Item 6. Selected Financial Data	
	Critical Accounting Policies	
	Item 7a. Quantitative and Qualitative Disclosures about Market Risk	
	Item 8. Financial Statements and Supplementary Data	
PART III	
	Item 9. Changes in and disagreements with Accountants on Accounting and Financial Disclosure	
	Item 10. Directors and Executive Officers of the Registrant	
	Item 11. Executive Compensation	
	Item 12. Security Ownership of Certain Beneficial Owners and Management	
	Item 13. Certain Relationships and Related Transactions	
	Item 14. Disclosure of Controls and Procedures	
PART IV	
	Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K	
SIGNATURES	
EXHIBIT 10.(B)	
EXHIBIT 10.(C)	
EXHIBIT 10.(D)	
EXHIBIT 10.(I)	
EXHIBIT 23	
EXHIBIT 99	

Table of Contents
GLACIER BANCORP, INC.
FORM 10-K ANNUAL REPORT
For the year ended December 31, 2002
TABLE OF CONTENTS 
 	 	 	 	 	
 	 	 	 	Page	
 	 	 	 		
PART I.	 	 	 	 	
 	 	 	 	 	
Item 1.	 	Business 	 	3	
Item 2.	 	Properties 	 	19	
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 and Related Stockholder Matters 	 	20	
Item 6.	 	Selected Financial Data 	 	21	
Item 7.	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations 	 	22	
Item 7a.	 	Quantitative and Qualitative Disclosure about Market Risk 	 	31	
Item 8.	 	Financial Statements and Supplementary Data 	 	31	
 	 	 	 	 	
PART III.	 	 	 	 	
 	 	 	 	 	
Item 9.	 	Changes in and Disagreements with Accountants in Accounting and Financial Disclosures 	 	62	
Item 10.	 	Directors and Executive Officers of the Registrant 	 	62	
Item 11.	 	Executive Compensation 	 	62	
Item 12.	 	Security Ownership of Certain Beneficial Owners and Management 	 	62	
Item 13.	 	Certain Relationships and Related Transactions 	 	62	
Item 14.	 	Disclosure of Controls and Procedures 	 	62	
 	 	 	 	 	
PART IV.	 	 	 	 	
 	 	 	 	 	
Item 15.	 	Exhibits, Financial Statement Schedules and Reports on Form 8-K 	 	62	
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PART I. 
Item 1. Business 
GENERAL DEVELOPMENT OF BUSINESS 
Glacier Bancorp, Inc. headquartered in Kalispell, Montana (the “Company”), is a Delaware corporation incorporated in 1990, pursuant to the reorganization of Glacier Bank, FSB into a bank holding company. The Company is a regional multi-bank holding company providing commercial banking services from 50 banking offices throughout Montana, Idaho and Utah. 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”), Community First, Inc. (“CFI”), and Glacier Capital Trust I (“Glacier Trust”). 
Through its subsidiary CFI, 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. CFI shares in the commissions generated, without devoting significant management and staff time to this portion of the business. 
The Company formed Glacier Capital Trust I (Glacier Trust) 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. 
Internet Access 
The Company’s website address is www.glacierbancorp.com. 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 with the Securities and Exchange Commission (SEC) are made available on the Company’s website, free of charge, as soon as reasonably practicable after such material is electronically filed with the SEC. 
Recent Acquisitions 
The Company’s strategy has been to profitably grow its business through internal growth and selective acquisitions. The Company continues to look for profitable expansion opportunities in existing and contiguous markets. On February 28, 2001, the Company acquired Western, through the purchase of WesterFed Financial Corporation, its parent company. On March 15, 2001, the Company acquired seven Wells Fargo & Company and First Security Corporation subsidiary banks located in Idaho and Utah. Both 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 had 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 and Big Sky was acquired on January 20, 1999. Both acquisitions were 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 and FHLB 
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”). 
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Bank Locations 
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 83816 (208) 765-0284, Big Sky’s address is Big Horn Center, Highway 191, Big Sky, MT, 59716 (406) 995-2321, Valley’s address is 3030 North Montana Avenue, Helena, MT 59601 (406) 443-7440, and Whitefish’s address is 319 East 2nd 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, 2002: 
 
FINANCIAL INFORMATION ABOUT SEGMENTS 
The Company has seven wholly owned banking subsidiaries, Glacier Bank, First Security, Western, Mountain West, Big Sky, Valley, and Whitefish. For information regarding the holding company, as separate from the subsidiaries, see Management’s Discussion & Analysis and footnote 16 to the Consolidated Financial Statements for the year ended December 31, 2002. 
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, and repurchase agreements, as well as general and administrative expenses. 
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Business Segment Results 
The Company evaluates segment performance internally based on individual bank charter, 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 units, and eliminations of transactions between segments. During the third quarter of 2001, certain branches of Western were transferred to other Company owned banks located in the same geographic area which accounted for the change in activity for certain segments. 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Glacier	 	First Security	 	Western	
(Dollars in thousands)	 	2002	 	2001	 	2000	 	2002	 	2001	 	2000	 	2002	 	2001	 	2000	
 	 		 		 		 		 		 		 		 		 		
Condensed Income Statements	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income	 	$	22,787	 	 	 	19,032	 	 	 	16,361	 	 	 	20,596	 	 	 	14,239	 	 	 	9,324	 	 	 	13,699	 	 	 	17,094	 	 	 	—	 	
Noninterest income	 	 	7,554	 	 	 	7,216	 	 	 	5,913	 	 	 	3,880	 	 	 	3,070	 	 	 	2,000	 	 	 	2,782	 	 	 	4,517	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Total revenues	 	 	30,341	 	 	 	26,248	 	 	 	22,274	 	 	 	24,476	 	 	 	17,309	 	 	 	11,324	 	 	 	16,481	 	 	 	21,611	 	 	 	—	 	
Provision for loan losses	 	 	1,080	 	 	 	962	 	 	 	460	 	 	 	1,800	 	 	 	975	 	 	 	360	 	 	 	325	 	 	 	1,350	 	 	 	—	 	
Core deposit intangible expense	 	 	332	 	 	 	254	 	 	 	199	 	 	 	325	 	 	 	136	 	 	 	—	 	 	 	419	 	 	 	650	 	 	 	—	 	
Goodwill and merger expense	 	 	—	 	 	 	393	 	 	 	118	 	 	 	—	 	 	 	143	 	 	 	—	 	 	 	—	 	 	 	590	 	 	 	—	 	
Other noninterest expense	 	 	12,913	 	 	 	12,120	 	 	 	11,440	 	 	 	9,192	 	 	 	6,813	 	 	 	4,771	 	 	 	7,832	 	 	 	10,795	 	 	 	—	 	
Minority interest	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Pretax earnings	 	 	16,016	 	 	 	12,519	 	 	 	10,057	 	 	 	13,159	 	 	 	9,242	 	 	 	6,193	 	 	 	7,905	 	 	 	8,226	 	 	 	—	 	
Income tax expense (benefit)	 	 	5,763	 	 	 	4,505	 	 	 	3,456	 	 	 	4,761	 	 	 	3,556	 	 	 	2,251	 	 	 	2,432	 	 	 	3,026	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net income	 	 	10,253	 	 	 	8,014	 	 	 	6,601	 	 	 	8,398	 	 	 	5,686	 	 	 	3,942	 	 	 	5,473	 	 	 	5,200	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Average Balance Sheet Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	477,195	 	 	 	493,342	 	 	 	464,565	 	 	 	455,039	 	 	 	310,253	 	 	 	199,697	 	 	 	397,277	 	 	 	529,514	 	 	 	—	 	
Total loans	 	 	320,774	 	 	 	309,738	 	 	 	285,398	 	 	 	324,274	 	 	 	260,481	 	 	 	171,462	 	 	 	216,238	 	 	 	331,079	 	 	 	—	 	
Total deposits	 	 	331,661	 	 	 	315,252	 	 	 	279,973	 	 	 	350,945	 	 	 	241,897	 	 	 	146,439	 	 	 	224,486	 	 	 	326,583	 	 	 	—	 	
Stockholders’ equity	 	 	51,014	 	 	 	45,509	 	 	 	38,547	 	 	 	41,457	 	 	 	27,326	 	 	 	17,164	 	 	 	45,065	 	 	 	45,035	 	 	 	—	 	
End of Year Balance Sheet Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	490,999	 	 	 	474,421	 	 	 	469,351	 	 	 	487,699	 	 	 	427,976	 	 	 	214,231	 	 	 	405,282	 	 	 	406,359	 	 	 	—	 	
Net loans	 	 	319,906	 	 	 	316,626	 	 	 	282,467	 	 	 	300,481	 	 	 	341,214	 	 	 	180,041	 	 	 	188,793	 	 	 	229,007	 	 	 	—	 	
Total deposits	 	 	327,018	 	 	 	340,186	 	 	 	288,556	 	 	 	352,805	 	 	 	345,423	 	 	 	164,168	 	 	 	226,482	 	 	 	237,477	 	 	 	—	 	
Performance Ratios	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Return on average assets	 	 	2.15	%	 	 	1.62	%	 	 	1.42	%	 	 	1.85	%	 	 	1.83	%	 	 	1.97	%	 	 	1.38	%	 	 	0.98	%	 	 	—	 	
Return on average equity	 	 	20.10	%	 	 	17.61	%	 	 	17.12	%	 	 	20.26	%	 	 	20.81	%	 	 	22.97	%	 	 	12.14	%	 	 	11.55	%	 	 	—	 	
Efficiency ratio	 	 	43.65	%	 	 	48.64	%	 	 	52.78	%	 	 	38.88	%	 	 	40.97	%	 	 	42.13	%	 	 	50.06	%	 	 	55.69	%	 	 	—	 	
Regulatory Capital Ratios & Other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tier I risk-based capital ratio	 	 	13.54	%	 	 	12.04	%	 	 	13.45	%	 	 	11.06	%	 	 	9.80	%	 	 	9.98	%	 	 	15.33	%	 	 	13.04	%	 	 	—	 	
Tier II risk-based capital ratio	 	 	14.79	%	 	 	13.17	%	 	 	14.38	%	 	 	12.31	%	 	 	10.95	%	 	 	11.15	%	 	 	16.61	%	 	 	14.30	%	 	 	—	 	
Leverage capital ratio	 	 	9.48	%	 	 	8.32	%	 	 	8.08	%	 	 	7.82	%	 	 	7.56	%	 	 	8.64	%	 	 	9.83	%	 	 	8.62	%	 	 	—	 	
Full time equivalent employees	 	 	170	 	 	 	164	 	 	 	152	 	 	 	120	 	 	 	121	 	 	 	73	 	 	 	105	 	 	 	97	 	 	 	—	 	
Locations	 	 	11	 	 	 	11	 	 	 	13	 	 	 	9	 	 	 	9	 	 	 	4	 	 	 	8	 	 	 	8	 	 	 	—	 	

 	 	Mountain West	 	Big Sky	 	Valley	
(Dollars in thousands)	 	2002	 	2001	 	2000	 	2002	 	2001	 	2000	 	2002	 	2001	 	2000	
 	 		 		 		 		 		 		 		 		 		
Condensed Income Statements	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income	 	 	13,629	 	 	 	10,141	 	 	 	5,037	 	 	 	6,860	 	 	 	4,678	 	 	 	2,721	 	 	 	7,522	 	 	 	5,998	 	 	 	4,171	 	
Noninterest income	 	 	6,392	 	 	 	3,855	 	 	 	2,206	 	 	 	1,591	 	 	 	1,294	 	 	 	750	 	 	 	2,641	 	 	 	1,990	 	 	 	1,411	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Total revenues	 	 	20,021	 	 	 	13,996	 	 	 	7,243	 	 	 	8,451	 	 	 	5,972	 	 	 	3,471	 	 	 	10,163	 	 	 	7,988	 	 	 	5,582	 	
Provision for loan losses	 	 	695	 	 	 	276	 	 	 	410	 	 	 	330	 	 	 	333	 	 	 	180	 	 	 	1,335	 	 	 	365	 	 	 	205	 	
Core deposit intangible expense	 	 	224	 	 	 	208	 	 	 	—	 	 	 	49	 	 	 	21	 	 	 	—	 	 	 	90	 	 	 	56	 	 	 	—	 	
Goodwill and merger expense	 	 	—	 	 	 	1,492	 	 	 	—	 	 	 	—	 	 	 	60	 	 	 	—	 	 	 	—	 	 	 	134	 	 	 	—	 	
Other noninterest expense	 	 	13,439	 	 	 	10,854	 	 	 	5,153	 	 	 	3,618	 	 	 	2,983	 	 	 	2,527	 	 	 	5,371	 	 	 	4,356	 	 	 	3,498	 	
Minority interest	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Pretax earnings	 	 	5,663	 	 	 	1,166	 	 	 	1,680	 	 	 	4,454	 	 	 	2,575	 	 	 	764	 	 	 	3,367	 	 	 	3,077	 	 	 	1,879	 	
Income tax expense (benefit)	 	 	1,633	 	 	 	150	 	 	 	657	 	 	 	1,705	 	 	 	995	 	 	 	258	 	 	 	1,053	 	 	 	1,114	 	 	 	657	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net income	 	 	4,030	 	 	 	1,016	 	 	 	1,023	 	 	 	2,749	 	 	 	1,580	 	 	 	506	 	 	 	2,314	 	 	 	1,963	 	 	 	1,222	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Average Balance Sheet Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	 	366,254	 	 	 	281,318	 	 	 	106,445	 	 	 	170,000	 	 	 	117,542	 	 	 	70,806	 	 	 	173,785	 	 	 	129,514	 	 	 	86,305	 	
Total loans	 	 	186,233	 	 	 	138,991	 	 	 	78,602	 	 	 	111,911	 	 	 	85,642	 	 	 	50,491	 	 	 	96,471	 	 	 	91,090	 	 	 	62,813	 	
Total deposits	 	 	260,420	 	 	 	228,761	 	 	 	77,334	 	 	 	92,894	 	 	 	68,998	 	 	 	46,981	 	 	 	127,243	 	 	 	108,503	 	 	 	69,864	 	
Stockholders’ equity	 	 	42,045	 	 	 	30,537	 	 	 	7,650	 	 	 	15,021	 	 	 	9,121	 	 	 	5,584	 	 	 	15,047	 	 	 	10,772	 	 	 	5,254	 	
End of Year Balance Sheet Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	 	396,777	 	 	 	342,841	 	 	 	126,518	 	 	 	179,543	 	 	 	168,865	 	 	 	77,111	 	 	 	190,536	 	 	 	165,372	 	 	 	87,791	 	
Net loans	 	 	214,453	 	 	 	162,701	 	 	 	90,921	 	 	 	111,378	 	 	 	110,363	 	 	 	57,050	 	 	 	97,937	 	 	 	103,062	 	 	 	62,645	 	
Total deposits	 	 	275,809	 	 	 	254,133	 	 	 	86,632	 	 	 	95,897	 	 	 	97,488	 	 	 	49,616	 	 	 	126,418	 	 	 	124,072	 	 	 	76,508	 	
Performance Ratios	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Return on average assets	 	 	1.10	%	 	 	0.36	%	 	 	0.96	%	 	 	1.62	%	 	 	1.34	%	 	 	0.71	%	 	 	1.33	%	 	 	1.52	%	 	 	1.42	%	
Return on average equity	 	 	9.58	%	 	 	13.28	%	 	 	13.37	%	 	 	18.30	%	 	 	17.32	%	 	 	9.06	%	 	 	15.38	%	 	 	18.22	%	 	 	23.26	%	
Efficiency ratio	 	 	68.24	%	 	 	89.70	%	 	 	71.14	%	 	 	43.39	%	 	 	51.31	%	 	 	72.80	%	 	 	53.73	%	 	 	56.91	%	 	 	62.67	%	
Regulatory Capital Ratios & Other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tier I risk-based capital ratio	 	 	9.85	%	 	 	10.03	%	 	 	11.12	%	 	 	10.77	%	 	 	9.53	%	 	 	9.68	%	 	 	11.43	%	 	 	10.02	%	 	 	12.41	%	
Tier II risk-based capital ratio	 	 	10.85	%	 	 	11.06	%	 	 	12.19	%	 	 	12.03	%	 	 	10.79	%	 	 	10.81	%	 	 	12.45	%	 	 	11.05	%	 	 	13.55	%	
Leverage capital ratio	 	 	6.71	%	 	 	6.33	%	 	 	8.11	%	 	 	8.04	%	 	 	7.10	%	 	 	8.28	%	 	 	7.54	%	 	 	7.22	%	 	 	8.66	%	
Full time equivalent employees	 	 	152	 	 	 	153	 	 	 	74	 	 	 	43	 	 	 	42	 	 	 	30	 	 	 	61	 	 	 	67	 	 	 	34	 	
Locations	 	 	11	 	 	 	12	 	 	 	5	 	 	 	3	 	 	 	3	 	 	 	3	 	 	 	6	 	 	 	6	 	 	 	3	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
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Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Whitefish	 	Other	 	Consolidated	
(Dollars in thousands)	 	2002	 	2001	 	2000	 	2002	 	2001	 	2000	 	2002	 	2001	 	2000	
 	 		 		 		 		 		 		 		 		 		
Condensed Income Statements	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income	 	 	4,901	 	 	 	4,290	 	 	 	3,741	 	 	 	(3,527	)	 	 	(3,098	)	 	 	125	 	 	 	86,467	 	 	 	72,374	 	 	 	41,480	 	
Noninterest income	 	 	1,096	 	 	 	1,157	 	 	 	1,036	 	 	 	(19	)	 	 	152	 	 	 	(22	)	 	 	25,917	 	 	 	23,251	 	 	 	13,294	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Total revenues	 	 	5,997	 	 	 	5,447	 	 	 	4,777	 	 	 	(3,546	)	 	 	(2,946	)	 	 	103	 	 	 	112,384	 	 	 	95,625	 	 	 	54,774	 	
Provision for loan losses	 	 	180	 	 	 	264	 	 	 	249	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	5,745	 	 	 	4,525	 	 	 	1,864	 	
Core deposit intangible expense	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,439	 	 	 	1,325	 	 	 	199	 	
Goodwill and merger expense	 	 	—	 	 	 	5	 	 	 	—	 	 	 	—	 	 	 	857	 	 	 	242	 	 	 	—	 	 	 	3,674	 	 	 	360	 	
Other noninterest expense	 	 	2,634	 	 	 	2,572	 	 	 	2,455	 	 	 	1,375	 	 	 	1,858	 	 	 	863	 	 	 	56,374	 	 	 	52,351	 	 	 	30,707	 	
Minority interest	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	35	 	 	 	61	 	 	 	—	 	 	 	35	 	 	 	61	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Pretax earnings	 	 	3,183	 	 	 	2,606	 	 	 	2,073	 	 	 	(4,921	)	 	 	(5,696	)	 	 	(1,063	)	 	 	48,826	 	 	 	33,715	 	 	 	21,583	 	
Income tax expense (benefit)	 	 	1,040	 	 	 	819	 	 	 	622	 	 	 	(1,963	)	 	 	(2,139	)	 	 	(321	)	 	 	16,424	 	 	 	12,026	 	 	 	7,580	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net income	 	 	2,143	 	 	 	1,787	 	 	 	1,451	 	 	 	(2,958	)	 	 	(3,557	)	 	 	(742	)	 	 	32,402	 	 	 	21,689	 	 	 	14,003	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Average Balance Sheet Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	 	121,757	 	 	 	103,264	 	 	 	84,304	 	 	 	(6,613	)	 	 	(18,495	)	 	 	(4,327	)	 	 	2,154,694	 	 	 	1,946,252	 	 	 	1,007,795	 	
Total loans	 	 	63,676	 	 	 	61,617	 	 	 	58,591	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,319,577	 	 	 	1,278,638	 	 	 	707,357	 	
Total deposits	 	 	64,107	 	 	 	62,188	 	 	 	58,036	 	 	 	(9,868	)	 	 	(10,190	)	 	 	(3,497	)	 	 	1,441,888	 	 	 	1,341,992	 	 	 	675,130	 	
Stockholders’ equity	 	 	10,080	 	 	 	8,879	 	 	 	8,002	 	 	 	(24,152	)	 	 	(16,447	)	 	 	6,267	 	 	 	195,577	 	 	 	160,732	 	 	 	88,468	 	
End of Year Balance Sheet Data	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	 	129,255	 	 	 	121,409	 	 	 	87,125	 	 	 	1,253	 	 	 	(21,496	)	 	 	(5,415	)	 	 	2,281,344	 	 	 	2,085,747	 	 	 	1,056,712	 	
Net loans	 	 	68,066	 	 	 	59,721	 	 	 	60,437	 	 	 	(361	)	 	 	(367	)	 	 	—	 	 	 	1,300,653	 	 	 	1,322,327	 	 	 	733,561	 	
Total deposits	 	 	67,810	 	 	 	64,885	 	 	 	60,760	 	 	 	(12,316	)	 	 	(17,600	)	 	 	(5,670	)	 	 	1,459,923	 	 	 	1,446,064	 	 	 	720,570	 	
Performance Ratios	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Return on average assets	 	 	1.76	%	 	 	1.73	%	 	 	1.72	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.50	%	 	 	1.11	%	 	 	1.39	%	
Return on average equity	 	 	21.26	%	 	 	20.13	%	 	 	18.13	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	16.57	%	 	 	13.49	%	 	 	15.83	%	
Efficiency ratio	 	 	43.92	%	 	 	47.31	%	 	 	51.39	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	51.44	%	 	 	59.97	%	 	 	57.08	%	
Regulatory Capital Ratios & Other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tier I risk-based capital ratio	 	 	11.64	%	 	 	11.65	%	 	 	13.43	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12.99	%	 	 	11.81	%	 	 	12.31	%	
Tier II risk-based capital ratio	 	 	12.88	%	 	 	12.90	%	 	 	14.66	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	14.24	%	 	 	13.07	%	 	 	13.36	%	
Leverage capital ratio	 	 	8.09	%	 	 	7.06	%	 	 	9.59	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	8.95	%	 	 	8.21	%	 	 	8.72	%	
Full time equivalent employees	 	 	30	 	 	 	28	 	 	 	26	 	 	 	56	 	 	 	56	 	 	 	34	 	 	 	737	 	 	 	728	 	 	 	423	 	
Locations	 	 	2	 	 	 	2	 	 	 	2	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	50	 	 	 	51	 	 	 	30	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Market Area 
The Company’s primary market area includes the four northwest Montana counties of Flathead, Lake, Lincoln and Glacier; the west central Montana counties of Missoula, Silver Bow, and Lewis & Clark, Gallatin, and Yellowstone; in Idaho, the Company’s primary market area includes Kootenai 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, with branches in Columbia Falls, Evergreen, Bigfork, and Polson (the county seat of Lake County), Libby (the county seat of Lincoln County), Anaconda (the county seat of Deer Lodge County), and 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. 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 nine offices in Idaho and two in Utah: Coeur d’Alene, Post Falls, Hayden Lake, Nampa, Hailey, Ketchum and three offices in Boise, Idaho and offices in Brigham City and Park City, Utah. Big Sky’s main office is in Bozeman (the county seat of Gallatin County), with a branch in Bozeman and a branch in Big Sky. 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, mining, energy exploration and production, 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 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, is one of the 
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fastest growing areas in the United States. Boise, the state capital, 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 23% of the total deposits in this area. Glacier’s three Butte, Montana offices have approximately 24% of the deposits in Silver Bow County and Glacier’s Anaconda office has 23% of the deposits in Deer Lodge County. First Security has approximately 29% of the total deposits in Missoula County. Western has approximately 12% of the deposits in Yellowstone and Fergus counties combined. Big Sky has approximately 10% of Gallatin County’s deposits and Valley has approximately 20% of Lewis and Clark County’s total deposits. In Idaho, Mountain West has approximately 11% of the deposits in Kootenai and Blaine counties, and 2% in Ada and Canyon counties. In Utah, Mountain West has 6% of the deposits in the Box Elder and Summit counties combined. 
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. 
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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 12-31-02	 	For the year ended 12-31-01	 	For the year ended 12-31-00				
 	 		 		 						
 	 	 	 	 	 	 	 	Interest	 	Average	 	 	 	 	 	Interest	 	Average	 	 	 	 	 	Interest	 	Average				
 	 	 	 	Average	 	and	 	Yield/	 	Average	 	and	 	Yield/	 	Average	 	and	 	Yield/				
(Dollars in Thousands)	 	Balance	 	Dividends	 	Rate	 	Balance	 	Dividends	 	Rate	 	Balance	 	Dividends	 	Rate				
 	 	 	 		 		 		 		 		 		 		 		 					
ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 				
 	Real Estate Loans	 	$	380,993	 	 	 	29,290	 	 	 	7.69	%	 	$	428,999	 	 	 	34,012	 	 	 	7.93	%	 	$	230,661	 	 	 	19,557	 	 	 	8.48	%				
 	Commercial Loans	 	 	649,665	 	 	 	47,013	 	 	 	7.24	%	 	 	556,907	 	 	 	48,292	 	 	 	8.67	%	 	 	312,434	 	 	 	28,784	 	 	 	9.21	%				
 	Consumer and Other Loans	 	 	288,919	 	 	 	22,559	 	 	 	7.81	%	 	 	292,732	 	 	 	25,528	 	 	 	8.72	%	 	 	164,262	 	 	 	14,856	 	 	 	9.04	%				
 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 				
 	 	Total Loans	 	 	1,319,577	 	 	 	98,862	 	 	 	7.49	%	 	 	1,278,638	 	 	 	107,832	 	 	 	8.43	%	 	 	707,357	 	 	 	63,197	 	 	 	8.93	%				
 	Tax-Exempt Investment Securities (1)	 	 	156,315	 	 	 	8,074	 	 	 	5.17	%	 	 	81,416	 	 	 	4,624	 	 	 	5.68	%	 	 	50,337	 	 	 	2,659	 	 	 	5.28	%				
 	Taxable Investment Securities	 	 	509,137	 	 	 	27,053	 	 	 	5.31	%	 	 	420,511	 	 	 	25,464	 	 	 	6.06	%	 	 	185,950	 	 	 	12,981	 	 	 	6.98	%				
 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 				
 	 	Total Earning Assets	 	 	1,985,029	 	 	 	133,989	 	 	 	6.75	%	 	 	1,780,565	 	 	 	137,920	 	 	 	7.75	%	 	 	943,644	 	 	 	78,837	 	 	 	8.35	%				
 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 				
 	Non-Earning Assets	 	 	169,036	 	 	 	 	 	 	 	 	 	 	 	165,687	 	 	 	 	 	 	 	 	 	 	 	64,151	 	 	 	 	 	 	 	 	 				
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 				
 	 	TOTAL ASSETS	 	$	2,154,065	 	 	 	 	 	 	 	 	 	 	$	1,946,252	 	 	 	 	 	 	 	 	 	 	$	1,007,795	 	 	 	 	 	 	 	 	 				
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 				
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	NOW Accounts	 	$	206,410	 	 	 	723	 	 	 	0.35	%	 	$	183,399	 	 	 	1,758	 	 	 	0.96	%	 	$	96,737	 	 	 	1,068	 	 	 	1.10	%		
 	Savings Accounts	 	 	127,245	 	 	 	857	 	 	 	0.67	%	 	 	102,736	 	 	 	1,855	 	 	 	1.81	%	 	 	44,996	 	 	 	806	 	 	 	1.79	%		
 	Money Market Accounts	 	 	355,211	 	 	 	6,771	 	 	 	1.91	%	 	 	287,150	 	 	 	9,575	 	 	 	3.33	%	 	 	167,533	 	 	 	7,447	 	 	 	4.45	%		
 	Certificates of Deposit	 	 	495,951	 	 	 	17,917	 	 	 	3.61	%	 	 	552,469	 	 	 	29,504	 	 	 	5.34	%	 	 	230,024	 	 	 	13,353	 	 	 	5.81	%		
 	FHLB Advances	 	 	409,168	 	 	 	16,959	 	 	 	4.14	%	 	 	349,023	 	 	 	18,280	 	 	 	5.24	%	 	 	211,217	 	 	 	13,454	 	 	 	6.37	%		
 	Repurchase Agreements and Other Borrowed Funds	 	 	76,087	 	 	 	4,295	 	 	 	5.64	%	 	 	66,658	 	 	 	4,574	 	 	 	6.86	%	 	 	31,799	 	 	 	1,229	 	 	 	3.86	%		
 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 		
 	 	Total Interest Bearing Liabilities	 	 	1,670,072	 	 	 	47,522	 	 	 	2.85	%	 	 	1,541,435	 	 	 	65,546	 	 	 	4.25	%	 	 	782,306	 	 	 	37,357	 	 	 	4.78	%		
 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 		
 	 	Non-interest Bearing Deposits	 	 	257,072	 	 	 	 	 	 	 	 	 	 	 	216,238	 	 	 	 	 	 	 	 	 	 	 	135,840	 	 	 	 	 	 	 	 	 		
 	 	Other Liabilities	 	 	31,344	 	 	 	 	 	 	 	 	 	 	 	27,847	 	 	 	 	 	 	 	 	 	 	 	1,181	 	 	 	 	 	 	 	 	 		
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 		
 	 	Total Liabilities	 	 	1,958,488	 	 	 	 	 	 	 	 	 	 	 	1,785,520	 	 	 	 	 	 	 	 	 	 	 	919,327	 	 	 	 	 	 	 	 	 		
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 		
 	Common Stock	 	 	171	 	 	 	 	 	 	 	 	 	 	 	157	 	 	 	 	 	 	 	 	 	 	 	110	 	 	 	 	 	 	 	 	 		
 	Paid-In Capital	 	 	170,291	 	 	 	 	 	 	 	 	 	 	 	152,420	 	 	 	 	 	 	 	 	 	 	 	95,554	 	 	 	 	 	 	 	 	 		
 	Retained Earnings	 	 	19,195	 	 	 	 	 	 	 	 	 	 	 	5,929	 	 	 	 	 	 	 	 	 	 	 	(2,250	)	 	 	 	 	 	 	 	 		
 	Accumulated Other
Comprehensive Earnings (Loss)	 	 	5,920	 	 	 	 	 	 	 	 	 	 	 	2,226	 	 	 	 	 	 	 	 	 	 	 	(4,946	)	 	 	 	 	 	 	 	 		
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 		
 	 	Total Stockholders’ Equity	 	 	195,577	 	 	 	 	 	 	 	 	 	 	 	160,732	 	 	 	 	 	 	 	 	 	 	 	88,468	 	 	 	 	 	 	 	 	 		
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 		
 	 	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	 	$	2,154,065	 	 	 	 	 	 	 	 	 	 	$	1,946,252	 	 	 	 	 	 	 	 	 	 	$	1,007,795	 	 	 	 	 	 	 	 	 		
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 		
 	Net Interest Income	 	 	 	 	 	$	86,467	 	 	 	 	 	 	 	 	 	 	$	72,374	 	 	 	 	 	 	 	 	 	 	$	41,480	 	 	 	 	 		
 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 		
 	Net Interest Spread	 	 	 	 	 	 	 	 	 	 	3.90	%	 	 	 	 	 	 	 	 	 	 	3.49	%	 	 	 	 	 	 	 	 	 	 	3.57	%		
 	Net Interest Margin on average earning assets (1)	 	 	 	 	 	 	 	 	 	 	4.36	%	 	 	 	 	 	 	 	 	 	 	4.06	%	 	 	 	 	 	 	 	 	 	 	4.40	%		
 	Return on Average Assets (2)	 	 	 	 	 	 	 	 	 	 	1.50	%	 	 	 	 	 	 	 	 	 	 	1.11	%	 	 	 	 	 	 	 	 	 	 	1.39	%		
 	Return on Average Equity (3)	 	 	 	 	 	 	 	 	 	 	16.57	%	 	 	 	 	 	 	 	 	 	 	13.49	%	 	 	 	 	 	 	 	 	 	 	15.83	%		
(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 

Table of Contents
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,	
 	 	 	 	 	 	 	 	2002 vs. 2001	 	 	 	 	 	 	 	 	 	2001 vs. 2000	 	 	 	 	
 	 	 	 		 		
 	 	 	 	Increase (Decrease) due to:	 	Increase (Decrease) due to:	
 	 	 	 		 		
(Dollars in Thousands)	 	Volume	 	Rate	 	Net	 	Volume	 	Rate	 	Net	
 	 	 	 		 		 		 		 		 		
Interest Income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Real Estate Loans	 	$	(3,806	)	 	$	(916	)	 	$	(4,722	)	 	$	16,816	 	 	$	(2,362	)	 	$	14,454	 	
Commercial Loans	 	 	8,044	 	 	 	(9,323	)	 	 	(1,279	)	 	 	22,524	 	 	 	(3,015	)	 	 	19,509	 	
Consumer and Other Loans	 	 	(332	)	 	 	(2,637	)	 	 	(2,969	)	 	 	11,619	 	 	 	(947	)	 	 	10,672	 	
Investment Securities	 	 	9,803	 	 	 	(4,764	)	 	 	5,039	 	 	 	17,583	 	 	 	(3,135	)	 	 	14,448	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total Interest Income	 	 	13,709	 	 	 	(17,640	)	 	 	(3,931	)	 	 	68,542	 	 	 	(9,459	)	 	 	59,083	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Interest Expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NOW Accounts	 	 	221	 	 	 	(1,255	)	 	 	(1,034	)	 	 	957	 	 	 	(267	)	 	 	690	 	
Savings Accounts	 	 	443	 	 	 	(1,441	)	 	 	(998	)	 	 	1,034	 	 	 	15	 	 	 	1,049	 	
Money Market Accounts	 	 	2,270	 	 	 	(5,074	)	 	 	(2,804	)	 	 	5,317	 	 	 	(3,189	)	 	 	2,128	 	
Certificates of Deposit	 	 	(3,018	)	 	 	(8,570	)	 	 	(11,588	)	 	 	18,719	 	 	 	(2,568	)	 	 	16,151	 	
FHLB Advances	 	 	3,150	 	 	 	(4,471	)	 	 	(1,321	)	 	 	8,778	 	 	 	(3,952	)	 	 	4,826	 	
Other Borrowings and Repurchase Agreements	 	 	647	 	 	 	(926	)	 	 	(279	)	 	 	1,347	 	 	 	1,998	 	 	 	3,345	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Interest Expense	 	 	3,713	 	 	 	(21,737	)	 	 	(18,024	)	 	 	36,152	 	 	 	(7,963	)	 	 	28,189	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net Interest Income	 	$	9,996	 	 	$	4,097	 	 	$	14,093	 	 	$	32,390	 	 	$	(1,496	)	 	$	30,894	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net interest income increased $14 million in 2002 over 2001. The increase was primarily due to increases in volumes and the decrease in rates on deposits. For additional information see section “Management’s Discussion and Analysis”. 
INVESTMENT ACTIVITIES 
It has generally been the Company’s policy to maintain a liquidity portfolio only slightly above requirements 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 judgement 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. 
There was no trading in the Company’s investment portfolios during 2002. 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. During 2002, there was a small net realized gain from the sale of securities, resulting from the disposition of less desirable investments and acquiring investments with better total return probabilities. 
The Company uses an effective tax rate of 35% in calculating the tax equivalent yield. Approximately $202 million of the investment portfolio is comprised of tax exempt investments which is an increase of $106 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 and the availability to fund these investments. 
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 Management’s Discussion & Analysis and footnote 3 to the Consolidated Financial Statements for the year ended December 31, 2002. 
9 

Table of Contents
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. Management’s Discussion & Analysis and footnote 4 of the Consolidated Financial Statements contain more information about the lending portfolio. 
Loan Portfolio Composition 
The following table summarizes the Company’s loan portfolio: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in Thousands)	 	At	 	At	 	At	 	At	 	At	
	 	12/31/02	 	12/31/01	 	12/31/00	 	12/31/99	 	12/31/98	
 	 	 		 		 		 		 		
TYPE OF LOAN	 	Amount	 	 	 	 	 	Percent	 	Amount	 	 	 	 	 	Percent	 	 	 	 	 	Amount	 	 	 	 	 	Percent	 	Amount	 	 	 	 	 	Percent	 	Amount	 	 	 	 	 	Percent	
	 		 	 	 	 	 		 		 	 	 	 	 		 	 	 	 	 		 	 	 	 	 		 		 	 	 	 	 		 		 	 	 	 	 		
Real Estate Loans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Residential first mortgage loans	 	$	310,205	 	 	 	 	 	 	 	23.85	%	 	$	395,417	 	 	 	 	 	 	 	29.90	%	 	 	 	 	 	$	224,631	 	 	 	 	 	 	 	30.62	%	 	$	219,482	 	 	 	 	 	 	 	33.65	%	 	$	222,018	 	 	 	 	 	 	 	38.87	%	
 	Loans held for sale	 	$	51,987	 	 	 	 	 	 	 	4.00	%	 	$	27,403	 	 	 	 	 	 	 	2.07	%	 	 	 	 	 	$	7,058	 	 	 	 	 	 	 	0.96	%	 	$	5,896	 	 	 	 	 	 	 	0.90	%	 	$	16,474	 	 	 	 	 	 	 	2.88	%	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	
 	   Total	 	$	362,192	 	 	 	 	 	 	 	27.85	%	 	$	422,820	 	 	 	 	 	 	 	31.98	%	 	 	 	 	 	$	231,689	 	 	 	 	 	 	 	31.58	%	 	$	225,378	 	 	 	 	 	 	 	34.55	%	 	$	238,492	 	 	 	 	 	 	 	41.75	%	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	
Commercial Loans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Real estate	 	$	397,803	 	 	 	 	 	 	 	30.58	%	 	$	379,346	 	 	 	 	 	 	 	28.69	%	 	 	 	 	 	$	198,414	 	 	 	 	 	 	 	27.05	%	 	$	154,155	 	 	 	 	 	 	 	23.64	%	 	$	118,434	 	 	 	 	 	 	 	20.73	%	
 	Other commercial loans	 	$	276,675	 	 	 	 	 	 	 	21.27	%	 	$	241,811	 	 	 	 	 	 	 	18.29	%	 	 	 	 	 	$	142,519	 	 	 	 	 	 	 	19.43	%	 	$	125,462	 	 	 	 	 	 	 	19.24	%	 	$	97,463	 	 	 	 	 	 	 	17.06	%	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	
 	   Total	 	$	674,478	 	 	 	 	 	 	 	51.85	%	 	$	621,157	 	 	 	 	 	 	 	46.97	%	 	 	 	 	 	$	340,933	 	 	 	 	 	 	 	46.48	%	 	$	279,617	 	 	 	 	 	 	 	42.88	%	 	$	215,897	 	 	 	 	 	 	 	37.79	%	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	
Installment and Other Loans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Consumer loans	 	$	112,893	 	 	 	 	 	 	 	8.68	%	 	$	142,875	 	 	 	 	 	 	 	10.80	%	 	 	 	 	 	$	86,336	 	 	 	 	 	 	 	11.77	%	 	$	87,967	 	 	 	 	 	 	 	13.49	%	 	$	69,726	 	 	 	 	 	 	 	12.21	%	
 	Home equity loans	 	$	174,033	 	 	 	 	 	 	 	13.38	%	 	$	156,140	 	 	 	 	 	 	 	11.81	%	 	 	 	 	 	$	83,539	 	 	 	 	 	 	 	11.39	%	 	$	66,566	 	 	 	 	 	 	 	10.21	%	 	$	53,325	 	 	 	 	 	 	 	9.34	%	
 	Outstanding balances on credit cards	 	 	—	 	 	 	 	 	 	 	—	 	 	 	—	 	 	 	 	 	 	 	—	 	 	 	 	 	 	 	—	 	 	 	 	 	 	 	—	 	 	 	—	 	 	 	 	 	 	 	—	 	 	$	18	 	 	 	 	 	 	 	—	 	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	
 	   Total	 	$	286,926	 	 	 	 	 	 	 	22.06	%	 	$	299,015	 	 	 	 	 	 	 	22.61	%	 	 	 	 	 	$	169,875	 	 	 	 	 	 	 	23.16	%	 	$	154,533	 	 	 	 	 	 	 	23.70	%	 	$	123,069	 	 	 	 	 	 	 	21.55	%	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	
 	Net deferred loan fees, premiums and discounts	 	($	1,999	)	 	 	 	 	 	 	-0.15	%	 	($	2,011	)	 	 	 	 	 	 	-0.15	%	 	 	 	 	 	($	1,137	)	 	 	 	 	 	 	-0.16	%	 	($	598	)	 	 	 	 	 	 	-0.10	%	 	($	602	)	 	 	 	 	 	 	-0.10	%	
 	Allowance for Losses	 	($	20,944	)	 	 	 	 	 	 	-1.61	%	 	($	18,654	)	 	 	 	 	 	 	-1.41	%	 	 	 	 	 	($	7,799	)	 	 	 	 	 	 	-1.06	%	 	($	6,722	)	 	 	 	 	 	 	-1.03	%	 	($	5,668	)	 	 	 	 	 	 	-0.99	%	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	
NET LOANS	 	$	1,300,653	 	 	 	 	 	 	 	100.00	%	 	$	1,322,327	 	 	 	 	 	 	 	100.00	%	 	 	 	 	 	$	733,561	 	 	 	 	 	 	 	100.00	%	 	$	652,208	 	 	 	 	 	 	 	100.00	%	 	$	571,188	 	 	 	 	 	 	 	100.00	%	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	 	 		 	
Loan Portfolio Maturities or Repricing Term 
The stated maturities or first repricing term (if applicable) for the loan portfolio at December 31, 2002 was as follows: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in Thousands)	 	Real Estate	 	Commercial	 	Consumer	 	Totals	
	 		 		 		 		
Variable Rate Maturing or Repricing in:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	One year or less	 	$	66,906	 	 	 	254,840	 	 	 	109,874	 	 	 	431,620	 	
 	One to five years	 	 	30,379	 	 	 	204,147	 	 	 	2,114	 	 	 	236,640	 	
 	Thereafter	 	 	2,001	 	 	 	4,550	 	 	 	—	 	 	 	6,551	 	
Fixed Rate Maturing or Repricing in:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	One year or less	 	 	126,492	 	 	 	103,067	 	 	 	46,906	 	 	 	276,465	 	
 	One to five years	 	 	90,833	 	 	 	76,814	 	 	 	105,169	 	 	 	272,816	 	
 	Thereafter	 	 	45,581	 	 	 	31,060	 	 	 	22,863	 	 	 	99,504	 	
 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Totals	 	$	362,192	 	 	 	674,478	 	 	 	286,926	 	 	 	1,323,596	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
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 mortgage loan applications from real estate brokers, contractors, existing customers, customer referrals, and walk-ins to their offices. The Banks’ lending policies generally limit the maximum loan-to-value ratio on residential 
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mortgage loans to 80% of the lesser of the appraised value or purchase price or up to 90% of the loan if insured by a private mortgage insurance company. The Banks also provide interim construction financing for single-family dwellings, and make land acquisition and development loans on properties intended for residential use. 
Consumer Lending 
The majority of all consumer loans are secured by either real estate, automobiles, or other assets. Presently 39% of the Banks’ consumer portfolio consists of variable interest rate loans compared to 25% in prior year. 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 Loans 
The Banks make commercial loans of various types including commercial real estate, operating loans secured by various collateral, 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 a loan committee, consisting of senior lenders and members of senior management, and generally has approval authority up to $500,000 ($1,000,000 for Western and Mountain West). Loans between $500,000 and $2,000,000 ($3,500,000 for Glacier and First Security) 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, 2002, loans serviced for others aggregated approximately $253 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 for originating the loan, 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 of $50 to $75 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, in the opinion of management, the collection of additional interest is doubtful. 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 collectibility of the loan. 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 (“REO”) 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 REO is charged to the allowance for loan losses. Any subsequent write-downs are a charge to current expenses. 
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The following table sets forth information regarding the Banks’ non-performing assets at the dates indicated: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NONPERFORMING ASSETS	 	At	 	At	 	At	 	At	 	At	
(Dollars in Thousands)	 	12/31/02	 	12/31/01	 	12/31/00	 	12/31/1999	 	12/31/1998	
 	 	 	 		 		 		 		 		
Non-accrual loans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Mortgage loans	 	$	2,476	 	 	$	4,044	 	 	$	687	 	 	$	613	 	 	$	438	 	
 	Commercial loans	 	 	5,157	 	 	 	4,568	 	 	 	442	 	 	 	776	 	 	 	1,068	 	
 	Consumer loans	 	 	409	 	 	 	620	 	 	 	25	 	 	 	74	 	 	 	64	 	
 	 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total	 	 	8,042	 	 	 	9,232	 	 	 	1,154	 	 	 	1,463	 	 	 	1,570	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Accruing Loans 90 days or more overdue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Mortgage loans	 	 	846	 	 	 	818	 	 	 	576	 	 	 	62	 	 	 	632	 	
 	Commercial loans	 	 	968	 	 	 	376	 	 	 	91	 	 	 	99	 	 	 	385	 	
 	Consumer loans	 	 	184	 	 	 	243	 	 	 	83	 	 	 	104	 	 	 	124	 	
 	 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total	 	 	1,998	 	 	 	1,437	 	 	 	750	 	 	 	265	 	 	 	1,141	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Troubled debt restructuring:	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	205	 	
Real estate and other assets owned, net	 	 	1,542	 	 	 	593	 	 	 	291	 	 	 	550	 	 	 	151	 	
Total non-performing loans, troubled debt restructurings, and real estate and other assets owned, net	 	$	11,582	 	 	$	11,262	 	 	$	2,195	 	 	$	2,278	 	 	$	3,067	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	As a percentage of total assets	 	 	0.51	%	 	 	0.53	%	 	 	0.21	%	 	 	0.23	%	 	 	0.39	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Interest Income (1)	 	$	596	 	 	$	658	 	 	$	101	 	 	$	132	 	 	$	103	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
(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. Interest income recognized on non-performing loans for each of the above periods was not significant. 
Non-performing assets as a percentage of total assets at December 31, 2002 were  .51 percent versus .53 percent at the same time as last year, which compares to the Peer Group average of .63 percent at September 30, 2002, the most recent information available. The reserve for loan losses was 181 percent of non-performing assets at December 31, 2002, up from 165 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 $2,290,000, or 12 percent, to $20,944,000, which is 1.58 percent of total loans outstanding, up from 1.39 percent of loans at December 31, 2001. 
Allowance for Loan Losses 
The Company maintains an allowance for loan losses to absorb inherent losses in the loan portfolio. The Company is committed to the early recognition of possible problems and to a strong, conservative allowance. The allowance consists of three elements: (i) allowances established on specific loans, (ii) allowances based on historical loan loss experience, and (iii) allowances based on general economic conditions and other factors in the Company’s individual markets. The specific allowance element is based on a regular analysis of all loans and commitments where credit ratings have fallen below standards. The historical loan loss element is determined by examining loss experience and the related internal gradings of loans charged off. The general economic conditions element is determined by management at the individual subsidiary banks and is based on knowledge of specific economic factors in their markets that might affect the collectibility of loans. Inherently this involves a higher degree of uncertainty and considers factors unique to the markets in which the Company operates. Generally these other risk factors have not manifested themselves in the Company’s historical losses/experience to the extent they might currently. 
Other risk factors take into consideration such factors as recent loss experience in specific portfolio segments, loan quality trends and loans volumes including concentration, economic, and administrative risk. 
The Banks’ charge-off policy is generally consistent with bank regulatory standards. 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 
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realizable value sufficient to discharge the debt in full, or if the loan is in the legal process of collection. Once a loan has been classified as non-accrual, previously accrued unpaid interest is reversed. 
Loan Loss Experience 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Years ended December 31,	 	 	 	 	
(Dollars in Thousands)	 		
 	 	 	 	 	2002	 	2001	 	2000	 	1999	 	1998	
 	 	 	 	 		 		 		 		 		
