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      As filed with the Securities and Exchange Commission on November 24, 1998
                                                     Registration No. 333-______
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------

                                    FORM S-4
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                                 ---------------
                              GLACIER BANCORP, INC.
             (Exact name of registrant as specified in its charter)

          DELAWARE                            6749                                81-0519541
                                                                 
(State or other jurisdiction of     (Primary standard industrial       (I.R.S. employer identification no.)
incorporation or organization)      classification code number)

   P.O. BOX 27, 49 COMMONS LOOP, KALISPELL, MONTANA 59903-0027 (406) 756-4200

   (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)
                                   ----------

                               MICHAEL J. BLODNICK
                      President and Chief Executive Officer
                          P.O. Box 27, 49 Commons Loop
                          Kalispell, Montana 59903-0027
                                 (406) 756-4200
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)
                                   -----------
                          Copies of communications to:

STEPHEN M. KLEIN, ESQ.                               WILLIAM D. LAMDIN III, ESQ.
WILLIAM E. BARTHOLDT, ESQ.                                 ALLAN L. KARELL, ESQ.
Graham & Dunn P.C.                                     Crowley, Haughey, Hanson,
1420 Fifth Avenue, 33rd Floor                              Toole & Dietrich PLLP
Seattle, Washington  98101                                    490 N. 31st Street
(206) 340-9648                                          Billings, Montana  59101
                                                                  (406) 252-3441

                                   -----------

 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
The date of mailing of the enclosed Prospectus/Proxy Statement to stockholders 
                            of Big Sky Western Bank

If the securities being registered on this Form are being offered in connection
  with the formation of a holding company and there is compliance with General
                   Instruction G, check the following box. [ ]

                         CALCULATION OF REGISTRATION FEE

Title of Each                                       Proposed Maximum           Proposed Maximum          Amount of
Class of Securities       Amount Being              Offering Price             Aggregate                 Registration
Being Registered          Registered(1)             Per Share(2)(3)            Offering Price(3)         Fee(3)
- ----------------          -------------             ---------------            -----------------         ------
                                                                                                 
Common Stock,             222,707                   $13.72                     $3,056,124                $849.60
   $.01 Par Value

(1)     Represents the estimated maximum number of shares of Glacier Bancorp,
        Inc.'s common stock, $.01 par value, issuable in exchange for the 20,400
        shares of Big Sky Western Bank common stock, $40.00 par value that are
        outstanding, under the terms of the Agreement and Plan of Share Exchange
        described in this Registration Statement.

(2)     Represents the maximum price per share of Glacier common stock issuable
        in exchange for Big Sky common stock (based upon the exchange ratio).

(3)     Estimated solely for the purpose of calculating the registration fee
        pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended,
        on the basis of the per-share book value ($149.81) of the Big Sky common
        stock as of October 31, 1998.

                                    ---------

        THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.

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                         BIG SKY LETTER TO STOCKHOLDERS

                                     [DATE]

TO OUR STOCKHOLDERS:

         You are cordially invited to attend a Special Meeting ("Special
Meeting") of Stockholders of Big Sky Western Bank ("Big Sky"), a Montana banking
corporation, to be held on January 13, 1999, at ___ o'clock __.m. local time, in
the _______________ room at the Best Western Buck's T-4 Lodge, _______________,
Big Sky, Montana 59716.

         The attached Notice of Special Meeting and Prospectus/Proxy Statement
describe the formal business to be transacted at the Special Meeting. At the
Special Meeting, you will be asked to consider and vote upon a proposal to
approve the Plan and Agreement of Share Exchange ("Share Exchange Agreement"),
dated as of October 20, 1998, as amended, between Glacier Bancorp, Inc.
("Glacier"), a Delaware corporation and bank holding company, and Big Sky. The
Share Exchange Agreement provides for the exchange ("Share Exchange") of
outstanding shares of Big Sky common stock for shares of Glacier common stock.
Following the closing of the Share Exchange, Big Sky's stockholders would become
stockholders of Glacier, and Big Sky would become a wholly-owned subsidiary of
Glacier.

         The Share Exchange Agreement is subject to various conditions which,
with other terms of the Share Exchange, are contained in the Share Exchange
Agreement and described in the attached Proxy Statement, which also serves as a
Prospectus of Glacier for its common stock, $.01 par value per share ("Glacier
Common Stock") to be issued in the Share Exchange. If the Share Exchange is
completed, each Big Sky stockholder will receive shares of Glacier Common Stock
for each share of Big Sky Common Stock, $40.00 par value per share ("Big Sky
Common Stock") owned, based on an exchange formula detailed in the
Prospectus/Proxy Statement. The complete text of the Share Exchange Agreement
appears as Appendix A to the Prospectus/Proxy Statement.

         Your Board of Directors has received an opinion from Professional Bank
Services, Inc. to the effect that, as of the date of this Prospectus/Proxy
Statement and based on the factors and assumptions described in the opinion, the
consideration to be received by Big Sky's stockholders in the Share Exchange is
fair from a financial point of view. THE MANAGEMENT AND BOARD OF DIRECTORS OF
BIG SKY BELIEVE THAT THE SHARE EXCHANGE IS IN THE BEST INTERESTS OF BIG SKY AND
ITS STOCKHOLDERS, AND THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE SHARE
EXCHANGE AGREEMENT. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE SHARE EXCHANGE.

         Approval of the Share Exchange requires the affirmative vote of the
holders of two-thirds of the outstanding shares of Big Sky Common Stock. We urge
you to review the attached Prospectus/Proxy Statement and to consider your vote
carefully. If you have any questions regarding this material in advance of the
Special Meeting, please call Michael F. Richards at (406) 995-2321.

         IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, REGARDLESS OF THE SIZE OF YOUR HOLDINGS, AND WHETHER YOU PLAN TO ATTEND
THE SPECIAL MEETING IN PERSON OR NOT. A FAILURE TO VOTE, EITHER BY NOT RETURNING
THE ENCLOSED PROXY OR BY CHECKING THE "ABSTAIN" BOX ON THE PROXY, WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE APPROVAL OF THE SHARE EXCHANGE AGREEMENT. TO
ASSURE THAT YOUR SHARES ARE REPRESENTED IN VOTING ON THIS VERY IMPORTANT MATTER,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM IN THE ENCLOSED
POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU DO
ATTEND, YOU MAY (IF YOU WISH), REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON
AT THE SPECIAL MEETING.

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                              BIG SKY WESTERN BANK

                    NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                           TO BE HELD JANUARY 13, 1999

TO THE STOCKHOLDERS OF BIG SKY WESTERN BANK:

         NOTICE IS HEREBY GIVEN that pursuant to call of its Board of Directors,
a Special Meeting of Stockholders of Big Sky Western Bank ("Big Sky"), a Montana
banking corporation, will be held on January 13, 1999, at ______ [a.m./p.m.]
local time, in the ______ room at the Best Western Buck's T-4 Lodge, _________,
Big Sky, Montana. The Special Meeting is for the following purposes:

         1. SHARE EXCHANGE AGREEMENT. To consider and vote upon a proposal to
approve the Plan and Agreement of Share Exchange ("Share Exchange Agreement"),
dated as of October 20, 1998, as amended, between Big Sky and Glacier Bancorp,
Inc. ("Glacier"), a Delaware corporation and bank holding company, under the
terms of which all outstanding shares of Big Sky's common stock will be
exchanged for shares of Glacier's common stock, as more fully described in the
accompanying Prospectus/Proxy Statement. The Share Exchange Agreement is
attached as APPENDIX A to the Prospectus/Proxy Statement.

         2. OTHER MATTERS. To act upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.

         Only holders of record of Big Sky common stock, $40.00 par value per
share, at _____ p.m. on ______________, 1998 (the record date for the Special
Meeting), are entitled to notice of, and to vote at, the special meeting or any
adjournments or postponements of the meeting. The affirmative vote of the
holders of two-thirds or more of the outstanding shares of Big Sky common stock
is required for approval of the Share Exchange Agreement. As of
_________________, 1998, there were 20,400 shares of Big Sky common stock
outstanding.

         Big Sky stockholders desiring to do so may dissent from the Share
Exchange and obtain payment for their shares in accordance with the provisions
of the Montana Business Corporation Act, Sections 35-1-826 through 35-1-839, a
copy of which is included in the Prospectus/Proxy Statement. See "THE SHARE
EXCHANGE -- Dissenters' Rights of Appraisal" and APPENDIX C.

         All stockholders are cordially invited to attend the special meeting
personally. Whether or not you are able to do so, it is important that you
complete, sign, date, and promptly return the accompanying proxy in the enclosed
postage-paid envelope in order to vote your shares of Big Sky common stock.
Stockholders may revoke proxies previously submitted by completing a later-dated
proxy, by written revocation delivered to Big Sky's Secretary at or prior to the
special meeting, or by appearing and voting at the special meeting in person.
Attendance at the special meeting will not of itself revoke a previously
submitted proxy.

                                            By Order of the Board of Directors,

                                            Michael R. Scholtz, Secretary

Big Sky, Montana
December ___, 1998

 YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN, AND WHETHER
 OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. APPROVAL OF THE SHARE EXCHANGE
REQUIRES THE AFFIRMATIVE VOTE OF HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES
    OF BIG SKY COMMON STOCK. IN ORDER TO ENSURE THAT THE REQUISITE VOTES ARE
  OBTAINED AND A QUORUM IS ATTAINED, WE URGE YOU TO SIGN, DATE AND RETURN THE
                              ENCLOSED PROXY FORM.

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         On behalf of your Board of Directors, we recommend that you vote FOR
approval of the Share Exchange Agreement.

         Yours truly,                       Yours truly,

         Robert L. Kester, Chairman         Michael F. Richards, President

         PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM

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                                 PROXY STATEMENT
                              BIG SKY WESTERN BANK

                                   PROSPECTUS
               GLACIER BANCORP, INC. COMMON STOCK ($.01 PAR VALUE)

         The boards of directors of Glacier Bancorp, Inc. and Big Sky Western
Bank have agreed that Glacier will acquire Big Sky in a Share Exchange
transaction. Big Sky will become a wholly-owned subsidiary of Glacier, but will
remain a separate entity and will remain headquartered in Big Sky, Montana. The
transaction will enable Big Sky to offer more products and services to customers
and will enable Glacier to extend its operations in Montana. Big Sky's board of
directors believes the transaction will benefit Big Sky and it's stockholders.

         As a Big Sky stockholder, you will receive shares of Glacier common
stock in exchange for your shares of Big Sky common stock. If the Share Exchange
is completed, subject to certain limitations, you will receive 10.917 shares of
Glacier common stock for each share of Big Sky common stock that you own.
Glacier will pay cash in lieu of fractional shares. See "THE SHARE EXCHANGE --
Basic Terms of the Share Exchange."

         Glacier common stock trades on the Nasdaq National Market under the
symbol "GBCI." The reported sales price for Glacier common stock was $____ on
_____, 1998, the most recent date for which it was practicable to obtain
information prior to printing this Prospectus/Proxy Statement. Big Sky common
stock does not trade on any market, thus no current market price is available.

         THE SHARE EXCHANGE CANNOT BE COMPLETED UNLESS BIG SKY STOCKHOLDERS
APPROVE IT. Big Sky has scheduled a special meeting of stockholders, to vote on
the Share Exchange, for JANUARY 13, 1999, AT __ P.M.. See "BIG SKY SPECIAL
SHAREHOLDERS MEETING."

         This document also serves as the prospectus of Glacier, filed as a part
of a Registration Statement on Form S-4 with the Securities and Exchange
Commission. The Registration Statement registers the shares of Glacier common
stock that will be issued to Big Sky stockholders in the Share Exchange.

         This Prospectus/Proxy Statement provides you with detailed information
about the Share Exchange, and we urge you to read it carefully. In addition, you
may obtain additional information about Glacier from documents that it has filed
with the SEC. See "WHERE YOU CAN FIND MORE INFORMATION."

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

         NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS/PROXY STATEMENT
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

         THE SHARES OF GLACIER COMMON STOCK TO BE ISSUED IN THE SHARE EXCHANGE
ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY A BANK INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY OR INSTRUMENTALITY.

         THIS PROSPECTUS/PROXY STATEMENT DOES NOT COVER ANY RESALE OF THE
SECURITIES TO BE RECEIVED BY BIG SKY STOCKHOLDERS IN THE SHARE EXCHANGE, AND NO
PERSON IS AUTHORIZED TO MAKE ANY USE OF THIS PROSPECTUS/PROXY STATEMENT IN
CONNECTION WITH ANY SUCH RESALE.

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

 This Prospectus/Proxy Statement is dated December __, 1998, and is first mailed
                 to Big Sky stockholders on December, __, 1998.

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                              [INSIDE FRONT COVER]

         THIS PROSPECTUS/PROXY STATEMENT INCORPORATES IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT GLACIER THAT IS NOT INCLUDED OR DELIVERED WITH THIS
DOCUMENT. SUCH INFORMATION IS AVAILABLE WITHOUT CHARGE TO BIG SKY STOCKHOLDERS
UPON WRITTEN OR ORAL REQUEST. CONTACT GLACIER AT 49 COMMONS LOOP, P.O. BOX 27,
KALISPELL, MONTANA 59903-0027, ATTN: JAMES H. STROSAHL, TELEPHONE NUMBER
(406) 756-4200.

         TO OBTAIN TIMELY DELIVERY OF REQUESTED DOCUMENTS PRIOR TO THE BIG SKY
SPECIAL STOCKHOLDERS MEETING, YOU MUST REQUEST THEM NO LATER THAN JANUARY ___,
1999, WHICH IS FIVE BUSINESS DAYS PRIOR TO THE MEETING.

         Also see "WHERE YOU CAN FIND MORE INFORMATION" and "INFORMATION
INCORPORATED BY REFERENCE."

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                                TABLE OF CONTENTS

                                                                                                                       PAGE
                                                                                                                       ----
                                                                                                                    
SUMMARY...................................................................................................................1

         INITIAL QUESTIONS AND ANSWERS ABOUT THE SHARE EXCHANGE...........................................................1

         ADDITIONAL IMPORTANT INFORMATION ABOUT THE SHARE EXCHANGE........................................................2

                  Parties to the Share Exchange...........................................................................2
                  Big Sky Special Stockholders Meeting....................................................................3
                  Opinion of Big Sky Financial Advisor....................................................................3
                  Conditions to the Share Exchange........................................................................3
                  Amendment or Termination of the Share Exchange Agreement................................................4
                  Competing Acquisition Proposals: Break-up Fee...........................................................4
                  Big Sky Convertible Debentures..........................................................................4
                  Ownership of Big Sky and Glacier After the Share Exchange...............................................4
                  Big Sky Directors and Officers After the Share Exchange.................................................4
                  Accounting Treatment of the Share Exchange..............................................................5
                  Dissenters' Rights of Appraisal.........................................................................5
                  Interests of Certain Persons in the Share Exchange......................................................5
                  Comparison of Stockholders' Rights......................................................................5
                  Trading Markets.........................................................................................5

STOCK PRICE AND DIVIDEND INFORMATION......................................................................................6

                  Glacier  ...............................................................................................6
                  Big Sky  ...............................................................................................6
                  Recent Stock Price Data.................................................................................6

EQUIVALENT PER COMMON SHARE DATA..........................................................................................8

SELECTED FINANCIAL DATA...................................................................................................9

                  Pro forma Glacier Bancorp, Inc. and Big Sky Western Bank (Unaudited)....................................9
                  Glacier Bancorp, Inc...................................................................................10
                  Big Sky Western Bank...................................................................................11

BIG SKY SPECIAL STOCKHOLDERS MEETING.....................................................................................12

                  Date, Time, Place......................................................................................12
                  Purpose  ..............................................................................................12
                  Record Date; Shares Outstanding and Entitled to Vote...................................................12
                  Vote Required..........................................................................................12
                  Voting, Solicitation, and Revocation of Proxies........................................................12

BACKGROUND OF AND REASONS FOR THE SHARE EXCHANGE.........................................................................13

                  Background of the Share Exchange.......................................................................13
                  Reasons For The Share Exchange - Big Sky...............................................................14
                  Opinion of Big Sky Financial Advisor...................................................................15
                  Recommendation of the Big Sky Board....................................................................18

THE SHARE EXCHANGE.......................................................................................................19

                  General  ..............................................................................................19

                                       i
   8

                                                                                                                     
                  Basic Terms of the Share Exchange......................................................................19
                  Big Sky Stock Options..................................................................................20
                  Exchange of Stock Certificates.........................................................................20
                  Cash for Fractional Shares.............................................................................21
                  Conditions to the Share Exchange; Regulatory Approvals.................................................21
                  Amendment or Termination of the Share Exchange Agreement...............................................21
                  Competing Acquisition Proposals: Break-up Fee..........................................................22
                  Conduct Pending the Share Exchange.....................................................................23
                  Directors and Executive Officers After the Share Exchange..............................................24
                  Employee Benefit Plans.................................................................................24
                  Interests of Certain Persons in the Share Exchange.....................................................24
                  Certain Federal Income Tax Consequences of the Share Exchange..........................................24
                  Accounting Treatment of Share Exchange.................................................................26
                  Dissenters' Rights of Appraisal........................................................................26
                  Stock Resales by Big Sky Affiliates....................................................................27

INFORMATION CONCERNING GLACIER...........................................................................................28

                  General  ..............................................................................................28
                  Year 2000 Issues.......................................................................................29

INFORMATION CONCERNING BIG SKY...........................................................................................31

                  Business 31
                  Competition............................................................................................32
                  Facilities.............................................................................................33
                  Employees..............................................................................................33
                  Legal Proceedings......................................................................................33

SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS.........................................................34

BIG SKY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................34

                  Overview 34
                  Results of Operations..................................................................................35
                  Financial Condition....................................................................................37
                  Liquidity and Source of Funds..........................................................................38
                  Year 2000..............................................................................................39

SUPERVISION AND REGULATION...............................................................................................41

DESCRIPTION OF GLACIER'S CAPITAL STOCK...................................................................................46

COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF GLACIER AND BIG SKY COMMON STOCK..............................................47

CERTAIN LEGAL MATTERS....................................................................................................52

EXPERTS..................................................................................................................52

WHERE YOU CAN FIND MORE INFORMATION......................................................................................52

INFORMATION INCORPORATED BY REFERENCE....................................................................................53

OTHER MATTERS............................................................................................................54

                                       ii
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BIG SKY FINANCIAL STATEMENTS............................................................................................F-1

         APPENDIX A - Plan and Agreement of Share Exchange, as amended

         APPENDIX B - Opinion of Professional Bank Services, Inc.

         APPENDIX C - Sections 35-1-826 through 35-1-839 of the Montana
                      Business Corporation Act (Dissenters' Rights of
                      Appraisal under Montana Law)

                                      iii
   10

                                     SUMMARY

         This Summary highlights selected information from this document and may
not contain all of the information that is important to you. To understand the
Share Exchange fully and for a more complete description of the legal terms of
the Share Exchange, you should read carefully this entire document and the
documents we have referred you to. See "WHERE YOU CAN FIND MORE INFORMATION."

             INITIAL QUESTIONS AND ANSWERS ABOUT THE SHARE EXCHANGE

Q.       What is the effect of the Share Exchange?

A.       If the Share Exchange occurs, and unless you dissent from the
         transaction as described in this document, you will receive shares of
         Glacier common stock in exchange for the shares of Big Sky common stock
         that you now own. As a result, Glacier will own all of the Big Sky
         common stock, and Big Sky will be a subsidiary of Glacier. Big Sky will
         continue its current operations, under its current name. You will be a
         Glacier stockholder. See "THE SHARE EXCHANGE -- Basic Terms of the
         Share Exchange."

Q:       Why are the companies proposing to enter into the Share Exchange?

A:       Because Glacier and Big Sky believe that the Share Exchange will
         provide you with substantial benefits, and will allow Big Sky to better
         serve its customers. Because of Glacier's financial and technology
         resources, Big Sky will be able to offer additional products and
         services, while maintaining continuity of services to its current
         customers. Glacier common stock is more actively traded than Big Sky
         common stock, and Big Sky stockholders can be expected to benefit from
         the increased liquidity in owning Glacier common stock. For a more
         complete discussion of the reasons that the board of directors of Big
         Sky approved the Share Exchange, see "THE SHARE EXCHANGE -- Background
         of and Reasons for the Share Exchange."

         THE BOARD OF DIRECTORS OF BIG SKY RECOMMENDS THAT YOU VOTE IN FAVOR OF
         THE PROPOSED SHARE EXCHANGE.

Q:       What will I receive in the Share Exchange?

A:       Big Sky stockholders will receive 10.917 shares of Glacier common stock
         in exchange for each outstanding share of Big Sky common stock. If,
         however, Big Sky's costs in connection with the Share Exchange exceed
         $125,000, the number of Glacier Shares that you receive will be
         reduced. Glacier will not issue fractional shares, but will instead pay
         cash based on the market value of the fractional share of Glacier
         common stock. See "THE SHARE EXCHANGE -- Basic Terms of the Share
         Exchange."

Q:       What do I need to do now?

A:       Just read this Prospectus/Proxy Statement and mail your signed proxy
         card in the enclosed return envelope as soon as possible, so that your
         shares can be represented at the Big Sky special stockholders meeting.
         The special stockholders meeting will take place on January 13, 1999 at
         ______ [a.m./p.m.]. See "BIG SKY SPECIAL STOCKHOLDERS MEETING."

Q:       Can I change my vote after I have mailed my signed proxy card?

A:       Yes. You can change your vote at any time before your proxy is voted at
         the special meeting. You can do this in one of three ways. First, you
         can send a written notice stating that you would like to revoke your
         proxy. Second, you can complete and submit a new proxy card. If you
         choose either of these two 

                                       1
   11

         methods, you must submit your notice of revocation or your new proxy
         card to Big Sky at the address set forth below under "Parties to the
         Share Exchange -- Big Sky." Third, you can attend the special meeting
         and vote in person. Simply attending the meeting, however, will not
         revoke your proxy. See "BIG SKY SPECIAL STOCKHOLDERS MEETING -- Voting,
         Solicitation, and Revocation of Proxies."

Q:       Should I send my stock certificates in now?

A:       No. After the Share Exchange is completed, Glacier will send you
         written instructions for exchanging your stock certificates. See "THE
         SHARE EXCHANGE -- Exchange of Stock Certificates."

Q:       When do you expect the Share Exchange to be completed?

A:       Glacier and Big Sky are working towards completing the Share Exchange
         as quickly as possible. In addition to Big Sky stockholder approval,
         certain regulatory approvals must be obtained, and there are other
         conditions to completing the Share Exchange. Glacier and Big Sky expect
         the Share Exchange to be completed by as soon as January 20, 1999. See
         "THE SHARE EXCHANGE -- Basic Terms of the Share Exchange."

Q:       What are the tax consequences of the Share Exchange?

A:       The Share Exchange generally will be tax-free to you for federal income
         tax purposes. To review the tax consequences to stockholders in greater
         detail, see "THE SHARE EXCHANGE -- Certain Federal Income Tax
         Consequences of the Share Exchange."

            ADDITIONAL IMPORTANT INFORMATION ABOUT THE SHARE EXCHANGE

PARTIES TO THE SHARE EXCHANGE

         Big Sky. Big Sky is a Montana chartered commercial bank which was
authorized to commence operations on March 21, 1990. Big Sky is a member of the
FDIC. Big Sky engages in a general commercial banking business in Big Sky,
Montana. At September 30, 1998, Big Sky had deposits of approximately $32
million and assets of approximately $40 million.

         Big Sky is located at 135 Big Sky Road, Big Sky, Montana 59716, and its
telephone number is (406) 995-2321. For additional information about Big Sky and
it business, see "INFORMATION CONCERNING BIG SKY."

         Glacier. Glacier is a Delaware corporation and a registered bank
holding company under the federal Bank Holding Company Act of 1956, as amended.
Glacier's principal business is conducted through five Montana - chartered bank
subsidiaries:

         -        Glacier Bank
 
         -        Glacier Bank of Whitefish
 
         -        Glacier Bank of Eureka
 
         -        First Security Bank of Missoula
 
         -        Valley Bank of Helena

         Glacier also has one non-bank subsidiary, Community First, Inc., which
offers full service brokerage services through Robert Thomas Securities, an
unrelated brokerage firm.

                                       2
   12

         At September 30, 1998, Glacier's bank subsidiaries had facilities in 14
communities in Montana, operating 21 full service banking offices. At September
30, 1998, Glacier had consolidated deposits of approximately $440 million and
consolidated assets of approximately $665 million. Glacier is headquartered in
Kalispell, Montana, and its executive offices are at 49 Commons Loop, Kalispell,
Montana 59903-0027. Its telephone number is (406) 756-4200.

         Glacier was incorporated on March 24, 1998, and is the successor
corporation of another company (also named "Glacier Bancorp, Inc.") that was
formed in 1990. Glacier merged with the prior corporation in July, 1998. This
transaction, which was done in order to cure uncertainty about the validity of
certain shares of the prior corporation's outstanding stock, is described in
"INFORMATION CONCERNING GLACIER."

         Additional information concerning Glacier and its business is included
in the documents that are incorporated by reference into this Prospectus/Proxy
Statement. See "INFORMATION INCORPORATED BY REFERENCE." For your information and
reference, Glacier's Annual Report for the year ended December 31, 1997, and its
Quarterly Report for the quarter ended September 30, 1998, accompany this
Prospectus/Proxy Statement.

BIG SKY SPECIAL STOCKHOLDERS MEETING

         A special meeting of Big Sky's stockholders will be held at
_______[a.m./p.m.] on January 13, 1999 in the ________ room at the Best Western
Buck's T-4 Lodge, ___________, Big Sky, Montana. At the Big Sky special meeting,
Big Sky stockholders will be asked to approve the Share Exchange and the Share
Exchange Agreement. The Share Exchange Agreement must be approved by owners of
two-thirds (2/3) of all of the shares of Big Sky common stock outstanding on
__________________, 1998, which is the record date for the Big Sky special
meeting. See "BIG SKY SPECIAL STOCKHOLDER MEETING."