Balance at beginning of period	 	$	18,654	 	 	 	7,799	 	 	 	6,722	 	 	 	5,668	 	 	 	4,654	 	
 	Charge offs:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Residential real estate	 	 	(887	)	 	 	(677	)	 	 	(98	)	 	 	(44	)	 	 	(50	)	
 	 	Commercial loans	 	 	(2,522	)	 	 	(723	)	 	 	(450	)	 	 	(409	)	 	 	(514	)	
 	 	Consumer loans	 	 	(1,328	)	 	 	(2,029	)	 	 	(424	)	 	 	(433	)	 	 	(517	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	Total charge offs	 	$	(4,737	)	 	 	(3,429	)	 	 	(972	)	 	 	(886	)	 	 	(1,081	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Recoveries:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Residential real estate	 	 	276	 	 	 	33	 	 	 	5	 	 	 	1	 	 	 	—	 	
 	 	Commercial loans	 	 	326	 	 	 	266	 	 	 	43	 	 	 	110	 	 	 	250	 	
 	 	Consumer loans	 	 	680	 	 	 	567	 	 	 	137	 	 	 	106	 	 	 	110	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	Total recoveries	 	$	1,282	 	 	 	866	 	 	 	185	 	 	 	217	 	 	 	360	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Chargeoffs, net of recoveries	 	 	(3,455	)	 	 	(2,563	)	 	 	(787	)	 	 	(669	)	 	 	(721	)	
 	Acquisitions (1)	 	 	—	 	 	 	8,893	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	Provision	 	 	5,745	 	 	 	4,525	 	 	 	1,864	 	 	 	1,723	 	 	 	1,735	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Balance at end of period	 	$	20,944	 	 	 	18,654	 	 	 	7,799	 	 	 	6,722	 	 	 	5,668	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Ratio of net charge offs to average loans outstanding during the period	 	 	0.26	%	 	 	0.20	%	 	 	0.11	%	 	 	0.11	%	 	 	0.13	%	
(1) Acquisition of WesterFed Financial Corporation and several branches 
Allocation of the Allowance for Loan Loss 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	2002	 	2001	 	2000	 	1999	 	1998	
 	 	 		 		 		 		 		
 	 	 	 	 	 	 	Percent	 	 	 	 	 	Percent	 	 	 	 	 	Percent	 	 	 	 	 	Percent	 	 	 	 	 	Percent	
 	 	 	 	 	 	 	of loans in	 	 	 	 	 	of loans in	 	 	 	 	 	of loans in	 	 	 	 	 	of loans in	 	 	 	 	 	of loans in	
(Dollars in thousands)	 	Allowance	 	category	 	Allowance	 	category	 	Allowance	 	category	 	Allowance	 	category	 	Allowance	 	category	
	 		 		 		 		 		 		 		 		 		 		
Residential first mortgage and loans held for sale	 	$	2,334	 	 	 	27.4	%	 	 	2,722	 	 	 	31.5	%	 	 	1,227	 	 	 	31.2	%	 	 	1,174	 	 	 	34.2	%	 	 	1,221	 	 	 	41.3	%	
Commercial real estate	 	 	7,088	 	 	 	30.1	%	 	 	5,906	 	 	 	28.3	%	 	 	2,300	 	 	 	26.7	%	 	 	1,526	 	 	 	23.4	%	 	 	1,095	 	 	 	20.5	%	
Other commercial	 	 	7,670	 	 	 	20.9	%	 	 	6,225	 	 	 	18.0	%	 	 	2,586	 	 	 	19.2	%	 	 	2,466	 	 	 	19.0	%	 	 	1,992	 	 	 	16.9	%	
Consumer	 	 	3,852	 	 	 	21.6	%	 	 	3,801	 	 	 	22.2	%	 	 	1,686	 	 	 	22.9	%	 	 	1,556	 	 	 	23.4	%	 	 	1,360	 	 	 	21.3	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Totals	 	$	20,944	 	 	 	100.0	%	 	 	18,654	 	 	 	100.0	%	 	 	7,799	 	 	 	100.0	%	 	 	6,722	 	 	 	100.0	%	 	 	5,668	 	 	 	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. 
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Management’s Discussion and Analysis section 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	 	$	21,422	 	 	 	384,815	 	 	 	406,237	 	
Three months to six months	 	 	10,881	 	 	 	—	 	 	 	10,881	 	
Seven months to twelve months	 	 	25,780	 	 	 	—	 	 	 	25,780	 	
Over twelve months	 	 	15,486	 	 	 	—	 	 	 	15,486	 	
 	 	 		 	 	 		 	 	 		 	
 	Totals	 	$	73,569	 	 	 	384,815	 	 	 	458,384	 	
 	 	 		 	 	 		 	 	 		 	
For additional information, see Management’s Discussion & Analysis and footnote 7 to the Consolidated Financial Statements for the year ended December 31, 2002. 
In addition to funds obtained in the ordinary course of business, the Company formed Glacier Trust as a financing subsidiary. 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 the trust. The purpose of the issuance of the securities was to finance the acquisition of WesterFed Financial Corporation and seven Wells Fargo & Company and First Security Corporation branches. For additional information regarding the trust preferred securities and the acquisitions, see Notes 10 and 20 to the Consolidated Financial Statements for the year ended December 31, 2002. 
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. 
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The following chart illustrates the average balances and the maximum outstanding month-end balances for FHLB advances and repurchase agreements: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	For the year ended December 31,	
(Dollars in thousands)	 		
 	 	 	2002	 	2001	 	2000	
 	 	 		 		 		
FHLB Advances	 	 	 	 	 	 	 	 	 	 	 	 	
 	Amount outstanding at end of period	 	$	483,660	 	 	 	367,295	 	 	 	196,791	 	
 	Average balance	 	$	409,168	 	 	 	349,023	 	 	 	211,217	 	
 	Maximum outstanding at any month-end	 	$	483,660	 	 	 	416,222	 	 	 	234,688	 	
 	Weighted average interest rate	 	 	4.15	%	 	 	5.24	%	 	 	6.37	%	
Repurchase Agreements:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Amount outstanding at end of period	 	$	46,206	 	 	 	32,585	 	 	 	24,877	 	
 	Average balance	 	$	35,479	 	 	 	27,375	 	 	 	19,052	 	
 	Maximum outstanding at any month-end	 	$	46,206	 	 	 	37,814	 	 	 	24,877	 	
 	Weighted average interest rate	 	 	1.46	%	 	 	2.11	%	 	 	5.39	%	
For additional information concerning the Company’s advances and repurchase agreements, see footnotes 8 and 9 to the Consolidated Financial Statements for the year ended December 31, 2002. 
EMPLOYEES 
As of December 31, 2002, the Company employed 809 persons, 737 of who were full time, none of whom were represented by a collective bargaining group. The Company provides its employees 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 for the year ended December 31, 2002 for detailed information regarding profit sharing plan costs and eligibility. 
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 because of its ownership of Glacier Bank, First Security Bank of Missoula, Western Security Bank, Mountain West Bank, Big Sky Western Bank, Valley Bank of Helena, and Glacier Bank of Whitefish, 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 the Bank Holding Company Act of 1956, as amended, which places us under the supervision of the Board of Governors of the Federal Reserve. The Company is required to file annual reports and additional information with the Federal Reserve, and the Company is periodically examined by the Federal Reserve. 
In general, the Bank Holding Company Act limits bank holding company business to owning or controlling banks and engaging in other banking-related activities. Bank holding companies must obtain the Federal Reserve Board’s approval before they: (1) acquire control (i.e., 5% or more) of the voting shares of a bank; (2) merge or consolidate with another bank holding company; or (3) acquire substantially all of the assets of any additional banks. Under the Financial Services Modernization Act of 1999, a bank holding company may apply to the Federal Reserve Board to become a financial holding company, and thereby engage (directly or through a subsidiary) in certain activities deemed financial in nature, such as securities brokerage and insurance underwriting. 
Control of Nonbanks. With certain exceptions, the Bank Holding Company Act prohibits bank holding companies from acquiring direct or indirect ownership or control of voting shares in any company that is not a bank or a bank holding company unless the Federal Reserve Board determines that the activities of such company are incidental or closely related to the business of banking. 
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Control Transactions. The Change in Bank Control Act of 1978, as amended, requires a person (or group of persons acting in concert) acquiring “control” of a bank holding company to provide the Federal Reserve Board with 60 days’ prior written notice of the proposed acquisition. Following receipt of this notice, the Federal Reserve Board has 60 days (or up to 90 days if extended) within which to issue a notice disapproving the proposed acquisition. In addition, any “company” must obtain the Federal Reserve Board’s approval before acquiring 25% (5% if the “company” is a bank holding company) or more of the Company’s outstanding shares or otherwise obtaining control over the Company. 
Transactions with Affiliates 
The Company and its subsidiaries are affiliates within the meaning of the Federal Reserve Act, and transactions between affiliates are subject to certain restrictions. Generally, the Federal Reserve Act limits the extent to which a financial institution or its subsidiaries may engage in “covered transactions” with an affiliate. It also requires all transactions with an affiliate, whether or not “covered transactions,” to be on terms substantially the same, or at least as favorable to the institution or subsidiary, as those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and other similar types of transactions. 
Regulation of Management 
Federal law: (1) sets forth the circumstances under which officers or directors of a financial institution may be removed by the institution’s federal supervisory agency; (2) places restraints on lending by an institution to its executive officers, directors, principal stockholders, and their related interests; and (3) prohibits management personnel from serving as a director or in other management positions with another financial institution which has assets exceeding a specified amount or which has an office within a specified geographic area. 
Tie-In Arrangements 
The Company and its subsidiaries cannot engage 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 on either (1) a requirement that the customer obtain additional services provided by it or (2) an agreement by the customer to refrain from obtaining other services from a competitor. 
The Subsidiaries 
General 
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 by the Idaho Department of Finance and by the FDIC as a state non-member commercial bank. In addition, Mountain West’s two Utah branches are regulated to a limited extent by the Utah Department of Financial Institutions. 
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. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, each federal banking agency has prescribed noncapital safety and soundness standards for institutions under its authority. These standards cover internal controls, information systems, and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for 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 a plan may subject the institution to regulatory actions. 
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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 and prohibited in-state banks from merging with out-of-state banks on or prior to September 30, 2001. After that date, 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 has enacted “opting in” legislation similar in certain respects to that enacted by Idaho, allowing banks to engage in interstate merger transactions subject to a five year aging requirement. De novo branching by an out of state bank is generally prohibited; however, once an out of state bank has acquired a Utah branch, that bank may establish additional branches in Utah. 
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. 
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. 
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 stockholders’ 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%. 
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Leverage Ratio. The guidelines also employ a leverage ratio, which is Tier I capital, less intangibles, as a percentage of total assets. 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. 
Financial Services Modernization 
The laws and regulations that affect banks and bank holding companies recently underwent significant changes as a result of the Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act of 1999. 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 consumers’ 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 may now engage in a wider variety of financial activities than permitted under previous law, particularly insurance and securities activities. In addition, in a change from previous law, a bank holding company may be owned, controlled or acquired by any company engaged in financially related activities, so long as such company meets certain regulatory requirements. The act also permits national banks (and certain state banks), either directly or through operating subsidiaries, to engage in certain non-banking financial activities. 
The Company does not believe that the act will negatively affect the Company’s operations. However, to the extent the act 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 the Company currently offers and that can aggressively compete in the markets it currently serves. 
Anti-Terrorism Legislation 
On October 26, 2001, President Bush signed the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (“USA Patriot Act”) of 2001. Among other things, the USA Patriot Act (1) prohibits banks from providing 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, it does not believe that the Act will have a material adverse effect on its business and operations. 
Significant Changes In Banking Laws And Regulations 
Sarbanes-Oxley Act of 2002. On July 30, 2002, the President signed into law the Sarbanes-Oxley Act of 2002 (the “Act”) to address corporate and accounting fraud. The Act establishes a new accounting oversight board that will 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. 
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As a publicly reporting company, we are subject to the requirements of the Act and are in the process of complying with, and establishing procedures for, compliance with the Act and related rules and regulations issued by the SEC and NASDAQ. At the present time, and subject to the final rules and regulations the SEC and NASDAQ may adopt, we anticipate that we will incur additional expense as a result of the Act, but we do not expect that such compliance will have a material impact on our business. 
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 in the Consolidated Financial Statements for additional information. 
State Taxation 
Under Montana and Idaho 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. Idaho imposes an 8% tax. 
Item 2. Properties 
At December 31, 2002, the Company owned 38 of its 50 offices, including its headquarters and other property having an aggregate book value of approximately $38 million, and leased the remaining branches. 8 offices are leased in Montana, 4 offices are leased in Idaho, and 1 office is leased in Utah. The following schedule provides property information for the Company’s operating segments as of December 31, 2002. 
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Properties	 	Properties	 	Net Book	
(dollars in thousands)	 	Leased	 	Owned	 	Value	
	 		 		 		
Glacier	 	 	2	 	 	 	9	 	 	$	7,989	 	
First Security	 	 	3	 	 	 	6	 	 	 	6,642	 	
Western	 	 	2	 	 	 	6	 	 	 	5,075	 	
Mountain West	 	 	5	 	 	 	6	 	 	 	10,104	 	
Big Sky	 	 	2	 	 	 	1	 	 	 	3,618	 	
Valley	 	 	1	 	 	 	5	 	 	 	2,883	 	
Whitefish	 	 	—	 	 	 	2	 	 	 	1,579	 	
 	 	 		 	 	 		 	 	 		 	
 	 	 	15	 	 	 	35	 	 	$	37,890	 	
 	 	 		 	 	 		 	 	 		 	
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 for the year ended December 31, 2002. 
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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 2002. 
PART II 
Item 5. Market Price of and Dividends on Registrant’s Common Equity & Related Stockholder Matters 
The Company’s stock trades on the Nasdaq National Market., under the symbol: GBCI. The primary market makers are: D.A. Davidson & Company, Inc.; Archipelago, LLC; Knight Securities LP; Piper Jaffray Companies, Inc.; Morgan Stanley & Co., Inc.; Cincinnati Stock Exchange; and Spear, Leeds & Kellogg. 
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, 2002, there were approximately 8,713 shareholders of Company common stock. Following is a schedule of quarterly common stock price ranges: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2002	 	2001	
 	 		 		
Quarter	 	High	 	Low	 	High	 	Low	
	 		 		 		 		
First	 	$	23.25	 	 	$	19.10	 	 	$	16.13	 	 	$	12.25	 	
Second	 	$	24.99	 	 	$	20.85	 	 	$	19.75	 	 	$	14.50	 	
Third	 	$	24.60	 	 	$	19.73	 	 	$	19.20	 	 	$	17.06	 	
Fourth	 	$	24.00	 	 	$	19.90	 	 	$	21.19	 	 	$	15.78	 	
The Company paid cash dividends on its common stock of $.67 and $.60 per share for the years ended December 31, 2002 and 2001, respectively. 
Unregistered Securities 
On September 26, 2001, the Company’s Board of Directors approved the issuance of 33,024 shares of Company common stock, to be issued in exchange for outstanding debentures issued by Big Sky Western Bank with a principal amount of $350,000 (the “Debentures”). The Debentures were scheduled to mature on December 31, 2001, and were convertible into common stock at that time. In connection with the Company’s acquisition of Big Sky on January 20, 1999 (the “Acquisition”), the Company assumed the obligation to deliver shares of Company common stock to those Debenture holders that elect to convert their Debentures into stock upon maturity. Based on the conversion provision in the Debentures and the exchange ratio for the Acquisition, the Debentures were convertible into an aggregate of 27,993 shares of Company common stock at the time of the Acquisition. As adjusted for subsequent stock dividends by the Company, the Debentures were convertible into an aggregate of 33,024 shares of Company common stock. 
In issuing the Shares, the Company relied upon the exemption from registration set forth in Section 3(a)(9) of the Securities Act of 1933, as amended (“1933 Act”). Section 3(a)(9) of the 1933 Act applies when securities are exchanged “by the issuer with its existing securities holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.” No commission or other consideration was paid or given, directly or indirectly, for soliciting the conversion of the Debentures. Further, the exchange was available exclusively to existing securities holders. 
With respect to the “same issuer” requirement of Section 3(a)(9) of the 1933 Act, the Company recognized that Big Sky issued the Debentures and that the Company was issuing the common stock upon conversion. The Company, however, relied on “no-action positions” taken by SEC Commission Staff with respect to Section 3(a)(9) in which a bank holding company in a reorganization has assumed joint and several responsibility for the due payment of principal and interest of the convertible debt securities of the acquired operating subsidiary and substituted the holding company’s common stock for the operating subsidiary’s common stock as the underlying security for conversion purposes, the bank holding company was allowed to issue its common stock upon conversion of the debt securities, without registration under the 1933 Act. 
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The Company, with the assistance of legal counsel, confirmed with SEC Staff that the issuance of the Shares in exchange for the Debentures was an exempt transaction under Section 3(a)(9) of the Securities Act. 
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 
Summary of Operations and Selected Financial Data 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	At December 31,	
 	 	 	 		
(dollars in thousands, except per share data)	 	2002	 	2001	 	2000	 	1999	 	1998	
	 		 		 		 		 		
Summary of Financial Condition:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Total assets	 	$	2,281,344	 	 	 	2,085,747	 	 	 	1,056,712	 	 	 	974,001	 	 	 	786,802	 	
 	Investment securities, available for sale	 	 	739,961	 	 	 	508,578	 	 	 	211,888	 	 	 	209,312	 	 	 	119,087	 	
 	Loans receivable, net	 	 	1,300,653	 	 	 	1,322,327	 	 	 	733,561	 	 	 	652,208	 	 	 	571,188	 	
 	Allowance for loan losses	 	 	(20,944	)	 	 	(18,654	)	 	 	(7,799	)	 	 	(6,722	)	 	 	(5,668	)	
 	Intangibles	 	 	40,011	 	 	 	41,771	 	 	 	6,493	 	 	 	7,035	 	 	 	2,601	 	
 	Deposits	 	 	1,459,923	 	 	 	1,446,064	 	 	 	720,570	 	 	 	644,106	 	 	 	546,503	 	
 	Advances from Federal Home Loan Bank	 	 	483,660	 	 	 	367,295	 	 	 	196,791	 	 	 	208,650	 	 	 	125,886	 	
 	Securities sold under agreements to repurchase and other borrowed funds	 	 	61,293	 	 	 	32,585	 	 	 	29,529	 	 	 	26,614	 	 	 	18,707	 	
 	Stockholders’ equity	 	 	212,249	 	 	 	176,983	 	 	 	98,113	 	 	 	85,056	 	 	 	84,146	 	
 	Equity per common share*	 	 	12.28	 	 	 	10.49	 	 	 	8.57	 	 	 	7.44	 	 	 	7.85	 	
 	Equity as a percentage of total assets	 	 	9.30	%	 	 	8.49	%	 	 	9.28	%	 	 	8.73	%	 	 	10.69	%	
 		
 	 	 	 	Years ended December 31,	
 	 	 	 		
(dollars in thousands, except per share data)	 	2002	 	2001	 	2000	 	1999	 	1998	
	 		 		 		 		 		
Summary of Operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Interest income	 	$	133,989	 	 	 	137,920	 	 	 	78,837	 	 	 	64,719	 	 	 	58,828	 	
 	Interest expense	 	 	47,522	 	 	 	65,546	 	 	 	37,357	 	 	 	27,635	 	 	 	25,470	 	
 	 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Net interest income	 	 	86,467	 	 	 	72,374	 	 	 	41,480	 	 	 	37,084	 	 	 	33,358	 	
 	Provision for loan losses	 	 	5,745	 	 	 	4,525	 	 	 	1,864	 	 	 	1,723	 	 	 	1,735	 	
 	Non-interest income	 	 	25,917	 	 	 	23,251	 	 	 	13,294	 	 	 	12,809	 	 	 	13,596	 	
 	Non-interest expense	 	 	57,813	 	 	 	57,385	 	 	 	31,327	 	 	 	29,096	 	 	 	27,170	 	
 	 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Earnings before income taxes	 	 	48,826	 	 	 	33,715	 	 	 	21,583	 	 	 	19,074	 	 	 	18,049	 	
 	Income taxes	 	 	16,424	 	 	 	12,026	 	 	 	7,580	 	 	 	6,722	 	 	 	6,674	 	
 	 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Net earnings	 	 	32,402	 	 	 	21,689	 	 	 	14,003	 	 	 	12,352	 	 	 	11,375	 	
 	 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Basic earnings per common share*	 	 	1.89	 	 	 	1.38	 	 	 	1.22	 	 	 	1.08	 	 	 	1.02	 	
 	 	Diluted earnings per common share*	 	 	1.86	 	 	 	1.34	 	 	 	1.21	 	 	 	1.07	 	 	 	1.00	 	
 	 	Dividends declared per share*	 	 	0.67	 	 	 	0.60	 	 	 	0.59	 	 	 	0.58	 	 	 	0.47	 	
 		
 	 	 	 	At or for the years ended December 31,	
 	 	 	 		
 	 	 	 	2002	 	2001	 	2000	 	1999	 	1998	
 	 	 	 		 		 		 		 		
Ratios:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings as a percent of	 	 			 	 			 	 			 	 			 	 			
 	average assets	 	 	1.50	%	 	 	1.10	%	 	 	1.39	%	 	 	1.41	%	 	 	1.47	%	
 	average stockholders’ equity	 	 	16.57	%	 	 	13.49	%	 	 	15.83	%	 	 	14.60	%	 	 	14.43	%	
Dividend payout ratio	 	 	35.45	%	 	 	43.48	%	 	 	48.36	%	 	 	53.70	%	 	 	46.08	%	
Average equity to average asset ratio	 	 	9.08	%	 	 	8.26	%	 	 	8.78	%	 	 	9.73	%	 	 	10.22	%	
Net interest margin on average earning assets (tax equivalent)	 	 	4.51	%	 	 	4.08	%	 	 	4.48	%	 	 	4.67	%	 	 	4.80	%	
Allowance for loan losses as a percent of loans	 	 	1.58	%	 	 	1.39	%	 	 	1.05	%	 	 	1.02	%	 	 	0.98	%	
Allowance for loan losses as a percent of nonperforming assets	 	 	181	%	 	 	165	%	 	 	372	%	 	 	295	%	 	 	185	%	
 		
 	 	 	 	At or for the years ended December 31,	
 	 	 	 		
(dollars in thousands)	 	2002	 	2001	 	2000	 	1999	 	1998	
	 		 		 		 		 		
Other Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Loans originated and purchased	 	$	1,204,852	 	 	 	994,527	 	 	 	570,652	 	 	 	528,325	 	 	 	516,497	 	
 	Loans serviced for others	 	$	253,063	 	 	 	286,996	 	 	 	146,534	 	 	 	159,451	 	 	 	169,378	 	
 	Number of full time equivalent employees	 	 	737	 	 	 	728	 	 	 	423	 	 	 	434	 	 	 	412	 	
 	Number of offices	 	 	50	 	 	 	51	 	 	 	30	 	 	 	31	 	 	 	27	 	
 	Number of shareholders of record	 	 	1,586	 	 	 	1,645	 	 	 	1,228	 	 	 	1,212	 	 	 	929	 	
*revised for stock splits and dividends 
All amounts have been restated to include mergers using the pooling of interests accounting method and includes the impact of purchasing minority interest in Valley Bank in 1998 and two Butte, Montana branches in 1999. WesterFed was acquired on February 28, 2001 using the purchase method of accounting, accordingly the financial information presented includes the operations of WesterFed since the acquisition date. 
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Management’s Discussion and Analysis of Financial Condition
And Results of Operations 
The Company is a Delaware corporation and at December 31, 2002 had six commercial banks located in Montana as subsidiaries: Glacier Bank, First Security Bank of Missoula, Western Security Bank, Big Sky Western Bank, Valley Bank of Helena, and Glacier Bank of Whitefish. Mountain West Bank of Coeur d’Alene, Idaho is its seventh banking subsidiary. The first quarter 2001 acquisitions of WesterFed Financial Corporation and the branch purchases in Idaho and Utah from Wells Fargo and First Security Corporation were accounted for as purchases, and accordingly the financial information presented includes the assets and results of operations of those locations from the date of purchase. The following narrative and tables focus on the significant financial changes that have taken place over the past years and include a discussion of the Company’s financial condition, results of operations, and capital resources. 
Financial Condition 
The following table summarizes the Company’s major asset and liability components as a percentage of total assets at December 31, 2002, 2001, and 2000. 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	December 31,	
 	 	 		
Assets:	 	2002	 	2001	 	2000	
	 		 		 		
 	Cash, and Cash Equivalents, Investment Securities, FHLB and Federal Reserve Stock	 	 	37.8	%	 	 	30.8	%	 	 	26.7	%	
 	Real Estate Loans and Loans Held for Sale	 	 	15.7	%	 	 	20.1	%	 	 	21.8	%	
 	Commercial Loans	 	 	28.9	%	 	 	29.2	%	 	 	31.8	%	
 	Consumer Loans	 	 	12.4	%	 	 	14.1	%	 	 	15.9	%	
 	Other Assets	 	 	5.2	%	 	 	5.8	%	 	 	3.8	%	
 	 	 		 	 	 		 	 	 		 	
 	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	
 	 	 		 	 	 		 	 	 		 	
Liabilities and Stockholder’s Equity:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Deposit Accounts	 	 	64.0	%	 	 	69.3	%	 	 	68.2	%	
 	FHLB Advances	 	 	21.2	%	 	 	17.6	%	 	 	18.6	%	
 	Other Borrowings and Repurchase Agreements	 	 	2.7	%	 	 	3.3	%	 	 	2.8	%	
 	Other Liabilities	 	 	2.8	%	 	 	1.3	%	 	 	1.1	%	
 	Stockholders’ Equity	 	 	9.3	%	 	 	8.5	%	 	 	9.3	%	
 	 	 	 		 	 	 		 	 	 		 	
 	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	
 	 	 		 	 	 		 	 	 		 	
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. 
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GAP analysis 
The following table gives a description of our GAP position for various time periods. As of December 31, 2002, 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 2.77% which compares to a negative 12.52% at December 31, 2001 and a negative 19.01% at December 31, 2000. The table also shows the GAP earnings sensitivity, and earnings sensitivity ratio, along with a brief description as to how they are calculated. The traditional one-dimensional view of GAP is not sufficient to show a bank’s ability to withstand interest rate changes. Superior earnings power is also a key factor in reducing exposure to higher interest rates. Using this analysis to join GAP information with earnings data produces a better picture of our strength and ability to handle interest rate change. 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	 	$	4,753	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	4,753	 	
 	Investment securities	 	 	7,219	 	 	 	1,661	 	 	 	39,553	 	 	 	212,173	 	 	 	260,606	 	
 	Mortgage-backed securities	 	 	110,224	 	 	 	112,791	 	 	 	238,215	 	 	 	18,125	 	 	 	479,355	 	
 	Floating rate loans	 	 	369,534	 	 	 	62,086	 	 	 	236,640	 	 	 	6,551	 	 	 	674,811	 	
 	Fixed rate loans	 	 	169,833	 	 	 	106,630	 	 	 	272,818	 	 	 	99,504	 	 	 	648,785	 	
 	FHLB stock and FRB stock	 	 	36,175	 	 	 	—	 	 	 	—	 	 	 	6,689	 	 	 	42,864	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Total interest bearing assets	 	$	697,738	 	 	 	283,168	 	 	 	787,226	 	 	 	343,042	 	 	 	2,111,174	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Interest-bearing deposits	 	 	592,668	 	 	 	132,303	 	 	 	110,765	 	 	 	329,171	 	 	 	1,164,907	 	
 	FHLB advances	 	 	102,278	 	 	 	57,394	 	 	 	220,819	 	 	 	103,169	 	 	 	483,660	 	
 	Other borrowed funds and repurchase agreements	 	 	61,293	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	61,293	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Total interest bearing liabilities	 	$	756,239	 	 	 	189,697	 	 	 	331,584	 	 	 	432,340	 	 	 	1,709,860	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Repricing gap	 	$	(58,501	)	 	 	93,471	 	 	 	455,642	 	 	 	(89,298	)	 	 	401,314	 	
Cumulative repricing gap	 	$	(58,501	)	 	 	34,970	 	 	 	490,612	 	 	 	401,314	 	 	 	 	 	
Cumulative gap as a % of total assets	 	 	-2.77	%	 	 	1.66	%	 	 	23.24	%	 	 	19.01	%	 	 	 	 	
Gap Earnings Sensitivity (1)	 	 	 	 	 	$	213	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gap Earnings Sensitivity Ratio (2)	 	 	 	 	 	 	0.66	%	 	 	 	 	 	 	 	 	 	 	 	 	

(1)	 	Gap Earnings Sensitivity is the estimated effect on income, after taxes of 39%, of a 1% increase or decrease in interest rates (1% of ($34,970 — $13,638))	
 		
(2)	 	Gap Earnings Sensitivity Ratio is Gap Earnings Sensitivity divided by the estimated yearly earnings of $32,402. A 1% increase in interest rates has this estimated percentage decrease 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. 
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Interest Rate Spread 
One way to protect against interest rate volatility is to maintain a comfortable interest spread between yields on assets and the rates paid on interest bearing liabilities. The interest spread for 2002 was .53 basis points higher than the prior year. The net interest margin increased in 2002 to 4.51% from 4.08%, primarily the result of reducing liability costs more than the reduction in income on assets in this low interest rate environment. 
Interest Rate Spread 
 	 	 	 	 	 	 	 	 	 	 	 	 		
 	 	December 31, [1]		
 	 			
 	 	2002	 	2001	 	2000		
 	 		 		 			
Combined weighted average yield on loans and investments [2]	 	 	6.90	%	 	 	7.80	%	 	 	8.51	%		
Combined weighted average rate paid on savings deposits and borrowings	 	 	2.84	%	 	 	4.27	%	 	 	4.89	%		
Net interest spread	 	 	4.06	%	 	 	3.53	%	 	 	3.62	%		
Net interest margin [3]	 	 	4.51	%	 	 	4.08	%	 	 	4.48	%		

(1)	 	Weighted averages are computed without the effect of compounding daily interest.	
 		
(2)	 	Includes dividends received on capital stock of the FHLB and Federal Reserve Bank.	
 		
(3)	 	The net interest margin (net yield on average interest earning assets) is interest income from loans and investments (tax free income adjusted for tax effect) less interest expense from deposits, FHLB advances, and other borrowings, divided by the total amount of earning assets.	
Liquidity and Capital Resources 
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. The principal source of the Company’s cash revenues is the dividends received from the Company’s banking subsidiaries. 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. The subsidiaries source of funds is generated by deposits, principal and interest payments on loans, sale of loans and securities, short and long-term borrowings, and net income. In addition, all seven subsidiaries are members of the Federal Home Loan Bank of Seattle (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, 2002, the Company had $776 million of available FHLB line of which $484 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 2002, all seven financial institutions maintained liquidity levels in excess of regulatory requirements and deemed sufficient to meet operating cash needs. 
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. 
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. 
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Interest Rate Risk 
Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with the Company’s financial instruments also change thereby impacting net interest income (NII), the primary component of the Company’s earnings. ALCO utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure of 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, 2002 and 2001 as compared to the 10% Board approved policy limit. 
 	 	 	 	 	 	 	 	 	
+200 bp	 	2002	 	2001	
	 		 		
Estimated sensitivity	 	 	-1.37	%	 	 	-3.20	%	
Estimated decrease in net interest income	 	$	(1,185	)	 	 	(2,316	)	
 		
-100 bp and -200 bp (1)	 	 	 	 	 	 	 	 	
Estimated sensitivity	 	 	0.46	%	 	 	0.77	%	
Estimated increase in net interest income	 	$	398	 	 	 	557	 	

(1)	 	-100 bp and -200 bp for the years ended December 31, 2002 and 2001, respectively	
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. 
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. 
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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 in the Consolidated Financial Statements for the year ended December 31, 2002. 
Impact of Recently Issued Accounting Standards 
In July 2001, the FASB issued Statement 141, Business Combinations, and Statement 142, Goodwill and Other Intangible Assets. In October 2002, the FASB issued Statement 147, Acquisitions of Certain Financial Institutions. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. However, goodwill recognized in connection with a branch acquisition will follow Statement 147, which states that if certain criteria are met in Statement 147, the amount of unidentifiable intangible asset will be reclassified to goodwill upon adoption of that Statement and follow Statement 142. Prior to October 2002, goodwill associated with branch acquisitions was subject to the provisions of Statement 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions, which required the amortization of the unidentifiable intangible asset. In addition, financial institutions meeting the requirements of Statement 147 will be required to restate previously issued financial statements. The objective of that restatement requirement is to present the balance sheet and income statement as if the amount accounted for under Statement 72 as an unidentifiable intangible asset had been reclassified to goodwill as of the date Statement 142 was initially applied. Statement 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with Statement 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company adopted the provisions of Statement 141 immediately, and Statement 142 and 144 effective January 1, 2002. Statement 147 was adopted October 1, 2002 and retroactively applied to January 1, 2002. 
Statement 141 required upon adoption of Statement 142 that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. The Company was required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption (March 31, 2002). In addition, to the extent an intangible asset was identified as having an indefinite useful life, the Company was required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss would be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. 
In connection with the transitional goodwill impairment evaluation, Statement 142 required the Company to perform an assessment of whether there was an indication that goodwill was impaired as of the date of adoption. To accomplish this, the Company identified its reporting units and determined the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company had up to six months from the date of adoption (June 30, 2002) to determine the fair value of each reporting unit and compare it to the reporting unit’s carrying amount. To the extent a reporting unit’s carrying amount exceeded its fair value, an indication would exist that the reporting unit’s goodwill may be impaired and the Company would be required to perform the second step of the transitional impairment test. In the second step, the Company would compare the implied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s fair value to all of its assets and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption (January 1, 2002). The second step, if necessary, is required to be completed as soon as possible, but no later than the end of the year of adoption (December 31, 2002). Any transitional impairment loss would be recognized as the cumulative effect of a change in accounting principle in the Company’s consolidated statements of operations. 
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As of December 31, 2002, the Company has identified its reporting units as its banking subsidiaries and has allocated goodwill accordingly. Intangibles with definite useful lives have been re-assessed and the useful lives and residual values were determined to be adequate. The Company estimated the fair value of each reporting unit, and determined that each unit’s fair value exceeded the carrying value of each reporting unit, and consequently no impairment is evident at this time. The Company has evaluated the goodwill recognized in connection with branch acquisitions and determined that it meets the criteria of Statement 147, and therefore the unidentifiable intangible asset has been reclassified to goodwill and is subject to Statement 142. The reclassification was retroactively applied to January 1, 2002, which resulted in the restatement of previously filed quarterly financial statements. On an annual basis, prior to the end of the third quarter, the Company will test goodwill for impairment, as required by Statement 142. 
In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, clarifying the accounting treatment and financial statement disclosure of certain guarantees issued and outstanding. Interpretation No. 45 clarifies that a guarantor is required to recognize, at the inception of certain guarantees, a liability for the fair value undertaken in issuing the guarantee. In addition, guarantors must disclose the approximate term and nature of the guarantee, the maximum potential amount of future payments, current carrying amount of the liability and the nature of recourse provisions and collateral. The initial recognition and measurement provisions of Interpretation No. 45 are effective for guarantees issued or modified after December 31, 2002. Management does not expect the adoption of the initial recognition and measurement provisions of Interpretation No. 45 to have a material impact on the Bank’s consolidated financial statements, results of operations or liquidity. Disclosure provisions of Interpretation No. 45 became effective and were adopted by the Bank on December 31, 2002. 
In December 2002, the FASB issued Statement 148, Accounting for Stock-Based Compensation-Transition and Disclosure, providing alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. Statement 148 also amends the disclosure requirements of Statement 123 to include prominent disclosures in financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the disclosure provisions of Statement 148 at December 31, 2002. 
In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, addressing consolidation by business enterprises of certain variable interest entities. Under the provisions of Interpretation No. 46, an enterprise must consolidate a variable interest entity if that enterprise will absorb a majority of the entity’s expected losses or receive a majority of the entity’s residual returns, or both, regardless of the enterprise’s direct or indirect ability to make decisions about the entity’s activities through voting or similar rights. An enterprise that consolidates a variable interest entity is called the primary beneficiary of that entity. Interpretation No. 46 requires the primary beneficiary to disclose the nature, purpose, size and activities of the variable interest entity; the carrying amount and classification of consolidated assets that are collateral for the variable interest entity’s obligations; and, creditor’s recourse to the general credit of the primary beneficiary. Additional disclosures are required for enterprises that hold significant interests in a variable interest entity but are not the primary beneficiaries. Interpretation No. 46 applies immediately to interests in variable interest entities created or acquired after January 31, 2003 and to the first fiscal year or interim period beginning after June 15, 2003 for interests in variable interest entities acquired before February 1, 2003. Interpretation No. 46 may be applied prospectively or retroactively with a cumulative-effect adjustment recorded as of the beginning of the first year applied. Application of this Interpretation is not expected to have a material effect on the Company’s financial statements. 
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Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Year Ended December 31, 2002 Compared to December 31, 2001 
Financial Condition 
Total assets increased $196,597,000, or 9.4%, over the December 31, 2001 asset level. Total gross loans outstanding decreased 1.4%, or $19,384,000. Residential real estate loans held for investment decreased $85,058,000, or 21.6%. With the continued decline in interest rates during 2002 a large number of real estate loans were refinanced which combined with the Company strategy of selling long term real estate loans as they are originated has resulted in a net reduction in real estate loans outstanding. Consumer loans, including home equity loans, also decreased 12,032,000, or 4.2%. The majority of the consumer loan decrease is attributed to dealer originated loans. Commercial loans, which continue to be our lending focus, increased $53,123,000 or 8.6%. Investment securities increased $231,383,000, or 45.5%, the result of redeploying the cash received from the residential real estate loans to mortgage related investment securities, and the investment of other liquid funds. 
Total liabilities increased $160,331,000, or 8.4%, primarily the result of the increase in FHLB and other borrowings which increased $144,013,000 or 36%. Total deposits decreased $13,859,000 or 1.0% however, there was a significant shift from interest bearing deposits to non-interest bearing deposits. Non-interest bearing deposits increased $60,698,000 or 26% and interest bearing deposits decreased $46,839,000 or 3.9%. Federal Home Loan Bank advances increased $116,365,000, or 31.7% and securities sold under repurchase agreements and other borrowed funds were up $27,648,000, or 82.2%. 
During 2002, the Company increased dividends per share to $.67, an increase of 11.7% over the prior year. Stockholders’ equity, excluding accumulated other comprehensive income, increased $26,911,000, or 15.4% the result of earnings retention and the exercise of stock options. Accumulated other income, which is comprised of unrealized gains on securities available-for-sale, increased $8,355,000 or 475.8%. 
Results of Operations 
The 2002 results of operations include the full year impact of the first quarter 2001 acquisitions of WesterFed Financial Corporation and branch purchases in Idaho and Utah. 
Interest Income — Interest income was $133,989,000 and $137,920,000 for the years ended December 31, 2002 and 2001, respectively, a $3,931,000, or 2.9% decrease, primarily the result of continuing low interest rates. The weighted average yield on the loan and investment portfolios decreased from 7.8% to 6.9%, also the result of lower interest rates. 
Interest Expense — Interest expense was $47,522,000 for the year ended December 31, 2002, down from $65,546,000 in 2001, a $18,024,000, or 27.50%, decrease. The increase in non-interest bearing deposits and significant reductions in rates paid on interest bearing deposits and borrowed funds, are the primary reasons for the decreased interest expense. The cost of interest bearing liabilities decreased from 4.3% in 2002 to 2.8% in 2001. 
Net Interest Income — Net interest income was $86,467,000 compared to $72,374,000 in 2001, an increase of $14,093,000, or 19.5%, the net result of the items discussed in the above paragraphs. 
Provision for Loan Losses — The provision for loan losses was $5,745,000 for 2002, up from $4,525,000 for 2001. Total loans charged off, net of recoveries, were $3,455,000 in 2002, up from the $2,563,000 experienced in 2001. The allowance for loan losses balance was $20,944,000 at year end 2002, up from $18,654,000 at year end 2001, an increase of $2,290,000. With the continual 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. At December 31, 2002, the non-performing assets (non-accrual loans, accruing loans 90 days or more overdue, real estate acquired by foreclosure or deed-in-lieu thereof, and repossessed personal property) totaled $11,582,000 or .51% of total assets; compared to $11,275,000 or .53% of total assets at December 31, 2001. The peer group average, according to the Federal Reserve Bank Performance Report as of September 30, 2002, the most recent 
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information available, for banking companies similar to our size was .63% of total assets. The allowance for loan losses was 181% of non-performing assets at December 31, 2002, up from 165% the prior year end. The allowance for loan losses as a percentage of loans increased to 1.58% from 1.39 % at the 2002 and 2001 year ends, respectively. 
Non-interest income — Total non-interest income of $25,917,000 was up $2,666,000, or 11.5% from 2001. Loan fees and charges and gain on sale of loans increased $138,000 and $1,324,000, respectively, from the prior year, the result of increased loan originations and refinancing in the low interest rate environment. Service charges and other fees increased $1,721,000 or 14.0% from 2001. Other income decreased $691,000, primarily from the 2001 $511,000 gain on sale of Glacier Bank Cutbank office included in other income. The gain on sale of investments was $238,000 in 2002, up from $64,000 in 2001, the result of repositioning certain investments. 
Non-interest expense – Total non-interest expense was $57,813,000 compared to $57,385,000 for the year ended December 31, 2001. Prior year includes $1,975,000 of merger expenses and $1,699,000 in goodwill amortization, and current year includes a reversal of a merger related accrual of $323,000. Compensation, employee benefits, and related expenses increased $2,507,000, or 9.0% from 2001. Outsourced data processing expense has decreased $548,000, or 21.1%, a result of converting Western Security Bank’s data processing functions to the Company’s system, which also was a reason for the increase in compensation expense. Occupancy and equipment expense increased $912,000, or 10.5% from 2001. Other expenses increased $1,152,000, or 8.8%. 
The efficiency ratio (non-interest expense)/(net interest income + non-interest income), was 51.4% in 2002, down from 60.0% in 2000, which compares favorably with similar sized bank holding companies nationally which average approximately 60.5%. 
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Year Ended December 31, 2001 Compared to December 31, 2000 
Financial Condition 
The acquisition of WesterFed and branch purchases in Idaho and Utah from Wells Fargo and First Security Corporation were the primary reasons for the increases detailed in the following discussion. 
Total assets increased $1,029,035,000, or 97.4% over the December 31, 2000 asset level. Total loans outstanding increased 80.9%, or $599,620,000, with the largest increase occurring in residential real estate loans and loans held for sale classification which increased $190,781,000, or 82.5%. The increase in loans from the WesterFed and branch acquisitions was approximately $629,000,000 of which $272,000,000 was in residential real estate loans. With the decline in interest rates during 2001 a large number of real estate loans were refinanced which combined with the Company strategy of selling long term real estate loans as they are originated has resulted in a net reduction in real estate loans outstanding. Commercial loans increased $279,742,000 or 82.2%. Consumer loans increased $129,097,000, or 76.0%. Investment securities increased $296,690,000, or 140.0%. 
Total liabilities increased $950,166,000, or 99.1%, with non-interest bearing deposits up $93,111,000, or 65.9%, and interest bearing deposits up $632,383,000, or 109.2%. Without the effect of acquisitions deposits increased approximately $12,000,000. Federal Home Loan Bank advances increased $170,504,000, or 86.6% and securities sold under repurchase agreements and other borrowed funds were up $4,116,000, or 13.9%, primarily due to the acquisitions. The Company issued $35,000,000 in capital trust preferred securities during 2001 to fund the WesterFed and branch purchases. 
Total stockholders’ equity increased $78,870,000, or 80.4%, the result of the WesterFed acquisition and earnings retention, and $1,489,000 net increase from the unrealized gain on securities available-for-sale. 
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Results of Operations 
Interest Income — Interest income was $137,920,000 compared to $78,837,000 for the years ended December 31, 2001 and 2000, respectively, a $59,083,000, or 74.9% increase. The weighted average yield on the loan and investment portfolios decreased from 8.51% to 7.80%, the result of lower rate assets acquired, and the large decline in interest rates in 2001. 
Interest Expense — Interest expense was $65,546,000 for the year ended December 31, 2001, up from $37,357,000 in 2000, a $28,189,000, or 75.46%, increase. Included in interest rate expense in 2001 is $3,313,000 from the $35,000,000 trust preferred securities issued in January of 2001. The proceeds were used to fund the acquisitions described above. The cost of interest bearing liabilities decreased from 4.9% in 2000 to 4.3% in 2001. 
Net Interest Income — Net interest income was $72,374,000 compared to $41,480,000 in 2000, an increase of $30,894,000, or 74.5%, the net result of the items discussed in the above paragraphs. 
Provision for Loan Losses — The provision for loan losses was $4,525,000 for 2001, up from $1,864,000 for 2000. Total loans charged off, net of recoveries, were $2,563,000 in 2001, up from the $787,000 experienced in 2000. The allowance for loan losses balance was $18,654,000 at year end 2001, up from $7,799,000 at year end 2000, an increase of $10,855,000. At December 31, 2001, the non-performing assets (non-accrual loans, accruing loans 90 days or more overdue, real estate acquired by foreclosure or deed-in-lieu thereof, and repossessed personal property) totaled $11,275,000 or .53% of total assets; compared to $2,097,000 or .20% of total assets at December 31, 2000. The peer group average, according to the Federal Reserve Bank Performance Report as of September 30, 2001, the most recent information available, for banking companies similar to our size was .61% of total assets. The allowance for loan losses was 165% of non-performing assets at December 31, 2001, down from 247% the prior year end. The allowance for loan losses as a percentage of loans increased to 1.39% from 1.06 % at the 2001 and 2000 year ends. The allowance for losses has increased primarily because of the WesterFed acquisition and the changing mix of loans from residential real estate to more commercial and consumer loans which historically have greater credit risk along with higher loan rates. 
Non-interest income — Total non-interest income of $23,251,000 was up $9,957,000, or 74.9% from 2000. Loan fees and charges were $2,141,000 higher than the prior year, a result of increased real estate lending due to the decrease in interest rates in 2001. Increased volumes in deposit accounts resulted in an increase in fee income of $4,451,000 from service charges and other fees. Other income, which includes $511,000 from our gain on sale of the Glacier Bank Cutbank office, was up $1,269,000. The gain on sale of investments was $64,000 in 2001, up from $51,000 in 2000. 
Non-interest expense — Total non-interest expense increased from $31,327,000 to $57,385,000 an increase of $26,058,000, or 83.2%. Compensation, employee benefits, and related expenses increased $11,727,000, or 72.3% from 2000 resulting from additional branch and data center staffing, increased activity volumes, and other normal increases. Occupancy and equipment expense increased $3,849,000, or 79.7% from 2000, the result of bringing more data processing functions in-house, the substantial investment in enhanced technology for transaction imaging and internet banking, and additional expenses from the acquisitions. Outsourced data processing and other expenses were up $1,283,000, or 97.7%, which includes increased charges at Mountain West Bank as that bank used an outside provider, and five months of service fees for Western Security Bank prior to conversion to our in-house data system. The minority interest in subsidiaries decreased $26,000, due to the purchase of the minority interest and subsequent merger of the Eureka Bank into Whitefish. Other expenses increased $4,785,000, or 57.3%, due to increased activity from the acquisitions. Included in non-interest expense is $1,975,000 of merger expense related to the WesterFed and branch acquisitions. 
The efficiency ratio (non-interest expense)/(net interest income + non-interest income), was 60.0% in 2001, up from 57.2% in 2000, which compares favorably with similar sized bank holding companies nationally which average approximately 63%. 
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Item 7a. Quantitative and Qualitative Disclosures about Market Risk 
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 
Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with the Company’s financial instruments also change thereby impacting net interest income (NII), the primary component of the Company’s earnings. ALCO utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure of 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 lever for NII exposure over a one year horizon, assuming no balance sheet growth, given a 200 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. 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, 2002 and 2001 as compared to the 10% Board approved policy limit. 
 	 	 	 	 	 	 	 	 	 	 	
+200 bp	 	2002	 	2001	
	 		 		
Estimated sensitivity	 	 	-1.37	%	 	 	-3.20	%	
Estimated decrease in net interest income	 	$(	1,185	)	 	(	2,316	)	
 	 	-100 bp and -200 bp (1)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Estimated sensitivity	 	 	0.46	%	 	 	0.77	%	
Estimated increase in net interest income	 	$	398	 	 	 	557	 	
 	 	 	 	 	 	 	 	 	 	 	
(1) -100 bp and -200 bp for the years ended December 31, 2002 and 2001, respectively	 	 	 	 	 	 	 	 	
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. 
Item 8. Financial Statements and Supplementary Data 
The following audited consolidated financial statements and related documents are set forth in the Annual Report on Form 10-K on the pages indicated. 
 	 	 	 	 	