OPINION OF BIG SKY FINANCIAL ADVISOR

         Big Sky asked its financial advisor, Professional Bank Services, Inc.
("PBS") for advice on the fairness of the amount that Glacier is offering to Big
Sky stockholders in the Share Exchange. PBS performed a number of analyses in
which it compared the companies' historical financial performances, compared the
financial terms of the Shares Exchange to other similar transactions, and
analyzed other matters. PBS delivered an opinion to Big Sky that the Share
Exchange is fair, from a financial point of view, to Big Sky's stockholders.
This opinion will be updated to the Share Exchange effective date. PBS's opinion
is described at "BACKGROUND OF AND REASONS FOR THE SHARE EXCHANGE -- Opinion of
Big Sky Financial Advisor" and a copy of the opinion is attached at APPENDIX B.

CONDITIONS TO THE SHARE EXCHANGE

         To complete the Share Exchange, Glacier and Big Sky must satisfy a
number of conditions in addition to approval by Big Sky stockholders, including
the following:

         -        no law or injunction may effectively prohibit the Share
                  Exchange;

         -        Glacier and Big Sky must receive all necessary approvals of
                  governmental authorities;

         -        Glacier and Big Sky must receive a legal opinion that the
                  Share Exchange will be treated as a tax-free reorganization
                  under the Internal Revenue Code; and

         -        Big Sky must receive an updated opinion from PBS that the
                  Share Exchange is fair to Big Sky's stockholders from a
                  financial point of view.

                                       3
   13

         Additionally, Glacier may terminate the Share Exchange Agreement if the
(a) total amount of cash it would be required to pay for fractional shares and
to Big Sky stockholders who dissent exceeds 10% of the total transaction
purchase price, or (b) if Glacier determines that the Share Exchange will not be
treated for accounting purposes as a "pooling of interests."

         Certain conditions to the Share Exchange may be waived by the company
entitled to assert the condition. For a more complete discussion of the
conditions to the completion of the Share Exchange, see "THE SHARE EXCHANGE --
Conditions to the Share Exchange."

AMENDMENT OR TERMINATION OF THE SHARE EXCHANGE AGREEMENT

         The Share Exchange Agreement may be amended at any time prior to the
closing, if both the Glacier and Big Sky boards of directors approve. However,
if any amendment would reduce or change the form of consideration that Big Sky
stockholders will receive, the Big Sky stockholders will have to approve that
change.

         The Share Exchange Agreement may be terminated, and the Share Exchange
abandoned, at any time (even after approval by Big Sky's stockholders) if both
the Glacier and Big Sky boards of directors agree to do so. Also, in certain
circumstances either one of Glacier's or Big Sky's board of directors may
terminate the Agreement, without the other board's consent. This would be the
case, for example, if the Share Exchange has not occurred by June 30, 1999. In
certain circumstances involving the termination of the Share Exchange, either
Glacier or Big Sky may be required to pay the other party a termination fee. See
"THE SHARE EXCHANGE -- Amendment or Termination of the Share Exchange
Agreement."

COMPETING ACQUISITION PROPOSALS: BREAK-UP FEE

         In the Share Exchange Agreement, Big Sky agrees that it will not
solicit or entertain acquisition offers from third parties, except as otherwise
required by the fiduciary duties of its board of directors. In certain
circumstances, if Big Sky is acquired by a party other than Glacier, Big Sky
will be required to pay Glacier a "break-up fee" of $400,000. See "THE SHARE
EXCHANGE -- Competing Acquisition Proposals: Break-up Fee."

BIG SKY CONVERTIBLE DEBENTURES

         Big Sky currently has issued and outstanding convertible debentures due
December 31, 2001 in the aggregate amount of $350,000. Pursuant to their terms,
holders of such debentures will be entitled to receive Glacier common stock at
the time of the debentures' maturity. A portion of the purchase price will be
allocated for issuance upon such maturity.
See "THE SHARE EXCHANGE -- Basic Terms of the Share Exchange".

OWNERSHIP OF BIG SKY AND GLACIER AFTER THE SHARE EXCHANGE

         After the Share Exchange, Glacier will own 100% of the stock of Big
Sky. Assuming that no Big Sky stockholders exercise their dissenters' rights,
the former stockholders of Big Sky will own approximately 3% of the outstanding
Glacier stock after the Share Exchange.

BIG SKY DIRECTORS AND OFFICERS AFTER THE SHARE EXCHANGE

         After the Share Exchange, the management and board of directors of Big
Sky will remain unchanged, except that two additional persons, to be designated
by Glacier, will join the Big Sky board of directors. They will serve until the
next annual stockholders' meeting of Big Sky.

                                       4
   14

ACCOUNTING TREATMENT OF THE SHARE EXCHANGE

         We expect the Share Exchange to qualify as a "pooling of interests,"
which means that, for accounting and financial reporting purposes, Glacier and
Big Sky will be treated as if they had always been one company. See "THE SHARE
EXCHANGE -- Accounting Treatment of the Share Exchange."

DISSENTERS' RIGHTS OF APPRAISAL

         You are entitled to dissent from the Share Exchange if you follow
certain procedures, and if the Share Exchange occurs. If you properly dissent,
you will have the right to obtain payment of the fair value of your Big Sky
common stock in cash, as provided by Montana law.

         If you fail to follow exactly the procedures specified in the
applicable Montana law, you will lose your rights to dissent. If you wish to
dissent, you should carefully read "THE SHARE EXCHANGE -- Dissenters' Rights of
Appraisal" and the copy of the applicable Montana statute, which is attached as
APPENDIX C.

INTERESTS OF CERTAIN PERSONS IN THE SHARE EXCHANGE

         Certain members of Big Sky's management may be deemed to have interests
in the Share Exchange in addition to their interests as stockholders of Big Sky
generally. See "THE SHARE EXCHANGE -- Interests of Certain Persons in the Share
Exchange."

COMPARISON OF STOCKHOLDERS' RIGHTS

         As a Big Sky stockholder, your rights are governed by Big Sky's
Articles of Agreement and Bylaws, and by Montana law. After the Share Exchange
you will be a Glacier stockholder, and your rights will be governed by Glacier's
Certificate of Incorporation and Bylaws, and by Delaware law. See "COMPARISON OF
CERTAIN RIGHTS OF HOLDERS OF GLACIER AND BIG SKY COMMON STOCK" for a discussion
of the major differences in the rights of the stockholders of the two companies.
That section also explains certain provisions of Glacier's Certificate of
Incorporation and Bylaws that could make a takeover of Glacier more difficult.

TRADING MARKETS

         Glacier's common stock is quoted on the NASDAQ National Market under
the symbol "GBCI," and is registered as a class with the SEC under the
Securities Exchange Act of 1934, as amended. Accordingly, Glacier is required to
file periodic reports with the SEC and to make information about Glacier
available to its stockholders and the public. See "WHERE YOU CAN FIND MORE
INFORMATION."

         Big Sky is not subject to the information and reporting requirements of
the 1934 Act. Big Sky's common stock is not actively traded, and is not listed
on any market system. See "STOCK PRICE AND DIVIDEND INFORMATION."

                                       5
   15

                      STOCK PRICE AND DIVIDEND INFORMATION

GLACIER

         The Glacier common stock trades on the NASDAQ National Market under the
symbol "GBCI," and its primary market makers are (i) Piper Jaffray Companies,
Inc.; (ii) Herzog, Heine, Geduld, Inc.; (iii) S.J. Wolfe & Co.; (iv) D.A.
Davidson; and (v) Wedbush Morgan Securities Inc. The respective high and low
sale prices of the Glacier common stock for the periods indicated are shown
below. The prices below do not include retail mark-ups, mark-downs or
commissions, and may not represent actual transactions. The per share
information has been adjusted retroactively for all stock dividends and splits
previously issued. As of September 30, 1998, there were approximately 841
holders of record of Glacier common stock.

                                1998(1)                           1997(1)                              1996(1)
                      ---------------------------      ------------------------------       -------------------------------
                                         Cash                                 Cash                                Cash
                                        Dividends                           Dividends                           Dividends
    Period            Market Price       Declared      Market Price(2)       Declared       Market Price        Declared(3)
- -----------         -----------------   ---------     ------------------    ---------      -----------------    -----------
                     High       Low                     High       Low                      High       Low
                                                                                       
1ST QUARTER         $26.82     $21.14      $0.11       $15.00     $14.09       $0.10       $12.39     $10.75       $0.09

2ND QUARTER         $25.91     $24.09      $0.12       $19.09     $13.86       $0.11       $13.56     $11.57       $0.10

3RD QUARTER         $26.36     $20.71      $0.13       $17.73     $15.91       $0.11       $15.30     $12.27       $0.10

4TH QUARTER(4)                                         $22.73     $16.94       $0.15       $15.30     $14.09       $0.10

(1)      All amounts have been adjusted to reflect the 10% stock dividend paid
         on October 1, 1998.
(2)      A 3-for-2 stock split was declared in April, 1997.
(3)      A 10% stock dividend was paid in May of 1996 and 1995.
(4)      Through _______________, 1998

BIG SKY

         No broker makes a market in Big Sky common stock, and the trades that
have occurred cannot be characterized as amounting to an established public
trading market. Big Sky common stock is traded by individuals on a personal
basis and is not listed on any exchange or traded on the over-the-counter
market, and the prices reported reflect only the transactions known to
management. The data below include trades between individual investors, as
reported to Big Sky as its own transfer agent. Due to the limited information
available, the following data may not accurately reflect the actual market value
of Big Sky common stock.

                                                                                   Stock Prices
                                 Number of Shares           No. of              -------------------          Cash Dividends
           Period               Reported as Traded       Transactions           High            Low              Paid
           ------               ------------------       ------------           ----            ---          --------------
                                                                                              
   1998 (THROUGH 9/30/98)               39                    1                $145.00         $145.00           $4.50

           1997(1)                       0                    0                  N/A             N/A             $4.50

            1996                       197                    4                $130.00         $130.00           $4.50

(1)      Big Sky issued 7,150 shares of common stock in November, 1997 at
         $140.00 per share.

RECENT STOCK PRICE DATA

         The following table sets forth the closing price per share of (1)
Glacier common stock, as reported on the NASDAQ National Market and Big Sky
common stock, on October 20, 1998 (the last full trading day prior to the public
announcement of the execution of the Share Exchange) and on _____________, 1998,
the most recent date for which it is practicable to obtain market price data
prior to the printing of this Prospectus/Proxy Statement. 

                                       6
   16

HOLDERS OF BIG SKY COMMON STOCK ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR SHARES OF GLACIER COMMON STOCK.

CLOSING PRICE PER SHARE:                                     October 20, 1998                ___________, 1998
                                                             ----------------                -----------------
                                                                                       
         Glacier common stock                                     $ 20.25

         Big Sky common stock(1)                                   145.00

         Big Sky Financial Equivalent Pro Forma(2)

(1)      There are no publicly available quotations of Big Sky common stock. The
         market price per share as of October 20, 1998, and _______________,
         1998, respectively (quoted above), represent the purchase prices known
         to Big Sky's management to have been paid for Big Sky common stock in
         the last transaction prior to such dates.

(2)      Giving effect for the Share Exchange and computed by multiplying the
         closing price per share of Glacier common stock by the Share Exchange
         exchange ratio.

                                       7
   17

                        EQUIVALENT PER COMMON SHARE DATA

                                                         GLACIER                         BIG SKY
                                             -------------------------------- ------------------------------
                                                                Pro Forma
                                                                Combined                        Pro Forma
                                               Historical      Corporation      Historical     Equivalent
                                             --------------- ---------------- --------------- --------------
                                                                                  
BOOK VALUE PER SHARE (1)
  September 30, 1998                             $8.82             $8.94          $147.80          $97.60
  December 31, 1997                              $7.98             $8.11          $143.47          $88.57
  December 31, 1996                              $7.09             $7.18          $132.71          $78.35
  December 31, 1995                              $6.34             $6.43          $127.34          $70.24

BASIC EARNINGS PER SHARE (2)
  September 30, 1998                             $0.97             $0.97            $9.05          $10.57
  December 31, 1997                              $1.24             $1.24           $13.01          $13.58
  December 31, 1996                              $1.03             $1.03            $9.06          $11.21
  December 31, 1995                              $1.08             $1.08           $17.35          $11.84

DILUTED EARNINGS PER SHARE (3)
  September 30, 1998                             $0.95             $0.95            $8.92          $10.35
  December 31, 1997                              $1.22             $1.22           $12.08          $13.33
  December 31, 1996                              $1.02             $1.01            $8.71          $11.07
  December 31, 1995                              $1.07             $1.08           $15.35          $11.78

CASH DIVIDENDS DECLARED PER SHARE
  September 30, 1998                             $0.32             $0.31            $0.00           $3.40
  December 31, 1997                              $0.47             $0.47            $4.50           $5.14
  December 31, 1996                              $0.38             $0.38            $4.50           $4.17
  December 31, 1995                              $0.34             $0.34            $4.50           $3.69

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

(1)      Book value per share is calculated by dividing the total actual
         historical and pro forma equity as of the date indicated by the actual
         historical and pro forma number of shares outstanding as of the same
         date.

(2)      Earnings per share is calculated by dividing total actual historical
         and pro forma net income for the periods ended by the actual historical
         and pro forma weighted average number of shares of common stock for the
         period indicated.

(3)      Diluted earnings per share includes the net increase in shares if all
         outstanding stock options were exercised, using the treasury stock
         method.

                                       8
   18

                             SELECTED FINANCIAL DATA

PRO FORMA GLACIER BANCORP, INC. AND BIG SKY WESTERN BANK (UNAUDITED)

         The following table presents unaudited information concerning certain
financial information and ratios on a pro forma basis giving effect to the
proposed Share Exchange on a pooling of interests accounting basis. The pro
forma combined information are presented as if the Share Exchange had been
consummated at the beginning of the earliest period presented. Any adjustments
necessary to prepare this information have been of a normal recurring nature.

         The information is qualified in its entirety by reference to more
detailed financial information and financial statements presented elsewhere in
this Prospectus/Proxy Statement. Dollar amounts are in thousands, except per
share data.

                                                 Nine Months Ended
                                                   September 30,           Year ended December 31,
                                                                          -------------------------
                                                 1998          1997          1997          1996    
                                              ----------    ----------    ----------    ---------- 
                                                                                
SUMMARY OF OPERATIONS:
   Interest income ........................   $   40,300        38,363        51,658        47,675 
   Interest expense .......................       17,880        17,402        23,296        21,426 
                                              ----------    ----------    ----------    ---------- 
     Net interest income ..................       22,420        20,961        28,362        26,249 
   Provision for loan losses ..............        1,094           669           889           949 
                                              ----------    ----------    ----------    ---------- 
     Net interest income after provision
     for loan losses ......................       21,326        20,292        27,473        25,300 
   Non-interest income ....................        9,034         7,372        10,163         9,847 
   Non-interest expense ...................       17,340        15,941        21,427        21,158 
                                              ----------    ----------    ----------    ---------- 
     Earnings before income taxes .........       13,020        11,723        16,209        13,989 
   Income taxes ...........................        4,880         4,352         5,973         5,662 
                                              ----------    ----------    ----------    ---------- 
     Net earnings .........................        8,140         7,371        10,236         8,327 
                                              ==========    ==========    ==========    ========== 
PER SHARE DATA:
   Basic earnings per common share(1) .....         0.97          0.90          1.24          1.03 
   Diluted earnings per common share(1) ...         0.95          0.90          1.22          1.01 
   Dividends declared per share(1) ........         0.32          0.31          0.47          0.38 
   Period end book value ..................         8.94          7.73          8.11          7.18 
   Average common shares outstanding(1) ...    8,408,904     8,226,310     8,230,551     8,112,991 
SUMMARY OF FINANCIAL CONDITION:
   Total assets ...........................   $  704,400       674,286       681,523       637,710 
   Investment securities ..................      100,105       121,739       122,749       122,866 
   Loans receivable, net ..................      507,669       478,380       486,292       447,169 
   Total deposits .........................      471,290       430,254       428,446       398,511 
   Total borrowed funds ...................      156,736       179,834       175,908       165,358 
   Stockholders' equity ...................       76,374        64,198        67,702        58,225 
FINANCIAL RATIOS:
   Return on:
     Average Assets .......................         1.57%         1.45%         1.55%         1.38%
     Beginning stockholders' equity .......        16.03%        16.88%        19.47%        18.70%
   Equity as a percentage of total assets .        10.84%         9.52%         9.93%         9.13%
   Dividend payout ratio ..................        33.06%        34.90%        37.50%        30.68%
   Efficiency ratio .......................        55.13%        56.26%        55.62%        58.62%
   Net loans to total assets ..............        72.07%        70.95%        71.35%        70.12%
   Net interest margin on average earning
     assets (tax equivalent) ..............         4.95%         4.62%         4.72%         4.75%
   Nonperforming assets to total assets ...         0.47%         0.21%         0.24%         0.34%
   Allowance for loan losses to 
     total loans ..........................         0.91%         0.89%         0.87%         0.86%
   Allowance for loan losses to
     nonperforming assets .................          139%          301%          264%          181%

                                              
                                                       Year ended December 31,
                                              --------------------------------------
                                                 1995         1994          1993
                                              ----------    ----------    ----------
                                                                    
SUMMARY OF OPERATIONS:
   Interest income ........................       42,358        33,557        30,256
   Interest expense .......................       18,346        13,200        12,269
                                              ----------    ----------    ----------
     Net interest income ..................       24,012        20,357        17,987
   Provision for loan losses ..............          611           318           270
                                              ----------    ----------    ----------
     Net interest income after provision
     for loan losses ......................       23,401        20,039        17,717
   Non-interest income ....................        8,860         8,111         9,002
   Non-interest expense ...................       17,733        15,735        14,513
                                              ----------    ----------    ----------
     Earnings before income taxes .........       14,528        12,415        12,206
   Income taxes ...........................        5,688         4,854         4,663
                                              ----------    ----------    ----------
     Net earnings .........................        8,840         7,561         7,543
                                              ==========    ==========    ==========
PER SHARE DATA:
   Basic earnings per common share(1) .....         1.08          0.94          0.94
   Diluted earnings per common share(1) ...         1.08           N/A           N/A
   Dividends declared per share(1) ........         0.34          0.21          0.18
   Period end book value ..................         6.43          5.37          4.76
   Average common shares outstanding(1) ...    8,151,683     8,059,400     8,046,139
SUMMARY OF FINANCIAL CONDITION:
   Total assets ...........................      566,043       489,403       416,815
   Investment securities ..................      109,200        86,795        76,041
   Loans receivable, net ..................      398,084       355,947       296,653
   Total deposits .........................      350,942       313,643       294,239
   Total borrowed funds ...................      149,427       121,533        74,651
   Stockholders' equity ...................       52,503        43,870        38,671
FINANCIAL RATIOS:
   Return on:
     Average Assets .......................         1.69%         1.67%         1.81%
     Beginning stockholders' equity .......        22.83%        19.55%        21.64%
   Equity as a percentage of total assets .         9.28%         8.96%         9.28%
   Dividend payout ratio ..................        31.48%        22.89%        18.85%
   Efficiency ratio .......................        53.95%        55.27%        53.77%
   Net loans to total assets ..............        70.33%        72.73%        71.17%
   Net interest margin on average earning
     assets (tax equivalent) ..............         4.97%         4.90%         5.13%
   Nonperforming assets to total assets ...         0.19%         0.23%         0.15%
   Allowance for loan losses to 
     total loans ..........................         0.91%         0.93%         1.00%
   Allowance for loan losses to
     nonperforming assets .................          334%          297%          492%

(1)      Revised for stock splits and dividends. Includes shares to be issued to
         Big Sky Western Bank.

                                       9
   19

GLACIER BANCORP, INC.

         The following table presents unaudited information concerning certain
financial information and ratios for Glacier Bancorp, Inc. Dollar amounts are in
thousands, except per share data.

                                                Nine Months Ended
                                                  September 30,                          Year ended December 31,
                                                                      ----------------------------------------------------------
                                                 1998        1997        1997        1996        1995        1994        1993
                                              ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                                                                                    
SUMMARY OF OPERATIONS:
   Interest income ........................   $   36,388      36,682      49,381      45,915      40,987      32,651      29,588
   Interest expense .......................       16,895      16,532      22,134      20,521      17,752      12,893      12,050
                                              ----------  ----------  ----------  ----------  ----------  ----------  ----------
     Net interest income ..................       21,493      20,150      27,247      25,394      23,235      19,758      17,538
   Provision for loan losses ..............        1,055         601         807         880         581         295         239
                                              ----------  ----------  ----------  ----------  ----------  ----------  ----------
     Net interest income after provision
     for loan losses ......................       20,438      19,549      26,440      24,514      22,654      19,463      17,299
   Non-interest income ....................        8,536       6,977       9,615       9,540       8,550       7,805       8,655
   Non-interest expense ...................       16,237      14,988      20,093      20,215      17,004      15,033      13,910
                                              ----------  ----------  ----------  ----------  ----------  ----------  ----------
     Earnings before income taxes .........       12,737      11,538      15,962      13,839      14,200      12,235      12,044
   Income taxes ...........................        4,782       4,288       5,908       5,632       5,577       4,815       4,647
                                              ----------  ----------  ----------  ----------  ----------  ----------  ----------
     Net earnings .........................        7,955       7,249      10,054       8,207       8,623       7,420       7,397
                                              ==========  ==========  ==========  ==========  ==========  ==========  ==========
PER SHARE DATA:
   Basic earnings per common share(1) .....         0.97        0.90        1.24        1.03        1.08        0.94        0.93
   Diluted earnings per common share(1) ...         0.95        0.88        1.22        1.02        1.07         N/A         N/A
   Dividends declared per share(1) ........         0.32        0.32        0.47        0.38        0.34        0.22        0.18
   Period end book value ..................         8.82        7.71        7.98        7.09        6.34        5.39        4.75
   Average common shares outstanding(1) ...    8,186,197   8,073,843   8,077,985   7,968,341   8,015,002   7,950,300   7,937,039
SUMMARY OF FINANCIAL CONDITION:
   Total assets ...........................   $  664,463     644,023     648,709     608,467     546,675     475,314     406,097
   Investment securities ..................       94,200     114,713     116,120     117,746     104,960      83,668      73,468
   Loans receivable, net ..................      487,197     459,042     466,917     429,362     386,476     346,991     290,473
   Total deposits .........................      439,539     406,251     402,997     371,571     335,684     302,265     285,074
   Total borrowed funds ...................      151,565     175,431     171,470     164,813     147,004     119,855      74,078
   Stockholders' equity ...................       73,359      62,341      64,775      56,467      50,816      42,837      37,691
FINANCIAL RATIOS:
   Return on:
     Average Assets .......................         1.59%       1.57%       1.60%       1.42%       1.70%       1.69%       1.89%
     Beginning stockholders' equity .......        15.37%      16.96%      17.81%      16.15%      20.13%      19.69%      22.75%
   Equity as a percentage of total assets .        11.04%       9.68%       9.99%       9.28%       9.30%       9.01%       9.28%
   Dividend payout ratio ..................        32.99%      35.56%      37.27%      30.40%      22.53%      22.92%      18.90%
   Efficiency ratio .......................        54.07%      55.25%      54.51%      57.87%      53.50%      54.54%      53.11%
   Net loans to total assets ..............        73.32%      71.28%      71.98%      70.56%      70.70%      73.00%      71.53%
   Net interest margin on average earning
     assets (tax equivalent) ..............         4.96%       4.65%       4.73%       4.76%       4.96%       4.88%       5.14%
   Nonperforming assets to total assets ...         0.51%       0.22%       0.23%       0.34%       0.20%       0.27%       0.25%
   Allowance for loan losses to 
     total loans ..........................         0.89%       0.88%       0.86%       0.86%       0.91%       0.93%       1.00%
   Allowance for loan losses to
     nonperforming assets .................          130%        285%        250%        173%        323%        289%        481%

- ----------

(1)      Revised for stock splits and dividends.

                                       10
   20

BIG SKY WESTERN BANK

         The following table presents unaudited information concerning certain
financial information and ratios for Big Sky. The information is qualified in
its entirety by reference to more detailed financial information and financial
statements presented elsewhere in this Prospectus/Proxy Statement. Dollar
amounts are in thousands, except per share data.

                                                Nine Months Ended
                                                  September 30,                          Year ended December 31,
                                                                    ---------------------------------------------------
                                               1998       1997       1997       1996       1995        1994      1993
                                              -------    -------    -------    -------    -------    -------    -------
                                                                                           
SUMMARY OF OPERATIONS:
   Interest income ........................   $ 1,912      1,681      2,277      1,760      1,371        906        668
   Interest expense .......................       985        870      1,162        905        594        307        219
                                              -------    -------    -------    -------    -------    -------    -------
     Net interest income ..................       927        811      1,115        855        777        599        449
   Provision for loan losses ..............        39         68         82         69         30         23         31
                                              -------    -------    -------    -------    -------    -------    -------
     Net interest income after provision
     for loan losses ......................       888        743      1,033        786        747        576        418
   Non-interest income ....................       498        395        548        307        310        306        347
   Non-interest expense ...................     1,103        953      1,334        943        729        702        603
                                              -------    -------    -------    -------    -------    -------    -------
     Earnings before income taxes .........       283        185        247        150        328        180        162
   Income taxes ...........................        98         64         65         30        111         39         16
                                              -------    -------    -------    -------    -------    -------    -------
     Net earnings .........................       185        121        182        120        217        141        146
                                              =======    =======    =======    =======    =======    =======    =======
PER SHARE DATA:
   Basic earnings per common share ........      9.05       8.66      13.01       9.06      17.35      14.10      14.60
   Diluted earnings per common share ......      8.92       7.34      12.08       8.71      15.35      14.10      14.60
   Dividends declared per share ...........      0.00       0.00       4.50       4.50       4.50       3.00       2.40
   Period end book value ..................    147.80     140.15     143.47     132.71     127.34     103.30      98.00
   Average common shares outstanding ......    20,400     13,975     13,975     13,250     12,520     10,000     10,000
SUMMARY OF FINANCIAL CONDITION:
   Total assets ...........................   $39,937     30,263     32,814     29,243     19,368     14,089     10,718
   Investment securities ..................     5,905      7,026      6,629      5,120      4,240      3,127      2,573
   Loans receivable, net ..................    20,472     19,338     19,375     17,807     11,608      8,956      6,180
   Total deposits .........................    31,751     24,003     25,449     26,940     15,258     11,378      9,165
   Total borrowed funds ...................     5,171      4,403      4,438        545      2,423      1,678        573
   Stockholders' equity ...................     3,015      1,857      2,927      1,758      1,687      1,033        980
FINANCIAL RATIOS:
   Return on:
     Average Assets .......................      0.70%      0.51%      0.59%      0.49%      1.30%      1.14%      0.55%
     Beginning stockholders' equity .......      8.43%      9.18%     10.35%      7.11%     21.01%     14.39%      6.23%
   Equity as a percentage of total assets .      7.55%      6.14%      8.92%      6.01%      8.71%      7.33%      9.14%
   Dividend payout ratio ..................      0.00%      0.00%     34.59%     49.69%     25.94%     21.28%     16.44%
   Efficiency ratio .......................     77.40%     79.02%     80.22%     81.15%     67.07%     77.57%     75.75%
   Net loans to total assets ..............     51.26%     63.90%     59.04%     60.89%     59.93%     63.57%     57.66%
   Net interest margin on average earning
     assets (tax equivalent) ..............      4.69%      4.13%      4.56%      4.41%      5.56%      5.75%      5.13%
   Nonperforming assets to total assets ...      0.00%      0.00%      0.02%      0.00%      0.00%      0.00%      0.00%
   Allowance for loan losses to 
     total loans ..........................      1.37%      1.23%      1.28%      0.96%      1.03%      1.01%      1.09%
   Allowance for loan losses to
     nonperforming assets .................       N/M        N/M       4200%       N/M        N/M        N/M        N/M

                                       11
   21

                      BIG SKY SPECIAL STOCKHOLDERS MEETING

DATE, TIME, PLACE

         The Big Sky special meeting of stockholders will be held on January 13,
1999, at ______ [a.m./p.m.] local time, in the ______ room at the Best Western
Buck's T-4 Lodge, ______, Big Sky, Montana.