Page	 		
	 	 	
Independent Auditors’ Report	 	 	32	 	
Consolidated Statements of Financial Condition	 	 	33	 	
Consolidated Statements of Operations	 	 	34	 	
Consolidated Statements of Stockholders’ Equity and Comprehensive Income	 	 	35	 	
Consolidated Statements of Cash Flows	 	 	36	 	
Notes to Consolidated Financial Statements	 	 	37-61	 	
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Independent Auditors’ Report 
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, 2002 and 2001 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, 2002. 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 auditing standards generally accepted in the United States of America. 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, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. 
As discussed in Notes 1 and 6 to the consolidated financial statements, the Company changed its accounting for goodwill in accordance with Statements of Financial Accounting Standards No. 142, Goodwill and Other Intangibles, and No. 147, Acquisitions of Certain Financial Institutions, effective January 1, 2002. 
/s/ KPMG 
Billings, Montana
January 31, 2003 
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Glacier Bancorp, Inc
Consolidated Statements of Financial Condition 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	December 31,	
 	 	 	 	 	 	 	 	 	 		
(dollars in thousands, except per share data)	 	 	 	 	 	2002	 	2001	
	 	 	 	 	 		 		
 	 	Assets:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Cash on hand and in banks	 	$	 	 	 	 	74,624	 	 	 	73,456	 	
 	 	 	Interest bearing cash deposits	 	 	 	 	 	 	4,753	 	 	 	23,970	 	
 	 	 	 	 	 	 		 	 	 		 	
 	 	 	 	Cash and cash equivalents	 	 	 	 	 	 	79,377	 	 	 	97,426	 	
 	 	 	Investment securities, available-for-sale	 	 	 	 	 	 	739,961	 	 	 	508,578	 	
 	 	 	Federal Home Loan Bank of Seattle stock, at cost	 	 	 	 	 	 	38,286	 	 	 	32,822	 	
 	 	 	Federal Reserve Bank stock, at cost	 	 	 	 	 	 	4,578	 	 	 	4,185	 	
 	 	 	Loans receivable, net	 	 	 	 	 	 	1,248,666	 	 	 	1,294,924	 	
 	 	 	Loans held for sale	 	 	 	 	 	 	51,987	 	 	 	27,403	 	
 	 	 	Premises and equipment, net	 	 	 	 	 	 	47,215	 	 	 	50,566	 	
 	 	 	Real estate and other assets owned, net	 	 	 	 	 	 	1,542	 	 	 	593	 	
 	 	 	Accrued interest receivable	 	 	 	 	 	 	13,421	 	 	 	12,409	 	
 	 	 	Core deposit intangible, net of accumulated amortization of $3,014 and $1,575 at December 31, 2002, and 2001, respectively	 	 	 	 	 	 	6,822	 	 	 	8,261	 	
 	 	 	Goodwill	 	 	 	 	 	 	33,189	 	 	 	33,510	 	
 	 	 	Other assets	 	 	 	 	 	 	16,300	 	 	 	15,070	 	
 	 	 	 	 	 	 		 	 	 		 	
 	 	$	 	 	 	 	2,281,344	 	 	 	2,085,747	 	
 	 	 	 	 	 	 		 	 	 		 	
 	Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Non-interest bearing deposits	 	$	 	 	 	 	295,016	 	 	 	234,318	 	
 	 	 	Interest bearing deposits	 	 	 	 	 	 	1,164,907	 	 	 	1,211,746	 	
 	 	 	Advances from Federal Home Loan Bank of Seattle	 	 	 	 	 	 	483,660	 	 	 	367,295	 	
 	 	 	Securities sold under agreements to repurchase	 	 	 	 	 	 	46,206	 	 	 	32,585	 	
 	 	 	Other borrowed funds	 	 	 	 	 	 	15,087	 	 	 	1,060	 	
 	 	 	Accrued interest payable	 	 	 	 	 	 	6,090	 	 	 	9,179	 	
 	 	 	Deferred tax liability	 	 	 	 	 	 	8,629	 	 	 	1,780	 	
 	 	 	Trust preferred securities	 	 	 	 	 	 	35,000	 	 	 	35,000	 	
 	 	 	Other liabilities	 	 	 	 	 	 	14,500	 	 	 	15,801	 	
 	 	 	 	 	 	 		 	 	 		 	
 	 	 	 	Total liabilities 	 	 	 	 	 	 	2,069,095	 	 	 	1,908,764	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Preferred shares, 1,000,000 shares authorized. None outstanding at December 31, 2002 and 2001	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	Common stock, $01 par value per share. 50,000,000 shares authorized, 17,285,818 and 16,874,422 issued and outstanding at December 31, 2002 and 2001, respectively	 	 	 	 	 	 	173	 	 	 	169	 	
 	 	 	Paid-in capital	 	 	 	 	 	 	173,408	 	 	 	167,371	 	
 	 	 	Retained earnings — substantially restricted	 	 	 	 	 	 	28,557	 	 	 	7,687	 	
 	 	 	Accumulated other comprehensive income	 	 	 	 	 	 	10,111	 	 	 	1,756	 	
 	 	 	 	 	 	 		 	 	 		 	
 	 	 	 	Total stockholders’ equity	 	 	 	 	 	 	212,249	 	 	 	176,983	 	
 	 	 	 	 	 	 		 	 	 		 	
 	 	$	 	 	 	 	2,281,344	 	 	 	2,085,747	 	
 	 	 	 	 	 	 		 	 	 		 	
See accompanying notes to consolidated financial statements. 
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Glacier Bancorp, Inc
Consolidated Statements of Operations 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Years ended December 31,	
 	 	 	 	 		
(dollars in thousands, except per share data)	 	2002	 	2001	 	2000	
	 		 		 		
Interest Income:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Real estate loans	 	$	29,290	 	 	 	34,012	 	 	 	19,557	 	
 	Commercial loans	 	 	47,013	 	 	 	48,292	 	 	 	28,784	 	
 	Consumer and other loans	 	 	22,559	 	 	 	25,528	 	 	 	14,856	 	
 	Investment securities and other	 	 	35,127	 	 	 	30,088	 	 	 	15,640	 	
 	 	 		 	 	 		 	 	 		 	
 	 	Total Interest Income	 	 	133,989	 	 	 	137,920	 	 	 	78,837	 	
 	 	 		 	 	 		 	 	 		 	
Interest Expense:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Deposits	 	 	26,268	 	 	 	42,692	 	 	 	22,674	 	
 	Federal Home Loan Bank of Seattle advances	 	 	16,959	 	 	 	18,280	 	 	 	13,454	 	
 	Securities sold under agreements to repurchase	 	 	591	 	 	 	1,014	 	 	 	949	 	
 	Trust preferred securities	 	 	3,616	 	 	 	3,313	 	 	 	—	 	
 	Other borrowed funds	 	 	88	 	 	 	247	 	 	 	280	 	
 	 	 		 	 	 		 	 	 		 	
 	 	Total Interest Expense	 	 	47,522	 	 	 	65,546	 	 	 	37,357	 	
 	 	 		 	 	 		 	 	 		 	
 	Net Interest Income	 	 	86,467	 	 	 	72,374	 	 	 	41,480	 	
 	Provision for loan losses	 	 	5,745	 	 	 	4,525	 	 	 	1,864	 	
 	 	 		 	 	 		 	 	 		 	
 	 	 	Net interest income after provision for loan losses	 	 	80,722	 	 	 	67,849	 	 	 	39,616	 	
Non-Interest Income:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Service charges and other fees	 	 	14,011	 	 	 	12,290	 	 	 	7,839	 	
 	Miscellaneous loan fees and charges	 	 	4,196	 	 	 	4,058	 	 	 	1,917	 	
 	Gain on sale of loans	 	 	5,456	 	 	 	4,132	 	 	 	2,049	 	
 	Gain on sale of investments, net	 	 	238	 	 	 	64	 	 	 	51	 	
 	Other income	 	 	2,016	 	 	 	2,707	 	 	 	1,438	 	
 	 	 		 	 	 		 	 	 		 	
 	 	Total Non-Interest Income	 	 	25,917	 	 	 	23,251	 	 	 	13,294	 	
 	 	 		 	 	 		 	 	 		 	
Non-Interest Expense:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Compensation, employee benefits and related expenses	 	 	30,448	 	 	 	27,941	 	 	 	16,214	 	
 	Occupancy and equipment expense	 	 	9,591	 	 	 	8,679	 	 	 	4,830	 	
 	Outsourced data processing expense	 	 	2,048	 	 	 	2,596	 	 	 	1,313	 	
 	Core deposit intangibles amortization	 	 	1,439	 	 	 	1,325	 	 	 	199	 	
 	Goodwill amortization	 	 	—	 	 	 	1,699	 	 	 	360	 	
 	Merger expense	 	 	—	 	 	 	1,975	 	 	 	—	 	
 	Other expense	 	 	14,287	 	 	 	13,135	 	 	 	8,350	 	
 	Minority interest	 	 	—	 	 	 	35	 	 	 	61	 	
 	 	 		 	 	 		 	 	 		 	
 	 	Total Non-Interest Expense	 	 	57,813	 	 	 	57,385	 	 	 	31,327	 	
 	 	 		 	 	 		 	 	 		 	
Earnings before income taxes	 	 	48,826	 	 	 	33,715	 	 	 	21,583	 	
 	Federal and state income tax expense	 	 	16,424	 	 	 	12,026	 	 	 	7,580	 	
 	 	 		 	 	 		 	 	 		 	
Net Earnings	 	$	32,402	 	 	 	21,689	 	 	 	14,003	 	
 	 	 		 	 	 		 	 	 		 	
 	Basic earnings per share	 	$	1.89	 	 	 	1.38	 	 	 	1.22	 	
 	Diluted earnings per share	 	$	1.86	 	 	 	1.34	 	 	 	1.21	 	
See accompanying notes to consolidated financial statements 
34 

Table of Contents
Glacier Bancorp, Inc
Consolidated Statements of Stockholders’ Equity
and Comprehensive Income
Years ended December 31, 2002, 2001, and 2000 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Retained	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	earnings	 	Accumulated	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(accumulated	 	other comp-	 	Total	
 	 	 	Common Stock	 	 	 	 	 	deficit)	 	rehensive	 	stock-	
 	 	 		 	Paid-in	 	substantially	 	income	 	holders'	
(Dollars in thousands, except per share data)	 	Shares	 	Amount	 	capital	 	restricted	 	(loss)	 	equity	
	 		 		 		 		 		 		
Balance at December 31, 1999	 	 	10,394,041	 	 	$	104	 	 	 	87,387	 	 	 	2,996	 	 	 	(5,431	)	 	 	85,056	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net earnings	 	 	—	 	 	 	—	 	 	 	—	 	 	 	14,003	 	 	 	—	 	 	 	14,003	 	
 	Unrealized gain on securities, net of reclassification adjustment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	5,689	 	 	 	5,689	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Total comprehensive income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	19,692	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Cash dividends declared ($59 per share)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(6,752	)	 	 	—	 	 	 	(6,752	)	
Stock options exercised	 	 	14,161	 	 	 	—	 	 	 	134	 	 	 	—	 	 	 	—	 	 	 	134	 	
Tax benefit from stock related compensation	 	 	—	 	 	 	—	 	 	 	16	 	 	 	—	 	 	 	—	 	 	 	16	 	
10% stock dividend	 	 	1,039,608	 	 	 	10	 	 	 	14,302	 	 	 	(14,334	)	 	 	—	 	 	 	(22	)	
Dissenting Mountain West shareholders	 	 	(660	)	 	 	—	 	 	 	(11	)	 	 	—	 	 	 	—	 	 	 	(11	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Balance at December 31, 2000	 	 	11,447,150	 	 	$	114	 	 	 	101,828	 	 	 	(4,087	)	 	 	258	 	 	 	98,113	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net earnings	 	 	—	 	 	 	—	 	 	 	—	 	 	 	21,689	 	 	 	—	 	 	 	21,689	 	
 	Unrealized gain on securities, net of reclassification adjustment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,498	 	 	 	1,498	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Total comprehensive income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	23,187	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Cash dividends declared ($60 per share)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(9,915	)	 	 	—	 	 	 	(9,915	)	
Stock options exercised	 	 	864,571	 	 	 	9	 	 	 	6,755	 	 	 	—	 	 	 	—	 	 	 	6,764	 	
Tax benefit from stock related compensation	 	 	—	 	 	 	—	 	 	 	2,778	 	 	 	—	 	 	 	—	 	 	 	2,778	 	
Conversion of debentures	 	 	32,239	 	 	 	1	 	 	 	341	 	 	 	—	 	 	 	 	 	 	 	342	 	
Stock issued in connection with merger of WesterFed Financial Corporation	 	 	4,530,462	 	 	 	45	 	 	 	55,669	 	 	 	—	 	 	 	—	 	 	 	55,714	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Balance at December 31, 2001	 	 	16,874,422	 	 	$	169	 	 	 	167,371	 	 	 	7,687	 	 	 	1,756	 	 	 	176,983	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net earnings	 	 	—	 	 	 	—	 	 	 	—	 	 	 	32,402	 	 	 	—	 	 	 	32,402	 	
 	Unrealized gain on securities, net of reclassification adjustment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	8,355	 	 	 	8,355	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Total comprehensive income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	40,757	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Cash dividends declared ($67 per share)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(11,532	)	 	 	—	 	 	 	(11,532	)	
Stock options exercised	 	 	411,396	 	 	 	4	 	 	 	4,957	 	 	 	—	 	 	 	—	 	 	 	4,961	 	
Tax benefit from stock related compensation	 	 	—	 	 	 	—	 	 	 	1,080	 	 	 	—	 	 	 	—	 	 	 	1,080	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Balance at December 31, 2002	 	 	17,285,818	 	 	$	173	 	 	 	173,408	 	 	 	28,557	 	 	 	10,111	 	 	 	212,249	 	

 	 	 	 	 	 	Year ended December 31,	
 	 	 	 	 	 		
 	 	 	 	 	 	2002	 	2001	 	2000	
 	 	 	 	 	 		 		 		
Disclosure of reclassification amount:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Unrealized and realized holding gains arising during the year	 	$	13,980	 	 	 	2,528	 	 	 	9,449	 	
 	 	Tax expense	 	 	(5,480	)	 	 	(991	)	 	 	(3,725	)	
 	 	 		 	 	 		 	 	 		 	
 	 	 	Net after tax	 	 	8,500	 	 	 	1,537	 	 	 	5,724	 	
 	 	 		 	 	 		 	 	 		 	
 	Reclassification adjustment for net gains included in net income	 	 	(238	)	 	 	(64	)	 	 	(51	)	
 	 	Tax expense	 	 	93	 	 	 	25	 	 	 	16	 	
 	 	 		 	 	 		 	 	 		 	
 	 	 	Net after tax	 	 	(145	)	 	 	(39	)	 	 	(35	)	
 	 	 		 	 	 		 	 	 		 	
 	 	 	 	Net change in unrealized gain on available-for-sale securities	 	$	8,355	 	 	 	1,498	 	 	 	5,689	 	
 	 	 		 	 	 		 	 	 		 	
See accompanying notes to consolidated financial statements. 
35 

Table of Contents
Consolidated Statements of Cash Flows 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Years ended December 31,	
 	 	 		
(dollars in thousands)	 	2002	 	2001	 	2000	
	 		 		 		
OPERATING ACTIVITIES :	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net earnings	 	$	32,402	 	 	 	21,689	 	 	 	14,003	 	
 	Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Mortgage loans held for sale originated or acquired	 	 	(409,481	)	 	 	(293,354	)	 	 	(103,284	)	
 	Proceeds from sales of mortgage loans held for sale	 	 	390,353	 	 	 	255,671	 	 	 	102,122	 	
 	Provision for loan losses	 	 	5,745	 	 	 	4,525	 	 	 	1,864	 	
 	Depreciation of premises and equipment	 	 	4,178	 	 	 	3,837	 	 	 	2,315	 	
 	Amortization of goodwill and core deposit intangible	 	 	1,439	 	 	 	3,024	 	 	 	559	 	
 	Gain on sale of investments, net	 	 	(238	)	 	 	(64	)	 	 	(51	)	
 	Gain on sale of loans	 	 	(5,456	)	 	 	(4,132	)	 	 	(2,049	)	
 	Amortization of investment securities premiums and discounts, net	 	 	5,640	 	 	 	3,268	 	 	 	162	 	
 	Federal Home Loan Bank of Seattle stock dividends	 	 	(2,170	)	 	 	(1,990	)	 	 	(1,022	)	
 	Gain on sale of branches	 	 	—	 	 	 	(511	)	 	 	(198	)	
 	Deferred tax expense (benefit)	 	 	1,466	 	 	 	593	 	 	 	(139	)	
 	Net (increase) decrease in accrued interest receivable	 	 	(1,012	)	 	 	485	 	 	 	(1,026	)	
 	Net (decrease) increase in accrued interest payable	 	 	(3,089	)	 	 	(3,462	)	 	 	1,874	 	
 	Net (decrease) increase in current income taxes	 	 	(915	)	 	 	1,077	 	 	 	(75	)	
 	Net increase in other assets	 	 	(1,041	)	 	 	(7,706	)	 	 	(15	)	
 	Net decrease in other liabilities and minority interest	 	 	(1,205	)	 	 	(10,934	)	 	 	(107	)	
 	 	 		 	 	 		 	 	 		 	
 	     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	 	 	16,616	 	 	 	(27,984	)	 	 	14,933	 	
 	 	 		 	 	 		 	 	 		 	
INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Proceeds from sales, maturities and prepayments of investment securities available-for-sale	 	 	206,554	 	 	 	183,752	 	 	 	34,042	 	
 	Purchases of investment securities available-for-sale	 	 	(429,596	)	 	 	(295,498	)	 	 	(27,335	)	
 	Principal collected on installment and commercial loans	 	 	576,109	 	 	 	433,639	 	 	 	231,674	 	
 	Installment and commercial loans originated or acquired	 	 	(617,200	)	 	 	(471,819	)	 	 	(311,590	)	
 	Principal collections on mortgage loans	 	 	259,774	 	 	 	308,530	 	 	 	128,714	 	
 	Mortgage loans originated or acquired	 	 	(178,171	)	 	 	(192,668	)	 	 	(132,464	)	
 	Net purchase of FHLB and FRB stock	 	 	(3,687	)	 	 	(3,857	)	 	 	(475	)	
 	Acquisition of WesterFed Financial Corporation and several branches	 	 	—	 	 	 	109,042	 	 	 	—	 	
 	Net payments for sale of branches	 	 	—	 	 	 	(53,131	)	 	 	(901	)	
 	Net (addition) disposal of premises and equipment	 	 	(828	)	 	 	984	 	 	 	(3,307	)	
 	Acquisition of minority interest	 	 	—	 	 	 	(251	)	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	
 	     NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES	 	 	(187,045	)	 	 	18,723	 	 	 	(81,642	)	
 	 	 		 	 	 		 	 	 		 	
FINANCING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net increase in deposits	 	 	13,859	 	 	 	18,549	 	 	 	81,878	 	
 	Net increase (decrease) in FHLB advances and other borrowed funds	 	 	130,391	 	 	 	1,876	 	 	 	(14,055	)	
 	Net increase (decrease) in securities sold under repurchase agreements	 	 	13,621	 	 	 	(143	)	 	 	5,111	 	
 	Proceeds from issuance of trust preferred securities	 	 	—	 	 	 	35,000	 	 	 	—	 	
 	Conversion of debentures	 	 	—	 	 	 	(8	)	 	 	—	 	
 	Cash dividends paid	 	 	(11,532	)	 	 	(9,915	)	 	 	(6,905	)	
 	Proceeds from exercise of stock options and other stock issued	 	 	6,041	 	 	 	9,542	 	 	 	101	 	
 	 	 		 	 	 		 	 	 		 	
 	     NET CASH PROVIDED BY FINANCING ACTIVITIES	 	 	152,380	 	 	 	54,901	 	 	 	66,130	 	
 	 	 		 	 	 		 	 	 		 	
 	NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	 	 	(18,049	)	 	 	45,640	 	 	 	(579	)	
 	CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	 	 	97,426	 	 	 	51,786	 	 	 	52,365	 	
 	 	 		 	 	 		 	 	 		 	
 	CASH AND CASH EQUIVALENTS AT END OF YEAR	 	$	79,377	 	 	 	97,426	 	 	 	51,786	 	
 	 	 		 	 	 		 	 	 		 	
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION	 	 	 	 	 	 	 	 	 	 	 	 	
 	Cash paid during the year for interest	 	$	62,762	 	 	 	68,545	 	 	 	35,483	 	
 	Cash paid during the year for income taxes	 	$	14,793	 	 	 	8,243	 	 	 	7,794	 	
See accompanying notes to consolidated financial statements. 
36 

Table of Contents
1. Summary of Significant Accounting Policies 
(a) General 
Glacier Bancorp, Inc. (the “Company”), a Delaware corporation organized in 1990, is a multi-bank holding company that provides a full range of banking services to individual and corporate customers in Montana, Idaho and Utah 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 judgements 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”), and Community First, Inc. (“CFI”). All significant inter-company transactions have been eliminated in consolidation. The Company owns 100% of the outstanding stock of each of the subsidiaries. 
Mountain West was acquired February 4, 2000 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. Western was acquired on February 28, 2001 through the purchase of WesterFed Financial Corporation, its parent company. The WesterFed acquisition was accounted for using the purchase method of accounting. Accordingly, the financial information presented includes the operations of Western since the date of acquisition. See footnote 20 for additional information related to these transactions. 
On July 31, 2001, Glacier Bank of Eureka was merged into Whitefish and the minority interest of both banks was redeemed. 
(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. 
37 

Table of Contents
1. Summary of Significant Accounting Policies . . . continued 
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. 
(e) Loans Receivable 
Loans that are intended to be held to maturity are reported at their unpaid principal balance less chargeoffs, 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 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 judgement 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. 
38 

Table of Contents
1. Summary of Significant Accounting Policies . . . continued 
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) Restricted Stock Investments 
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. 
(k) Goodwill 
The excess of purchase price over the fair value of net assets from acquisitions (“Goodwill”), prior to January 1, 2002, was being amortized using the straight-line method over periods of primarily 5 to 25 years. As of January 1, 2002, the Company ceased amortization of goodwill as a result of Financial Accounting Standards Board (FASB) Statement 142, Goodwill and Other Intangible Assets and Statement 147, Acquisition of Certain Financial Institutions. As of January 1, 2002, on an annual basis, the Company tests goodwill for impairment at the subsidiary level. 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. See Management Discussion and Analysis for information related to the recently issued accounting standards. As of December 31, 2002 and 2001 the accumulated amortization of goodwill was $3,001,000. 
(l) 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. 
(m) 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. 
(n) 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 2002, 2001 and 2000 was $3.26, $2.81, and $2.47, respectively, on the date of grant using the Black Scholes option-pricing model with the following assumptions: 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: 2001 – expected dividend yield of 3.60%, risk-free interest rate of 4.44%, volatility ratio of 25%, and expected life of 4.8 years: 2000 – expected dividend yield of 4.60%, risk-free interest rate of 4.98%, volatility ratio of 25%, and expected life of 4.8 years. 
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1. Summary of Significant Accounting Policies . . . continued 
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 FASB Statement 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,	
 	 	 	 	 	 		
 	 	 	 	 	 	2002	 	2001	 	2000	
 	 	 	 	 	 		 		 		
Net earnings (in thousands):	 	As reported	 	$	32,402	 	 	 	21,689	 	 	 	14,003	 	
 	 	 	 	Compensation cost	 	 	(577	)	 	 	(329	)	 	 	(624	)	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	
 	 	 	 	Pro forma	 	 	31,825	 	 	 	21,360	 	 	 	13,379	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	
Basic earnings per share:	 	As reported	 	 	1.89	 	 	 	1.38	 	 	 	1.22	 	
 	 	 	 	Compensation cost	 	 	(0.03	)	 	 	(0.02	)	 	 	(0.05	)	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	
 	 	 	 	Pro forma	 	 	1.86	 	 	 	1.36	 	 	 	1.17	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	
Diluted earnings per share:	 	As reported	 	 	1.86	 	 	 	1.34	 	 	 	1.21	 	
 	 	 	 	Compensation cost	 	 	(0.03	)	 	 	(0.02	)	 	 	(0.05	)	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	
 	 	 	 	Pro forma	 	 	1.83	 	 	 	1.32	 	 	 	1.16	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	
(o) 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, 2002 and 2001 there were no assets that were considered impaired. 
(p) 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, 2002 and 2001 the carrying value of servicing rights was approximately $1,973,000 and $2,200,000, respectively. Amortization expense of $480,000, $314,000, and $89,000 was recognized in the years ended December 31, 2002, 2001, and 2000, 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, 2002 or 2001. At December 31, 2002, the fair value of mortgage servicing rights was approximately $2,172,000. 
(q) 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. 
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1. Summary of Significant Accounting Policies . . . continued 
(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 2001 and 2000 financial statements to conform to the 2002 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, 2002 was $7,404,000. 
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, 2002 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Estimated	
 	 	 	 	Weighted	 	Amortized	 	Gross Unrealized	 	Fair	
(Dollars in thousands)	 	Yield	 	Cost	 	Gains	 	Losses	 	Value	
	 		 		 		 		 		