PURPOSE

         The purposes of the Big Sky special meeting are as follows: (i) to
consider and vote upon approval of the Share Exchange Agreement, and (ii) to act
upon other matters, if any, that may properly come before the Big Sky special
meeting.

RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE

         The Big Sky board of directors has fixed _______ p.m. on
______________, 1998 as the Big Sky record date for determining the holders of
shares of Big Sky common stock entitled to notice of and to vote at the Big Sky
special meeting. At the close of business on the Big Sky record date, there were
20,400 shares of Big Sky common stock issued and outstanding held by
approximately 149 holders of record. Holders of record of Big Sky common stock
on the Big Sky record date are entitled to one vote per share, and are also
entitled to exercise dissenters' rights if certain procedures are followed. See
"THE SHARE EXCHANGE -- Dissenters' Rights of Appraisal" and APPENDIX C.

VOTE REQUIRED

         The affirmative vote of two-thirds of all shares of Big Sky common
stock outstanding on the Big Sky record date is required to approve the Share
Exchange Agreement. Big Sky's stockholders are entitled to one vote for each
share of Big Sky common stock held. The presence of at least sixty percent (60%)
of the outstanding shares of Big Sky common stock in person or by proxy is
necessary to constitute a quorum of stockholders for the Big Sky special
meeting. For this purpose, abstentions and broker nonvotes (that is, proxies
from brokers or nominees indicating that such person has not received
instructions from the beneficial owners or other persons entitled to vote shares
as to a matter with respect to which the broker or nominees do not have
discretionary power to vote) are counted in determining the shares present at a
meeting. For voting purposes, however, only shares affirmatively voted for the
approval of the Share Exchange Agreement, and neither abstentions nor broker
nonvotes, will be counted as favorable votes in determining whether the Share
Exchange Agreement is approved by the holders of Big Sky common stock. As a
consequence, abstentions and broker nonvotes will have the same effect as votes
against approval of the Share Exchange Agreement.

VOTING, SOLICITATION, AND REVOCATION OF PROXIES

         If the enclosed proxy is duly executed and received in time for the Big
Sky special meeting, it will be voted in accordance with the instructions given.
If no instruction is given, it is the intention of the persons named in the
proxy to vote the shares represented by the proxy FOR THE APPROVAL OF THE SHARE
EXCHANGE AGREEMENT AND IN THE PROXY'S DISCRETION ON ANY OTHER MATTER COMING
BEFORE THE MEETING, unless otherwise directed by the proxy. Any proxy given by a
stockholder may be revoked before its exercise by written notice to the
Secretary of Big Sky, or by a subsequently dated proxy, or in open meeting
before the stockholder vote is taken. The shares represented by properly
executed, unrevoked proxies will be voted in accordance with the instructions in
the proxy. Stockholders are entitled to one vote for each share of Big Sky
common stock held on the Big Sky record date.

                                       12
   22

         The proxy for the Big Sky special meeting is being solicited on behalf
of the Big Sky board of directors. Big Sky will bear the cost of solicitation of
proxies from its stockholders. In addition to using the mails, proxies may be
solicited by personal interview, telephone, and facsimile. Banks, brokerage
houses, other institutions, nominees, and fiduciaries will be requested to
forward their proxy soliciting material to their principals and obtain
authorization for the execution of proxies. Officers and other employees of Big
Sky may solicit proxies personally. Big Sky does not expect to pay any
compensation for the solicitation of proxies, but will, upon request, pay the
standard charges and expenses of banks, brokerage houses, other institutions,
nominees, and fiduciaries for forwarding proxy materials to and obtaining
proxies from their principals.

                BACKGROUND OF AND REASONS FOR THE SHARE EXCHANGE

BACKGROUND OF THE SHARE EXCHANGE

         In June 1998, Mr. Fred Flanders (President and CEO of Valley Bank of
Helena, a Glacier subsidiary) approached Mr. Robert Kester (Chairman of Big Sky)
regarding Big Sky's interest in pursuing a merger or similar transaction with
Glacier. Mr. Kester indicated that Big Sky would be receptive to discussions. A
variety of issues were discussed, including Valley Bank's experience with
Glacier, the prospects for a combined institution going forward and the various
market areas served by each institution.

         As a result of those discussions, certain members of Glacier's
management team, including Mr. Flanders, Mr. Michael Blodnick (President and
Chief Executive Officer of Glacier) and Mr. William Bouchee (President and Chief
Executive Officer of First Security Bank of Missoula, a Glacier subsidiary) met
with representatives of Big Sky, including Mr. Kester and Mr. Michael Richards
(President of Big Sky). Discussion at that meeting on July 14, 1998 centered on
background information of the two companies, the community banking philosophy
shared by the two institutions, the potential benefits of a consolidation
transaction, management values and strategies, and prospects for future growth.
Following the meeting, both parties exchanged financial and other information
regarding their respective companies. Glacier officials, in conjunction with
D.A. Davidson & Co., Glacier's investment banking advisor, prepared pro forma
combined financial schedules and had several telephone discussions with Mr.
Richards regarding Big Sky. A follow-up meeting was scheduled for August 13 to
discuss preliminary values and potential structures for the transaction.

         Messrs. Blodnick, Bouchee and Flanders met with Messrs. Kester and
Richards on August 13, 1998 in Butte, Montana. Discussions at this meeting
centered on possible pricing and structure of a transaction and the process
going forward. At the conclusion of the meeting, the Big Sky representatives
expressed an interest in receiving a written proposal from Glacier as to the
proposed terms of a transaction with Glacier. A confidentiality agreement was
executed by the Big Sky Board and delivered to Mr. Blodnick at the meeting.

         On September 8, 1998, Messrs. Blodnick and Bouchee, along with a
representative from D.A. Davidson, met with Messrs. Kester and Richards, who
were accompanied by a representative from PBS. Big Sky had engaged PBS in
August, 1998 to provide financial advisory services. The discussion centered on
the proposed terms, as outlined in the term sheet submitted by Glacier, as well
as certain transaction structure and timing considerations. After discussion,
Glacier agreed to consider certain modifications to the terms of the proposed
share exchange.

         On September 16, 1998, Big Sky held a board of directors meeting where
the general terms of the term sheet were approved. A representative of PBS
participated in that meeting and was authorized by the board to complete
negotiations on the final term sheet.

         On October 7, 1998, at a special Big Sky board of directors meeting, in
which a representative of PBS participated by conference call, the Big Sky board
of directors discussed the recent trading price drop of bank 

                                       13
   23

stocks generally, which had caused the trading price of Glacier to fall below
the previously agreed "collar" price of $22.50 per share. The Big Sky board of
directors approved the amendment of the pricing terms proposed by Glacier, for
an exchange of 250,000 shares of Glacier common stock for all the Big Sky common
stock shares.

         The Big Sky executive committee met on October 15, 1998 to approve the
definitive Share Exchange Agreement and to authorize the Chairman to sign it and
to present it to Big Sky's board of directors for their approval and signatures.

         The Glacier board met on October 20, 1998 to approve the definitive
Share Exchange Agreement. Following that board meeting, the Chairman of Big Sky
and the President of Glacier met to sign the Share Exchange Agreement. Their
respective legal counsel were present at the meetings. Following the close of
trading on October 20, the parties issued a press release announcing the signing
of the definitive Share Exchange Agreement.

         Subsequent to the execution of the Share Exchange Agreement, the
parties decided to make certain clarifying and technical changes to the Share
Exchange Agreement. These changes are reflected in the First Amendment of Plan
and Agreement of Share Exchange, dated as of November 25, 1998 (the
"Amendment"). The Big Sky board approved the Amendment on November 18, 1998, and
the Glacier board approved the Amendment on November 25, 1998. The Amendment is
attached to this Prospectus/Proxy Statement at APPENDIX A, immediately following
the Share Exchange Agreement.

REASONS FOR THE SHARE EXCHANGE - BIG SKY

         The Big Sky board of directors believes that the terms of the Share
Exchange Agreement are fair and in the best interests of Big Sky and its
stockholders. In reaching a decision on the Share Exchange Agreement, the Big
Sky board considered numerous factors taken as a whole, none of which were
accorded any particular or relative weight, and consulted with legal, tax,
accounting and financial advisors as well as Big Sky senior management. The
factors considered included:

         -        the fairness opinion of PBS with respect to the Share Exchange
                  Agreement;

         -        the federal tax treatment to Big Sky stockholders of the
                  proposed transaction which provides for tax deferred treatment
                  of the exchange of stock contemplated by the Share Exchange
                  Agreement;

         -        the liquidity of Glacier common stock as a result of the
                  public market available for the trading of Glacier common
                  stock and the comparatively more limited liquidity of Big Sky
                  common stock;

         -        the increased financial and technology resources of Glacier
                  that will be available to Big Sky following the Share
                  Exchange;

         -        the financial, business and other prospects of Glacier in its
                  existing markets and in the markets served by Big Sky;

         -        the compatibility of Big Sky and Glacier senior management and
                  the opportunity for continuity of employment of Big Sky
                  employees following consummation of the Share Exchange;

         -        the enhancement of Big Sky stockholder value anticipated by
                  reason of the issuance of the shares of Glacier common stock
                  in exchange for Big Sky common stock in the Share Exchange;

         -        the availability and continuity of services to existing Big
                  Sky customers and the Big Sky and Bozeman communities served
                  by Big Sky;

                                       14
   24

         -        the competitive nature of the commercial banking industry and
                  the markets served by Big Sky; and

         -        the future business and other prospects of Big Sky.

         Pursuant to a resolution adopted at a meeting on November 18, 1998, the
Big Sky board of directors determined that the Share Exchange Agreement is in
the best interests of Big Sky and its stockholders, and unanimously ratified and
approved the Share Exchange Agreement, as amended.

OPINION OF BIG SKY FINANCIAL ADVISOR

         Professional Bank Services, Inc. ("PBS") was engaged by the Big Sky
Board to advise the Board as to the fairness of the consideration, from a
financial perspective, to be received by the Big Sky shareholders as set forth
in the Share Exchange Agreement between Glacier and Big Sky.

         Professional Bank Services, Inc. is a bank consulting firm with offices
in Louisville, Washington, D.C., Chicago and Nashville. As part of its
investment banking business, PBS is regularly engaged in reviewing the fairness
of financial institution acquisition transactions from a financial perspective
and in the valuation of financial institutions and other businesses and their
securities in connection with mergers, acquisitions, estate settlements, and
other transactions. Neither PBS nor any of its affiliates has a material
financial interest in Big Sky or Glacier. PBS was selected to advise Big Sky's
Board based upon its familiarity with Montana financial institutions and
knowledge of the banking industry as a whole.

         PBS performed certain analyses described herein and presented the range
of values for Big Sky resulting from such analyses to the Big Sky Board in
connection with its advice as to the fairness of the consideration to be paid by
Glacier.

         A Fairness Opinion of PBS dated October 19, 1998 was delivered to the
Chairman of the Board of Directors of Big Sky and has been updated as of the
date of this Prospectus/Proxy Statement. The Fairness Opinion will be updated to
the Share Exchange effective date as well. A copy of the Fairness Opinion, which
includes a summary of the assumptions made and information analyzed in deriving
the Fairness Opinion, is attached as APPENDIX B to this Prospectus/Proxy
Statement and should be read in its entirety.

         In arriving at its Fairness Opinion, PBS reviewed certain publicly
available business and financial information relating to Big Sky and Glacier.
PBS considered certain financial and stock market data of Big Sky and Glacier,
compared that data with similar data for certain other publicly-held bank
holding companies and considered the financial terms of certain other comparable
bank transactions in the states of Montana, Colorado, Idaho, Kansas, Nevada,
North Dakota, South Dakota, Utah and Wyoming (the "Regional Area") that had
recently been effected. PBS also considered such other information, financial
studies, analyses and investigations and financial, economic and market criteria
that it deemed relevant. In connection with its review, PBS did not
independently verify the foregoing information and relied on such information as
being complete and accurate in all material respects. Financial forecasts
prepared by PBS were based on assumptions believed by PBS to be reasonable and
to reflect currently available information. PBS did not make an independent
evaluation or appraisal of the assets of Big Sky or Glacier.

         As part of preparing its Fairness Opinion, PBS performed a due
diligence review of Glacier on October 8-9, 1998. As part of its due diligence,
PBS reviewed the following items: minutes of the Board of Directors meetings
from January 1997 through August 1998; reports filed with the Securities and
Exchange Commission by Glacier on Forms 10-K, 8-K and 10-Q for the years ending
December 31, 1996 and 1997 and year-to-date 1998; reports of independent
auditors and management letters and response thereto, for the year ending
December 31, 1996 and 1997; the most recent analysis and calculation of
allowance for loan and lease 

                                       15
   25

losses for Glacier; internal loan review reports; investment portfolio activity
reports; asset quality reports; Uniform Holding Company Report for Glacier as of
June 30,1998; December 31, 1997 and June 30, 1998 reports of Condition and
Income for Glacier and its affiliate banks; and discussion of pending litigation
and other issues with senior management of Glacier.

         PBS reviewed and analyzed the historical performance of Big Sky
contained in: the June 30, 1998 and December 31, 1997 Consolidated Reports of
Condition and Income filed by Big Sky with the FDIC; June 30, 1998 Uniform Bank
Performance Report of Big Sky; financial data of Big Sky supplied by SNL
Securities LC. Financial Datasource; historical common stock trading activity of
Big Sky; and schedules of Big Sky's premises and other fixed assets. PBS
reviewed and tabulated statistical data regarding the loan portfolio, securities
portfolio and other performance ratios and statistics. Financial projections
were prepared and analyzed as well as other financial studies, analyses and
investigations as deemed relevant for the purposes of this opinion. In review of
the aforementioned information, PBS took into account its assessment of general
market and financial conditions, its experience in other similar transactions,
and its knowledge of the banking industry generally.

         In connection with rendering its Fairness Opinion and preparing its
written and oral presentation to the Big Sky Board, PBS performed a variety of
financial analyses, including those summarized herein. This summary does not
purport to be a complete description of the analyses performed by PBS in this
regard. The preparation of a Fairness Opinion involves various determinations as
to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and therefore, such
an opinion is not readily susceptible to summary description. Accordingly,
notwithstanding the separate factors summarized below, PBS believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinion. In performing its analyses, PBS made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond Big Sky's or Glacier's
control. The analyses performed by PBS are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. In addition, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the process by which
businesses actually may be sold.

         Acquisition Comparison Analysis: In performing this analysis, PBS
reviewed all bank acquisition transactions in the states of Montana, Colorado,
Idaho, Kansas, Nevada, North Dakota, South Dakota, Utah and Wyoming (the
"Regional Area") since 1990. There were 273 bank acquisition transactions in the
Regional Area announced since 1990 for which detailed financial information was
available. The purpose of the analysis was to obtain an evaluation range based
on these Regional Area bank acquisition transactions. Median multiples of
earnings and book value implied by the comparable transactions were utilized in
obtaining a range for the acquisition value of Big Sky. As part of its review of
recent Regional Area bank transactions, PBS performed separate comparable
analyses for acquisitions of banks which, like Big Sky, were located in the
State of Montana, had an equity-to-asset ratio between 7.50% and 9.50%, had
total assets between $25.0 - $50.0 million, had a return on average assets
("ROAA") between 0.50% - 1.00%, had a return on average equity ("ROAE") between
6.00% - 10.00% and bank transactions effected in the Regional Area since January
1, 1996. The median values for the 273 Regional Area acquisitions expressed as
multiples of both book value and earnings were 1.55 and 12.12, respectively. The
median multiples of book value and earnings for acquisitions of Regional Area
banks which, like Big Sky, were located in the State of Montana were 1.68 and
11.38, respectively. For acquisitions of Regional Area banks which, like Big
Sky, had an equity-to-asset ratio between 7.50% and 9.50%, the median multiples
of book value and earnings were 1.51 and 10.91, respectively. For acquisitions
of Regional Area banks with assets between $25.0 - $50.0 million the median
multiples were 1.49 and 11.82. For Regional Area acquisitions of banks with a
ROAA between 0.50% - 1.00%, the median multiples of book value and earnings were
1.32 and 12.46, respectively. For Regional Area acquisitions of banks with a
ROAE between 6.00% - 10.00%, the median multiples of book value and earnings
were 1.19 and 13.25, respectively. The median 

                                       16
   26

multiples of book value and earnings for acquisitions of Regional Area banks
since January 1, 1996 were 2.24 and 14.02, respectively.

         In the proposed transaction and subject to adjustment for Big Sky's
convertible debentures outstanding on the closing date (as provided in Section
1.2.3 of the Share Exchange Agreement), Big Sky shareholders (except
shareholders who exercise their dissenter's rights) will receive in aggregate
222,707 Glacier common shares for all 20,400 Big Sky common shares outstanding
or 10.917 Glacier common shares per Big Sky common share. In addition, Glacier
will allocate 27,293 shares of Glacier common stock for issuance, and will
assume the obligation to issue such shares, upon conversion of the outstanding
Big Sky debentures due December 31, 2001 at the same exchange ratio to be
applied to outstanding Big Sky common stock. At the close of trading, on October
16, 1998, the average of the bid/ask price for Glacier common stock on the
National Association of Securities Dealers Automated Quotation System was
$20.375 per share. Utilizing this average price of $20.375 per Glacier common
share, the proposed consideration to be received represents an aggregate value
of $5,093,750 or $222.43 per Big Sky common share. The $222.43 per Big Sky
common share represents a multiple of Big Sky's June 30, 1998 adjusted book
value and a multiple of Big Sky's budgeted December 31, 1998 earnings of 1.55
and 18.63 respectively.

         The market value of the proposed transaction's percentile ranking was
prepared and analyzed with respect to the above Regional Area comparable
transactions group. Compared to all Regional Area bank transactions, the
acquisition value ranks in the 49th percentile as a multiple of book value and
in the 84th percentile as a multiple of earnings. Compared to Regional Area
transactions where the acquired bank was located in the State of Montana, the
proposed acquisition value ranks in the 40th percentile as a multiple of book
value and the 100th percentile as a multiple of earnings. Compared to Regional
Area bank transactions where the acquired institution had an equity-to-asset
ratio between 7.50% and 9.50%, the acquisition value ranks in the 51st
percentile as a multiple of book value and the 85th percentile as a multiple of
earnings. For Regional Area bank acquisitions where the acquired institution had
between $25.0 - $50.0 million in assets, the acquisition value ranks in the 56th
percentile as a multiple of book value and the 81st percentile as a multiple of
earnings. For Regional Area bank transactions where the acquired institution had
a ROAA between 0.50% and 1.00%, the acquisition value ranks in the 70th
percentile as a multiple of book value and the 87th percentile as a multiple of
earnings. For Regional Area bank transactions where the acquired institution had
a ROAE between 6.00% and 10.00%, the acquisition value ranks in the 83rd
percentile as a multiple of book value and the 82nd percentile as a multiple of
earnings. For Regional Area bank transactions effected since January 1, 1996,
the acquisition value ranks in the 25th percentile as a multiple of book value
and in the 76th percentile as a multiple of earnings.

         Adjusted Net Asset Value Analysis: PBS reviewed Big Sky's balance sheet
data to determine the amount of material adjustments required to the
stockholders' equity of Big Sky based on differences between the market value of
Big Sky's assets and their value reflected on Big Sky's financial statements.
PBS determined that three adjustments were warranted. Equity was increased
$30,000 to reflect the after tax appreciation in Big Sky's held to maturity
securities portfolio. Equity was reduced by $28,000 to reflect goodwill on Big
Sky's balance sheet. PBS also reflected a value of the non-interest bearing
demand deposits of approximately $1,484,000. The aggregate adjusted net asset
value of Big Sky was determined to be $4,772,000 or $208.38 per Big Sky common
share.

         Discounted Earnings Analysis: A dividend discount analysis was
performed by PBS pursuant to which a range of values of Big Sky was determined
by adding (i) the present value of estimated future dividend streams that Big
Sky could generate over a five-year period and (ii) the present value of the
"terminal value" of Big Sky's earnings at the end of the fifth year. The
"terminal value" of Big Sky's earnings at the end of the five-year period was
determined by applying a multiple of 11.82 times the projected terminal year's
earnings. The 11.82 multiple represents the median price paid as a multiple of
earnings for all Regional Area bank transactions where the acquired institution
had assets between $25.0 - $50.0 million.

                                       17
   27

         Dividend streams and terminal values were discounted to present values
using a discount rate of 12%. This rate reflects assumptions regarding the
required rate of return of holders or buyers of Big Sky's common stock. The
aggregate value of Big Sky, determined by adding the present value of the total
cash flows, was $4,071,000 or $177.78 per share. In addition, using the
five-year projection as a base, a twenty-year projection was prepared assuming
an annual growth rate of 10.0%, and an initial return on assets of 0.75% in year
one increasing to 0.95% by year five and after. Dividends were assumed to
increase from 40.0% of income in years one through five to 50.0% of income for
years six through twenty. This long-term projection resulted in an aggregate
value of $4,795,000 or $209.39 per Big Sky common share.

         Specific Acquisition Analysis: PBS valued Big Sky based on an
acquisition analysis assuming a "break-even" earnings scenario to an acquiror as
to price, current interest rates and amortization of the premium paid. Based on
this analysis, an acquiring institution would pay in aggregate $4,391,168, or
$191.75 per share, assuming they were willing to accept no impact to their net
income in the initial year. This analysis was based on a funding cost of 7.0%
adjusted for taxes, amortization of the acquisition premium over 15 years and a
budgeted, December 31, 1998 earnings level of $273,476. This analysis was
repeated assuming a potential acquiror would attain non-interest expense
reductions of 5.0% in the transaction. Based on this analysis an acquiring
institution would pay in aggregate $4,828,431 or $210.85 per Big Sky share.

         Pro Forma Merger Analysis: PBS compared the historical performance of
Big Sky to that of Glacier and other regional holding companies. This analysis
included, among other things, a comparison of profitability, asset quality and
capital measures. In addition, the contribution of Big Sky and Glacier to the
income statement and balance sheet of the pro forma combined company was
analyzed.

         The effect of the affiliation on the historical and pro forma financial
data of Big Sky was prepared and analyzed. Big Sky's historical financial data
was compared to the pro forma combined historical and projected earnings, book
value and dividends per share.

         The Fairness Opinion is directed only to the question of whether the
consideration to be received by Big Sky's shareholders under the Share Exchange
Agreement is fair and equitable from a financial perspective and does not
constitute a recommendation to any Big Sky shareholder to vote in favor of the
affiliation. No limitations were imposed on PBS regarding the scope of its
investigation or otherwise by Big Sky.

         Based on the results of the various analyses described above, PBS has
concluded that the consideration to be received by Big Sky's shareholders under
the Agreement is fair and equitable from a financial perspective to the
stockholders of Big Sky.

         PBS will receive fees of approximately $50,000 for all services
performed in connection with the sale of Big Sky and the rendering of its
Fairness Opinions. In addition, Big Sky has agreed to indemnify PBS and its
directors, officers and employees, from liability in connection with the
transaction, and to hold PBS harmless from any losses, actions, claims, damages,
expenses or liabilities related to any of PBS' acts or decisions made in good
faith and in the best interest of Big Sky.

RECOMMENDATION OF THE BIG SKY BOARD

         The Big Sky board of directors unanimously recommends that its
stockholders vote for approval of the Share Exchange Agreement.

                                       18
   28

                               THE SHARE EXCHANGE

GENERAL

         The following description of the material aspects of the Share Exchange
does not purport to be complete, and is qualified in its entirety by reference
to the Share Exchange Agreement dated as of October 20, 1998, and amended as of
November 25, 1998. Big Sky stockholders are being asked to approve the Share
Exchange in accordance with the terms of the Share Exchange Agreement, as
amended, and are urged to read the Share Exchange Agreement carefully. The Share
Exchange Agreement and the November 25, 1998 Amendment are attached to this
Prospectus/Proxy Statement as APPENDIX A.

BASIC TERMS OF THE SHARE EXCHANGE

         The Share Exchange Agreement provides for the exchange of the shares of
Big Sky common stock for shares of Glacier common stock, with the result that
holders of Big Sky common stock would become stockholders of Glacier, and Big
Sky would become a wholly owned subsidiary of Glacier. Certain regulatory
approvals are required in order to complete the Share Exchange. While Glacier
and Big Sky believe that they will receive the requisite regulatory approvals,
there can be no assurance that such approvals will be received or, if received,
as to the timing of these approvals or as to the ability to obtain these
approvals on satisfactory terms. See "-- Conditions to the Share Exchange."