U.S. Government and Federal Agencies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	maturing after ten years	 	 	3.45	%	 	$	1,086	 	 	 	10	 	 	 	(2	)	 	 	1,094	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	3.45	%	 	 	1,086	 	 	 	10	 	 	 	(2	)	 	 	1,094	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
State and Local Governments and other issues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	maturing within one year	 	 	5.81	%	 	 	3,144	 	 	 	53	 	 	 	—	 	 	 	3,197	 	
 	maturing one year through five years	 	 	5.20	%	 	 	10,037	 	 	 	227	 	 	 	(98	)	 	 	10,166	 	
 	maturing five years through ten years	 	 	5.44	%	 	 	2,457	 	 	 	101	 	 	 	—	 	 	 	2,558	 	
 	maturing after ten years	 	 	5.44	%	 	 	236,620	 	 	 	8,046	 	 	 	(1,075	)	 	 	243,591	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	5.43	%	 	 	252,258	 	 	 	8,427	 	 	 	(1,173	)	 	 	259,512	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
Mortgage-Backed Securities	 	 	5.39	%	 	 	81,043	 	 	 	2,440	 	 	 	(82	)	 	 	83,401	 	
Real Estate Mortgage Investment Conduits	 	 	4.63	%	 	 	388,927	 	 	 	7,208	 	 	 	(181	)	 	 	395,954	 	
FHLB and FRB stock, at cost	 	 	6.17	%	 	 	42,864	 	 	 	—	 	 	 	—	 	 	 	42,864	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total Investments	 	 	5.06	%	 	$	766,178	 	 	 	18,085	 	 	 	(1,438	)	 	 	782,825	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
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3. Investment Securities, Available for Sale...continued 
INVESTMENTS AS OF DECEMBER 31, 2001 

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Estimated	
(Dollars in thousands)	 	Weighted	 	Amortized	 	Gross Unrealized	 	Fair	
	 	Yield	 	Cost	 	Gains	 	Losses	 	Value	
 	 	 	 		 		 		 		 		
U.S. Government and Federal Agencies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	maturing after ten years	 	 	2.77	%	 	$	1,330	 	 	 	12	 	 	 	(3	)	 	 	1,339	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	2.77	%	 	 	1,330	 	 	 	12	 	 	 	(3	)	 	 	1,339	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
State and Local Governments and other issues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	maturing within one year	 	 	3.25	%	 	 	4,639	 	 	 	28	 	 	 	—	 	 	 	4,667	 	
 	maturing one year through five years	 	 	5.36	%	 	 	13,774	 	 	 	291	 	 	 	(65	)	 	 	14,000	 	
 	maturing five years through ten years	 	 	5.50	%	 	 	2,349	 	 	 	57	 	 	 	(6	)	 	 	2,400	 	
 	maturing after ten years	 	 	5.81	%	 	 	135,789	 	 	 	1,563	 	 	 	(1,722	)	 	 	135,630	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	5.67	%	 	 	156,551	 	 	 	1,939	 	 	 	(1,793	)	 	 	156,697	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
Mortgage-Backed Securities	 	 	6.08	%	 	 	129,322	 	 	 	1,868	 	 	 	(126	)	 	 	131,064	 	
Real Estate Mortgage Investment Conduits	 	 	6.11	%	 	 	218,470	 	 	 	2,941	 	 	 	(1,933	)	 	 	219,478	 	
FHLB and FRB stock, at cost	 	 	6.82	%	 	 	37,007	 	 	 	—	 	 	 	—	 	 	 	37,007	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total Investments	 	 	6.01	%	 	$	542,680	 	 	 	6,760	 	 	 	(3,855	)	 	 	545,585	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
The book value of investment securities is as follows at: 

 	 	December 31,	
(dollars in thousands)	 	2000	
	 		
U.S. Government and Federal Agencies	 	$	9,573	 	
State and Local Governments and Other Issues	 	 	61,842	 	
Mortgage-Backed Securities	 	 	39,485	 	
Real Estate Mortgage Investment Conduits	 	 	100,988	 	
FHLB and FRB stock	 	 	18,098	 	
 	 	 		 	
 	 	$	229,986	 	
 	 	 		 	
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. 
Interest Income includes tax-exempt interest for the years ended December 31, 2002, 2001, and 2000 of $8,074,000, $4,624,000, and $2,659,000, respectively. 
Gross proceeds from sales of investment securities for the years ended December 31, 2002, 2001, and 2000 were approximately $31,695,000, $86,311,000 and $19,253,000 respectively, resulting in gross gains of approximately $451,000, $71,000 and $127,000 and gross losses of approximately $213,000, $7,000 and $76,000, respectively. The cost of any investment sold is determined by specific identification. 
At December 31, 2002, the Company had investment securities with carrying values of approximately $113,742,000 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. 
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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)	 	2002	 	2001	
	 		 		
 	Residential first mortgage	 	$	310,205	 	 	 	395,417	 	
 	Loans held for sale	 	 	51,987	 	 	 	27,403	 	
 	Commercial real estate	 	 	397,803	 	 	 	379,346	 	
 	Commercial	 	 	276,675	 	 	 	241,811	 	
 	Consumer	 	 	112,893	 	 	 	142,875	 	
 	Home equity	 	 	174,033	 	 	 	156,140	 	
 	 	 		 	 	 		 	
 	 	 	1,323,596	 	 	 	1,342,992	 	
Net deferred loan fees, premiums and discounts	 	 	(1,999	)	 	 	(2,011	)	
Allowance for loan losses	 	 	(20,944	)	 	 	(18,654	)	
 	 	 		 	 	 		 	
 	 	$	1,300,653	 	 	 	1,322,327	 	
 	 	 		 	 	 		 	
The following is a summary of activity in allowance for losses on loans: 
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	
	 		
(dollars in thousands)	 	2002	 	2001	 	2000	
	 		 		 		
Balance, beginning of period	 	$	18,654	 	 	 	7,799	 	 	 	6,722	 	
Acquisitions	 	 	—	 	 	 	8,893	 	 	 	—	 	
Net charge offs	 	 	(3,455	)	 	 	(2,563	)	 	 	(787	)	
Provision	 	 	5,745	 	 	 	4,525	 	 	 	1,864	 	
 	 	 		 	 	 		 	 	 		 	
Balance, end of period	 	$	20,944	 	 	 	18,654	 	 	 	7,799	 	
 	 	 		 	 	 		 	 	 		 	
The following is the allocation of allowance for loan losses and percent of loans in each category at: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2002	 	December 31, 2001	
 	 		 		
 	 	 	 	 	 	Percent of	 	 	 	 	 	Percent of	
 	 	 	 	 	 	of loans in	 	 	 	 	 	of loans in	
 	 	Amount	 	category	 	Amount	 	category	
	 		 		 		 		
(dollars in thousands)		
		
Residential first mortgage and loans held for sale	 	$	2,334	 	 	 	27.4	%	 	$	2,722	 	 	 	31.5	%	
Commercial real estate	 	 	7,088	 	 	 	30.1	%	 	 	5,906	 	 	 	28.3	%	
Other commercial	 	 	7,670	 	 	 	20.9	%	 	 	6,225	 	 	 	18.0	%	
Consumer loans	 	 	1,830	 	 	 	8.5	%	 	 	2,132	 	 	 	10.6	%	
Home equity	 	 	2,022	 	 	 	13.1	%	 	 	1,669	 	 	 	11.6	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	$	20,944	 	 	 	100.0	%	 	$	18,654	 	 	 	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, 2002, no individual borrower had outstanding loans or commitments exceeding 10% of the Company’s consolidated stockholders’ equity. 
Impaired loans, which consists of those reported as non-accrual, for the years ended December 31, 2002, 2001, and 2000 were approximately $8,042,000, $9,232,000, and $1,154,000, respectively, of which no impairment allowance was deemed necessary. The average recorded investment in impaired loans for 
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4. Loans Receivable, Net and Loans Held for Sale . . . continued 
the years ended December 31, 2002, 2001, and 2000 was approximately $8,275,000, $7,842,000, and $1,309,000, 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 $596,000, $658,000, and $101,000 for the years ended December 31, 2002, 2001, and 2000, respectively. Interest income recognized on impaired loans for the years ended December 31, 2002, 2001, and 2000 was not significant. Loans ninety days overdue and still accruing for the years ended December 31, 2002, 2001, and 2000 were approximately $1,998,000, $1,437,000, and $750,000, respectively. 
The weighted average interest rate on loans was 7.48% and 8.37% at December 31, 2002 and 2001, respectively. 
At December 31, 2002, 2001 and 2000 loans sold and serviced for others were $253,063,000, $286,996,000, and $146,534,000, respectively. 
At December 31, 2002 the Company had $674,811,000 in variable rate loans and $648,785,000 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, 2002. 
The Company had outstanding commitments as follows: 
 	 	 	 	 	 	 	 	 	
 	 	December 31,	
 	 		
(dollars in thousands)	 	2002	 	2001	
	 		 		
Loans and loans in process	 	$	208,345	 	 	 	159,481	 	
Unused consumer lines of credit	 	 	78,138	 	 	 	60,890	 	
Letters of credit	 	 	18,716	 	 	 	23,750	 	
 	 	 		 	 	 		 	
 	 	$	305,199	 	 	 	244,121	 	
 	 	 		 	 	 		 	
Substantially all of the loans held for sale at December 31, 2002 and 2001 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, 2002 was approximately $21,187,000. During 2002, new loans to such related parties were approximately $15,358,000 and repayments were approximately $7,157,000. 
5. Premises and Equipment, Net 
Premises and equipment, net consist of the following at: 
 	 	 	 	 	 	 	 	 	
 	 	December 31,	
 	 		
(dollars in thousands)	 	2002	 	2001	
	 		 		
Land	 	$	10,324	 	 	 	10,956	 	
Office buildings and construction in progress	 	 	35,830	 	 	 	37,241	 	
Furniture, fixtures and equipment	 	 	22,066	 	 	 	23,317	 	
Leasehold improvements	 	 	2,613	 	 	 	2,149	 	
Accumulated depreciation	 	 	(23,618	)	 	 	(23,097	)	
 	 	 		 	 	 		 	
 	 	$	47,215	 	 	 	50,566	 	
 	 	 		 	 	 		 	
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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, 2002	 	 	 	 	 	 	 	 	 	 	 	 	
 	Gross carrying value	 	$	9,836	 	 	 	 	 	 	 	 	 	
 	Accumulated Amortization	 	 	(3,014	)	 	 	 	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	
 	Net carrying value	 	$	6,822	 	 	 	1,973	 	 	 	8,795	 	
 	 	 		 	 	 	 	 	 	 	 	 	
As of December 31, 2001	 	 	 	 	 	 	 	 	 	 	 	 	
 	Gross carrying value	 	$	9,836	 	 	 	 	 	 	 	 	 	
 	Accumulated Amortization	 	 	(1,575	)	 	 	 	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	
 	Net carrying value	 	$	8,261	 	 	 	2,200	 	 	 	10,461	 	
 	 	 		 	 	 	 	 	 	 	 	 	
Weighted-Average amortization period	 	 	 	 	 	 	 	 	 	 	 	 	
 	(Period in years)	 	 	10.0	 	 	 	8.9	 	 	 	9.8	 	
Aggregate Amortization Expense	 	 	 	 	 	 	 	 	 	 	 	 	
 	For the year ended December 31, 2001	 	$	1,325	 	 	 	314	 	 	 	1,639	 	
 	For the year ended December 31, 2002	 	 	1,439	 	 	 	480	 	 	 	1,919	 	
Estimated Amortization Expense	 	 	 	 	 	 	 	 	 	 	 	 	
 	For the year ended December 31, 2003	 	 	1,219	 	 	 	332	 	 	 	1,551	 	
 	For the year ended December 31, 2004	 	 	1,011	 	 	 	317	 	 	 	1,328	 	
 	For the year ended December 31, 2005	 	 	847	 	 	 	302	 	 	 	1,149	 	
 	For the year ended December 31, 2006	 	 	779	 	 	 	286	 	 	 	1,065	 	
 	For the year ended December 31, 2007	 	 	766	 	 	 	271	 	 	 	1,037	 	

(1)	 	Gross carrying value and accumulated amortization are not readily available	
As of January 1, 2002, the Company no longer amortizes goodwill as a result of the FASB Statements 142 and 147. See Management Discussion and Analysis for further information regarding recently issued accounting standards. The following pro forma information presents the consolidated results of operations as if the adoption of Statements 142 and 147 had occurred on January 1, 2000. 
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	For the year ended December 31,	
 	 		
(Dollars in thousands)	 	2002	 	2001	 	2000	
	 		 		 		
Reported net income	 	$	32,402	 	 	 	21,689	 	 	 	14,003	 	
Add back goodwill amortization, net of tax	 	 	—	 	 	 	1,368	 	 	 	236	 	
 	 	 		 	 	 		 	 	 		 	
Adjusted net income	 	$	32,402	 	 	 	23,057	 	 	 	14,239	 	

 	 	2002	 	2001	 	2000	
 	 		 		 		
 	 	Basic EPS	 	Diluted EPS	 	Basic EPS	 	Diluted EPS	 	Basic EPS	 	Diluted EPS	
 	 		 		 		 		 		 		
Reported net income	 	$	1.89	 	 	 	1.86	 	 	 	1.38	 	 	 	1.34	 	 	 	1.22	 	 	 	1.21	 	
Add back goodwill amortization, net of tax	 	 	—	 	 	 	—	 	 	 	0.09	 	 	 	0.09	 	 	 	0.02	 	 	 	0.02	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Adjusted net income	 	$	1.89	 	 	 	1.86	 	 	 	1.47	 	 	 	1.43	 	 	 	1.24	 	 	 	1.23	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
45 

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7. Deposits 
     Deposits consist of the following at: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	December 31, 2002	 	December 31, 2001	
 	 	 	 		 		
 	 	 	 	Weighted	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(dollars in thousands)	 	Average Rate	 	Amount	 	Percent	 	Amount	 	Percent	
	 		 		 		 		 		
Demand accounts	 	 	0.0	%	 	$	295,016	 	 	 	20.2	%	 	$	234,318	 	 	 	16.2	%	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
NOW accounts	 	 	0.4	%	 	 	214,177	 	 	 	14.7	%	 	 	218,048	 	 	 	15.1	%	
Savings accounts	 	 	0.7	%	 	 	124,787	 	 	 	8.5	%	 	 	122,042	 	 	 	8.4	%	
Money market demand accounts	 	 	1.9	%	 	 	353,998	 	 	 	24.2	%	 	 	313,934	 	 	 	21.7	%	
Certificate accounts:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	2.00% and lower	 	 	 	 	 	 	106,556	 	 	 	7.3	%	 	 	6,868	 	 	 	0.5	%	
 	2.01% to 3.00%	 	 	 	 	 	 	157,980	 	 	 	10.8	%	 	 	102,961	 	 	 	7.1	%	
 	3.01% to 4.00%	 	 	 	 	 	 	103,393	 	 	 	7.1	%	 	 	140,610	 	 	 	9.7	%	
 	4.01% to 5.00%	 	 	 	 	 	 	33,916	 	 	 	2.3	%	 	 	125,544	 	 	 	8.7	%	
 	5.01% to 6.00%	 	 	 	 	 	 	37,822	 	 	 	2.7	%	 	 	107,462	 	 	 	7.5	%	
 	6.01% to 7.00%	 	 	 	 	 	 	30,894	 	 	 	2.1	%	 	 	70,672	 	 	 	4.9	%	
 	7.01% and higher	 	 	 	 	 	 	1,384	 	 	 	0.1	%	 	 	3,605	 	 	 	0.2	%	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total certificate accounts	 	 	3.6	%	 	 	471,945	 	 	 	32.4	%	 	 	557,722	 	 	 	38.6	%	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
Total interest bearing deposits	 	 	2.2	%	 	 	1,164,907	 	 	 	79.8	%	 	 	1,211,746	 	 	 	83.8	%	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
Total deposits	 	 	1.8	%	 	$	1,459,923	 	 	 	100.0	%	 	 	1,446,064	 	 	 	100.0	%	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
Deposits with a balance in excess of $100,000	 	 	 	 	 	$	458,384	 	 	 	 	 	 	$	416,137	 	 	 	 	 	
 	 	 	 	 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	
At December 31, 2002, scheduled maturities of certificate accounts are as follows: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ending December 31,	
 	 		
(dollars in thousands)	 	Total	 	2003	 	2004	 	2005	 	2006	 	Thereafter	
	 		 		 		 		 		 		
2.00% and lower	 	$	106,556	 	 	 	105,228	 	 	 	1,200	 	 	 	128	 	 	 	—	 	 	 	—	 	
2.01% to 3.00%	 	 	157,980	 	 	 	137,001	 	 	 	18,852	 	 	 	2,036	 	 	 	68	 	 	 	23	 	
3.01% to 4.00%	 	 	103,393	 	 	 	72,620	 	 	 	20,560	 	 	 	8,350	 	 	 	1,014	 	 	 	849	 	
4.01% to 5.00%	 	 	33,916	 	 	 	16,263	 	 	 	6,140	 	 	 	5,060	 	 	 	4,028	 	 	 	2,425	 	
5.01% to 6.00%	 	 	37,822	 	 	 	13,801	 	 	 	7,792	 	 	 	2,348	 	 	 	2,576	 	 	 	11,305	 	
6.01% to 7.00%	 	 	30,894	 	 	 	12,582	 	 	 	3,225	 	 	 	6,265	 	 	 	1,842	 	 	 	6,980	 	
7.01% and higher	 	$	1,384	 	 	 	881	 	 	 	17	 	 	 	486	 	 	 	—	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	471,945	 	 	 	358,376	 	 	 	57,786	 	 	 	24,673	 	 	 	9,528	 	 	 	21,582	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Interest expense on deposits is summarized as follows: 
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	
 	 		
(dollars in thousands)	 	2002	 	2001	 	2000	
	 		 		 		
NOW accounts	 	$	723	 	 	 	1,758	 	 	 	1,068	 	
Savings accounts	 	 	857	 	 	 	1,855	 	 	 	806	 	
Money market demand accounts	 	 	6,771	 	 	 	9,575	 	 	 	7,447	 	
Certificate accounts	 	 	17,917	 	 	 	29,504	 	 	 	13,353	 	
 	 	 		 	 	 		 	 	 		 	
 	 	$	26,268	 	 	 	42,692	 	 	 	22,674	 	
 	 	 		 	 	 		 	 	 		 	
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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)	 	2003	 	2004	 	2005	 	2006	 	2007	 	2008-2013	 	2002	 	2001	
	 		 		 		 		 		 		 		 		
1.00% to 2.00%	 	 	23,815	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	59,700	 	 	 	—	 	 	 	83,515	 	 	 	35,600	 	
2.01% to 3.00%	 	 	8,000	 	 	 	26,000	 	 	 	13,000	 	 	 	4,000	 	 	 	36,000	 	 	 	—	 	 	 	87,000	 	 	 	325	 	
3.01% to 4.00%	 	 	—	 	 	 	35,250	 	 	 	41,350	 	 	 	—	 	 	 	—	 	 	 	40,000	 	 	 	116,600	 	 	 	18,500	 	
4.01% to 5.00%	 	 	83,075	 	 	 	5,500	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	42,000	 	 	 	130,575	 	 	 	216,977	 	
5.01% to 6.00%	 	 	30,573	 	 	 	12,652	 	 	 	144	 	 	 	144	 	 	 	144	 	 	 	18,129	 	 	 	61,786	 	 	 	84,693	 	
6.01% to 7.00%	 	 	233	 	 	 	184	 	 	 	169	 	 	 	969	 	 	 	69	 	 	 	870	 	 	 	2,494	 	 	 	9,470	 	
7.01% to 8.00%	 	 	340	 	 	 	240	 	 	 	210	 	 	 	500	 	 	 	300	 	 	 	100	 	 	 	1,690	 	 	 	1,530	 	
8.01% to 8.15%	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	200	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	$	146,036	 	 	 	79,826	 	 	 	54,873	 	 	 	5,613	 	 	 	96,213	 	 	 	101,099	 	 	 	483,660	 	 	 	367,295	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
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, 2002 was approximately $292,377,000. 
The weighted average interest rate on these advances was 4.15% and 5.24% at December 31, 2002 and 2001, respectively. 
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, 2002: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	Interest	 	 	 	 	 	Earliest	
(dollars in thousands)	 	Amount	 	Rate	 	Maturity	 	Call	
	 		 		 		 		
Call Terms	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Quarterly at FHLB option	 	$	59,700	 	 	 	1.22% - 1.23	%	 	 	2007	 	 	 	2003	 	
 	Quarterly at FHLB option	 	 	13,000	 	 	 	2.33	%	 	 	2007	 	 	 	2004	 	
 	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	 	 	 	2003	 	
 	Quarterly at FHLB option	 	 	15,000	 	 	 	5.52	%	 	 	2008	 	 	 	2003	 	
 	If three month LIBOR is greater than 8% on quarterly measurement date after initial term	 	 	82,000	 	 	 	3.49% - 4.83	%	 	 	2012	 	 	 	2004	 	
 	 	 	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	$	195,700	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
47 

Table of Contents
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, 2002	 	amount	 	rate	 	assets	 	assets	
	 		 		 		 		
Securities sold under agreements to repurchase within:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	1-30 days	 	 	46,206	 	 	 	1.46	%	 	 	67,846	 	 	 	70,722	 	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	
 	 	$	46,206	 	 	 	1.46	%	 	$	67,846	 	 	 	70,722	 	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	
December 31, 2001:		
		
Securities sold under agreements to repurchase within:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	1-30 days	 	$	29,452	 	 	 	2.09	%	 	$	46,721	 	 	 	49,088	 	
 	Greater than 90 days	 	 	3,133	 	 	 	2.38	%	 	 	2,538	 	 	 	2,657	 	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	
 	 	$	32,585	 	 	 	2.11	%	 	$	49,259	 	 	 	51,745	 	
 	 	 		 	 	 	 	 	 	 		 	 	 		 	
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, 2002 and 2001 securities sold under agreements to repurchase averaged approximately $35,480,000 and $27,375,000, respectively, and the maximum outstanding at any month end during the year was approximately $46,206,000 and $37,814,000, 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, 2002 and 2001 the outstanding balance under this program was approximately $15,087,000 and $1,060,000. The borrowings are secured with investment securities with a par value of approximately $27,320,000 and a market value of approximately $28,680,000. For the year ended December 31, 2002, the maximum outstanding at any month end was approximately $16,799,000 and the average balance was approximately $5,541,000. 
During 1999, the Company assumed Big Sky’s subordinated convertible debentures as part of the merger transaction. The outstanding balance at December 31, 2000 was $350,000. The interest rate was 7.5 percent, payable quarterly. On December 31, 2001, the debentures became due and were exchanged for 33,257 shares of Company stock and $8,508 in cash. 
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Table of Contents
10. Trust Preferred Securities 
On January 25, 2001, 1,400,000 shares of trust preferred shares were issued by Glacier Trust 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 the Trust. 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 the Trust under the Trust Preferred Securities. The Trust Preferred Securities qualify as Tier 1 capital under regulatory definitions. 
The Subordinated Debentures are unsecured, bear interest at a rate of 9.40% per annum and mature on February 1, 2031. Interest is payable quarterly. 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 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 prior to maturity at the Company’s option on or after February 1, 2006 at par. The Trust Preferred Securities may also be redeemed at any time in whole (but not in part) in the event of unfavorable changes in laws or regulations that result in (1) Glacier Trust 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 Glacier 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. 
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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, 2002: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	Minimum capital	 	Well capitalized	
 	 	 	Actual	 	requirement	 	requirement	
 	 	 		 		 		