         The total number of shares of Glacier common stock that Glacier will
pay in the Share Exchange is 250,000. In the Share Exchange, each Big Sky
stockholder (except stockholders who exercise their dissenters' rights) will
receive shares of Glacier common stock for each share of Big Sky common stock.
Subject to adjustment as described below, Glacier will pay a total of 222,707
shares of Glacier common stock for all of the shares of Big Sky common stock
that are outstanding on the effective date of the Share Exchange. The number of
Glacier shares that a Big Sky stockholder will receive for each share of Big Sky
common stock will be determined by dividing 222,707 by the number of shares of
Big Sky common stock outstanding (20,400) on the Share Exchange effective date
(222,707 / 20,400 = 10.917).

         By way of example, if you currently own 100 shares of Big Sky common
stock, on the Share Exchange effective date you will receive 1,091 shares of
Glacier common stock (and cash for the remaining fractional share; see "-- Cash
for Fractional Shares"), subject to adjustment as described below.

         In addition to the 222,707 shares that will be issued in exchange for
the outstanding shares of Big Sky common stock, Glacier will allocate 27,293
shares for issuance upon the conversion of currently outstanding 7.5%
Convertible Debentures of Big Sky due December 31, 2001 in the aggregate
principal amount of $350,000 (the "Debentures"). Such Debentures will be
convertible into shares of Glacier common stock, at the same exchange ratio that
will be applied to the outstanding Big Sky common stock (10.917 shares of
Glacier common stock for each share of Big Sky common stock into which the
Debenture would otherwise have been converted, if not for the Share Exchange,
subject to adjustment as described below), on the maturity of the Debentures on
December 31, 2001.

         If Big Sky's "Transaction Fees" as defined in the Share Exchange
Agreement exceed $125,000, then Glacier's total purchase price of 250,000
Glacier common stock shares will be reduced by the number of Glacier common
stock shares equal in value to the excess. For purposes of determining any such
reduction, Glacier common stock shares will be valued at the "Determination Date
Closing Price" as defined in the Share Exchange Agreement.

                                       19
   29

         -        "Transaction Fees" under the Share Exchange Agreement mean all
                  costs and expenses incurred by Big Sky, or owed or paid by Big
                  Sky to third parties in connection with the Share Exchange.

         -        "Determination Date Closing Price" under the Share Exchange
                  Agreement means the midpoint of the bid and ask prices per
                  share of Glacier common stock on the third business day prior
                  to the Share Exchange effective date.

         If, for example, Big Sky's Transaction Fees were $150,000, and the
Determination Date Closing Price for the Glacier common stock was $20.00, then
Glacier's total purchase price would be reduced from 250,000 shares to 248,700
shares and (assuming 20,400 shares of Big Sky common stock outstanding on the
Share Exchange effective date and 2,500 Big Sky shares attributable to the
Debentures), each share of Big Sky common stock (whether currently outstanding
or attributable to the Debentures) would be converted into a right to receive
10.86 shares of Glacier common stock (as noted, cash would be paid for the
fractional share of outstanding stock).

         Subject to the conditions set forth in the Share Exchange Agreement,
the effective date of the Share Exchange will occur as soon as possible after
such conditions have been satisfied or waived. Subject to those conditions,
Glacier and Big Sky anticipate that the Share Exchange will occur as early as
January 31, 1999. Either Glacier or Big Sky may terminate the Share Exchange
Agreement if the Share Exchange does not occur by June 30, 1999.

BIG SKY STOCK OPTIONS

         Mr. Michael Richards, President of Big Sky, currently has an
outstanding option to acquire 100 shares of Big Sky common stock, at an exercise
price of $100 per share. On the Share Exchange effective date, this option will
convert automatically into the right to receive Glacier common stock. The option
will be converted into Glacier common stock (as to the number of shares and the
per share exercise price) at the Share Exchange exchange ratio (10.917 Glacier
shares per Big Sky share, subject to adjustment as described in the preceding
section). Except for the conversion into shares of Glacier common stock, Mr.
Richard's option will be governed by the terms of the option as they existed
immediately prior to the Share Exchange effective date.

EXCHANGE OF STOCK CERTIFICATES

         On and after the Share Exchange effective date, certificates
representing Big Sky common stock will be deemed to represent only the right to
receive Glacier common stock or cash (for fractional shares) as provided in the
Share Exchange Agreement. Upon surrender to the Exchange Agent designated by
Glacier and Big Sky of certificates that, before the Share Exchange effective
date, represented shares of Big Sky common stock, together with a properly
executed transmittal letter form and any other required documents, the holder
surrendering the certificates will be entitled to receive certificates
representing the number of shares of Glacier common stock, and cash, if any, to
which he or she is entitled in accordance with the terms of the Share Exchange
Agreement. DO NOT SEND IN YOUR CERTIFICATES AT THIS TIME. HOLDERS OF BIG SKY
COMMON STOCK WILL RECEIVE WRITTEN INSTRUCTIONS AND THE REQUIRED LETTER OF
TRANSMITTAL AFTER THE SHARE EXCHANGE IS EFFECTIVE.

         All Glacier common stock issued to current Big Sky stockholders under
the Share Exchange Agreement will be deemed issued as of the Share Exchange
effective date. No distributions or dividends paid on shares of Glacier common
stock after closing of the Share Exchange will be paid to holders of Big Sky
common stock who are entitled under the Share Exchange Agreement to receive
Glacier common stock, until such holders have surrendered the certificates
formerly representing shares of Big Sky common stock. At that time, any
accumulated dividends and distributions since the Share Exchange effective date,
without interest, will be paid.

                                       20
   30

CASH FOR FRACTIONAL SHARES

         Glacier will not issue certificates for fractional shares of Glacier
common stock. Each holder of Big Sky common stock who is otherwise entitled to
receive a fractional share, will receive cash in lieu of such fractional share,
in an amount equal to the product of such fraction multiplied by the
Determination Date Closing Price, as described above under "-- Basic Terms of
the Share Exchange." Holders of Big Sky common stock will have no other rights
with respect to such fractional shares.

CONDITIONS TO THE SHARE EXCHANGE; REGULATORY APPROVALS

         Consummation of the Share Exchange is subject to various conditions. No
assurance can be provided as to whether these conditions will be satisfied or
waived by the appropriate party. Accordingly, there can be no assurance that the
Share Exchange will be completed. If conditions to the Share Exchange remain
unsatisfied after June 30, 1999, then either Big Sky's or Glacier's board of
directors may terminate the Share Exchange Agreement.

         Under Montana law, approval of the Share Exchange requires the
affirmative vote of two-thirds of the holders of all outstanding shares of Big
Sky common stock. In addition, the Federal Reserve Board must approve the Share
Exchange. An application for prior approval by the Federal Reserve Board has
been filed. Although no assurance can be given, the parties expect to receive
this approval in due course.

         Certain conditions must be satisfied or events must occur before the
parties will be obligated to complete the Share Exchange. Each party's
obligations under the Share Exchange Agreement are conditioned on satisfaction
by the other parties of conditions applicable to them. Some of these conditions
are as follows:

         -        Big Sky's receipt of an opinion from Graham & Dunn, P.C. to
                  the effect that, among other things, the Share Exchange will
                  qualify as a tax-free reorganization under Section
                  368(a)(1)(B) of the Code;

         -        Big Sky's receipt of an opinion from PBS, updated to the
                  effective date of the Share Exchange, to the effect that the
                  financial terms of the Share Exchange are financially fair to
                  Big Sky's stockholders;

         -        Glacier's and Big Sky's receipt of opinions from Crowley,
                  Haughey, Hanson, Toole & Dietrich PLLP and Graham & Dunn,
                  P.C., respectively, to the effect that, among other things,
                  Big Sky and Glacier have the corporate power and authority,
                  and have taken all necessary corporate action, to execute,
                  deliver and perform the Share Exchange Agreement; and

         -        Glacier's receipt of a letter from KPMG Peat Marwick LLP, to
                  the effect that they concur with management's understanding
                  that the Share Exchange will qualify for "pooling of
                  interests" accounting treatment if it is consummated in
                  accordance with the Share Exchange Agreement.

         Additionally, Glacier may terminate the Share Exchange if certain
conditions applicable to Big Sky are not satisfied or waived. Those conditions
are discussed below under "-- Amendment or Termination of the Share Exchange
Agreement."

         Either Glacier or Big Sky may waive any of the other party's
conditions, except those that are required by law (such as receipt of regulatory
and Big Sky stockholder approval). Either Glacier or Big Sky may also grant
extended time to the other party to complete an obligation or condition.

AMENDMENT OR TERMINATION OF THE SHARE EXCHANGE AGREEMENT

         The Share Exchange Agreement may be amended or supplemented at any time
by written agreement of the parties, whether before or after the Big Sky special
meeting. To the extent permitted under applicable law, the 

                                       21
   31

parties may make any amendment or supplement without further approval of Big
Sky's stockholders. However, any amendments which would reduce the amount or
change the form of consideration Big Sky's stockholders will receive in the
Share Exchange transaction or affect the tax treatment of the Share Exchange
would require further Big Sky stockholder approval.

         The Share Exchange Agreement contains several provisions entitling
either Big Sky or Glacier to terminate the Share Exchange Agreement under
certain circumstances. The following briefly describes these provisions:

         Lapse of Time. If the Share Exchange has not closed by June 30, 1999,
then at any time after that date, the board of directors of either Glacier or
Big Sky may terminate the Share Exchange Agreement, as long as the party
terminating has not caused the delay in closing by breaching its obligations
under the Share Exchange Agreement.

         Mutual Consent. The parties may terminate the Share Exchange Agreement
at any time before Closing, whether before or after approval by Big Sky's
stockholders, by mutual consent.

         Impracticability. The parties may terminate the Share Exchange
Agreement if the party seeking termination, through its board of directors, has
determined that the transaction has become inadvisable or impracticable by
reason of litigation by the federal government or the government of Montana to
restrain or invalidate the Share Exchange.

         Big Sky's Conditions Not Met. Glacier may terminate the Share Exchange
Agreement if, by June 30, 1999, any of Big Sky's conditions to closing are not
met. Among such conditions are: (i) Big Sky's Tangible Equity Capital,
determined in accordance with GAAP, must be at least $2.8 million (not including
Equity Capital as a result of conversion of the Debentures); (ii) there must
have been no event that causes a Material Adverse Effect, as defined in the
Share Exchange Agreement, with respect to Big Sky; (iii) Big Sky's financial
condition must meet the criteria set forth in the Share Exchange Agreement; and
(iv) the aggregate amount of cash to be paid by Glacier for fractional shares
and to holders of dissenting shares of Big Sky common stock must not exceed 10%
of the Share Exchange purchase price.

         Glacier's Conditions Not Met. Big Sky may terminate the Share Exchange
Agreement if, by June 30, 1999, any of Glacier's conditions to closing are not
met. Among such conditions are (i) there must have been no event that causes a
Material Adverse Effect, as defined in the Share Exchange Agreement, with
respect to Glacier; and (ii) Glacier must have complied with all terms,
covenants and conditions of the Share Exchange Agreement.

         Termination Fees. If Big Sky terminates the Share Exchange Agreement
under certain circumstances, or Glacier terminates the Share Exchange Agreement
under certain circumstances due to Big Sky's failure to comply with or satisfy
certain conditions to closing, Big Sky will pay Glacier a termination fee of
$300,000. If Glacier terminates the Share Exchange Agreement under certain
circumstances, or Big Sky terminates the Share Exchange Agreement under certain
circumstances due to Glacier's failure to comply with or satisfy certain
conditions to closing, Glacier will pay Big Sky a termination fee of $125,000.

         Allocation of Costs Upon Termination. If the Share Exchange Agreement
is terminated, Glacier and Big Sky will each pay their own out-of-pocket
expenses incurred in connection with the transaction and, except for any
applicable termination or break-up fees, will have no other liability to the
other party.

COMPETING ACQUISITION PROPOSALS: BREAK-UP FEE

         The Share Exchange Agreement provides that neither Big Sky nor its
officers or directors will solicit, encourage, entertain or facilitate any other
proposals or inquiries regarding the possible acquisition of the common stock or
assets of Big Sky, except as otherwise required by the fiduciary duties of the
board of directors.

                                       22
   32

         If a third party makes an acquisition proposal for Big Sky prior to
June 30, 1999, Big Sky will be required to pay Glacier the amount of $400,000,
if each of the following conditions exist:

         -        Big Sky stockholders did not approve the Share Exchange at the
                  Big Sky special stockholders meeting;

         -        prior to April 15, 2000, a third party acquires control of Big
                  Sky by merger, purchase of assets, acquisition of stock, or
                  otherwise;

         -        Glacier's representations and warranties in the Share Exchange
                  Agreement were not false in any material respect as of the
                  date of the Big Sky special stockholders meeting; and

         -        Glacier was not in material default of any of its covenants in
                  the Share Exchange Agreement as of the date of the Big Sky
                  special stockholders meeting.

         The fee described above may have the effect of making third party
offers for Big Sky during the period prior to June 30, 1999 less likely.

CONDUCT PENDING THE SHARE EXCHANGE

         The Share Exchange Agreement provides that, until the Share Exchange is
effective, Big Sky will conduct its business only in the ordinary and usual
course, and use all reasonable efforts to preserve its present business
organization, retain the services of its present management, and preserve the
goodwill of all parties with whom it has business dealings. The Share Exchange
Agreement also provides that, unless Glacier otherwise consents in writing, Big
Sky will refrain from engaging in various activities such as:

         -        effecting any stock split or other recapitalization;

         -        except under certain limited circumstances, declaring or
                  paying dividends or other distributions except Big Sky's
                  regular annual dividends to its stockholders, consistent with
                  past practices;

         -        acquiring or disposing of assets or making with respect to
                  assets material commitments outside the ordinary course of
                  business;

         -        with certain exceptions, soliciting or accepting deposit
                  accounts of a different type than previously accepted by Big
                  Sky, or incurring any indebtedness in excess of $25,000;

         -        acquiring real property without conducting an environmental
                  evaluation;

         -        with certain exceptions, entering into or terminating any
                  contracts with a term of more than one year or that require
                  Big Sky to pay or owe more than $25,000;

         -        selling investment securities if the aggregate gain realized
                  would exceed $25,000, or transferring investment securities
                  between portfolios;

         -        amending or materially changing its policies;

         -        increasing its full-time employees above 20;

         -        with certain exceptions, making capital expenditures in excess
                  of $10,000 per project or $25,000 in the aggregate; and

                                       23
   33

         -        entering into transactions or incurring any expenses that are
                  not in the ordinary course of business.

DIRECTORS AND EXECUTIVE OFFICERS AFTER THE SHARE EXCHANGE

         Following the Share Exchange Agreement the Big Sky board of directors
will consist of Big Sky's current directors plus two additional directors to be
designated by Glacier. Such Glacier-designated directors will serve until the
election of directors of Big Sky, at Big Sky's next annual stockholders'
meeting. Big Sky's executive officers will remain unchanged following the
closing of the Share Exchange.

EMPLOYEE BENEFIT PLANS

         The Share Exchange Agreement confirms Glacier's intention to allow Big
Sky's employees who continue as employees of Big Sky after the Share Exchange to
participate in certain Glacier employee benefit plans. Big Sky's employee
benefit plans will be terminated as soon as practical after the Share Exchange,
and employee interests in those plans will be transferred or merged into
Glacier's employee benefit plans.

INTERESTS OF CERTAIN PERSONS IN THE SHARE EXCHANGE

         Certain members of Big Sky's board of directors and management may be
deemed to have interests in the Share Exchange, in addition to their interests
as stockholders of Big Sky generally. The Big Sky board of directors was aware
of these factors and considered them, among other things, in approving the Share
Exchange Agreement.

         Employment Agreement. Glacier has ratified an employment agreement
between Big Sky and Michael F. Richards, the President of Big Sky. The
employment agreement is for a term of three years, beginning on the Share
Exchange effective date. Mr. Richards' salary for 1999 will be $95,000.
Subsequent salary adjustments will be subject to Big Sky's annual review of Mr.
Richards' compensation and performance, but in no event will his salary increase
less than 5% annually during the two remaining years of the employment
agreement. Big Sky may terminate the employment agreement at any time for Cause
(as defined in the employment agreement) without incurring any post-termination
obligations or penalties.

         If Big Sky terminates the employment agreement without Cause, or if Mr.
Richards terminates the employment agreement for Good Reason (as defined in the
employment agreement), Mr. Richards will be entitled to severance payments
consisting of the compensation and other benefits to the end of the term of his
employment agreement, to which he would have been entitled if his employment had
not been terminated. If Mr. Richards' employment is terminated in certain
circumstances tied to a change in control of Big Sky, Mr. Richards will be
entitled to a one-time payment equal to the amount of his annual salary at the
time of termination, and the continuation of other employee benefits for the
greater of (i) one year, or (ii) the remaining term of the employment agreement.
Mr. Richards is prohibited from competing with Big Sky or Glacier in Gallatin
County, Montana for a certain period following his termination of employment.

         Stock Options. Mr. Michael F. Richards has existing options to acquire
Big Sky common stock that will be converted on the Share Exchange effective
date, into options to acquire Glacier common stock. See "--Big Sky Stock
Options" above.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE SHARE EXCHANGE

         The following is a discussion of the material federal income tax
consequences of the Share Exchange that are generally applicable to Big Sky
stockholders. This discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended, existing Treasury regulations
thereunder (including final, 

                                       24
   34

temporary or proposed), and current administrative rulings and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences described herein. The following
discussion is intended only as a summary of the material federal income tax
consequences of the Share Exchange and does not purport to be a complete
analysis or listing of all of the potential tax effects relevant to a decision
on whether to vote in favor of approval of the Share Exchange.

         The Share Exchange is expected to qualify as a reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code. As parties to a
reorganization, neither Glacier nor Big Sky will recognize gain or loss as a
result of the Share Exchange. Except for cash received in lieu of a fractional
share interest in Glacier common stock, holders of shares of Big Sky common
stock will recognize no gain or loss on the receipt of Glacier common stock.

         Consummation of the Share Exchange is conditioned upon the receipt by
Glacier and Big Sky of an opinion of Graham & Dunn, P.C., special counsel to
Glacier, to the effect that if the Share Exchange is consummated within the
meaning of Section 368(a)(1)(B) of the Internal Revenue Code, no gain or loss
will be recognized by Big Sky stockholders who exchange all of their Big Sky
common stock solely for shares of Glacier common stock (except for cash received
in lieu of fractional shares).

         The opinion of counsel, which will be delivered on the closing date of
the Share Exchange, is filed as an exhibit to the Registration Statement, and
the foregoing is only a summary of the tax consequences of the Share Exchange as
described in the opinion. An opinion of counsel only represents counsel's best
legal judgment, and has no binding effect or official status of any kind, and no
assurance can be given that contrary positions may not be taken by the Internal
Revenue Service or a court considering these issues. Neither Big Sky nor Glacier
has requested or will request a ruling from the IRS with regard to the federal
income tax consequences of the Share Exchange.

         The tax basis of the Glacier common stock received in the Share
Exchange by Big Sky stockholders will be the same as the tax basis of the Big
Sky common stock surrendered in the exchange therefor, reduced by any basis
allocable to a fractional share interest in Big Sky common stock for which cash
is received. The holding period for the shares of Glacier common stock received
in the Share Exchange will include the holding period of Big Sky common stock
exchanged therefor, provided that Big Sky shares were held as capital assets at
the time of the Share Exchange.

         Gain or loss will be recognized by Big Sky stockholders who receive
cash in lieu of fractional shares of Glacier common stock, or who exercise
dissenters' rights and receive cash for their Big Sky shares. The amount of such
gain or loss will be the difference between the cash received and the basis of
the shares or fractional share interests surrendered in the exchange. Generally,
such gain or loss will be a capital gain or loss provided that the shares of Big
Sky surrendered were capital assets at the time of surrender, and will be
long-term capital gain or loss if such shares of Big Sky common stock have been
held for more than one year.

         THE FOREGOING IS A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE SHARE EXCHANGE TO BIG SKY SHAREHOLDERS, WITHOUT REGARD TO
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH STOCKHOLDER'S TAX SITUATION AND
STATUS. IN ADDITION, THERE MAY BE RELEVANT STATE, LOCAL OR OTHER TAX
CONSEQUENCES, NONE OF WHICH ARE DESCRIBED ABOVE. BECAUSE CERTAIN TAX
CONSEQUENCES OF THE SHARE EXCHANGE MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH STOCKHOLDER, EACH BIG SKY STOCKHOLDER SHOULD CONSULT HIS
OR HER OWN TAX ADVISOR REGARDING SUCH STOCKHOLDER'S SPECIFIC TAX SITUATION AND
STATUS, INCLUDING THE SPECIFIED APPLICATION AND EFFECT OF STATE, LOCAL AND
FOREIGN LAWS TO SUCH STOCKHOLDER AND THE POSSIBLE EFFECT OF CHANGE IN FEDERAL
AND OTHER TAX LAWS.

                                       25
   35

ACCOUNTING TREATMENT OF SHARE EXCHANGE

         It is anticipated that the Share Exchange will be accounted for as a
"pooling of interests" for accounting purposes. Under this method of accounting,
assets and liabilities of Big Sky and Glacier are carried forward at their
previously recorded amounts, and operating results of Big Sky and Glacier will
represent the combined results for periods before and after the Share Exchange.
No recognition of goodwill arising from the Share Exchange is required of any
party to the Share Exchange.

         Glacier's receipt of a letter from KPMG Peat Marwick LLP, to the effect
that they concur with management's understanding that the Share Exchange will
qualify as a "pooling of interests" if consummated in accordance with the Share
Exchange Agreement, is a condition to the closing the Share Exchange.

DISSENTERS' RIGHTS OF APPRAISAL

         Under Montana law (MBCA Section 35-1-826 through 35-1-839), a holder of
Big Sky common stock may exercise "dissenters' rights" and receive the fair
value of his or her shares in cash, if certain procedures are followed. To
exercise these rights, a holder of Big Sky common stock must (1) deliver to Big
Sky before the vote on the approval of the Share Exchange is taken, written
notice of intent to demand payment for his or her shares if the Share Exchange
is effected, and (2) not vote in favor of the Share Exchange. A stockholder
wishing to deliver such notice should hand deliver or mail such notice to Big
Sky at the following address within the requisite time period:

                              Big Sky Western Bank
                                 P.O. Box 160489
                                135 Big Sky Road
                                Big Sky, MT 54716

         If the stockholders of Big Sky approve the Share Exchange and the Share
Exchange Agreement, then Big Sky will deliver a written Dissenters' Notice to
all stockholders who have previously satisfied the statutory requirements listed
above. The Dissenters' Notice must be sent within ten days after Big Sky
stockholders voted to approve the Share Exchange Agreement and the Share
Exchange. The Dissenters' Notice must (1) state where the payment demand must be
sent and where and when certificates for certified shares must be deposited, (2)
inform stockholders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment is received, (3) supply a form for
demanding payment which includes the date of the first announcement to the news
media or to stockholders of the terms of the proposed Share Exchange Agreement
and Share Exchange and requires the person asserting dissenters' rights to
certify whether or not he or she acquired beneficial ownership of the shares
before that date, (4) set a date (not fewer than 30 nor more than 60 days after
the date the Dissenters' Notice is delivered) by which Big Sky must receive the
dissenting Big Sky stockholder's payment demand, and (5) be accompanied by a
copy of MBCA Sections 35-1-826 through 35-1-839.

         A holder of Big Sky common stock who receives a Dissenters' Notice as
described above must (1) demand payment, (2) certify whether the stockholder
acquired beneficial ownership of his/her shares before the date set forth in the
Dissenter's Notice, and (3) deposit his or her certificates in accordance with
the terms of the Dissenters' Notice. A holder of Big Sky common stock who
demands payment and deposits his or her certificates in accordance with the
Dissenters' Notice and Montana law, will retain all other rights of a Big Sky
stockholder until these rights are canceled or modified by the consummation of
the Share Exchange as provided in the Share Exchange Agreement. A stockholder
who does not demand payment or deposit his or her certificates when and where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment under the Montana dissenters' rights provisions for his or her shares.

                                       26
   36

         Except in the case of after acquired shares, if Big Sky stockholders
approve the Share Exchange and the Share Exchange Agreement, and upon receipt of
a payment demand as described above, Big Sky will pay each dissenter who has
satisfied the statutory requirements, the amount that Big Sky estimates to be
the fair value of his/her shares, plus accrued interest.

         Big Sky's payment to each dissenting Big Sky stockholder will be
accompanied by: (1) Big Sky's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date the payment will be made, an
income statement for that year, a statement of changes in stockholder equity for
that year, and Big Sky's latest available interim financial statements, if any;
(2) a statement of Big Sky's estimate of the fair value of the shares; (3) an
explanation of how the interest paid to the dissenter was calculated; (4) a
statement of the dissenter's right to demand payment if the dissenter disagrees
with Big Sky's assessment of the fair value of his/her shares under the
appropriate Montana statutes, and (5) a copy of MBCA Section 35-1-826 through
35-1-839. If a stockholder exercises dissenters' rights, the dissenting
stockholder is entitled to receive the fair value of his or her shares in cash.
Such value may be higher or lower than the value of Glacier's common stock
issuable under the Share Exchange Agreement.

         THE FAILURE OF A HOLDER OF BIG SKY COMMON STOCK TO COMPLY STRICTLY WITH
THE MONTANA STATUTORY REQUIREMENTS WILL RESULT IN A LOSS OF DISSENTERS' RIGHTS.
A COPY OF THE RELEVANT STATUTORY PROVISIONS IS ATTACHED AS APPENDIX C. HOLDERS
OF BIG SKY COMMON STOCK SHOULD REFER TO THIS APPENDIX FOR A COMPLETE STATEMENT
CONCERNING DISSENTERS' RIGHTS AND THE FOREGOING SUMMARY OF SUCH RIGHTS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH APPENDIX.

STOCK RESALES BY BIG SKY AFFILIATES

         The Glacier common stock to be issued in the Share Exchange will be
transferable free of restrictions under the 1933 Act, except for shares received
by persons, including directors and executive officers of Big Sky, who may be
deemed to be "affiliates" of Big Sky, as that term is used in (i) paragraphs (c)
and (d) of Rule 145 under the 1933 Act and/or (ii) Accounting Series Releases
130 and 135, as amended, of the SEC. Affiliates may not sell their shares of
Glacier common stock acquired in the Share Exchange, except (a) pursuant to an
effective registration statement under the 1933 Act covering those shares, (b)
in compliance with Rule 145, or (c) in accordance with an opinion of counsel
reasonably satisfactory to Glacier, under other applicable exemptions from the
registration requirements of the 1933 Act. Glacier will obtain customary
agreements with all Big Sky directors, officers, and affiliates of Big Sky,
under which such persons will represent that they will not dispose of their
shares of Glacier received in the Share Exchange or the shares of capital stock
of Big Sky or Glacier held by them before the Share Exchange, except in
compliance with the 1933 Act and the rules and regulations promulgated under the
1933 Act. This Prospectus/Proxy Statement does not cover any resales of the
Glacier common stock received by affiliates of Big Sky.

                                       27
   37

                         INFORMATION CONCERNING GLACIER

GENERAL

         Glacier is a corporation organized under Delaware law, and a registered
bank holding company under the Bank Holding Company Act of 1956, as amended.
Glacier's principal office is located in Kalispell, Montana, and it presently
has five bank subsidiaries. Glacier has long-standing roots in northwest Montana
dating back to 1955, and owns (i) all of the outstanding common stock of Glacier
Bank, First Security Bank of Missoula, Valley Bank of Helena, and Community
First, Inc., a full-service brokerage firm; (ii) approximately 94% of the
outstanding common stock of Glacier Bank of Whitefish; and (iii) approximately
98% of the outstanding common stock of Glacier Bank of Eureka.

         Glacier offers a broad range of community banking services throughout
its 21 banking offices located primarily in western Montana and Billings,
Montana. The business of the Glacier subsidiary banks consists primarily of
attracting deposit accounts from the general public and originating commercial,
residential, and installment loans. The Glacier subsidiary banks' principal
sources of income are interest on loans, loan origination fees, and interest and
dividends on investment securities, while principal expenses consist of interest
on savings deposits, FHLB advances, and repurchase agreements, as well as
general and administrative expenses. Glacier has one non-bank subsidiary,
Community First, Inc., which offers full-service brokerage services through
Robert Thomas Securities, an unrelated brokerage firm.

         Glacier's expansion plans include internally-generated growth from
strategically-located existing branches, some selected new branch expansion and
expansion into other areas of Montana. In addition to limited de novo branching,
Glacier's management strategy has also been to pursue attractive alliance
opportunities with other well-run community banks such as the proposed
transaction with Big Sky, as well as other financial service related companies.
In furtherance of this management strategy, Glacier acquired Valley Bank of
Helena, through a merger with its parent holding company and a share exchange
for minority stock interests, on August 31, 1998. Glacier has continued to
invest significantly in management and other resources to support its expansion.

         Glacier was incorporated on March 24, 1998. It is the successor
corporation of another company, also named "Glacier Bancorp, Inc." that was
formed in 1990. That corporation is referred to in this discussion as "Original
Glacier." Glacier merged with Original Glacier on July 8, 1998. In early 1998,
Original Glacier discovered certain technical issues associated with its capital
stock, including the existence of fewer authorized shares than Original Glacier
had previously believed were available. Because these issues created uncertainty
about the validity of certain outstanding shares of Original Glacier common
stock, Original Glacier completed the merger with Glacier. This transaction was
designed to cure the concerns regarding Original Glacier's common stock.

         Glacier is the successor in interest to all of the rights and
liabilities of Original Glacier. Glacier's corporate attributes are identical to
those of Original Glacier, except that Glacier has a larger number of authorized
shares of common stock than Original Glacier. At the time of the merger of the
two companies, Original Glacier's common stock was withdrawn from quotation on
the NASDAQ National Market and from registration under the Securities Exchange
Act of 1934. Also at that time, Glacier became subject to the reporting
requirements of the 1934 Act as the successor corporation to Original Glacier,
and Glacier listed its common stock on the NASDAQ National Market under the same
symbol that Original Glacier's common stock had traded under.

         Historical information regarding Glacier in this Prospectus/Proxy
Statement that refers to a date prior to July 8, 1998, and information regarding
Glacier that is incorporated by reference to certain filings with the SEC,

                                       28
   38

as described in "INFORMATION INCORPORATED BY REFERENCE," is information
regarding Original Glacier.

         Financial and other information regarding Glacier, including
information relating to Glacier's directors and executive officers, is set forth
in the 1997 10-K, 1998 10-Qs, the 1998 Annual Meeting Proxy Statement and the
Forms 8-K filed by Glacier (or Original Glacier) and incorporated by reference
into this Prospectus/Proxy Statement. Copies of Glacier's Annual Report for the
year ended December 31, 1997 and Glacier's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 are also being mailed to Big Sky stockholders
together with this Prospectus/Proxy Statement. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "WHERE YOU CAN FIND INFORMATION."

YEAR 2000 ISSUES

         The century date change for the year 2000 is a serious issue that may
impact virtually every organization, including Glacier. Many software programs
are not able to recognize the year 2000, since most programs and systems were
designed to store calendar years in the 1900s by assuming the "19" and storing
only the last two digits of the year. The problem is especially important to
financial institutions since many transactions, such as interest accruals and
payments, are date sensitive, and because Glacier and its subsidiary banks
interact with numerous customers, vendors and third party service providers who
must also address the year 2000 issue. The problem is not limited to computer
systems. Year 2000 issues will also potentially affect every system that has an
embedded microchip, such as automated teller machines, elevators and vaults.

Glacier's State of Readiness

         Glacier and its subsidiary banks are committed to addressing these Year
2000 issues in a prompt and responsible manner, and they have dedicated the
resources to do so. Management has completed an assessment of its automated
systems and has implemented a program consistent with applicable regulatory
guidelines, to complete all steps necessary to resolve identified issues.
Glacier's compliance program has several phases, including (1) project
management; (2) assessment; (3) testing; and (4) remediation and implementation.

         Project Management. Glacier has formed a Year 2000 compliance committee
consisting of senior management and departmental representatives. The committee
has met regularly since October 1997. A Year 2000 compliance plan was developed
and regular meetings have been held to discuss the process, assign tasks,
determine priorities and monitor progress. The committee regularly reports to
the Company's Board.

         Assessment. All of Glacier's and its subsidiary banks' computer
equipment and mission-critical software programs have been identified. This
phase is essentially complete. Glacier's primary software vendors were also
assessed during this phase, and vendors who provide mission-critical software
have been contacted. Glacier is in the process of obtaining written
certification from providers of material services that such providers are, or
will be, Year 2000 compliant. Based upon its ongoing assessment of the readiness
of its vendors, suppliers and service providers, Glacier intends to develop
contingency plans addressing the most reasonably likely worst case scenarios.
Glacier will continue to monitor and work with these vendors. Glacier has also
identified, and began working with, the subsidiary banks' significant borrowers
and funds providers to assess the extent to which they may be affected by Year
2000 issues.

         Testing. Updating and testing of the Glacier's and its subsidiary
banks' automated systems is currently underway and Glacier anticipates that all
testing will be complete by January 31, 1999. Upon completion, Glacier will be
able to identify any internal computer systems that remain non-compliant.

                                       29
   39

         Remediation and Implementation. This phase involves obtaining and
implementing renovated software applications provided by Glacier's vendors. As
these applications are received and implemented, Glacier will test them for Year
2000 compliance. This phase also involves upgrading and replacing automated
systems where appropriate, and will continue throughout 1998 and the first
quarter of 1999.

         Estimated Costs to Address Glacier's Year 2000 Issues

         The total financial effect that Year 2000 issues will have on Glacier
cannot be predicted with any certainty at this time. In fact, in spite of all
efforts being made to rectify these problems, the success of Glacier's efforts
will not be known until the year 2000 actually arrives. However, based on its
assessment to date, Glacier does not believe that expenses related to meeting
Year 2000 challenges will have a material effect on the operations or
consolidated financial condition of Glacier. Year 2000 challenges facing vendors
of mission-critical software and systems, and facing Glacier's customers, could
have a material effect on the operations or consolidated financial condition of
Glacier, to the extent such parties are materially affected by such challenges.

         Risks Related to Year 2000 Issues

         The year 2000 poses certain risks to Glacier and its subsidiary banks
and their operations. Some of these risks are present because Glacier purchases
technology and information systems applications from other parties who face Year
2000 challenges. Other risks are inherent in the business of banking or are
risks faced by many companies. Although it is impossible to identify all
possible risks that Glacier may face moving into the millennium, management has
identified the following significant potential risks:

         Commercial banks may experience a contraction in their deposit base, if
a significant amount of deposited funds are withdrawn by customers prior to the
year 2000, and interest rates may increase as the millennium approaches. This
potential deposit contraction could make it necessary for the Bank to change its
sources of funding and could impact future earnings. Glacier established a
contingency plan for addressing this situation, should it arise, into its asset
and liability management policies. The plan includes maintaining the ability to
borrow funds from the Federal Home Loan Bank of Seattle. Significant demand for
funds from other banks could reduce the amount of funds available for Glacier to
borrow. If insufficient funds are available from these sources, Glacier may also
sell investment securities or other liquid assets to meet liquidity needs.

         Glacier lends significant amounts to businesses in its marketing area.
If these businesses are adversely affected by Year 2000 problems, their ability
to repay loans could be impaired. This increased credit risk could adversely
affect Glacier's financial performance. During the assessment phase of Glacier's
Year 2000 program, each of Glacier's subsidiary banks' substantial borrowers
were identified, and Glacier is working with such borrowers to ascertain their
levels of exposure to Year 2000 problems. To the extent that Glacier is unable
to assure itself of the Year 2000 readiness of such borrowers, it intends to
apply additional risk assessment criteria to the indebtedness of such borrowers
and make any necessary related adjustments to Glacier's provision for loan
losses.

         Glacier and its subsidiary banks, like those of many other companies,
can be adversely affected by the Year 2000 triggered failures of other companies
upon whom Glacier and its subsidiary banks depend for the functioning of their
automated systems. Accordingly, Glacier's and its subsidiary banks' operations
could be materially affected, if the operations of mission-critical third party
service providers are adversely affected. As described above, Glacier has
identified its mission-critical vendors and is monitoring their Year 2000
compliance programs.

                                       30
   40

         Glacier's Contingency Plans

         Glacier is in the process of developing specific contingency plans
related to Year 2000 issues. As Glacier and its subsidiary banks continue the
testing phase, and based on future ongoing assessment of the readiness of
vendors, service providers and substantial borrowers, Glacier will develop
appropriate contingency plans that address the most reasonably likely "worst
case" scenarios. Certain circumstances, as described above in "Risks," may occur
for which there are no completely satisfactory contingency plans.

                           FORWARD LOOKING STATEMENTS

         The discussion above regarding to the century date change for the year
2000 includes certain "forward looking statements" concerning the future
operations of Glacier. Glacier desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 as they apply
to forward looking statements. This statement is for the express purpose of
availing Glacier of the protections of such safe harbor with respect to all
"forward looking statements." Management's ability to predict results of the
effect of future plans is inherently uncertain, and is subject to factors that
may cause actual results to differ materially from those projected. Factors that
could affect the actual results include Glacier's success in identifying systems
and programs that are not Year 2000 compliant; the possibility that systems
modifications will not operate as intended; unexpected costs associated with
remediation, including labor and consulting costs; the nature and amount of
programming required to upgrade or replace the affected systems; the uncertainty
associated with the impact of the century change on Glacier's customers, vendors
and third-party service providers; and the economy generally.

                         INFORMATION CONCERNING BIG SKY

BUSINESS

         Big Sky was organized under Montana law as a state-chartered bank,
beginning bank operations on March 21, 1990. Big Sky engages in commercial
banking activities from its main office located in the resort community of Big
Sky at 135 Big Sky Road, Big Sky, Gallatin County, Montana, and a branch
facility (the Gateway Branch) located in the Four Corners area of Gallatin
County, Montana, approximately 6 miles west of Bozeman, Montana. The bank was
organized to address a perceived need for the services of a local community bank
with commitment to personalized service to the businesses and residents of Big
Sky and Gallatin County. Big Sky offers commercial banking services, primarily
to small and medium-sized businesses, professionals, and retail customers,
including commercial loans, consumer installments loans, residential and
commercial real estate and construction loans, certificates of deposit, and
checking and savings accounts.

         Big Sky's deposit accounts are insured by the FDIC. As of December 31,
1997, Big Sky had deposits of approximately $25 million and total assets of
approximately $33 million, and approximately $32 million in deposits and
approximately $40 million in total assets as of September 30, 1998.

         Big Sky is an independent bank owned by approximately 149 stockholders,
primarily individuals, who are residents of the Big Sky community or have some
association with the area. Big Sky has no other bank or non-bank subsidiaries.

         Nearly all of Big Sky's current management has been with the bank since
its inception in 1990. Big Sky has established a strong presence in commercial
and residential real estate, small business, and installment loan markets in its
area.

                                       31
   41

COMPETITION

         Competition in the banking industry is significant and has intensified
with interest rate deregulation. Furthermore, competition from outside the
traditional banking system from investment banking firms, insurance companies,
credit unions, and related industries offering bank-like products has
intensified the competition for deposits and loans.

         Big Sky is the only financial institution presently located in Big Sky.
However, it has been announced that American Bank, headquartered in Livingston,
Montana, is anticipating opening a branch in Big Sky within the next 12 to 18
months. Big Sky experiences significant competition from Bozeman-based financial
institutions seeking to establish a foothold in the rapidly expanding Big Sky
market, and these same institutions represent very strong competition for Big
Sky's Gateway Branch located just 6 miles west of Bozeman.

         The banking industry presence in Bozeman is characterized by two
well-established branches of large banks controlled by holding companies with
headquarters located outside the State of Montana, one credit union, five
offices of Montana-based savings and loan associations or commercial banks and
one locally owned commercial bank. Additional institutions in Belgrade, Montana
and West Yellowstone, Montana do not represent significant direct competition to
the Big Sky location and only minimal competition to the Gateway Branch.

         Big Sky's traditional competition for deposits comes from commercial
banks, savings and loan associations, credit unions, and money market funds,
many of which have more office locations or offer higher rates of interest than
does Big Sky. Competition for deposit funds also comes from issuers of corporate
and governmental securities, insurance companies, mutual funds, and other
financial intermediaries. Big Sky competes for deposits by offering a variety of
deposit accounts at rates generally competitive with similar financial
institutions in the area.

         In competing for deposits, Big Sky is subject to certain regulations
not applicable to non-bank competitors. Legislation enacted in the 1980s
authorized banks to offer deposit instruments with rates competitive with money
market funds, but subject to restrictions not applicable to those funds.
Legislation has also made non-bank financial institutions more effective
competitors. Savings and loan associations and credit unions are now permitted
to offer checking accounts and to make commercial loans with certain
limitations.

         Big Sky's competition for loans comes primarily from the same financial
institutions with which Big Sky competes for deposits. Big Sky competes for loan
originations primarily through the level of interest rates and loan fees
charged, the variety of commercial and mortgage loan products offered, and the
efficiency and quality of services provided to borrowers. Factors which affect
loan competition include the availability of lendable funds, local and national
economic conditions, current interest rate levels, and loan demand. Big Sky
engages in loan origination for residential loans which are sold to traditional
secondary market investors which generates fee income while preserving
liquidity.

         The offices of the larger banks and savings and loan associations have
competitive advantages over Big Sky in that they have a stronger presence and
are able to maintain advertising and marketing activity on a much larger scale
than Big Sky can economically maintain. Because single borrower lending limits
imposed by law are tied to the institution's capital, the branches or offices of
larger institutions with substantial capital bases are also at an advantage with
respect to loan applications for amounts in excess of Big Sky's legal lending
limit. This advantage has been mitigated somewhat by Big Sky's network of
over-line participants.

                                       32
   42

FACILITIES

         The principal offices of Big Sky are located at the bank's main office
at 135 Big Sky Road, Big Sky, Montana. The Big Sky location houses employee
offices, a lobby with three teller stations, a one-lane drive-up window, and an
ATM. ATM's are also located in the Mountain Mall and Huntley Lodge in the
Mountain Village at Big Sky Resort. Big Sky operates the Gateway Branch located
at the junction of U.S. 191 and Huffine Lane (Four Corners), six miles west of
Bozeman, Montana. The Gateway Branch is a full service branch with a lobby with
four teller stations, upstairs offices and conference room, two drive-up lanes
and a drive-up ATM. The real estate department is housed in separate leased
quarters within the same retail complex.

EMPLOYEES

         As of September 30, 1998, Big Sky had 20 full-time-equivalent (19
full-time and 2 part-time) employees. Employee turnover has historically been
relatively low.

LEGAL PROCEEDINGS

         Big Sky has not been a party to any legal proceedings since opening in
1990. Management believes that there is no threatened or pending proceedings
against Big Sky which, if determined adversely, would have a material effect on
its business or financial position.

                                       33
   43

        SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

         The following table sets forth information regarding the beneficial
ownership of Big Sky common stock as of September 30, 1998 by (i) each person
known to Big Sky to own beneficially more than 5 percent of Big Sky common
stock; (ii) each current director of Big Sky; and (iii) all executive officers
and directors of Big Sky as a group. Except as otherwise indicated, each of the
persons named below has sole voting and investment power with respect to the Big
Sky common stock owned by them. Each of the following persons may be reached at
the main office location of Big Sky.

                                                          Amount and Nature                     Percentage of
                  Name of Stockholder                  of Beneficial Ownership                Shares Outstanding
                  -------------------                  -----------------------                ------------------
                                                                                        
         Robert L. Kester (1)                                     1,283                             6.29%
         Stewart R. Kester (2)                                    1,260                             6.18%
         George B. Hagar (3)                                        550                             2.70%
         Herbert A. Kern (4)                                        340                             1.67%
         O. Taylor Middleton (5)                                    320                             1.57%
         Michael F. Richards (6)                                    601                             2.95%
         Michael R. Scholz                                          584                             2.86%
         Beatrice R. Taylor (7)                                     698                             3.42%
         Don T. Wilson (8)                                           15                             0.07%

         All Directors and Executive
         Officers as a Group                                      5,651                             27.70%

- ---------------
(1)      Includes 1,150 shares owned with Mr. Kester's spouse and 100 shares

         owned by Mrs. Marcia M. Kester, Mr. Kester's spouse.
(2)      Includes 1,060 shares owned with Mr. Kester's spouse and 175 shares
         owned by Commerica Bank, Trustee, Calhoun & Company FBO Stewart R.
         Kester.
(3)      All shares are held in a trust, George B. Hagar Trust UTD 3/19/93 with
         Mr. Hagar and his spouse, Shirley D. Hagar, as trustees.
(4)      Includes 315 shares owned with Mr. Kern's spouse.
(5)      Includes 295 shares owned with Mr. Middleton's spouse.
(6)      Includes 576 shares owned with Mr. Richards' spouse.
(7)      Includes 254 shares owned by Mr. James C. Taylor, Mrs. Taylor's spouse;
         132 shares owned by Elizabeth Kean Taylor Revocable Trust (Mrs.
         Taylor's daughter); and 132 shares owned by James Campbell Taylor, Jr.
         Revocable Trust (Mrs. Taylor's son).

(8)      All shares are held with Mr. Wilson's spouse.

                 BIG SKY MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

         The following discussion and analysis is intended to provide greater
details of the results of operations and financial condition of Big Sky. The
following discussion should be read in conjunction with the selected financial
and other data appearing elsewhere in this Prospectus/Proxy Statement.

         Big Sky operates two full-service banking offices. The main office is
in Big Sky, Montana with the Big Sky Western Bank-Gateway Branch located in the
Four Corners area, approximately 6 miles west of Bozeman. 

                                       34
   44

Big Sky also operates a Real Estate Department that is located in the same
commercial complex as the Gateway Branch. Big Sky's income is derived solely
from the income generated from its branches and real estate lending operation
consisting of net interest income and other operating income. Net interest
income consists of the excess of interest income, received primarily on customer
loans and investment securities, over interest expense, paid principally on
customer deposits and indebtedness. Other operating income primarily includes
service charges on deposit accounts and loan and other fee income.

         Since December 31, 1996, Big Sky has experienced deposit growth of
approximately $7.7 million and asset growth during the same period of $10.6
million or 32 percent and 36.4 percent respectively. Both deposit and asset
growth is consistent with recent historical growth rates. At December 31, 1997,
Big Sky had total deposits of $25.5 million and total assets of $32.7 million
and more recently at September 30, 1998, total deposits and total assets were
$31.8 million and $39.8 million respectively.

RESULTS OF OPERATIONS

         Net Income and Expense. Big Sky's net income after income taxes
increased from approximately $120,000 in 1996 to approximately $182,000 in 1997,
an increase of approximately 51.7%. Net income after taxes for the period ended
September 30, 1998, was approximately $185,000, an increase of $64,100 or 53%
over the same nine month period in 1997.

         Net Interest Income. Big Sky's net interest income is the largest
source of operating income. As noted above, net interest income is derived from
interest, dividends and fees received from interest-earning assets, less
interest expense incurred on interest-bearing liabilities. Interest-earning
assets primarily include loans and investment securities. Interest-bearing
liabilities primarily include deposits and various forms of indebtedness.

         Big Sky's net interest income for 1997 was $1.396 million, an increase
of 46.7 percent over the net interest income in 1996 of $.952 million. While
much of the increase resulted from asset and loan growth in 1997, it is also
attributable to an increase in loan fees of $184,000 in 1997. The increase in
loan fees was largely generated by Big Sky's real estate department started in
1997 that sells all real estate loans in the secondary investment market. Total
interest expense in 1997 was $1.162 million, an increase of 28.4 percent over
the total interest expense in 1996 of $.905 million.

         The most significant impact on Big Sky's net interest income between
periods is derived from the interaction of changes in the volume of and rates
earned or paid on interest-earning assets and interest-bearing liabilities. The
volume of loans, investment securities and other interest-earning assets,
compared with the volume of interest-bearing deposits and indebtedness, combined
with the spread, produces the changes in the net interest income between
periods. This increase in interest expense was due to the growth of
interest-bearing deposits and additional borrowings with the Federal Home Loan
Bank during 1997.

         Non-interest Income and Expense. Big Sky experienced an increase in
non-interest income in 1997 as compared to 1996 of approximately $56,000. Big
Sky also experienced an increase in non-interest expenses of approximately
$390,000 from $.944 million in 1996 to $1.334 million in 1997. Salaries and
benefits accounted for approximately $225,000 or 57.8 percent of the increase in
non-interest expense in 1997 as compared to 1996. The increase in non-interest
expense is largely attributable to the new branch office opened in the Four
Corners area in June, 1996 and also the non-interest expense associated with the
new real estate department started in November, 1996.

         Provision for Loan Losses. The provision for loan losses creates an
allowance for future loan losses based upon management's current estimates. The
loan loss provision for each year is dependent on many factors, including loan
growth, net charge-offs, changes in the composition of the loan portfolio,
delinquencies, 

                                       35
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management's assessment of the quality of loan portfolio, the value of the
underlying collateral on problem loans and the general economic conditions in
the relevant markets. Big Sky performs a monthly assessment of the risk inherent
in its loan portfolio, as well as a detailed review of each asset determined to
have identified weaknesses. Based on the analysis, which includes reviewing
historical loss trends, current economic conditions, industry concentrations and
specific reviews of assets classified with identified weaknesses, Big Sky may
make provisions for potential loan losses.

         Specific allocations are made for loans when the probability of a loss
can be defined and reasonably determined, while the balance of the provisions
for loan losses are based on historical data, delinquency trends and economic
conditions. Fluctuations in the provision for loan loss result from management's
assessment of the adequacy of the allowance, and ultimate loan losses may vary
from current estimates.

         At December 31, 1997, the allowance for loan losses was approximately
$252,000 or 1.28 percent of total loans. The allowance for loan losses at
December 31, 1996, was $172,000 or .96 percent of total loans at such date. The
increase in the allowance reflects, among other things, the growth of the Big
Sky loan portfolio from $17.979 million at December 31, 1996, to $19.627 million
at December 31, 1997. At September 30, 1998, the allowance for loan losses was
$285,000 or 1.37 percent of total loans.

         The following table sets forth activity in the allowance for loan
losses for the nine months ending September 30, 1998 and for the years ended
December 31, 1997, and December 31, 1996:

(Dollars in thousands)                        Nine Months ended     For the year ended December 31,
                                                September 30,       -------------------------------
                                                    1998                1997                1996
                                                  --------            --------            --------
                                                                                 
Balance beginning of period                       $    252                 172                 121

Charge-offs:
         Commercial                                     (6)                 (1)                 (5)
         Real Estate                                     0                   0                   0
         Consumer                                        0                  (3)                (13)
                                                  --------            --------            --------

                                                        (6)                 (4)                (18)
                                                  --------            --------            --------
Recoveries:
         Commercial                                      0                   2                   0
         Real Estate                                     0                   0                   0
         Consumer                                        0                   0                   0
                                                  --------            --------            --------
                                                         0                   2                   0
                                                  --------            --------            --------
         Net (charge-offs) recoveries                   (6)                 (2)                (18)
                                                  --------            --------            --------

Provision charged to operations                         39                  82                  69

Balance at end of period                          $    285                 252                 172
                                                  --------            --------            --------

Ratio of net (charge-offs) recoveries to              0.03%               0.01%               0.13%
average outstanding loans during period

Average outstanding loans during period           $ 20,481              18,651              14,099

                                       36
   46

         Income Tax Expense. For the year ended December 31, 1997 Big Sky's
effective federal tax rate was approximately 20 percent and its effective
Montana tax rate was 6.75 percent. Big Sky anticipates an effective federal tax
rate of 34% for 1998, with the effective Montana tax rate remaining constant.

FINANCIAL CONDITION

         Loans. Big Sky's loan portfolio consists of a mix of commercial,
consumer, real estate, agricultural and other loans, including fixed and
variable rate loans. Fluctuations in the loan portfolio are directly related to
the economics of the markets served by Big Sky. Thus, Big Sky borrowers could be
adversely impacted by a downturn in the sectors of the economy which could have
a material adverse effect on the borrower abilities to repay loans.