 	 	 	Amount	 	Ratio	 	Amount	 	Ratio	 	Amount	 	Ratio	
 	 	 		 		 		 		 		 		
Tier 1 (core) capital to risk weighted assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Consolidated	 	 	197,131	 	 	 	12.99	%	 	 	60,712	 	 	 	4.00	%	 	 	91,069	 	 	 	6.00	%	
 	Glacier	 	 	45,357	 	 	 	13.54	%	 	 	13,404	 	 	 	4.00	%	 	 	20,106	 	 	 	6.00	%	
 	First Security	 	 	36,963	 	 	 	11.06	%	 	 	13,369	 	 	 	4.00	%	 	 	20,053	 	 	 	6.00	%	
 	Western	 	 	38,755	 	 	 	15.33	%	 	 	10,114	 	 	 	4.00	%	 	 	15,171	 	 	 	6.00	%	
 	Mountain West	 	 	25,088	 	 	 	9.85	%	 	 	10,184	 	 	 	4.00	%	 	 	15,276	 	 	 	6.00	%	
 	Big Sky	 	 	13,922	 	 	 	10.77	%	 	 	5,169	 	 	 	4.00	%	 	 	7,754	 	 	 	6.00	%	
 	Valley	 	 	13,647	 	 	 	11.43	%	 	 	4,776	 	 	 	4.00	%	 	 	7,164	 	 	 	6.00	%	
 	Whitefish	 	 	9,957	 	 	 	11.64	%	 	 	3,423	 	 	 	4.00	%	 	 	5,134	 	 	 	6.00	%	
Tier 2 (total) capital to risk weighted assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Consolidated	 	 	216,179	 	 	 	14.24	%	 	 	121,425	 	 	 	8.00	%	 	 	151,781	 	 	 	10.00	%	
 	Glacier	 	 	49,546	 	 	 	14.79	%	 	 	26,808	 	 	 	8.00	%	 	 	33,510	 	 	 	10.00	%	
 	First Security	 	 	41,147	 	 	 	12.31	%	 	 	26,738	 	 	 	8.00	%	 	 	33,422	 	 	 	10.00	%	
 	Western	 	 	41,991	 	 	 	16.61	%	 	 	20,228	 	 	 	8.00	%	 	 	25,285	 	 	 	10.00	%	
 	Mountain West	 	 	27,618	 	 	 	10.85	%	 	 	20,367	 	 	 	8.00	%	 	 	25,459	 	 	 	10.00	%	
 	Big Sky	 	 	15,543	 	 	 	12.03	%	 	 	10,338	 	 	 	8.00	%	 	 	12,923	 	 	 	10.00	%	
 	Valley	 	 	14,860	 	 	 	12.45	%	 	 	9,552	 	 	 	8.00	%	 	 	11,940	 	 	 	10.00	%	
 	Whitefish	 	 	11,021	 	 	 	12.88	%	 	 	6,845	 	 	 	8.00	%	 	 	8,557	 	 	 	10.00	%	
Leverage capital to total average assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Consolidated	 	 	197,131	 	 	 	8.95	%	 	 	88,110	 	 	 	4.00	%	 	 	110,137	 	 	 	5.00	%	
 	Glacier	 	 	45,357	 	 	 	9.48	%	 	 	19,132	 	 	 	4.00	%	 	 	23,915	 	 	 	5.00	%	
 	First Security	 	 	36,963	 	 	 	7.82	%	 	 	18,918	 	 	 	4.00	%	 	 	23,647	 	 	 	5.00	%	
 	Western	 	 	38,755	 	 	 	9.83	%	 	 	15,771	 	 	 	4.00	%	 	 	19,714	 	 	 	5.00	%	
 	Mountain West	 	 	25,088	 	 	 	6.71	%	 	 	14,959	 	 	 	4.00	%	 	 	18,699	 	 	 	5.00	%	
 	Big Sky	 	 	13,922	 	 	 	8.04	%	 	 	6,929	 	 	 	4.00	%	 	 	8,662	 	 	 	5.00	%	
 	Valley	 	 	13,647	 	 	 	7.54	%	 	 	7,239	 	 	 	4.00	%	 	 	9,049	 	 	 	5.00	%	
 	Whitefish	 	 	9,957	 	 	 	8.09	%	 	 	4,922	 	 	 	4.00	%	 	 	6,153	 	 	 	5.00	%	
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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, 2001: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	Minimum capital	 	Well capitalized	
 	 	 	Actual	 	requirement	 	requirement	
 	 	 		 		 		
 	 	 	Amount	 	Ratio	 	Amount	 	Ratio	 	Amount	 	Ratio	
 	 	 		 		 		 		 		 		
Tier 1 (core) capital to risk weighted assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Consolidated	 	 	168,389	 	 	 	11.81	%	 	 	57,010	 	 	 	4.00	%	 	 	85,515	 	 	 	6.00	%	
 	Glacier	 	 	39,317	 	 	 	12.04	%	 	 	13,065	 	 	 	4.00	%	 	 	19,597	 	 	 	6.00	%	
 	First Security	 	 	32,054	 	 	 	9.80	%	 	 	13,078	 	 	 	4.00	%	 	 	19,618	 	 	 	6.00	%	
 	Western	 	 	34,128	 	 	 	13.04	%	 	 	10,466	 	 	 	4.00	%	 	 	15,699	 	 	 	6.00	%	
 	Mountain West	 	 	19,807	 	 	 	10.03	%	 	 	7,902	 	 	 	4.00	%	 	 	11,854	 	 	 	6.00	%	
 	Big Sky	 	 	11,778	 	 	 	9.53	%	 	 	4,941	 	 	 	4.00	%	 	 	7,412	 	 	 	6.00	%	
 	Valley	 	 	11,625	 	 	 	10.02	%	 	 	4,641	 	 	 	4.00	%	 	 	6,961	 	 	 	6.00	%	
 	Whitefish	 	 	8,440	 	 	 	11.65	%	 	 	2,898	 	 	 	4.00	%	 	 	4,347	 	 	 	6.00	%	
Tier 2 (total) capital to risk weighted assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Consolidated	 	 	186,215	 	 	 	13.07	%	 	 	114,020	 	 	 	8.00	%	 	 	142,524	 	 	 	10.00	%	
 	Glacier	 	 	43,016	 	 	 	13.17	%	 	 	26,129	 	 	 	8.00	%	 	 	32,661	 	 	 	10.00	%	
 	First Security	 	 	35,797	 	 	 	10.95	%	 	 	26,157	 	 	 	8.00	%	 	 	32,696	 	 	 	10.00	%	
 	Western	 	 	37,422	 	 	 	14.30	%	 	 	20,932	 	 	 	8.00	%	 	 	26,165	 	 	 	10.00	%	
 	Mountain West	 	 	21,850	 	 	 	11.06	%	 	 	15,805	 	 	 	8.00	%	 	 	19,756	 	 	 	10.00	%	
 	Big Sky	 	 	13,326	 	 	 	10.79	%	 	 	9,882	 	 	 	8.00	%	 	 	12,353	 	 	 	10.00	%	
 	Valley	 	 	12,817	 	 	 	11.05	%	 	 	9,281	 	 	 	8.00	%	 	 	11,601	 	 	 	10.00	%	
 	Whitefish	 	 	9,346	 	 	 	12.90	%	 	 	5,796	 	 	 	8.00	%	 	 	7,245	 	 	 	10.00	%	
Leverage capital to total average assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Consolidated	 	 	168,389	 	 	 	8.21	%	 	 	82,049	 	 	 	4.00	%	 	 	102,561	 	 	 	5.00	%	
 	Glacier	 	 	39,317	 	 	 	8.32	%	 	 	18,911	 	 	 	4.00	%	 	 	23,639	 	 	 	5.00	%	
 	First Security	 	 	32,054	 	 	 	7.56	%	 	 	16,958	 	 	 	4.00	%	 	 	21,198	 	 	 	5.00	%	
 	Western	 	 	34,128	 	 	 	8.62	%	 	 	15,845	 	 	 	4.00	%	 	 	19,807	 	 	 	5.00	%	
 	Mountain West	 	 	19,807	 	 	 	6.33	%	 	 	12,511	 	 	 	4.00	%	 	 	15,639	 	 	 	5.00	%	
 	Big Sky	 	 	11,778	 	 	 	7.10	%	 	 	6,638	 	 	 	4.00	%	 	 	8,297	 	 	 	5.00	%	
 	Valley	 	 	11,625	 	 	 	7.22	%	 	 	6,442	 	 	 	4.00	%	 	 	8,053	 	 	 	5.00	%	
 	Whitefish	 	 	8,440	 	 	 	7.06	%	 	 	4,784	 	 	 	4.00	%	 	 	5,980	 	 	 	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, 2002 and 2001, 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, 2002 and 2001. 
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12. Federal and State Income Taxes 
The following is a summary of consolidated income tax expense for: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Years ended December 31,	
 	 	 	 	 		
(dollars in thousands)	 	2002	 	2001	 	2000	
	 		 		 		
Current:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Federal	 	$	11,925	 	 	 	9,292	 	 	 	6,259	 	
 	State	 	 	3,033	 	 	 	2,141	 	 	 	1,460	 	
 	 	 		 	 	 		 	 	 		 	
 	 	Total current tax expense	 	 	14,958	 	 	 	11,433	 	 	 	7,719	 	
 	 	 		 	 	 		 	 	 		 	
Deferred:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Federal	 	 	1,139	 	 	 	454	 	 	 	(74	)	
 	State	 	 	327	 	 	 	139	 	 	 	(65	)	
 	 	 		 	 	 		 	 	 		 	
 	 	Total deferred tax expense (benefit)	 	 	1,466	 	 	 	593	 	 	 	(139	)	
 	 	 		 	 	 		 	 	 		 	
 	 	 	Total income tax expense	 	$	16,424	 	 	 	12,026	 	 	 	7,580	 	
 	 	 		 	 	 		 	 	 		 	
Federal and state income tax expense differs from that computed at the federal statutory corporate tax rate as follows for: 
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	
 	 		
 	 	2002	 	2001	 	2000	
 	 		 		 		
Federal statutory rate	 	 	35.0	%	 	 	35.0	%	 	 	35.0	%	
State taxes, net of federal income tax benefit	 	 	4.4	%	 	 	4.4	%	 	 	4.2	%	
Tax-exempt interest income	 	 	-5.4	%	 	 	-4.5	%	 	 	-4.1	%	
Other, net	 	 	-0.4	%	 	 	0.8	%	 	 	0.0	%	
 	 	 		 	 	 		 	 	 		 	
 	 	 	33.6	%	 	 	35.7	%	 	 	35.1	%	
 	 	 		 	 	 		 	 	 		 	
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)	 	2002	 	2001	
	 		 		
Deferred tax assets:	 	 	 	 	 	 	 	 	
 	Allowance for losses on loans	 	$	8,270	 	 	 	7,816	 	
 	Deferred compensation	 	 	1,211	 	 	 	1,540	 	
 	Other	 	 	863	 	 	 	1,017	 	
 	 	 		 	 	 		 	
 	 	 	Total gross deferred tax assets	 	 	10,344	 	 	 	10,373	 	
 	 	 		 	 	 		 	
Deferred tax liabilities:	 	 	 	 	 	 	 	 	
 	Federal Home Loan Bank stock dividends	 	 	(8,301	)	 	 	(7,870	)	
 	Fixed assets, due to differences in depreciation	 	 	(1,864	)	 	 	(1,969	)	
 	Available-for-sale securities fair value adjustment	 	 	(6,536	)	 	 	(1,149	)	
 	Other	 	 	(2,272	)	 	 	(1,165	)	
 	 	 		 	 	 		 	
 	 	 	Total gross deferred tax liabilities	 	 	(18,973	)	 	 	(12,153	)	
 	 	 		 	 	 		 	
 	 	 	Net deferred tax liability	 	$	(8,629	)	 	 	(1,780	)	
 	 	 		 	 	 		 	
There is no valuation allowance at December 31, 2002 and 2001 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. 
Retained earnings at December 31, 2002 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 
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12. Federal and State Income Taxes . . . continued 
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 
Prior to 2002, the Company had a noncontributory defined contribution retirement plan covering substantially all employees. The Company followed the policy of funding retirement plan contributions as accrued. As of January 1, 2002, the retirement plan was merged with the employee savings plan as a profit sharing plan. The plan 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. The total plan expense for the years ended December 31, 2002, 2001, and 2000 was approximately $2,691,000, $1,599,000 and $1,058,000 respectively. 
The Company also has an employees’ savings plan. The plan allows eligible employees to contribute up to 25% 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, 2002, 2001 and 2000 was approximately $577,000, $511,000, and $331,000, 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, 2002, 2001 and 2000 was approximately $28,000, $9,000, and $18,000, 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 $67,000, $59,000, and $34,000, for the years ending December 31, 2002, 2001, and 2000, 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 (losses) for the years ended 2002, 2001, and 2000 were approximately $72,000, $164,000, and ($24,000), respectively. In connection with the WesterFed acquisition (See note 20), 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, 2002, the liability related to the obligation was approximately $2,300,000 and was included in other liabilities of the Consolidated Statements of Financial Condition. The amount expensed related to the obligation during 2002 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. 
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14. Earnings Per Share 
The following table sets forth the computation of basic and diluted earnings per share: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	For the Years Ended December 31,	
 	 	 	 		
 	 	 	 	2002	 	2001	 	2000	
 	 	 	 		 		 		
Net earnings available to common stockholders, basic	 	$	32,401,809	 	 	 	21,689,058	 	 	 	14,003,000	 	
 	After tax effect of interest on convertible subordinated debentures	 	 	—	 	 	 	16,000	 	 	 	16,000	 	
 	 	 		 	 	 		 	 	 		 	
Net earnings available to common stockholders, diluted	 	$	32,401,809	 	 	 	21,705,058	 	 	 	14,019,000	 	
 	 	 		 	 	 		 	 	 		 	
Average outstanding shares — basic	 	 	17,151,759	 	 	 	15,701,935	 	 	 	11,440,391	 	
Add: Dilutive stock options	 	 	292,726	 	 	 	406,089	 	 	 	70,730	 	
 	 	Convertible subordinated debentures	 	 	—	 	 	 	33,025	 	 	 	33,025	 	
 	 	 		 	 	 		 	 	 		 	
Average outstanding shares — diluted	 	 	17,444,485	 	 	 	16,141,049	 	 	 	11,544,146	 	
 	 	 		 	 	 		 	 	 		 	
Basic earnings per share	 	$	1.89	 	 	 	1.38	 	 	 	1.22	 	
 	 	 		 	 	 		 	 	 		 	
Diluted earnings per share	 	$	1.86	 	 	 	1.34	 	 	 	1.21	 	
 	 	 		 	 	 		 	 	 		 	
There were no options excluded from the diluted share calculation in the current year due to market price exceeding the option exercise price as of December 31, 2002. Approximately 276,000 and 510,000 option shares in 2001 and 2000, respectively, were not included because the option exercise price exceeded the market value. 
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. 
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15. Stock Option Plans . . . continued 
     At December 31, 2002, total shares available for option grants to employees and directors are 1,880,848. Changes in shares granted for stock options for the years ended December 31, 2002, 2001, and 2000, are summarized as follows: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Options outstanding	 	Options exercisable	
 	 		 		
 	 	 	 	 	 	Weighted	 	 	 	 	 	Weighted	
 	 	 	 	 	 	average	 	 	 	 	 	average	
 	 	Shares	 	exercise price	 	Shares	 	exercise price	
 	 		 		 		 		
Balance, December 31, 1999	 	 	711,456	 	 	$	15.85	 	 	 	402,342	 	 	$	12.41	 	
Canceled	 	 	(12,687	)	 	 	15.42	 	 	 	(28,889	)	 	 	16.77	 	
Granted	 	 	145,818	 	 	 	15.27	 	 	 	 	 	 	 	 	 	
Became exercisable	 	 	 	 	 	 	 	 	 	 	161,852	 	 	 	17.81	 	
Stock dividend	 	 	54,887	 	 	 	 	 	 	 	60,210	 	 	 	 	 	
Exercised	 	 	(14,161	)	 	 	9.47	 	 	 	(14,161	)	 	 	9.47	 	
 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	
Balance, December 31, 2000	 	 	885,313	 	 	 	14.34	 	 	 	581,354	 	 	 	13.13	 	
Canceled	 	 	(45,059	)	 	 	15.20	 	 	 	(18,523	)	 	 	17.84	 	
Granted	 	 	222,006	 	 	 	14.98	 	 	 	 	 	 	 	 	 	
Became exercisable	 	 	 	 	 	 	 	 	 	 	179,992	 	 	 	18.72	 	
WesterFed acquisition	 	 	947,979	 	 	 	7.45	 	 	 	947,979	 	 	 	7.45	 	
Exercised	 	 	(864,571	)	 	 	7.82	 	 	 	(864,571	)	 	 	7.82	 	
 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	
Balance, December 31, 2001	 	 	1,145,668	 	 	 	13.64	 	 	 	826,231	 	 	 	13.28	 	
Canceled	 	 	(20,158	)	 	 	18.88	 	 	 	(3,516	)	 	 	16.62	 	
Granted	 	 	198,997	 	 	 	21.89	 	 	 	 	 	 	 	 	 	
Became exercisable	 	 	 	 	 	 	 	 	 	 	123,884	 	 	 	14.26	 	
Exercised	 	 	(415,099	)	 	 	12.15	 	 	 	(415,099	)	 	 	12.15	 	
 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	
Balance, December 31, 2002	 	 	909,408	 	 	 	16.00	 	 	 	531,500	 	 	 	14.36	 	
 	 	 		 	 	 	 	 	 	 		 	 	 	 	 	
The range of exercise prices on options outstanding at December 31, 2002 is as follows: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Options exercisable	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
 	 	 	 	 	 	 	Weighted	 	Weighted	 	 	 	 	 	Weighted	
 	 	 	 	 	 	 	average	 	average	 	 	 	 	 	average	
Price range	 	Shares	 	exercise price	 	life of options	 	Shares	 	exercise price	
	 		 		 		 		 		
  $2.76 - $  7.11	 	 	29,625	 	 	$	5.87	 	 	1.3 years	 	 	29,625	 	 	$	5.87	 	
  $8.79 - $  9.36	 	 	107,817	 	 	 	9.05	 	 	4.9 years	 	 	107,817	 	 	 	9.05	 	
$11.20 - $12.94	 	 	84,139	 	 	 	11.81	 	 	4.2 years	 	 	81,139	 	 	 	11.77	 	
$13.53 - $15.52	 	 	220,025	 	 	 	13.75	 	 	2.8 years	 	 	87,174	 	 	 	13.92	 	
$17.50 - $19.47	 	 	234,245	 	 	 	18.38	 	 	.9 years	 	 	180,245	 	 	 	18.60	 	
$20.71 - $22.69	 	 	233,557	 	 	 	21.72	 	 	4.0 years	 	 	45,500	 	 	 	21.12	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	
 	 	 	909,408	 	 	 	16.00	 	 	3.0 years	 	 	531,500	 	 	 	14.36	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	
The options exercised during the year ended December 31, 2002 were at prices from $5.59 to $19.09. 
In connection with the acquisition of WesterFed Financial Corporation, outstanding options for employees and directors of WesterFed for 947,979 were exchanged for options outstanding of Company stock at a weighted exercise price of $7.45. 
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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)	 	2002	 	2001	
	 		 		
Assets:	 	 	 	 	 	 	 	 	
 	Cash	 	$	4,807	 	 	 	6,548	 	
 	Interest bearing cash deposits	 	 	6,010	 	 	 	441	 	
 	 	 		 	 	 		 	
 	 	Cash and cash equivalents	 	 	10,817	 	 	 	6,989	 	
 	Investment securities, available-for-sale	 	 	1,393	 	 	 	321	 	
 	Other assets	 	 	4,719	 	 	 	7,253	 	
 	Investment in subsidiaries	 	 	233,866	 	 	 	200,438	 	
 	 	 		 	 	 		 	
 	 	$	250,795	 	 	 	215,001	 	
 	 	 		 	 	 		 	
Liabilities and Stockholders’ Equity:	 	 	 	 	 	 	 	 	
 	Dividends payable	 	$	3,115	 	 	 	2,538	 	
 	Trust preferred securities	 	 	35,000	 	 	 	35,000	 	
 	Other liabilities	 	 	431	 	 	 	480	 	
 	 	 		 	 	 		 	
 	 	 	Total liabilities	 	 	38,546	 	 	 	38,018	 	
 	Common stock	 	 	173	 	 	 	169	 	
 	Paid-in capital	 	 	173,408	 	 	 	167,371	 	
 	Retained earnings	 	 	28,557	 	 	 	7,687	 	
 	Accumulated other comprehensive income	 	 	10,111	 	 	 	1,756	 	
 	 	 		 	 	 		 	
 	 	 	 	Total stockholders’ equity	 	 	212,249	 	 	 	176,983	 	
 	 	 		 	 	 		 	
 	 	$	250,795	 	 	 	215,001	 	

Statements of Operations	 	Years ended December 31,	
	 		
(dollars in thousands)	 	2002	 	2001	 	2000	
	 		 		 		
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	
 	Dividends from subsidiaries	 	$	13,232	 	 	 	37,268	 	 	 	8,650	 	
 	Other income	 	 	178	 	 	 	371	 	 	 	163	 	
 	Intercompany charges for services	 	 	5,381	 	 	 	3,826	 	 	 	2,469	 	
 	 	 		 	 	 		 	 	 		 	
 	     Total revenues	 	 	18,791	 	 	 	41,465	 	 	 	11,282	 	
Expenses 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Employee compensation and benefits	 	 	3,755	 	 	 	2,984	 	 	 	1,852	 	
 	Goodwill amortization	 	 	—	 	 	 	236	 	 	 	243	 	
 	Other operating expenses	 	 	6,778	 	 	 	6,743	 	 	 	1,635	 	
 	 	 		 	 	 		 	 	 		 	
 	     Total expenses	 	 	10,533	 	 	 	9,963	 	 	 	3,730	 	
 	Earnings before income tax benefit and equity in undistributed earnings of subsidiaries	 	 	8,258	 	 	 	31,502	 	 	 	7,552	 	
 	Income tax benefit	 	 	(1,984	)	 	 	(2,181	)	 	 	(359	)	
 	 	 		 	 	 		 	 	 		 	
 	Income before equity in undistributed earnings of subsidiaries	 	 	10,242	 	 	 	33,683	 	 	 	7,911	 	
 	Earnings in excess of (less than) dividends distributed	 	 	22,160	 	 	 	(11,994	)	 	 	6,092	 	
 	 	 		 	 	 		 	 	 		 	
Net earnings	 	$	32,402	 	 	 	21,689	 	 	 	14,003	 	
 	 	 		 	 	 		 	 	 		 	
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16. Parent Company Information (Condensed)...continued 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Statements of Cash Flows	 	Years ended December 31,	
	 		
(dollars in thousands)	 	2002	 	2001	 	2000	
	 		 		 		
Operating Activities Net earnings	 	$	32,402	 	 	 	21,689	 	 	 	14,003	 	
 	Adjustments to reconcile net earnings to net cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Goodwill amortization	 	 	—	 	 	 	236	 	 	 	243	 	
 	Gain (loss) on sale of investments available-for-sale	 	 	43	 	 	 	—	 	 	 	(11	)	
 	Earnings (in excess of) less than dividends distributed	 	 	(22,160	)	 	 	11,994	 	 	 	(6,092	)	
 	Net increase in other assets and other liabilities	 	 	1,761	 	 	 	(965	)	 	 	322	 	
 	 	 		 	 	 		 	 	 		 	
Net cash provided by operating activities	 	 	12,046	 	 	 	32,954	 	 	 	8,465	 	
 	 	 		 	 	 		 	 	 		 	
Investing activities Purchases of investment securities available-for-sale	 	 	(1,261	)	 	 	—	 	 	 	—	 	
 	Proceeds from sales, maturities and prepayments of securities available-for-sale	 	 	234	 	 	 	254	 	 	 	702	 	
 	Equity contribution to subsidiary	 	 	(1,000	)	 	 	(61,934	)	 	 	(2,200	)	
 	Net addition of premises and equipment	 	 	(700	)	 	 	(921	)	 	 	(480	)	
 	Acquisition of minority interest	 	 	—	 	 	 	(251	)	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	
Net cash used by investing activities	 	 	(2,727	)	 	 	(62,852	)	 	 	(1,978	)	
 	 	 		 	 	 		 	 	 		 	
Financing activities Proceeds from exercise of stock options and other stock issued	 	 	6,041	 	 	 	9,542	 	 	 	101	 	
 	Proceeds from issuance of trust preferred securities	 	 	—	 	 	 	35,000	 	 	 	—	 	
 	Cash dividends paid	 	 	(11,532	)	 	 	(9,915	)	 	 	(6,905	)	
 	 	 		 	 	 		 	 	 		 	
Net cash provided (used) by financing activities	 	 	(5,491	)	 	 	34,627	 	 	 	(6,804	)	
 	 	 		 	 	 		 	 	 		 	