         Big Sky's gross loans increased to $19.627 million for the year ended
December 31, 1997, from $17.979 million for the year ended December 31, 1996, an
increase of approximately $1.6 million or 9.2 percent. At September 30, 1998,
gross loans were $21.757 million, an increase of $2.178 million compared to the
corresponding period in 1997.

         The following table presents the composition of Big Sky's loan
portfolio as of the dates indicated:

                                                                1997                             1996
(Dollars in thousands)            September 30,       ------------------------         ------------------------
                                      1998            Amount         % of Total        Amount         % of Total
                                     -------          -------          -------         -------          -------
                                                                                         
Commercial and Agricultural          $ 7,388          $ 7,005             35.7%        $ 5,942             33.0%
Consumer                               2,584            1,123              5.8             928              5.2
Real Estate
         Construction                  2,717            1,570              8.0           1,678              9.3
         Mortgage                      9,068            9,929             50.5           9,431             52.5
                                     -------          -------          -------         -------          -------
Total Gross Loans                    $21,757          $19,627            100.0%        $17,979            100.0%
                                     -------          -------          -------         -------          -------

Mortgage loans declined to $9.068 million at September 30, 1998 from $9.929
million at December 31, 1997, a decrease of 8.7 percent. In 1997 Big Sky
starting selling a large portion of residential real estate loans after staffing
a real estate department to originate loans for sale in the secondary investment
market. The decrease in real estate loan balances is primarily attributable to
Big Sky customers refinancing in 1997 through Big Sky's newly established real
estate department, and the sale of these loans on the secondary market.

         Nonperforming and Classified Assets. Federal regulation and Big Sky
loan policies require that Big Sky classify its assets on a regular basis. Big
Sky management generally places loans on non-accrual when they become 90 days
past due unless they are well secured and in the process of collection. When a
loan is placed on non-accrual status, any interest previously accrued but not
collected is reversed from income. Loans are charged off when management
determines that collection has become unlikely. OREO consists of real property
acquired through foreclosure on the related collateral underlying defaulted
loans.

         The following tables set forth certain information with respect to
non-performing assets as of the dates indicated:

                                                                                As of December 31,
                                                         As of                ---------------------
                                                   September 30, 1998          1997           1996
                                                  ---------------------       ------         ------
                                                                                    
Non-performing Loans: 
     Non-accrual loans                                     0                    0              0
     Accruing loans past due 90 days or more               0                    0              0
     Restructured loans                                    0                    0              0
                                                           -                    -              -

                                       37
   47

                                                                                          

         Total non-performing Assets                       0                    0                    0
Other real estate owned (OREO)                             0                    0                    0
     Total non-performing assets                           0                    0                    0
Non-performing assets to total loans and OREO             0.0%                 0.0%                 0.0%

         Big Sky has not held any OREO since the bank's inception.

         Investment Securities. Big Sky's investment portfolio is managed to
meet its liquidity needs and is utilized for pledging requirements for deposits
of state and political subdivisions and securities sold under repurchase
agreements. The portfolio is comprised of U.S. Treasury securities, U.S.
government agency securities, tax-exempt securities, mortgage-backed securities
and real estate investment conduits or REMICs. Federal funds sold are additional
investments that are not classified as investment securities. Investment
securities classified as available for sale are recorded at fair market value
while investment securities classified as held to maturity are recorded at
stockholders' equity for available for sale securities.

         The balance of investment securities increased to $7.193 million at
December 31, 1997 compared to $5.460 million at December 31, 1996. The increase
is attributable to the investment of excess funds provided from deposit growth,
additional Federal Home Loan Bank borrowings, and real estate loan refinancing
through Big Sky's new real estate department.

         Deposits. Big Sky's deposits consist primarily of demand deposits,
interest-bearing demand deposits, savings accounts and time deposits (CDs).

LIQUIDITY AND SOURCE OF FUNDS

         Liquidity is the ability of Big Sky to meet its day-to-day cash flow
requirements of customers who may wish to withdraw funds on deposit with Big Sky
or required funds to meet credit needs. Big Sky manages its liquidity with the
intent to meet the cash flow requirements while maintaining an appropriate
balance between assets and liabilities to meet the return on investment
objectives of its stockholders.

         Big Sky's primary sources of funds are customer deposits, maturity of
investment securities, loan repayments, net income, sales of "available for
sale" securities, and advances from the Federal Home Loan Bank of Seattle. Big
Sky primarily attracts deposits from its primary market areas through
competitive pricing policies and delivery of products demanded in the market.
Big Sky has recognized exceptional deposit growth over the past three years.
Deposit growth for 1995, 1996, and 1997 was 34.1%, 57.7%, and 5.9% respectively.
The outstanding deposit growth in 1996 can largely be attributed to the opening
of the new branch located in the Four Corners area. As of September 30, 1998,
deposits increased by $6.288 million over December 31, 1997, or 24.7 percent
during this period.

         Management anticipates that Big Sky will continue relying on customer
deposits, maturity of investment securities, loan repayments and net income to
provide liquidity. Although deposit balances have shown strong historical
growth, such balances may be influenced by changes in the banking industry,
interest rates available on other investments, general economic conditions,
competition and other factors. Federal Home Loan Bank borrowings may also be
used on a short-term basis to compensate for reduction in other sources of
funds. Federal Home Loan Bank borrowings may also be used on a long-term basis
to support expanded lending and to match maturities or repricing intervals of
assets.

         Capital Resources. Stockholders' equity increased approximately 66.4%
from $1.758 million in 1996 to $2.927 million in 1997. This large increase was
due primarily to the issuance of 7,150 shares of Big Sky 

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common stock in 1997 totaling $1,001,000 with the balance of the increase being
retained earnings and the net change in unrealized gains on available for sale
securities. Big Sky is subject to capital adequacy requirements established by
bank regulators. At December 31, 1997, and also as of September 30, 1998, Big
Sky was considered "Well Capitalized" under applicable bank regulatory
standards.

YEAR 2000

         Big Sky is committed to addressing Year 2000 (Y2K) issues in a prompt
and responsible manner, and has involved senior management and the necessary
resources to do so. Management has completed various phases of the plan and has
implemented action that will make all computer systems compliant in line with
the regulatory timeline guidelines. Big Sky compliance plan has several phase,
including (1) project responsibility; (2) awareness; (3) assessment; (4)
renovation; (5) validation; and (6) implementation.

- -        Project Responsibility: Big Sky has formed a Y2K project responsibility
         team consisting of senior management and three other individuals.
         Additionally, other employees and outside consultants are recruited to
         help with various parts of the project. A Y2K plan was developed and an
         ongoing process of implementing and carrying out the plan has been
         done. Robert L. Kester, Chairman/CEO has been kept informed of the
         progress of the project on a monthly basis and the board of directors
         is reported to at each regularly scheduled board meeting.

- -        Awareness: The year 2000 computer problem results from the design of
         many computer operating systems now in use. The internal logic of these
         systems expresses the year in two digits rather than four, and assumes
         that the first two digits are always 19. At the end of the century,
         these systems will revert to the year 1900 or to a previous date
         specified in the system logic, such as the year 1980. An additional
         consideration is that the year 2000 is a Leap Year and all date and
         calculation routines will need to be reviewed to ensure that they are
         compliant for that.

- -        Assessment:

         IDENTIFICATION OF MISSION CRITICAL APPLICATIONS
         The team members have identified all applications within the bank that
         they feel pose a risk. All items have been identified as far as
         application priority and what the bank will do in the event each
         identified item can not be made year 2000 compliant. Each vendor who
         provides the application has been notified in writing about the
         application and asked when the application will be year 2000 compliant.
         All vendor responses have been monitored.

         IDENTIFICATION OF CUSTOMERS
         The team members have developed a list of customers that may be
         impacted by the year 2000 issue. A personalized letter was mailed to
         all identified customers. Additionally, the bank has purchased three
         videos from the company of Young & Associates, Inc. titled "Year 2000:
         A Practical Guide to Staying in Business." This video has been designed
         specifically to show, lend, or give to our customers to make them aware
         of the year 2000 problem. We have assembled a packet of material which
         is available to each customer to assist them in developing and
         addressing their own year 2000 compliance program.

         Big Sky has also obtained a video from Young & Associates, Inc. titled
         "Nine Steps to Year 2000 Compliance" which is bank specific in regard
         to year 2000 compliance. This video has been shown to all staff members
         in an effort to keep them informed about the year 2000 situation.

         All loan customer files have been reviewed to assess the risk
         associated with repayment of loans in the event that a customer's
         business is not year 2000 compliant and/or their vendors are not
         compliant which 

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         could adversely affect their business. All large deposit customers have
         been assessed to determine the liquidity risk in the event they are not
         year 2000 compliant. Additionally, two statement stuffers have been
         developed and mailed to all customers.

         REPLACEMENT OR REPAIR OF EXISTING SOFTWARE OR HARDWARE
         All software and hardware items have been identified which could pose a
         risk to Big Sky. During 1997, Big Sky made a decision to upgrade all
         hardware and software programs. The cost of the upgrades was
         approximately $60,000. The upgrades made a substantial contribution to
         making the bank's hardware and software year 2000 complaint. A
         comprehensive PC Test Plan was developed and all testing has been
         completed on the PC's and the two network servers with all being
         compliant.

         CONTRACTS WITH VENDORS
         All existing contracts with vendors are being reviewed to address
         specific treatment of the year 2000 issue. Management has reviewed the
         financials and assessed the operational capabilities of both First
         Interstate BancSystem and FI-SERV, who provide data processing services
         to Big Sky, and has determined that they are both capable of providing
         year 2000 capability.

         CUSTOMER AWARENESS AND CUSTOMER CONTACT
         Big Sky has made its entire staff aware of the year 2000 problem in
         specific training meetings at both locations. Big Sky will continue to
         keep its staff updated on the year 2000 issue.

- -        Renovation: All systems tested to date have been Y2K compliant.
         Additional upgrades and renovation will be done if any systems are
         discovered that are not Y2K compliant.

- -        Validation: All testing of our internal systems has been completed with
         all being Y2K compliant. Testing of various systems at First Interstate
         BancSystem and the Federal Reserve System are being done based on their
         testing schedule. All have been Y2K compliant.

- -        Implementation: Michael F. Richards, President, a member of senior
         management and a director, is on the team and is very active in the
         development, day-to-day progress, and implementation of the Y2K
         project. This project has been given the highest priority and Big Sky
         is committed to do whatever is necessary to become compliant within and
         ahead of schedule as outlined by the regulatory agencies.

         Big Sky has developed contingency plans to address the most likely
"worst case" scenarios in the event that any of its systems or vendors are not
Y2K compliant.

                                       40
   50

                           SUPERVISION AND REGULATION

INTRODUCTION

         The following generally refers to certain statutes and regulations
affecting the banking industry. These references provide brief summaries only
and are not intended to be complete. They are qualified in their entirety by the
referenced statutes and regulations. In addition, some statutes and regulations
may exist which apply to and regulate the banking industry, but are not
referenced below.

         Glacier is a bank holding company, due to its ownership of Glacier
Bank, Glacier Bank of Whitefish, Glacier Bank of Eureka, Valley Bank of Helena,
and First Security Bank of Missoula, all of which are Montana-state chartered
commercial banks, and all of which are members of the Federal Reserve
(collectively, the "State Banks"). Prior to Glacier Bank's conversion from a
federal savings bank to a state-chartered commercial bank, Glacier was also a
savings and loan holding company within the meaning of the Home Owners' Loan Act
and, as such, was registered with and subject to examination and supervision by
the Office of Thrift Supervision. The Bank Holding Company Act of 1956, as
amended ("BHCA") subjects Glacier and the State Banks to supervision and
examination by the Federal Reserve Bank ("FRB"), and Glacier files annual
reports of operations with the FRB. Big Sky is a Montana state-chartered
commercial bank.

BANK HOLDING COMPANY REGULATION

         In general, the BHCA limits bank holding company business to owning or
controlling banks and engaging in other banking-related activities. Bank holding
companies must obtain the FRB's approval before they: (1) acquire direct or
indirect ownership or control of any voting shares of any bank that results in
total ownership or control, directly or indirectly, of more than 5% of the
voting shares of such bank; (2) merge or consolidate with another bank holding
company; or (3) acquire substantially all of the assets of any additional banks.
Subject to certain state laws, such as age and contingency laws, a bank holding
company that is adequately capitalized and adequately managed may acquire the
assets of both in-state and out-of-state bank.

         Control of Nonbanks. With certain exceptions, the BHCA 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 FRB determines that the activities of such company are incidental or closely
related to the business of banking. If a bank holding company is
well-capitalized and meets certain criteria specified by the FRB, it may engage
de novo in certain permissible nonbanking activities without prior FRB approval.

         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 FRB with 60 days' prior
written notice of the proposed acquisition. Following receipt of this notice,
the FRB has 60 days within which to issue a notice disapproving the proposed
acquisition, but the FRB may extend this time period for up to another 30 days.
An acquisition may be completed before expiration of the disapproval period if
the FRB issues written notice of its intent not to disapprove the transaction.
In addition, any "company" must obtain the FRB's approval before acquiring 25%
(5% if the "company" is a bank holding company) or more of the outstanding
shares or otherwise obtaining control over Glacier.

TRANSACTIONS WITH AFFILIATES

         Glacier and its subsidiaries are deemed affiliates within the meaning
of the Federal Reserve Act, and transactions between affiliates are subject to
certain restrictions. Accordingly, Glacier and its subsidiaries must comply with
Sections 23A and 23B of the Federal Reserve Act. Generally, Sections 23A and
23B: (1) limit the extent to which the financial institution or its subsidiaries
may engage in "covered transactions" with an affiliate, 

                                       41
   51

as defined, to an amount equal to 10% of such institution's capital and surplus
and an aggregate limit on all such transactions with all affiliates to an amount
equal to 20% of such capital and surplus, and (2) require 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

         Glacier 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 Glacier 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 FRB has adopted significant amendments to its anti-tying rules
that: (1) removed FRB-imposed anti-tying restrictions on bank holding companies
and their non-bank subsidiaries; (2) allow banks greater flexibility to package
products with their affiliates; and (3) establish a safe harbor from the trying
restrictions for certain foreign transactions. These amendments were designed to
enhance competition in banking and nonbanking products and to allow banks and
their affiliates to provide more efficient, lower cost service to their
customers. However, the impact of the amendments on Glacier and its subsidiaries
is unclear at this time.

STATE LAW RESTRICTIONS

         As a Delaware corporation, Glacier may be subject to certain
limitations and restrictions as provided under applicable Delaware corporate
law. Each of the State Banks and Big Sky, as Montana state-chartered commercial
banks, are subject to supervision and regulation by the Montana Department of
Commerce's Banking and Financial Institutions Division.

THE SUBSIDIARIES

GENERAL

         Glacier's subsidiaries, as well as Big Sky, are subject to extensive
regulation and supervision by the Montana Department of Commerce's Banking and
Financial Institutions Division, and the State Banks are also subject to
regulation and examination by the FRB as a result of their membership in the
Federal Reserve System. Big Sky is subject to regulation by the FDIC as a state
non-member commercial bank. The federal laws that apply to Glacier's banking
subsidiaries and Big Sky 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. The laws and regulations governing Glacier's banking subsidiaries and Big
Sky generally have been promulgated to protect depositors and not to protect
stockholders of such institutions or their holding companies.

                                       42
   52

         CRA. The Community Reinvestment Act (the "CRA") requires that, in
connection with examinations of financial institutions within their
jurisdiction, the Federal Reserve or the FDIC evaluates the record of the
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 imposed by the Federal Reserve Act on extensions of credit to
executive officers, directors, principal shareholders, or any related interests
of such persons. Extensions of credit (i) 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 persons not covered above and who are not
employees; and (ii) must not involve more than the normal risk of repayment or
present other unfavorable features. Banks are also subject to certain lending
limits and restrictions on overdrafts to such persons. A violation of these
restrictions may result in the assessment of substantial civil monetary
penalties on the affected bank or any officer, director, employee, agent, or
other person participating in the conduct of the affairs of that bank, the
imposition of a cease and desist order, and other regulatory sanctions.

         FDICIA. Under the Federal Deposit Insurance Corporation Improvement Act
(the "FDICIA"), each federal banking agency has prescribed, by regulation,
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 which fails to meet these
standards must develop a plan acceptable to the agency, specifying the steps
that the institution will take to meet the standards. Failure to submit or
implement such a plan may subject the institution to regulatory sanctions.
Management of Glacier and Big Sky believes that Glacier's subsidiary banks and
Big Sky meet all such standards, and therefore, does not believe that these
regulatory standards materially affect Glacier's or Big Sky's business
operations.

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.

         Under recent FDIC regulations, banks are prohibited from using their
interstate branches primarily for deposit production. The FDIC has accordingly
implemented a loan-to-deposit ratio screen to ensure compliance with this
prohibition.

         With regard to interstate bank mergers, Montana has "opted-out" of the
Interstate Act and prohibits in-state banks from merging with out-of-state banks
if the merger would be effective on or before September 30, 2001. Montana law
generally authorizes the acquisition of an in-state bank by an out-of-state bank
holding company through the acquisition of a financial institution if the
in-state bank being acquired has been in existence for at least 5 years prior to
the acquisition. 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 

                                       43
   53

unions located in Montana. Montana law does not authorize the establishment of a
branch bank in Montana by an out-of-state bank.

         At this time, the full impact that the Interstate Act might have on
Glacier, its subsidiary banks and Big Sky is impossible to predict.

DEPOSIT INSURANCE

         The deposits of the Subsidiary Banks and of Big Sky 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 required to pay
semi-annual deposit insurance premium assessments to the FDIC.

         The FDICIA included provisions to reform the Federal Deposit Insurance
System, including the implementation of risk-based deposit insurance premiums.
The FDICIA also permits the FDIC to make special assessments on insured
depository institutions in amounts determined by the FDIC to be necessary to
give it adequate assessment income to repay amounts borrowed from the U.S.
Treasury and other sources, or for any other purpose the FDIC deems necessary.
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 BIF.
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 Glacier's cash revenues is dividends received
from its 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. Other than the laws and regulations
noted above, which apply to all banks and bank holding companies, neither
Glacier, its subsidiary banks or Big Sky is currently subject to any regulatory
restrictions on its dividends.

CAPITAL ADEQUACY

         Federal bank regulatory agencies use capital adequacy guidelines in the
examination and regulation of bank holding companies and banks. If capital falls
below minimum guideline levels, the holding company or bank may be denied
approval to acquire or establish additional banks or nonbank businesses or to
open new facilities.

         The FDIC and Federal Reserve use risk-based capital guidelines for
banks and bank holding companies. These are designed to make such capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance sheet items. The guidelines are minimums, and the Federal
Reserve has noted that bank holding companies contemplating significant
expansion programs should not allow expansion to diminish their capital ratios
and should maintain ratios well in excess of the minimum. The current guidelines
require all bank holding companies and federally regulated banks to maintain a
minimum risk-based total capital ratio equal to 8%, of which at least 4% must be
Tier I capital.

                                       44
   54

         Tier I capital for bank holding companies includes common shareholders'
equity, qualifying perpetual preferred stock (up to 25% of total Tier I capital,
if cumulative, although under a Federal Reserve Rule, redeemable perpetual
preferred stock may not be counted as Tier I capital unless the redemption is
subject to the prior approval of the Federal Reserve), and minority interests in
equity accounts of consolidated subsidiaries, less intangibles, except as
described above. Tier 2 capital includes: (i) the allowance for loan losses of
up to 1.25% of risk-weighted assets; (ii) any qualifying perpetual preferred
stock which exceeds the amount which may be included in Tier I capital; (iii)
hybrid capital instruments; (iv) perpetual debt; (v) mandatory convertible
securities; and (vi) subordinated debt and intermediate term preferred stock of
up to 50% of Tier I capital. Total capital is the sum of Tier I and Tier 2
capital, less reciprocal holdings of other banking organizations, capital
instruments, and investments in unconsolidated subsidiaries.

         The assets of banks and bank holding companies receive risk-weights of
0%, 20%, 50%, and 100%. In addition, certain off-balance sheet items are given
credit conversion factors to convert them to asset equivalent amounts to which
an appropriate risk-weight will apply. These computations result in total
risk-weighted assets.

         Most loans are assigned to the 100% risk category, except for first
mortgage loans fully secured by residential property, which carry a 50% rating.
Most investment securities are assigned to the 20% category, except for
municipal or state revenue bonds, which have a 50% risk-weight, and direct
obligations of or obligations guaranteed by the United States Treasury or
agencies of the federal government, which have 0% risk-weight. In converting
off-balance sheet items, direct credit substitutes, including general guarantees
and standby letters of credit backing financial obligations, are given a 100%
conversion factor. Transaction related contingencies such as bid bonds, other
standby letters of credit and undrawn commitments, including commercial credit
lines with an initial maturity of more than one year, have a 50% conversion
factor. Short-term, self-liquidating trade contingencies are converted at 20%,
and short-term commitments have a 0% factor.

         The Federal Reserve also employs a leverage ratio, which is Tier I
capital as a percentage of total assets less intangibles, to be used as a
supplement to risk-based guidelines. 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 Federal Reserve requires a minimum
leverage ratio of 3%. However, for all but the most highly rated bank holding
companies, and for bank holding companies seeking to expand, the Federal Reserve
expects an additional cushion of at least 1% to 2%.

         The FDICIA created a statutory framework of supervisory actions indexed
to the capital level of the individual institution. Under regulations adopted by
the FDIC, 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.
Institutions which are deemed to be "undercapitalized" depending on the category
to which they are assigned are subject to certain mandatory supervisory
corrective actions. Glacier and Big Sky do not believe that these regulations
have any material effect on their operations.

EFFECTS OF GOVERNMENT MONETARY POLICY

         The earnings and growth of Glacier and Big Sky are affected not only by
general economic conditions, but also by the fiscal and monetary policies of the
federal government, particularly the Federal Reserve. The Federal Reserve can
and does implement 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 nature
and impact of future changes in monetary policies and their impact on Glacier,
its subsidiary banks and Big Sky cannot be predicted with certainty.

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   55

CHANGES IN BANKING LAWS AND REGULATIONS

         The laws and regulations that affect banks and bank holding companies
are currently undergoing significant changes. This year, legislation was
proposed in Congress which contained proposals to alter the structure,
regulation, and competitive relationships of the nation's financial
institutions. Although the legislation was not passed in the 1998 general
session of Congress, similar legislation may be proposed in the coming years
and, if enacted into law, such bills could have the effect of increasing or
decreasing the cost of doing business, limiting or expanding permissible
activities (including activities in the insurance and securities fields), or
affecting the competitive balance among banks, savings associations, and other
financial institutions. Some of these bills may reduce the extent of federal
deposit insurance, broaden the powers or the geographical range of operations of
bank holding companies, alter the extent to which banks could engage in
securities activities, and change the structure and jurisdiction of various
financial institution regulatory agencies. Whether or in what form such
legislation may be adopted, or the extent to which the business of Glacier might
be affected thereby, cannot be predicted with certainty.

                     DESCRIPTION OF GLACIER'S CAPITAL STOCK

         Glacier's authorized capital stock consists of 15,000,000 common stock
shares with a $.01 per share par value, and 1,000,000 preferred stock shares
with a $.01 per share par value. As of the date of this Prospectus/Proxy
Statement, Glacier had no shares of preferred stock issued. The Glacier Board is
authorized, without further stockholder action, to issue preferred stock shares
with such designations, preferences and rights as the Glacier Board may
determine.

         Glacier's stockholders do not have preemptive rights to subscribe to
any additional securities that may be issued. If Glacier is liquidated, the
holders of Glacier common stock are entitled to share, on a pro rata basis,
Glacier's remaining assets after provision for liabilities. The Glacier Board is
authorized to determine the liquidation rights of any preferred stock that may
be issued.

         Under the Delaware General Corporation Law ("DGCL"), a stockholder who
has neither voted in favor of a proposed merger nor consented in writing to a
proposed merger is entitled to an appraisal by the Delaware Court of Chancery of
the fair value of his or her shares, unless the merger is a stock-for-stock
merger and either (i) the stock is listed on a national exchange or is
designated a national market system security on an interdealer quotation system
by The NASDAQ Stock Market, (ii) the stock is held by more than 2,000
stockholders, or (iii) stockholders are not entitled to vote on the merger.
Because Glacier's common stock is traded on NASDAQ, in the event of a proposed
merger, Glacier stockholders will not be entitled under Delaware law to
appraisal rights (rights to receive the fair value of their shares in cash upon
dissent from the proposed merger and rights to an appraisal of the fair value of
their shares), regardless of whether such Glacier stockholders vote for or
against the proposed merger.

         Under the DGCL, Glacier may acquire shares of its own stock. Glacier's
stockholders may amend Glacier's Certificate of Incorporation by an affirmative
majority vote of the shares entitled to vote on the matter following approval of
the amendment by Glacier's Board, but the anti-takeover provisions detailed in
Section 9.6 of Glacier's Certificate of Incorporation, may not be amended or
repealed and provisions inconsistent with Article 9 may not be adopted without
the affirmative vote of 80% of Glacier's outstanding voting stock. Glacier's
Board is authorized to alter, amend or repeal Glacier's Bylaws by affirmative
vote; Glacier's stockholders are authorized to alter, amend or repeal Glacier's
Bylaws by majority vote at an annual stockholders meeting or at a special
stockholders meeting.

         For additional information concerning Glacier's capital stock, see
"COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF GLACIER AND BIG SKY COMMON STOCK."

                                       46
   56

                   COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
                        GLACIER AND BIG SKY COMMON STOCK

         The DGCL and Glacier's Certificate of Incorporation and Bylaws govern
the rights of Glacier stockholders and will govern the rights of Big Sky's
stockholders who become stockholders of Glacier as a result of the Share
Exchange. The rights of Big Sky stockholders are currently governed by the MBCA
and by Big Sky's Articles of Agreement and Bylaws. The following is a brief
summary of certain differences between the rights of Big Sky and Glacier
stockholders. This summary does not purport to be complete and is qualified by
the documents and statutes referenced and by other applicable law.

GENERAL

         Under its Certificate of Incorporation, Glacier's authorized capital
stock consists of 15,000,000 of common stock, par value $.01 per share, and
1,000,000 shares of preferred stock, $.01 par value per share. No shares of
preferred stock are currently outstanding.

         Under its Articles of Agreement, as amended, Big Sky's authorized
capital consists of 20,400 shares of common stock, $40.00 par value per share.

         The following is a more detailed description of Glacier's and Big Sky's
capital stock.

COMMON STOCK

         As of September 30, 1998, there were 8,319,940 shares of Glacier common
stock issued and outstanding, in addition to options for the purchase of 511,902
shares of Glacier common stock under Glacier's employee and director stock
option plans.

         As of September 30, 1998, there were 20,400 shares of Big Sky common
stock issued and outstanding. Additionally, 2,500 shares of Big Sky common stock
are reserved for issuance upon the conversion of Big Sky's Debentures.

PREFERRED STOCK

         As of the date of this Prospectus/Proxy Statement, neither Glacier nor
Big Sky had shares of preferred stock issued. The Glacier board of directors is
authorized, without further stockholder action, to issue preferred stock shares
with such designations, preferences and rights as the Glacier board of directors
may determine.

DIVIDEND RIGHTS

         Dividends may be paid on Glacier common stock as and when declared by
the Glacier board of directors out of funds legally available for the payment of
dividends. The Glacier board of directors may issue preferred stock that is
entitled to such dividend rights as the board of directors may determine,
including priority over the common stock in the payment of dividends. The
ability of Glacier to pay dividends basically depends on the amount of dividends
paid to it by its subsidiaries. Accordingly, the dividend restrictions imposed
on the subsidiaries by statute or regulation effectively may limit the amount of
dividends Glacier can pay. See "SUPERVISION AND REGULATION -- The Bank
Subsidiaries; Dividend Restrictions." Under the DGCL, the Glacier board of
directors can declare dividends out of Glacier's surplus. If there is no
surplus, the board of directors may declare dividends out of Glacier's net
profits for the fiscal year in which the dividend is declared, or for the
preceding fiscal year, unless there is a deficiency in the amount of capital
represented by the issued and outstanding stock of all classes having a
preference to the distribution of assets.

                                       47
   57

VOTING RIGHTS

         All voting rights are currently vested in the holders of Glacier common
stock and Big Sky common stock, with each share being entitled to one vote.

         Glacier's Bylaws provide that stockholders do not have cumulative
voting rights in the election of directors. Under governing law Big Sky
stockholders are entitled to cumulate their shares in the voting for directors
by multiplying the number of shares held by the number of directors to be
elected and distributing the votes among the candidates. The Glacier board of
directors is also authorized to determine the voting rights of any preferred
stock that may be issued.

PREEMPTIVE RIGHTS

         Glacier's and Big Sky's stockholders do not have preemptive rights to
subscribe to any additional securities that may be issued.

LIQUIDATION RIGHTS

         If Glacier is liquidated, the holders of Glacier common stock are
entitled to share, on a pro rata basis, Glacier's remaining assets after
provision for liabilities. The Glacier board of directors is authorized to
determine the liquidation rights of any preferred stock that may be issued.

         If Big Sky is voluntarily liquidated, the holders of Big Sky common
stock are entitled to share, on a pro rata basis, Big Sky's remaining assets
after provision for liabilities, subject to certain limitations and bank
regulatory requirements applicable to Big Sky under the Montana Bank Act.

ASSESSMENTS

         All outstanding shares of Glacier common stock are fully paid and
nonassessable.

         All outstanding shares of Big Sky common stock are fully paid and
nonassessable except to the extent of assessments under the Montana Bank Act.

STOCK REPURCHASES

         Under Delaware law, a corporation may acquire shares of its own stock.
Therefore, Glacier may repurchase shares of its own capital stock. Montana
banking statutes prohibit banks from purchasing their own stock unless necessary
to prevent loss to the bank on debts previously contracted.

AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS

         Under Delaware law, Glacier's stockholders may amend Glacier's
Certificate of Incorporation by an affirmative majority vote of the shares
entitled to vote on the matter following approval of the amendment by Glacier's
Board, but the anti-takeover provisions detailed in Article 9 of Glacier's
Certificate of Incorporation may not be amended or repealed, and provisions
inconsistent with Article 9 may not be adopted, without the affirmative vote of
80% of the outstanding voting stock. Glacier's board of directors is authorized
to alter, amend or repeal Glacier's Bylaws by affirmative vote; Glacier's
stockholders are authorized to alter, amend or repeal Glacier's Bylaws by
majority vote at an annual stockholders meeting or at a special stockholders
meeting.

         Under the MBCA, Big Sky stockholders may amend the Articles of
Agreement of Big Sky by an affirmative majority vote of the shares entitled to
vote on the matter following recommendation of the 

                                       48
   58

amendment by Big Sky's Board (unless special circumstances exist, in which case
no Board recommendation is required).

         Big Sky's Board is authorized to amend or repeal Big Sky's Bylaws, and
to adopt new Bylaws, in its discretion upon the affirmative vote of a majority
of Big Sky's Board when a quorum is present. Under the MBCA, Big Sky's
stockholders are also authorized to amend or repeal Big Sky's Bylaws upon the
affirmative vote of a majority of Big Sky's stockholders when a quorum is
present.

APPROVAL OF CERTAIN TRANSACTIONS

         Under the DGLA, sales of assets, mergers and dissolutions must be
approved by a majority of a corporation's outstanding stock. In addition, the
DGLA prohibits certain business combinations with a business entity for a period
of three years following the entity's acquisition of at least 15% of the
corporation's voting stock. Article 9 of Glacier's Certificate of Incorporation
provides that certain mergers involving a stockholder owning 10% or more of
Glacier's outstanding voting stock must be approved by 80% of Glacier's
outstanding voting stock. These provisions are described in "Potential
`Anti-Takeover' Provisions" below.

         Under the MBCA, unless a corporation's articles of incorporation
provide for a greater vote, approval by at least two-thirds of the outstanding
shares entitled to vote or two-thirds of each voting group is required for
mergers, asset sales, and dissolutions. Separate voting by voting groups is
required (i) on a plan of share exchange, and (ii) on a plan of merger if it
contains provisions that would require separate voting if contained in an
amendment to articles of incorporation. Big Sky's Articles of Agreement do not
contain provisions pertaining to stockholder approval of mergers and share
exchanges.

DISSENTERS' RIGHTS

         Under the DGCL, a stockholder who has neither voted in favor of a
proposed merger nor consented in writing to a proposed merger is entitled to an
appraisal by the Delaware Court of Chancery of the fair value of his or her
shares, unless the merger is a stock-for-stock merger and either (i) the stock
is listed on a national exchange or is designated a national market system
security on an interdealer quotation system by The NASDAQ Stock Market, (ii) the
stock is held by more than 2,000 stockholders, or (iii) stockholders are not
entitled to vote on the merger. Because Glacier's Common Stock is traded on
Nasdaq, in the event of a proposed merger, Glacier stockholders will not be
entitled under Delaware law to appraisal rights (rights to receive the fair
value of their shares in cash upon dissent from the proposed merger and rights
to an appraisal of the fair value of their shares), regardless of whether a
Glacier stockholder votes for or against such proposed merger.

         Under the MBCA, a stockholder is entitled to dissent from, and, upon
completion of various notice and demand requirements prescribed in Section
35-1-826 through Section 35-1-839, to obtain payment of the fair value of his or
her shares in the event of certain corporate actions, including certain mergers,
share exchanges, sales of substantially all assets of the corporation, and
certain amendments to the corporation's articles of incorporation.

BOARD OF DIRECTORS

         Glacier's Certificate of Incorporation provide for division of its
Board into three classes, as nearly equal in number as possible. Each director
serves for a three-year term, and the classes are staggered so that one class is
elected each year. The Glacier Board sets the exact number of directors by
resolution. Currently, the Glacier Board has ten directors. A Glacier director
may be removed with cause by Glacier's stockholders if a majority of the
stockholders entitled to vote on the matter vote in favor of removal at a
meeting expressly called for that purpose. A Glacier director may not be removed
without cause.

                                       49
   59

         Big Sky's Articles of Agreement provide for the annual election of its
Board by the stockholders. Between annual meetings, a majority of the Board is
authorized to increase the number of directors by up to two additional
directors. Big Sky's Articles of Agreement further provide that the number of
directors on the Board shall not be less than three and shall not exceed eleven.
A Big Sky director may be removed with or without cause by Big Sky's
stockholders if at least two-thirds of the stockholders entitled to vote at an
election of directors vote in favor of removal at a meeting expressly called for
that purpose. Big Sky stockholders may cumulate votes in voting for or against
the removal of a director to the same extent such votes may be cumulated in
voting for or against the appointment of a director. Big Sky's Bylaws prohibit
the re-election of a director who reaches the age of 70 years prior to the
annual stockholders' meeting, unless the director is an original shareholder or
organizer, or the restriction is waived by a majority of the Board.

INDEMNIFICATION AND LIMITATION OF LIABILITY

         Glacier's Certificate of Incorporation provides that the personal
liability of Glacier's directors and officers for monetary damages shall be
eliminated to the fullest extent permitted under the DGCL.

         Glacier's Bylaws provide that Glacier will indemnify any present or
former director, officer or employee, or any present or former director, officer
or employee of another business entity serving in such capacity at Glacier's
request, from any threatened, pending or completed action, suit or proceeding
against expenses (including attorney's fees), judgments, fines, excise taxes and
settlement amounts actually and reasonably incurred by such person to the
fullest extent permitted under Sections 145(a)-(d) of the DGCL. Glacier will not
be liable, however, for any settlement amounts which are effected without
Glacier's prior written consent, or any amounts claimed in an action that was
initiated by any person seeking indemnification without Glacier's prior written
consent. Reasonable expenses (including attorney's fees) will be advanced to any
person claiming indemnification, if that person undertakes in writing to repay
Glacier if it is ultimately determined that the person is not entitled to
indemnification. Glacier's obligation to indemnify and advance expenses to
persons covered by Glacier's bylaw indemnification provisions will continue
despite the subsequent amendment or repeal of such provisions.

         Big Sky's Articles of Agreement allow Big Sky to indemnify its
individual directors from personal liability to the extent permitted by the
MBCA. Big Sky's Bylaws further provide that Big Sky shall indemnify each
director to the extent permitted by the MBCA and shall further provide liability
insurance for the directors with a reputable insurance carrier.

         The MBCA provides for mandatory indemnification of a director or
officer who has been wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the director was made a party because he is
or was a director or officer of the corporation. The MBCA also provides for
discretionary indemnification by a corporation of a director, officer or
employee subject to certain statutory requirements.

POTENTIAL "ANTI-TAKEOVER" PROVISIONS

         Glacier's Certificate of Incorporation and the DGCL contain certain
provisions which may limit or prevent certain acquisitions. These provisions are
briefly summarized below.

         1.       Glacier's Certificate of Incorporation.

         Glacier's Certificate of Incorporation includes certain provisions that
could make it more difficult for another party to acquire Glacier by means of a
tender offer, a proxy contest, merger or otherwise. These provisions include (i)
a requirement that at least 80% of Glacier's outstanding voting stock approve
business combinations (discussed in more detail below), (ii) an authorization to
Glacier's Board allowing it to issue 

                                       50
   60

preferred stock (discussed in more detail below), and (iii) restrictions on
removal of directors which could limit changes in the composition of the Glacier
Board (see "-- Board of Directors" above).

         Article 9 of Glacier's Certificate of Incorporation contains detailed
provisions governing certain change-in-control transactions, including mergers
and consolidations, and significant sales of corporate assets, involving
business entities owning at least 10% of Glacier's outstanding voting stock, or
which have the opportunity, through beneficial ownership of the voting stock or
rights to acquire Glacier voting stock, to own or control at least 10% of
Glacier's voting stock. Other transactions treated as business combinations
under these change-in-control provisions are detailed in Section 9.1 of
Glacier's Certificate of Incorporation. All such business combinations must be
approved by at least 80% of Glacier's outstanding voting stock entitled to vote
generally in the election of directors, all of which will vote as one class,
with each share entitled to the number of votes that it is granted either under
the Certificate of Incorporation, or, if preferred stock, as designated by the
Board of Directors when the preferred shares were issued. The "super-majority"
voting requirement applies regardless of other requirements in Glacier's
Certificate of Incorporation and Bylaws, lesser voting requirements provided by
applicable law, and requirements imposed under any agreement between Glacier and
any national securities exchange.

         The "super-majority" voting requirement does not apply to those
business combinations which meet all the criteria prescribed in Section 9.2 of
Glacier's Certificate of Incorporation. Some of these stringent criteria include
the approval of the business combination by directors unaffiliated with the
Glacier stockholder seeking the business combination, the payment of fair and
adequate consideration (based upon recent pricing history of Glacier's stock),
limitations on the form of consideration payable to Glacier's stockholders, and
Glacier's continuing ability to pay dividends of a consistent value on its
outstanding stock. Other requirements are detailed in Section 9.2 of Glacier's
Certificate of Incorporation.

         In addition, the authorization of preferred stock, which is intended
primarily as a financing tool and not as a defense against takeovers, may
potentially be used by management to render more difficult uninvited attempts to
acquire control of Glacier (e.g., by diluting the ownership interest of a
substantial stockholder, increasing the amount of consideration necessary for a
stockholder to obtain control, or selling authorized but unissued shares to
friendly third parties).

         The requirement of a super-majority vote of stockholders to approve
change-in-control transactions, the availability of Glacier's preferred stock
for issuance without stockholder approval, the staggered terms for Glacier's
directors, provisions in Glacier's Certificate of Incorporation permitting the
removal of directors only for cause and the Glacier Board's ability to expand
the Board size and fill resulting vacancies, may have the effect of lengthening
the time required for a person to acquire control of Glacier through a tender
offer, proxy contest, the election of a majority of the Glacier Board, or
otherwise, and may deter any potential unfriendly offers or other efforts to
obtain control of Glacier. This could deprive Glacier's stockholders of
opportunities to realize a premium for their Glacier common stock and could make
removal of incumbent directors more difficult, even in circumstances where the
action was favored by a majority of Glacier's stockholders.

         2.       Delaware Law.

         Delaware's significant anti-takeover provisions are generally described
below.

         Delaware prohibits business combinations with an interested stockholder
(i.e., a stockholder who owns at least 15% of the voting stock of a corporation)
for a period of three years following the date the stockholder becomes
interested. Business combinations with an interested stockholder are not
prohibited, however, if (i) the corporation's board of directors approves in
advance either the business combination or the transaction in which the
stockholder becomes an interested stockholder, (ii) the stockholder acquires 85%
or more of the outstanding voting stock in the same transaction in which the
stockholder becomes interested, or (iii) the board of directors approves 

                                       51
   61

the business combination and at least two-thirds of the outstanding voting stock
(excluding those shares held by the acquiring stockholder) approve the
transaction by affirmative vote.

         These change-of-control provisions of the DGCL will not apply if (i) a
corporation expressly elects not to follow them, (ii) a stockholder
inadvertently becomes interested and divests his shares as soon as practicable,
or (iii) the corporation has no stock listed on a national securities exchange,
authorized for quotation on an inter dealer quotation system of a registered
national securities association, or held of record by more than 2,000
stockholders.

         3.       Montana Law.

         The MBCA contains no significant anti-takeover provisions. All
provisions regarding mergers, consolidations, exchange of shares and related
business combinations are governed by Sections 35-1-813 through 35-1-839, the
MBCA's standard merger and consolidation provisions, and Section 32-1-371, which
relates solely to the consolidation or merger of banking corporations. Big Sky's
Articles of Agreement do not contain any anti-takeover provisions.

                              CERTAIN LEGAL MATTERS

         The validity of the Glacier common stock to be issued in the Share
Exchange will be passed upon for Glacier by its counsel, Graham & Dunn, P.C.,
Seattle, Washington. Graham & Dunn, P.C. also will give an opinion concerning
certain tax matters related to the Merger.

                                     EXPERTS

         The consolidated financial statements of Glacier as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, are incorporated in this Prospectus/Proxy Statement and in the
Registration Statement in reliance on the report of KPMG Peat Marwick LLP,
independent certified public accountants, as indicated in their reports with
respect thereto, and on the authority of such firm as experts in accounting and
auditing.

         The financial statements of Big Sky as of December 31, 1997 and for the
year then ended included in this Prospectus/Proxy Statement and in the
Registration Statement in reliance on the report of KPMG Peat Marwick LLP,
independent certified public accountants, as indicated in their report with
respect thereto, and on the authority of such as experts in accounting and
auditing.

                       WHERE YOU CAN FIND MORE INFORMATION

         Glacier files annual, quarterly and current reports, proxy statements,
and other information with the SEC. You may read and copy any reports,
statements, or other information that Glacier files at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Glacier's SEC filings are also
available to the public on the SEC Internet site (http://www.sec.gov).

         Glacier has filed a Registration Statement on Form S-4 (File No. 333-
______) to register with the SEC, the Glacier common stock to be issued to Big
Sky stockholders in the Share Exchange. This Prospectus/Proxy Statement is part
of that Registration Statement and constitutes a prospectus of Glacier in
addition to being a proxy statement of Big Sky for the Big Sky special
stockholders meeting. As allowed by SEC rules, this Prospectus/Proxy Statement
does not contain all of the information that you can find in the Registration
Statement or the exhibits to the Registration Statement.

                                       52
   62

                      INFORMATION INCORPORATED BY REFERENCE

         The SEC allows Glacier to "incorporate by reference" information into
this Prospectus/Proxy Statement, which means that Glacier can disclose important
information to you by referring you to another document filed separately by
Glacier with the SEC. The information incorporated by reference is deemed to be
part of this Prospectus/Proxy Statement, except for any information superseded
by any information in this Prospectus/Proxy Statement. This Prospectus/Proxy
Statement incorporates by reference the documents set forth below that Glacier
has previously filed with the SEC. These documents contain important information
about Glacier and its finances:

         -        Annual Report on Form 10-K for the year ended December 31,
                  1997;

         -        Quarterly Reports on Form 10-Q for the quarters ended March
                  31, 1998; June 30, 1998 and September 30, 1998;

         -        Proxy Statement for Glacier's 1998 Annual Meeting of
                  Stockholders; and

         -        Current Reports on Form 8-K filed January 16, 1998; March 10,
                  1998; September 3, 1998; and October 26, 1998.

         Copies of Glacier's Annual Report for the year ended December 31, 1997,
and Glacier's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, accompany this Prospectus/Proxy Statement.

         As described in "INFORMATION CONCERNING GLACIER", information filed
with the SEC prior to July 8, 1998 was filed by, and describes, "Original
Glacier", Glacier's predecessor corporation.

         Glacier is also incorporating by reference additional documents that
Glacier files with the SEC between the date of this Prospectus/Proxy Statement
and the date of the special meeting of Big Sky stockholders.

         You can obtain the documents that are incorporated by reference through
Glacier or the SEC. You can obtain the documents from the SEC, as described
above under "WHERE YOU CAN FIND MORE INFORMATION". These documents are also
available from Glacier without charge, excluding exhibits unless Glacier has
specifically incorporated such exhibits by reference in this Prospectus/Proxy
Statement. You may obtain documents incorporated by reference in this
Prospectus/Proxy Statement by requesting them from Glacier at 49 Commons Loop,
P.O. Box 27, Kalispell, Montana 59903-0027, telephone number (406) 756-4200,
ATTN: James H. Strosahl. If you would like to request documents from Glacier,
please do so by January ___, 1999 to receive them before the Big Sky special
stockholders meeting.

         Glacier has supplied all of the information concerning it contained in
this Prospectus/Proxy Statement, and Big Sky has supplied all of the information
concerning it.

         YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS/PROXY STATEMENT IN DECIDING HOW TO VOTE ON THE
SHARE EXCHANGE. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
OTHER THAN WHAT IS CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT. THIS
PROSPECTUS/PROXY STATEMENT IS DATED DECEMBER __, 1998. YOU SHOULD NOT ASSUME
THAT INFORMATION CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT IS ACCURATE AS OF
ANY OTHER DATE, AND NEITHER THE MAILING OF THIS PROSPECTUS/PROXY STATEMENT TO
BIG SKY STOCKHOLDERS NOR THE ISSUANCE OF GLACIER COMMON STOCK IN THE SHARE
EXCHANGE WILL CREATE ANY IMPLICATION TO THE CONTRARY.

                                       53
   63

                                  OTHER MATTERS

         The Big Sky Board is not aware of any business to come before the Big
Sky special stockholders meeting, other than those matters described above in
this Prospectus/Proxy Statement. However, if any other matters should properly
come before the meeting, it is intended that proxies in the accompanying form
will be voted on such matters in accordance with the judgment of the persons
voting the proxies.

                                       54

   64

                          Independent Auditors' Report

The Board of Directors and Stockholders
Big Sky Western Bank

We have audited the accompanying statement of financial condition of Big Sky
Western Bank as of December 31, 1997 and the related statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Big Sky Western Bank as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

/s/ KPMG Peat Marwick LLP

Billings, Montana
November 2, 1998

   65

                              BIG SKY WESTERN BANK

                          Independent Auditor's Report

                                       and

                              Financial Statements

                                December 31, 1997

        Unaudited December 31, 1996 Statement of Financial Condition, and

    unaudited Statements of Operations, Stockholders' Equity, and Cash Flows

                      for the year ended December 31, 1996.

   66

                        STATEMENTS OF FINANCIAL CONDITION

                                                                                                    (Unaudited)
                                                                                  December 31,      December 31,
                     (dollars in thousands except share data)                         1997             1996
                                                                                     -------          -------
                                                                                              
ASSETS:
     Cash on hand and in banks ............................................          $ 1,933            2,175
     Federal funds sold ...................................................            2,500            2,425
     Interest bearing deposits ............................................               83               66
                                                                                     -------          -------
          Cash and cash equivalents .......................................            4,516            4,666

     Investment securities, available-for-sale ............................            5,659            4,321
     Investment securities, held-to-maturity (market value December 31,
         1997 - $989, December 31, 1996 - $787 unaudited) .................              970              799
     Loans receivable, net ................................................           19,303           17,748
     Premises and equipment, net ..........................................            1,118              735
     Federal Home Loan Bank of Seattle stock, at cost .....................              481              274
     Accrued interest receivable ..........................................              242              208
     Deferred income taxes ................................................               37               42
     Other assets .........................................................              398              395
                                                                                     -------          -------
                                                                                     $32,724           29,188
                                                                                     =======          =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
     Deposits - non-interest bearing ......................................          $ 5,816            5,343
     Deposits - interest bearing ..........................................           19,633           18,697
     Advances from Federal Home Loan Bank of Seattle ......................            3,800            2,900
     Accrued interest payable .............................................              124              107
     Current income taxes .................................................               38                1
     Other liabilities ....................................................               36               32
     Subordinated debentures ..............................................              350              350
                                                                                     -------          -------
          Total liabilities ...............................................           29,797           27,430

     Stockholders' equity
     Common stock, $40 par value per share Authorized and outstanding
        December 31, 1997 20,400 shares and December 31, 1996 13,350 shares              816              530
     Additional paid-in capital ...........................................            1,635              920
     Retained earnings ....................................................              449              327
     Net unrealized gains (losses) on securities available-for-sale .......               27              (19)
                                                                                     -------          -------
          Total stockholders' equity ......................................            2,927            1,758
                                                                                     -------          -------
                                                                                     $32,724           29,188
                                                                                     =======          =======

See accompanying notes to financial statements.

   67

                            STATEMENTS OF CASH FLOWS

                                                                                            (unaudited)
                                                                         Year Ended          Year ended
                                                                        December 31,        December 31,
                            (dollars in thousands)                          1997               1996
                                                                          --------           --------
                                                                                      
OPERATING ACTIVITIES:
      Net Earnings .............................................          $    182                122
      Adjustments to reconcile Net Earnings to Net
      Cash Provided by Operating Activities:
        Provision for loan losses ..............................                82                 69
        Depreciation of premises and equipment .................                96                 30
        Amortization of investment securities premiums, net ....                65                  9
        Net increase (decrease) in deferred income taxes .......               (13)               (27)
        Net decrease (increase) in interest receivable .........               (34)               (20)
        Net increase in interest payable .......................                17                 39
        Net increase (decrease) in current income taxes ........                41                (52)
        Net increase in other assets ...........................                (7)              (353)
        Net increase (decrease) in other liabilities ...........                 4                (37)
        FHLB stock dividends ...................................               (30)               (19)
                                                                          --------           --------
           NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES .               403               (239)
                                                                          --------           --------

INVESTING ACTIVITIES:
      Proceeds from maturities and prepayments of investment
          securities available-for-sale ........................             1,309              2,423
      Purchases of investment securities available-for-sale ....            (2,706)            (3,763)
      Proceeds from maturities and prepayments of investment
          securities held-to-maturity ..........................               162                200
      Purchases of investment securities held-to-maturity ......              (275)                 0
      Principal collected on installment and commercial loans ..             1,523              5,236
      Installment and commercial loans originated or acquired ..            (4,656)            (7,597)
      Proceeds from sales of commercial loans ..................             1,887                250
      Principal collections on mortgage loans ..................             3,104              4,765
      Mortgage loans originated or acquired ....................           (11,299)            (9,090)
      Proceeds from sales of mortgage loans ....................             7,804                227
      Net purchase of FHLB stock ...............................              (177)               (67)
      Net addition of premises and equipment ...................              (479)              (507)
                                                                          --------           --------
           NET CASH USED BY INVESTING ACTIVITIES ...............            (3,803)            (7,923)
                                                                          --------           --------

FINANCING ACTIVITIES:
      Net increase in deposits .................................             1,409              8,785
      Net increase (decrease) in FHLB advances & other borrowing               900              1,000
      Proceeds from issuance of common stock ...................             1,001                  0
      Cash dividends paid to stockholders ......................               (60)                 0
                                                                          --------           --------
          NET CASH PROVIDED BY FINANCING ACTIVITIES ............             3,250              9,785
                                                                          --------           --------
          NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .              (150)             1,623
      CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .........             4,666              3,043
                                                                          --------           --------
      CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............          $  4,516              4,666
                                                                          ========           ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
      Cash paid during the period for:        Interest ..........          $  1,145              1,082
                                              Income taxes ......          $     37                 76

      See accompanying notes to financial statements.