Net increase (decrease) in cash and cash equivalents	 	 	3,828	 	 	 	4,729	 	 	 	(317	)	
Cash and cash equivalents at beginning of year	 	 	6,989	 	 	 	2,260	 	 	 	2,577	 	
 	 	 		 	 	 		 	 	 		 	
Cash and cash equivalents at end of year	 	$	10,817	 	 	 	6,989	 	 	 	2,260	 	
 	 	 		 	 	 		 	 	 		 	
17. Unaudited Quarterly Financial Data 
Summarized unaudited quarterly financial data is as follows (in thousands except per share amounts): 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Quarters Ended, 2002	
 	 		
 	 	March 31	 	June 30	 	September 30	 	December 31	
 	 		 		 		 		
Interest income	 	$	33,078	 	 	 	33,507	 	 	 	33,829	 	 	 	33,575	 	
Interest expense	 	 	12,711	 	 	 	11,906	 	 	 	11,698	 	 	 	11,207	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Net interest income	 	 	20,367	 	 	 	21,601	 	 	 	22,131	 	 	 	22,368	 	
Provision for loan losses	 	 	1,300	 	 	 	1,260	 	 	 	1,665	 	 	 	1,520	 	
Income before income taxes	 	 	10,551	 	 	 	12,333	 	 	 	12,927	 	 	 	13,015	 	
Net earnings	 	 	6,897	 	 	 	8,128	 	 	 	8,616	 	 	 	8,761	 	
Basic earnings per share	 	 	0.41	 	 	 	0.47	 	 	 	0.50	 	 	 	0.51	 	
Diluted earnings per share	 	 	0.40	 	 	 	0.47	 	 	 	0.49	 	 	 	0.50	 	
Dividends per share	 	 	0.16	 	 	 	0.16	 	 	 	0.17	 	 	 	0.18	 	
Market range high-low	 	$	23.25-$19.10	 	 	$	24.99-$20.85	 	 	$	24.60-$19.73	 	 	$	24.00-$19.90	 	
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17. Unaudited Quarterly Financial Data...continued 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Quarters Ended, 2001 (1)	
 	 		
 	 	March 31	 	June 30	 	September 30	 	December 31	
 	 		 		 		 		
Interest income	 	$	26,375	 	 	 	38,663	 	 	 	37,100	 	 	 	35,782	 	
Interest expense	 	 	13,273	 	 	 	19,536	 	 	 	17,901	 	 	 	14,836	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Net interest income	 	 	13,102	 	 	 	19,127	 	 	 	19,199	 	 	 	20,946	 	
Provision for loan losses	 	 	585	 	 	 	1,838	 	 	 	1,006	 	 	 	1,096	 	
Income before income taxes	 	 	6,129	 	 	 	8,683	 	 	 	8,879	 	 	 	10,024	 	
Net earnings	 	 	3,914	 	 	 	5,608	 	 	 	5,707	 	 	 	6,460	 	
Basic earnings per share	 	 	0.30	 	 	 	0.35	 	 	 	0.34	 	 	 	0.39	 	
Diluted earnings per share	 	 	0.29	 	 	 	0.34	 	 	 	0.33	 	 	 	0.38	 	
Dividends per share	 	 	0.15	 	 	 	0.15	 	 	 	0.15	 	 	 	0.15	 	
Market range high-low	 	$	16.13-$12.25	 	 	$	19.75-$14.50	 	 	$	19.20-$17.06	 	 	$	21.19-$15.78	 	

 	 	[1] Includes WesterFed results from February 28, 2001	
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: 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2002	 	2001	
 	 		 		
(dollars in thousands)	 	Amount	 	Fair Value	 	Amount	 	Fair Value	
	 		 		 		 		
Financial Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash	 	$	74,624	 	 	 	74,624	 	 	 	73,456	 	 	 	73,456	 	
Interest bearing cash deposits	 	 	4,753	 	 	 	4,753	 	 	 	23,970	 	 	 	23,970	 	
Investment securities	 	 	260,606	 	 	 	260,606	 	 	 	158,036	 	 	 	158,036	 	
Mortgage-backed securities	 	 	479,355	 	 	 	479,355	 	 	 	350,542	 	 	 	350,542	 	
Loans	 	 	1,300,653	 	 	 	1,341,141	 	 	 	1,322,327	 	 	 	1,359,925	 	
FHLB and Federal Reserve Bank stock	 	 	42,864	 	 	 	42,864	 	 	 	37,007	 	 	 	37,007	 	
Financial Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Deposits	 	$	1,459,923	 	 	 	1,465,029	 	 	 	1,446,064	 	 	 	1,472,241	 	
Advances from the FHLB of Seattle	 	 	483,660	 	 	 	498,286	 	 	 	367,295	 	 	 	375,253	 	
Repurchase agreements and other borrowed funds	 	 	61,293	 	 	 	61,293	 	 	 	33,645	 	 	 	33,645	 	
Trust preferred securities	 	 	35,000	 	 	 	39,060	 	 	 	35,000	 	 	 	38,780	 	
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 approximates 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 loans is estimated by discounting future cash flows using current rates at which similar loans would be made. The fair value of FHLB and Federal Reserve Bank stock approximates the book value. 
Financial Liabilities – The estimated fair value of demand and savings deposits approximates 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 FHLB of Seattle fair value is estimated by discounting future cash flows using current rates for advances with 
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18. Fair Value of Financial Instruments...continued 
similar weighted average maturities. Repurchase agreements and other borrowed funds have variable interest rates, or are short term, so fair value approximates book value. The trust preferred securities’ fair value is based on quoted market prices. 
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 leases. Total rent expense for the year ended December 31, 2002, 2001, and 2000 was approximately $926,000 $865,000, and $462,000, respectively. The total future minimum rental commitments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2002 are as follows (Dollars in thousands): 
 	 	 	 	 	 	 	
Years ended December 31,	 	Amount	
	 		
 	 	2003	 	$	881	 	
 	 	2004	 	 	762	 	
 	 	2005	 	 	635	 	
 	 	2006	 	 	492	 	
 	 	2007	 	 	350	 	
 	Thereafter	 	 	2,925	 	
 	 	 		 	
Total minimum future rental expense	 	$	6,045	 	
 	 	 		 	
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 February 28, 2001 the Company completed the acquisition of WesterFed Financial Corporation (WesterFed). The Company issued 4,530,462 shares and $37,274,000 cash to shareholders as consideration for the merger. The acquisition was accounted for under the purchase method of accounting. Accordingly, the assets and liabilities of WesterFed were recorded by the Company at their respective fair values at the time of the completion of the merger and the results of WesterFed have been included with those of the Company since the date of the 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. 
On March 15, 2001, the Company acquired seven Wells Fargo & Company and First Security Corporation branches located in Idaho and Utah. The acquisition was 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. 
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21. Sale of Branches 
On June 23, 2001 the Company completed the sale of six branch locations in north central Montana with assets of $23,500,000 to Stockman Bank of Montana (“Stockman”). Stockman acquired five Western Security Bank offices and one Glacier Bank office. Included in the sale were loans of approximately $21,800,000, property and equipment with a book value of approximately $1,700,000, and deposits of $81,700,000. A gain of $511,000 was recognized on the sale. 
22. 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, nonbank 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, 2002, 2001, and 2000. During the third quarter of 2001, certain branches of Western were transferred to other Company owned banks located in the same geographic area which accounted for much of the change in activity for certain segments. 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	First	 	 	 	 	 	Mountain	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2002	 	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	 	
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	 	
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23. Operating Segment Information . . . continued 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	First	 	 	 	 	 	Mountain	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2001	 	Glacier	 	Security	 	Western	 	West	 	Big Sky	 	Valley	 	Whitefish	 	Other	 	Consolidated	
 	 		 		 		 		 		 		 		 		 		
Net interest income	 	$	19,032	 	 	 	14,239	 	 	 	17,094	 	 	 	10,141	 	 	 	4,678	 	 	 	5,998	 	 	 	4,290	 	 	 	(3,098	)	 	 	72,374	 	
Provision for loan losses	 	 	962	 	 	 	975	 	 	 	1,350	 	 	 	276	 	 	 	333	 	 	 	365	 	 	 	264	 	 	 	—	 	 	 	4,525	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net interest income after provision for loan losses	 	 	18,070	 	 	 	13,264	 	 	 	15,744	 	 	 	9,865	 	 	 	4,345	 	 	 	5,633	 	 	 	4,026	 	 	 	(3,098	)	 	 	67,849	 	
Noninterest income	 	 	7,216	 	 	 	3,070	 	 	 	4,517	 	 	 	3,855	 	 	 	1,294	 	 	 	1,990	 	 	 	1,157	 	 	 	152	 	 	 	23,251	 	
Merger expense	 	 	248	 	 	 	65	 	 	 	136	 	 	 	761	 	 	 	36	 	 	 	103	 	 	 	5	 	 	 	621	 	 	 	1,975	 	
Goodwill amortization	 	 	145	 	 	 	78	 	 	 	454	 	 	 	731	 	 	 	24	 	 	 	31	 	 	 	—	 	 	 	236	 	 	 	1,699	 	
Core deposit amortization	 	 	254	 	 	 	136	 	 	 	650	 	 	 	208	 	 	 	21	 	 	 	56	 	 	 	—	 	 	 	—	 	 	 	1,325	 	
Other noninterest expense	 	 	12,120	 	 	 	6,813	 	 	 	10,795	 	 	 	10,854	 	 	 	2,983	 	 	 	4,356	 	 	 	2,572	 	 	 	1,858	 	 	 	52,351	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Income before income taxes and minority interest	 	 	12,519	 	 	 	9,242	 	 	 	8,226	 	 	 	1,166	 	 	 	2,575	 	 	 	3,077	 	 	 	2,606	 	 	 	(5,661	)	 	 	33,750	 	
Minority interest	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	35	 	 	 	35	 	
Income tax expense (benefit)	 	 	4,505	 	 	 	3,556	 	 	 	3,026	 	 	 	150	 	 	 	995	 	 	 	1,114	 	 	 	819	 	 	 	(2,139	)	 	 	12,026	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net income	 	$	8,014	 	 	 	5,686	 	 	 	5,200	 	 	 	1,016	 	 	 	1,580	 	 	 	1,963	 	 	 	1,787	 	 	 	(3,557	)	 	 	21,689	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Assets	 	$	474,421	 	 	 	427,976	 	 	 	406,359	 	 	 	342,841	 	 	 	168,865	 	 	 	165,372	 	 	 	121,409	 	 	 	(21,496	)	 	 	2,085,747	 	
Net loans	 	 	316,626	 	 	 	341,214	 	 	 	229,007	 	 	 	162,701	 	 	 	110,363	 	 	 	103,062	 	 	 	59,721	 	 	 	(367	)	 	 	1,322,327	 	
Deposits	 	 	340,186	 	 	 	345,423	 	 	 	237,477	 	 	 	254,133	 	 	 	97,488	 	 	 	124,072	 	 	 	64,885	 	 	 	(17,600	)	 	 	1,446,064	 	
Stockholders’ equity	 	 	46,473	 	 	 	37,479	 	 	 	42,825	 	 	 	37,668	 	 	 	13,394	 	 	 	13,134	 	 	 	8,775	 	 	 	(22,765	)	 	 	176,983	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	First	 	 	 	 	 	Mountain	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2000	 	Glacier	 	Security	 	Western	 	West	 	Big Sky	 	Valley	 	Whitefish	 	Other	 	Consolidated	
 	 		 		 		 		 		 		 		 		 		
Net interest income	 	$	16,361	 	 	 	9,324	 	 	 	—	 	 	 	5,037	 	 	 	2,721	 	 	 	4,171	 	 	 	3,741	 	 	 	125	 	 	 	41,480	 	
Provision for loan losses	 	 	460	 	 	 	360	 	 	 	—	 	 	 	410	 	 	 	180	 	 	 	205	 	 	 	249	 	 	 	—	 	 	 	1,864	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net interest income after provision for loan losses	 	 	15,901	 	 	 	8,964	 	 	 	—	 	 	 	4,627	 	 	 	2,541	 	 	 	3,966	 	 	 	3,492	 	 	 	125	 	 	 	39,616	 	
Noninterest income	 	 	5,913	 	 	 	2,000	 	 	 	—	 	 	 	2,206	 	 	 	750	 	 	 	1,411	 	 	 	1,036	 	 	 	(22	)	 	 	13,294	 	
Goodwill amortization	 	 	118	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	242	 	 	 	360	 	
Core deposit amortization	 	 	199	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	199	 	
Other noninterest expense	 	 	11,440	 	 	 	4,771	 	 	 	—	 	 	 	5,153	 	 	 	2,527	 	 	 	3,498	 	 	 	2,455	 	 	 	863	 	 	 	30,707	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Income before income taxes and minority interest	 	 	10,057	 	 	 	6,193	 	 	 	—	 	 	 	1,680	 	 	 	764	 	 	 	1,879	 	 	 	2,073	 	 	 	(1,002	)	 	 	21,644	 	
Minority interest	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	61	 	 	 	61	 	
Income tax expense (benefit)	 	 	3,456	 	 	 	2,251	 	 	 	—	 	 	 	657	 	 	 	258	 	 	 	657	 	 	 	622	 	 	 	(321	)	 	 	7,580	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Net income	 	$	6,601	 	 	 	3,942	 	 	 	—	 	 	 	1,023	 	 	 	506	 	 	 	1,222	 	 	 	1,451	 	 	 	(742	)	 	 	14,003	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Assets	 	$	469,351	 	 	 	214,231	 	 	 	—	 	 	 	126,518	 	 	 	77,111	 	 	 	87,791	 	 	 	87,125	 	 	 	(5,415	)	 	 	1,056,712	 	
Net loans	 	 	282,467	 	 	 	180,041	 	 	 	—	 	 	 	90,921	 	 	 	57,050	 	 	 	62,645	 	 	 	60,437	 	 	 	—	 	 	 	733,561	 	
Deposits	 	 	288,556	 	 	 	164,168	 	 	 	—	 	 	 	86,632	 	 	 	49,616	 	 	 	76,508	 	 	 	60,760	 	 	 	(5,670	)	 	 	720,570	 	
Stockholders’ equity	 	 	42,049	 	 	 	18,027	 	 	 	—	 	 	 	9,780	 	 	 	6,090	 	 	 	7,649	 	 	 	8,462	 	 	 	6,056	 	 	 	98,113	 	
  
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PART III 
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 10. Directors and Executive Officers of the Registrant 
Information regarding “Directors and Executive Officers of the Registrant” is set forth under the headings “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 2003 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. 
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. 
Information regarding “Equity Compensation Plan Information” is set forth under the heading “Equity Compensation Plan Information” 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. Disclosure of Controls and Procedures 
The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) as of a date within 90 days before the filing date of this annual report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective and timely, providing them with material information relating to the Company required to be disclosed in the reports we file or submit under the Exchange act. There have not been any significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. We are not aware of any significant deficiencies or material weaknesses, therefore no corrective actions were taken. 
PART IV 
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 
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. 
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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. 
(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, 2002 between the Company, Glacier Bancorp, Inc. and Michael J. Blodnick	
 	 	 	
10(c)	 	Employment Agreement dated January 1, 2002 between the Company, Glacier Bancorp, Inc. and James H. Strosahl	
 	 	 	
10(d)	 	Employment Agreement dated January 1, 2002 between First Security Bank and William L. Bouchee	
 	 	 	
10(e)	 	1994 Director Stock Option Plan (4)	
 	 	 	
10(f)	 	1995 Employee Stock Option Plan (5)	
 	 	 	
10(g)	 	Deferred Compensation Plan (4)	
 	 	 	
10(h)	 	Supplemental Executive Retirement Agreement (4)	
 	 	 	
10(i)	 	Employment agreement dated September 9, 2002, between Mountain West Bank and Jon W. Hippler	
 	 	 	
10(j)	 	Employment agreement dated September 20, 2000 between Western Security Bank and Ralph R. Holliday (6)	
 	 	 	
21	 	Subsidiaries of the Company (See item 1, “Subsidiaries”)	
 	 	 	
23	 	Consent of KPMG LLP	
 	 	 	
99	 	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 3.2 included in the Company’s Quarterly Report on form 10-Q for the quarter ended September 30, 2000.	
 	 	 	
(2)	 	Incorporated by reference to Exhibit 3 (b) included in the Company’s Form 10-K for the fiscal year ended December 31, 1998	
 	 	 	
(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 Exhibits 10(I), 10(k) and 10(h), included in the Company’s Form 10-K for the fiscal year ended December 31, 1995.	
 	 	 	
(5)	 	Incorporated by reference to Exhibit 99.1 of the Company’s S-8 Registration Statement (No. 33-94648).	
 	 	 	
(6)	 	Incorporated by reference to exhibit 10.4 of the Company’s Registration Statement on S-4 (No. 333-52498), declared effective as of February 28, 2001.	
(b) Reports on Form 8-K 
     NONE 
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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 14, 2003. 
 	
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 14, 2003, by the following persons in the capacities indicated. 
 	 	 	
/s/ Michael J. Blodnick

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

James H. Strosahl	 	Executive Vice President and CFO
(Principal Financial/Accounting Officer)	
 		
Majority of the Board of Directors	 	 	
 		
/s/ John S. MacMillan

John S. MacMillan	 	Chairman	
 		
/s/ L. Peter Larson

L. Peter Larson	 	Director	
 		
/s/ Allen Fetscher

Allen J. Fetscher	 	Director	
 		
/s/ Jon W. Hippler

Jon W. Hippler	 	Director	
 		
/s/ Everit A. Sliter

Everit A. Sliter	 	Director	
 		
/s/ William L. Bouchee

William L. Bouchee	 	Director	
 		
/s/ Fred J. Flanders

Fred J. Flanders	 	Director	
 		
/s/ F. Charles Mercord

F. Charles Mercord	 	Director	
 		
/s/ Ralph K. Holliday

Ralph K. Holliday	 	Director	
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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 annual 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 annual report;	
 	 	 	
3.	 	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;	
 	 	 	
4.	 	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:	
 	 	 	
a)	 	designed such disclosure controls and procedures 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 annual report is being prepared;	
 	 	 	
b)	 	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and	
 	 	 	
c)	 	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;	
 	 	 	
5.	 	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):	
 	 	 	
a)	 	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and	
 	 	 	
b)	 	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and	
 	 	 	
6.	 	The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.	
 	 	
 	March 14, 2003	
 	 	
 	/s/ Michael J. Blodnick	
 		
 	Michael J. Blodnick
President/CEO	
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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 annual 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 annual report;	
 	 	 	
3.	 	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;	
 	 	 	
4.	 	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:	
 	 	 	
a)	 	designed such disclosure controls and procedures 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 annual report is being prepared;	
 	 	 	
b)	 	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and	
 	 	 	
c)	 	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;	
 	 	 	
5.	 	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):	
 	 	 	
a)	 	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and	
 	 	 	
b)	 	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and	
 	 	 	
6.	 	The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.	
 	 	
 	March 14, 2003	
 	 	
 	/s/ James H. Strosahl	
 		
 	James H. Strosahl
Executive Vice President/CFO	
  
66 

                                                                   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, 2002.

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 $240,000.00, 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
                           greater of (1) the payment and benefits described in
                           Section 10(d)(3) below, or (2) the compensation and
                           other benefits he would have been entitled to for the
                           remainder of the Term if his employment had not been
                           terminated.

                  (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 9(d)(3).

                  (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 28th day of January, 2002.

                                                     GLACIER BANCORP, INC.

                                                     By: /s/ John S. MacMillan
                                                     -------------------------
                                                     Its Chairman
Attest:

By: /s/ James H. Strosahl
- -------------------------
Secretary

                                                     EXECUTIVE

                                                     By: /s/ 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, 2002.

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.

                                       -1-

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 $175,000.00, 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.

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
                           greater of (1) the payment and benefits described in
                           Section 9(d)(3) below, or (2) the compensation and
                           other benefits he would have been entitled to for the
                           remainder of the Term if his employment had not been
                           terminated.

                  (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 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 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 (U
                           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.

                                                     GLACIER BANCORP, INC.

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

Attest: By:

By: /s/ LeeAnn Wardinsky
- ------------------------
Assistant Secretary

                                                     EXECUTIVE

                                                     By: /s/ 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. ("Bancorp"),

                                    RECITALS

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

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

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,
         2002.

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 Bancorp'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
                  Bancorp. 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 Bancorp. 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 Bancorp has an existing
         competitive or commercial relationship.

5.       SALARY. Executive will receive an annual salary of $168,000.00 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 Bancorp'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 Bancorp'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 Bancorp 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 Bancorp, 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 1 year
                           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 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 Bancorp (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
         Bancorp. 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 Bancorp 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 Bancorp may have a presence which is
                  competitive with the business of the Bank or Bancorp 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 Bancorp 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 Bancorp.

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 Bancorp'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 Bancorp to the maximum
                  extent, in time, scope of activities and geography, the court
                  finds enforceable.

         (b)      Executive acknowledges the Bank and Bancorp 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 Missoula 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
                  Bancorp.

         (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 Missoula 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 14 day of January, 2002.

                                                 FIRST SECURITY BANK OF MISSOULA

                                                 By: /s/ William L. Bouchee

Attest: By:

By: /s/ Harold J. Fraser
- ------------------------
Secretary

                                                 EXECUTIVE

                                                 By: /s/ William L. Bouchee

Ratified December 27, 2001

GLACIER BANCORP, INC.

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

                                                                   EXHIBIT 10(i)

                              EMPLOYMENT AGREEMENT

                  AGREEMENT between Mountain West Bank, ("Bank"), and Jon W.
         Hippler, ("Executive"), and ratified by Glacier Bancorp, Inc.
         ("Bancorp"),

                                    RECITALS

A.       Mountain West Bank, ("Bank"), is a wholly owned subsidiary of Glacier
         Bancorp, Inc., ("Bancorp").

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

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 from September 9, 2002 to December
         31, 2002.

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 Bancorp'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
                  Bancorp. 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 Bancorp. 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 Bancorp has an existing
         competitive or commercial relationship.

5.       SALARY. Executive will receive an annual salary of $158,080.00 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 Bancorp'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 Bancorp'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 Bancorp 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 Bancorp, 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 1 year
                           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 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 Bancorp (or executive
                           officers of a successor or controlling entity of the
                           Bank) 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 Bank, or

                  (4)      A relocation or transfer of Executive's principal
                           place of employment that would require Executive to
                           commute on a regular basis more than 20 miles each
                           way from Coeur d'Alene, Idaho, with the exception of
                           travel to and from Boise, 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 Code Section 30-14-402),
         various confidential information on investment management practices,
         marketing plans, pricing structure and technology of either the Bank or
         Bancorp. 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 Bancorp 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 Bancorp may have a presence which is
                  competitive with the business of the Bank or Bancorp 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 Bancorp 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 Bancorp.

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 Bancorp'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 Bancorp to the maximum
                  extent, in time, scope of activities and geography, the court
                  finds enforceable.

         (b)      Executive acknowledges the Bank and Bancorp 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 Kootenai County, Idaho. The
                  arbitrator, in rendering a decision as to any state law
                  claims, will apply Idaho 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
                  Bancorp.

         (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 Kootenai County, Idaho.

         (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 9th day of September, 2002.

                                                      MOUNTAIN WEST BANK

                                                      By: /s/ Charles Nipp

Attest: By:

By: /s/ Kim Jacklin
   ----------------
Secretary

                                                      EXECUTIVE

                                                      By: /s/ Jon W. Hippler

Ratified September 25, 2002

GLACIER BANCORP, INC.

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

                                                                      EXHIBIT 23

                          Independent Auditors' Consent

The Board of Directors
Glacier Bancorp, Inc.:

We consent to incorporation by reference in the registration statements on Form
S-8 (No. 33-94648 and No. 333-36514) of our report dated January 31, 2003
relating to the consolidated statements of financial condition of Glacier
Bancorp, Inc. and subsidiaries as of December 31, 2002 and 2001 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, 2002, which report appears in the December 31, 2002 annual report
on Form 10-K of Glacier Bancorp, Inc. Our report indicates that Glacier Bancorp,
Inc. changed its accounting for goodwill and other intangibles on January 1,
2002.

/s/KPMG

Billings, Montana
March 14, 2003

                                                                      EXHIBIT 99

                            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, 2002, 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.

                                                    March 14, 2003

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

                                                    /s/ James H. Strosahl
                                                    ---------------------
                                                    James H. Strosahl
                                                    Executive Vice President/CFO