   68

                            STATEMENTS OF OPERATIONS

                                                                    (Unaudited)
                                                   Year ended        Year ended
                                                   December 31,      December 31,
 (dollars in thousands except per share data)         1997              1996
                                                     -------           -------
                                                              
INTEREST INCOME:
      Real estate loans ...................          $ 1,070               798
      Commercial loans ....................              603               483
      Consumer and other loans ............              110                77
      Investment securities ...............              522               424
                                                     -------           -------

        TOTAL INTEREST INCOME .............            2,305             1,782
                                                     -------           -------

INTEREST EXPENSE:
      Deposits ............................              900               709
      Advances ............................              236               170
      Subordinated debentures .............               26                26
                                                     -------           -------

        TOTAL INTEREST EXPENSE ............            1,162               905
                                                     -------           -------

        NET INTEREST INCOME ...............            1,143               877
      Provision for loan losses ...........               82                69
                                                     -------           -------
        NET INTEREST INCOME AFTER PROVISION
         FOR LOAN LOSSES ..................            1,061               808

NON-INTEREST INCOME:
      Service charges and other fees ......              360               158
      Losses on sale of investments .......               (1)              (19)
      Other income ........................              161               146
                                                     -------           -------
        TOTAL NON-INTEREST INCOME .........              520               285

NON-INTEREST EXPENSE:
      Compensation, employee benefits
            and related expenses ..........              655               431
      Occupancy expense ...................              222               144
      Data processing expense .............               82                56
      Other expense .......................              375               312
                                                     -------           -------

        TOTAL NON-INTEREST EXPENSE ........            1,334               943
                                                     -------           -------

      Earnings before income taxes ........              247               150
      Federal and state income
          tax expense .....................               65                28
                                                     -------           -------

        NET EARNINGS ......................          $   182               122
                                                     =======           =======

      Basic earnings per share ............          $ 13.02              9.21
                                                     =======           =======

      Diluted earnings per share ..........          $ 12.02              8.82
                                                     =======           =======

See accompanying notes to financial statements.

   69

                        STATEMENT OF STOCKHOLDERS' EQUITY

                     Years ended December 31, 1997 and 1996

                                                                                                   Net unrealized
                                                                                                   gains(losses)
                                                                          Additional                on securities     Total
                                                    Common Stock            paid-in     Retained     available-    stockholders
 ($ in thousands, except per share data)          Shares       Amount       capital     earnings      for-sale       equity
                                                  ------       ------       ------       ------        ------        ------
                                                                                                 
Balance at December 31, 1995
     (unaudited) ..........................       13,250       $  530          820          305            32         1,687

Decrease in net unrealized gains (losses)
     on securities available-for-sale
     (unaudited) ..........................           --           --           --           --           (51)          (51)
Transfer from retained earnings to
     additional paid in capital (unaudited)           --           --          100         (100)           --             0
Net earnings (unaudited) ..................           --           --           --          122            --           122
                                                  ------       ------       ------       ------        ------        ------
Balance at December 31, 1996 (unaudited) ..       13,250          530          920          327           (19)        1,758

Cash dividends declared
     ($4.50 per share) ....................           --           --           --          (60)           --           (60)
Increase in net unrealized gains (losses)
     on securities available-for-sale .....           --           --           --           --            46            46
Additional shares issued ..................        7,150          286          715           --            --         1,001
Net earnings ..............................           --           --           --          182            --           182
                                                  ------       ------       ------       ------        ------        ------
Balance at December 31, 1997 ..............       20,400       $  816        1,635          449            27         2,927
                                                  ======       ======       ======       ======        ======        ======

See accompanying notes to financial statements.

   70

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a)  GENERAL
Big Sky Western Bank, a Montana corporation, ("Big Sky") began operations on
March 21, 1990, and provides a full range of banking services to individual and
corporate customers primarily in Gallatin county.

Big Sky is subject to competition from other financial service providers. Big
Sky is also subject to the regulations of certain government agencies and
undergoes periodic examinations by those regulatory agencies.

The accounting and financial statement reporting policies of Big Sky conform
with generally accepted accounting principles and prevailing practices within
the banking industry. In preparing 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 these 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 ecconomic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review Big Sky's allowance for loan
losses. Such agencies may require Big Sky to recognize additions to the
allowance based on their judgements about information available to them at the
time of their examination.

(b)  CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, cash held as demand deposits at
various banks, federal funds sold and time deposits with original maturities of
three months or less.

(c)  INVESTMENT SECURITIES
Debt securities for which Big Sky 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 them in the
near term are classified as trading securities and are reported at fair market
value, with unrealized gains and losses included in income. Big Sky historically
has not classified any securities as trading securities. 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.

Premiums and discounts on investment securities are amortized or accreted into
income using a method which approximates the level-yield interest method.

The cost of any investment, if sold, is determined by specific identification.
Declines in the fair value of available-for-sale or held-to-maturity securities
below carrying value that are other than temporary are charged to expense as
realized losses and the related carrying value reduced to fair value.

(d)  LOANS RECEIVABLE
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding
unpaid principal balance reduced by any chargeoffs or specific valuation
accounts and net of any deferred fees or costs on originated loans or
unamortized premiums or discounts on purchased loans. Discounts and premiums on
purchased loans and net loan fees on originated loans are amortized over the
expected life of each loan.

   71

(e)  LOANS HELD FOR SALE
Mortgage loans originated and intended for sale in the secondary market are
carried at their outstanding principal balance during the short interim period,
usually less than 30 days, until purchased under the commitment by the investor.

(f)  ALLOWANCE FOR LOAN LOSSES
Management's periodic evaluation of the adequacy of the allowance is based on
several factors. These factors include Big Sky'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.

Big Sky also provides an allowance for losses on specific loans which are deemed
to be impaired. 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 loans'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, the
current value of the collateral, reduced by anticipated selling costs, will be
used in place of discounted cash flows. Generally, when a loan is deemed
impaired, current period interest previously accrued but not collected is
reversed against current period interest income. Income on such impaired loans
is then recognized only to the extent that cash in excess of any amounts charged
off to the allowance for loan losses is received and where the future collection
of principal is probable. 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.

During 1997 the amount of impaired loans was not material.

(g)  PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less depreciation. Depreciation is
generally computed on a straight-line method over the estimated useful lives,
which range from 3 to 30 years, of the various classes of assets from their
respective dates of acquisition.

(h)  REAL ESTATE OWNED
Property acquired by foreclosure or deed in lieu of foreclosure is carried at
the lower of cost or estimated fair value, not to exceed estimated net
realizable value. 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, this
deficiency is recognized as a valuation allowance and is charged to expense. Big
Sky has not held any Real Estate Owned since the inception.

(i)  RESTRICTED STOCK INVESTMENTS
Big Sky holds stock in the Federal Home Loan Bank (FHLB). The investment is
carried at cost.

(j)  INCOME TAXES
Deferred tax assets and liabilities are recognized for estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. 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.

   72

(k) EARNINGS PER SHARE
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share"
was issued in February 1997 to simplify the standard for computing earnings per
share (EPS) by replacing the presentation of primary and fully diluted EPS on
the face of the income statement for all entities with complex capital
structures with a presentation of basic and diluted EPS. SFAS No. 128 also
requires a reconciliation of the numerator and the denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation. The
EPS data presented reflects the provisions of SFAS No. 128 for all periods
presented.

(l) IMPAIRMENT AND DISPOSAL OF LONG-LIVED ASSETS
Long lived assets and certain identifiable 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 flow 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, 1997 there were no assets that
were considered impaired.

(m) TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF
LIABILITIES
SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," provides guidance on accounting for transfers
and servicing of financial assets, recognition and measurement of servicing
assets and liabilities, financial assets subject to prepayment, secured
borrowings and collateral, and extinguishment of liabilities.

SFAS No. 125 generally requires the recognition as separate assets the rights to
service mortgage loans for others, whether the servicing rights are acquired
through purchases or loan originations. SFAS No. 125 also specifies that
financial assets subject to prepayment, including loans that can be
contractually prepaid or otherwise settled in such a way that the holder would
not recover substantially all of its recorded investment be measured like debt
securities available-for-sale under SFAS No. 115, as amended by SFAS No. 125.
SFAS No. 125 was adopted by the Company January 1, 1997 and did not have a
material impact on Big Sky's financial position or results of operations.

(n) FUTURE ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued and is
effective January 1, 1998. SFAS No. 130 establishes standards for the reporting
and display of comprehensive income and its components in a full set of
financial statements. All items required to be recognized under accounting
standards as components of comprehensive income are to be reported in a
financial statement that is displayed as prominently as other financial
statements. SFAS No. 130 also requires the classification of items of other
comprehensive income by their nature in a financial statement and the display of
other comprehensive income separately from retained earnings and paid-in capital
in the stockholders' equity section of the statement of financial condition. Big
Sky's only significant elements of comprehensive income is the unrealized gains
and losses on securities available-for-sale.

   73

2. CASH ON HAND AND IN BANKS:

Big Sky is required to maintain an average reserve balance with the Federal
Reserve Bank, or maintain such reserve in the form of cash on hand. The amount
of this required reserve balance was approximately $66,000 at December 31, 1997,
and was met by maintaining cash on hand and an average reserve balance with the
Federal Reserve Bank in excess of this amount.

3.  INVESTMENT SECURITIES:
A comparison of the amortized cost and estimated fair value of the Bank's
investment securities is as follows at:

                                                                                             Estimated
                DECEMBER 31, 1997                     Amortized       Gross Unrealized         Fair
             (dollars in thousands)                     Cost         Gains        Losses       Value
                                                       ------       ------       ------        ------
               HELD-TO-MATURITY
                                                                                 
US GOVERNMENT AND FEDERAL AGENCIES:
      maturing within one year .................       $  197            2            0           199

STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
      maturing within one year .................           25            0            0            25
      maturing one year through five years .....          130            1            0           131
      maturing five years through ten years ....          618           22           (6)          634

                                                       ------       ------       ------        ------
          TOTAL HELD-TO-MATURITY SECURITIES ....       $  970           25           (6)          989
                                                       ======       ======       ======        ======

              AVAILABLE-FOR-SALE
US GOVERNMENT AND FEDERAL AGENCIES:
      maturing within one year .................       $  298            0            0           298
      maturing one year through five years .....        3,452           29           (4)        3,477
      maturing five years through ten years ....          854           12            0           866
      maturing after ten years .................          390            0            0           390

STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
      maturing five years through ten years ....          254            9            0           263

REAL ESTATE MORTGAGE INVESTMENT CONDUITS .......          368            0           (3)          365

                                                       ------       ------       ------        ------
          TOTAL AVAILABLE-FOR-SALE SECURITIES ..       $5,616           50           (7)        5,659
                                                       ======       ======       ======        ======

Maturities of securities do not reflect repricing opportunities present in many
adjustable rate securities, nor do they reflect expected shorter maturities
based upon early prepayment of principal.

The Bank has not entered into any swaps, options or future contracts. Included
in the U.S. Government and Federal Agencies securities amounts are investments
in notes which have contractual call features.

Gross proceeds from the sale of investment securities during the year ended
December 31, 1997 were $499,875 resulting in gross losses of $736.

At December 31, 1997, the Bank had investment securities with book values of
approximately $900,000 pledged as security for deposits of local government
units.

The Real Estate Mortgage Investment Conduits consist of two certificates which
are backed by the FNMA or FHLMC.

   74

4.  LOANS RECEIVABLE:

SUMMARY OF LOANS RECEIVABLE:               December 31,
     (dollars in thousands)                   1997
                                            --------
                                        
REAL ESTATE LOANS AND CONTRACTS:
     Residential first mortgage loans       $  9,891
     Construction .....................        1,564
                                            --------
                                              11,455
COMMERCIAL LOANS:
     Real estate ......................        3,528
     Other commercial loans ...........        3,450
                                            --------
                                               6,978
INSTALLMENT AND OTHER LOANS:
     Consumer loans ...................        1,122

LESS:
     Allowance for losses .............         (252)
                                            --------
                                            $ 19,303
                                            ========

                                                          Year ended
SUMMARY OF ACTIVITY IN ALLOWANCE FOR LOSSES ON LOANS:    December 31,
  (dollars in thousands)                                    1997
                                                            -----
                                                        
Balance, beginning of period ..........                     $ 172
Net charge offs .......................                        (2)
Provision .............................                        82
                                                            -----
Balance, end of period ................                     $ 252
                                                            =====

Approximately 96 percent of the Bank's loans have been granted to customers in
the Bank's market area.

The weighted average interest rate on loans was 9.37% at December 31, 1997.

THE BANK HAD OUTSTANDING COMMITMENTS AS FOLLOWS:           December 31,
                (dollars in thousands)                        1997
                                                         ---------------
                                                                 
     Letters of credit ................                  $          288
     loans and loans in process .......                           1,045
     Unused consumer lines of credit ..                             687
                                                         ---------------
                                                         $        2,020
                                                         ===============

The Bank 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. Those
financial instruments include commitments to extend credit and letters of
credit, and involve to varying degrees, elements of credit risk.

The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend letters of credit is
represented by the contractual amount of these instruments. The Bank uses the
same credit policies in making commitments and conditional obligations as it
does for on- balance sheet instruments.

Loans sold to others and serviced by the Bank as of December 31, 1997 were
$1,728,000. Loans receivable include approximately $3,900,000 in adjustable rate
loans.

LOANS TO OFFICERS AND DIRECTORS:
The Bank has entered into transactions with its directors, significant
shareholders and their affiliates (related parties). The aggregate amount of
loans to such related parties at December 31, 1997 was $819,579. During 1997,
new loans to such related parties amounted to $821,425 and repayments were
$1,507,968.

ACCRUED INTEREST RECEIVABLE:                              December 31,
                (dollars in thousands)                        1997
                                                         ---------------
                                                                  
     Investment securities ............                  $            87
     Loans receivable .................                              155
                                                         ---------------
                                                         $           242
                                                         ===============

   75

5.  PREMISES AND EQUIPMENT:
Office properties and equipment consist of the following at:

                                                                    December 31,
                   (dollars in thousands)                              1997
                                                                 ----------------
                                                                          
Land                                                             $           375
Leasehold improvements                                                       581
Furniture, fixtures and equipment                                            483
Accumulated depreciation                                                    (321)
                                                                 ----------------
                                                                 $         1,118
                                                                 ================

   76

6.  DEPOSITS:

                                                            December 31,
                                                                1997
                                              ------------  -----------
                                                Weighted
         (dollars in thousands)               Average Rate       Amount
                                              ------------  -----------
                                                      
Demand accounts............................           0.0%   $    5,816
                                                            -----------

Interest bearing demand accounts...........           2.2%        1,794
Savings accounts...........................           3.0%        1,182
Money market demand accounts...............           3.3%        4,999

Individual retirement accounts.............           5.8%          139
Certificate accounts:
     4.01% to 500%.........................                       1,574
     5.01% to 600%.........................                       6,798
     6.01% to 700%.........................                       2,726
     7.01% to 800%.........................                         421
                                                            -----------
            Total certificate accounts.....           5.7%       11,519
                                                            -----------
Total interest bearing deposits............           4.6%       19,633
                                                            -----------
Total deposits.............................           3.6%   $   25,449
                                                            ===========

Deposits with a balance in excess 
  of $100,000..............................                  $9,762,000

At December 31, 1997, scheduled maturities of certificates of deposit are as
follows:

                                                           Years ending December 31,
                       -------          ---------------------------------------------------------------------------
(dollars in thousands)  Total            1998             1999             2000             2001          Thereafter
                       -------          -------          -------          -------          -------          -------
                                                                                         
4.01% to 500%......    $ 1,574            1,574                0                0                0                0
5.01% to 600%......      6,798            6,056              705               37                0                0
6.01% to 700%......      2,726            1,060              737              437              197              295
7.01% to 800%......        421              143               52              226                0                0
                       -------          -------          -------          -------          -------          -------
                       $11,519            8,833            1,494              700              197              295
                       =======          =======          =======          =======          =======          =======

Interest expense on deposits is summarized as follows:

                                                            Year ended
                                                            December 31,
      (dollars in thousands)                                    1997
                                                            ------------
                                                          
Interest bearing demand accounts..........................      $ 36
Money market demand accounts .............................       164
Certificate accounts .....................................       664
Savings accounts .........................................        32
Individual retirement accounts ...........................         4
                                                                ----
                                                                $900
                                                                ====

   77

7. ADVANCES FROM FEDERAL HOME LOAN BANK OF SEATTLE:
Advances from the Federal Home Loan Bank of Seattle consist of the following at
December 31, 1997:

                                                            Maturing in years ending December 31,
                       ------          --------------------------------------------------------------------------------------
(dollars in thousands) TOTAL            1998            1999            2000            2001            2002        2003-2010
                       ------          ------          ------          ------          ------          ------       ---------
                                                                                               
5.01% to 600% .......  $  400             200               0             200               0               0               0
6.01% to 700% .......   1,500             300               0               0             100             200             900
7.01% to 800% .......   1,700               0             200               0             100               0           1,400
8.01% to 900% .......     200               0               0               0               0               0             200
                       ------          ------          ------          ------          ------          ------          ------
                       $3,800             500             200             200             200             200           2,500
                       ======          ======          ======          ======          ======          ======          ======

These advances were collateralized by the Federal Home Loan Bank of Seattle
stock held by the Bank, and qualifying real estate loans and investments
totaling approximately $10,108,000.

The weighted average interest rate on these advances at December 31, 1997 was
6.82%.

   78

8.  STOCKHOLDERS' EQUITY:

The Federal Deposit Insurance Corporation (FDIC) has adopted capital adequacy
guidelines pursuant to which it assesses the adequacy of capital in supervising
a bank. The following table illustrates the FDIC's capital adequacy guidelines
and Big Sky's compliance with those guidelines as of December 31, 1997.

                                                      Tier I (Core) Capital        Tier II (Total) Capital        Leverage Capital
                                                      --------------------         ----------------------       --------------------
      (dollars in thousands)                             $           %                 $            %               $           %
                                                      --------   ---------         --------     ---------       --------    --------
                                                                                                          
GAAP Capital .............................            $  2,927                     $  2,927                     $  2,927
Net unrealized gains on securities
     available-for-sale ..................                 (27)                         (27)                         (27)
Other intangibles ........................                 (18)                         (18)                         (18)
Qualifying subordinated debt .............                  --                          210                           --
General loan valuation allowance .........                  --                          232                           --
                                                      --------                     --------                     --------
Regulatory capital computed ..............            $  2,882                     $  3,324                     $  2,882
                                                      ========                     ========                     ========

Risk weighted assets .....................            $ 18,572                     $ 18,572
                                                      ========                     ========

Total assets .............................                                                                      $ 32,724
                                                                                                                ========

Regulatory capital as % of assets ........                          15.52%                          17.90%                     8.81%
Regulatory "well capitalized" requirement                            6.00%                          10.00%                     5.00%
                                                                 --------                        --------                   --------
Excess over "well capitalized" requirement                           9.52%                           7.90%                     3.81%
                                                                 ========                        ========                   ========

The Federal Deposit Insurance Corporation Improvement Act generally restricts a
depository institution from making any capital distribution, including payment
of a dividend, if the depository 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, 1997, Big Sky's 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%. Big Sky was
considered well capitalized by the Bank's regulator as of December 31, 1997.

State banks may pay dividends up to the total of the prior two years earnings
without permission of the state regulator. The amount available for dividend
distribution by Big Sky as of December 31, 1997 was approximately $242,000.

The Bank has entered into an agreement with President Richards which provides
for the purchase of up to 100 shares of the Bank stock at a price of $100 per
share. Since all authorized shares have been issued, only shares that become
available from other shareholders can be acquired by Mr. Richards, or
shareholder approval would be required to authorize additional shares.

Mr. Richards had a similar prior agreement for the purchase of 318 shares at $90
per share which was exercised during 1997, resulting in an expense of $15,900.

   79

9.  FEDERAL AND STATE INCOME TAXES:

The following is a summary of income tax expense for:         Year ended
                                                              December 31,
         (dollars in thousands)                                   1997
                                                              ------------
                                                           
Current:
     Federal .................................                    $ 60
     State ...................................                      18
                                                                  ----
           Total current tax expense .........                      78
                                                                  ----

Deferred:
     Federal .................................                     (11)
     State ...................................                      (2)
                                                                  ----
           Total deferred tax benefit ........                     (13)
                                                                  ----
                      Total income tax expense                    $ 65
                                                                  ====

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

                                                               December 31,
                                                                  1997
                                                               -----------
                                                              
Federal statutory rate ......................................      34.0%
State taxes, net of federal income tax benefit...............       4.5%
Tax-free municipal securities income ........................      -6.6%
Surtax exemption ............................................      -3.7%
Other, net ..................................................      -1.9%
                                                                  -----
                                                                   26.3%
                                                                  =====

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

                                                                       December 31,
            (dollars in thousands)                                        1997
                                                                       ------------
                                                                    
Deferred tax assets:
   Allowance for losses on loans ....................................     $ 65
   Other ............................................................       12
                                                                          ----
          Total gross deferred tax assets ...........................       77
                                                                          ----

Deferred tax liabilities:
   Fixed assets, due to differences in depreciation .................      (22)
   Available-for-sale securities fair value adjustment...............      (18)
                                                                          ----
           Total gross deferred tax liabilities .....................      (40)
                                                                          ----
           Net deferred tax asset ...................................     $ 37
                                                                          ====

There was no valuation allowance at December 31, 1997 because management
believes that it is more likely than not that the Bank's deferred tax assets
will be realized by offsetting future taxable income from reversing taxable
temporary differences and anticipated future taxable income.

   80

10. NON-INTEREST EXPENSES IN EXCESS OF 1% OF TOTAL INCOME:

Included in other expenses are advertising expenses of $26,000, office supplies
of $33,000, ATM expenses of $33,000, and merchant credit card fees of $70,000.

11.  SUBORDINATED DEBENTURES:

During 1995, the Bank issued subordinated convertible debentures in the amount
of $350,000, with an interest rate of 7.5 percent payable quarterly, due
December 31, 2001. The debentures may be prepaid at any time by the Bank,
subject to approval by the FDIC and the Bank's primary regulator. The debentures
are convertible at the rate of one share of Bank stock for each $140.00 of
principal value of the debentures, or an equivalent of 2,500 shares.

12.  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 Big Sky's Statement of Financial Condition, this
includes the following items:

                                                             December 31, 1997
                                                       --------------------------------
     (dollars in thousands)                            Amount                Fair Value
                                                       ------                ----------
                                                                       
FINANCIAL ASSETS:
Cash on hand and in banks ..........................   $ 1,933                 1,933
Federal funds sold .................................     2,500                 2,500
Interest bearing deposits ..........................        83                    83
Investment securities ..............................     6,629                 6,648
Loans ..............................................    19,375                19,282
Federal Home Loan Bank of Seattle stock.............       481                   481

FINANCIAL LIABILITIES:
Deposits ...........................................   $25,449                25,365
Advances from the Federal Home Loan Bank............     3,800                 3,898
Subordinated debentures ............................       350                   350

Financial assets and financial liabilities other than investment 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
on hand and in banks, federal funds sold and interest bearing deposits. For
investment 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 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. Certificates of deposit 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 similar weighted average maturities. The fair value of
the subordinated debentures approximates book value due to the terms of
conversion of the debentures.

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 financial statements.

   81

13.  EARNINGS PER SHARE:

Basic earnings per share is computed by dividing net earnings by the weighted
average number of shares of common stock outstanding during the year. Diluted
earnings per share is computed by including the net increase in shares if all
outstanding convertible debentures were exercised.

                                                                                          YEAR ENDED DECEMBER 31, 1997
                                                                              ----------------------------------------------------
                                                                                                    AVERAGE               PER-SHARE
                                                                               INCOME                SHARES                AMOUNT
                                                                              --------               ------               --------
                                                                                                                 
BASIC EARNINGS PER SHARE:
Income available to common shareholders ...............................       $182,000               13,975                  13.02

EFFECT OF DILUTIVE SECURITIES:
Net increase in shares from assumed conversion of debentures ..........                               2,500

Net after tax income increase from elimination
     of interest on debentures ........................................         16,000

DILUTED EARNINGS PER SHARE:
                                                                              --------               ------               --------
Income available to common stockholders plus assumed debentures .......        198,000               16,475                  12.02
                                                                              ========               ======               ========

14. COMMITMENTS:

During 1996, Big Sky entered into a salary continuation agreement with Big Sky's
President and Vice President, that provides for predetermined periodic payments
over 15 years upon retirement or death. In the event of disability or early
retirement, the predetermined payments are based on years of service. Amounts
expensed under these agreements were $9,200 during the year ended December 31,
1997.

In February 1993, Big Sky entered into a five-year service contract for data
processing services, which was subsequently extended for an additional
three-year period. In the event of early termination of the service contract by
Big Sky, Big Sky has agreed to pay an amount equal to the average monthly fee
paid for services since the execution of the agreement multiplied by the number
of months remaining under the term of the agreement.

During December 1989, Big Sky entered into an operating lease agreement for the
lease of its facility in Big Sky, Montana. The initial term of the agreement was
for three years and one month and has been extended for two year and five year
periods. The lease can be extended for two additional five-year terms. Payments
under the lease are based on square footage of space utilized by Big Sky. During
December of 1995, Big Sky entered into another operating lease agreement for the
lease of its facility in Bozeman, Montana. The initial term of the agreement is
for a period of ten years. The lease can be renewed for three five-year terms.
Payments under the lease agreement range from $2,600 in the initial year to
$3,900 in the tenth year. Amounts expensed under these agreements were $71,700
during the year ended December 31, 1997.

15.  AGREEMENT TO MERGE

On October 20, 1998, the Bank entered into a definitive agreement to merge with
Glacier Bancorp, Inc. (Glacier). Upon completion of the merger, Big Sky will
operate as an independent, wholly owned subsidiary of Glacier. The purchase
price that Glacier will pay for the acquisition of all outstanding common stock
and upon the conversion of all subordinated debentures is 250,000 shares of
Glacier common stock subject to adjustment for those shareholders that have
perfected their dissenters rights. While it is anticipated that the acquisition
will be completed in 1998, it is subject to certain conditions, including the
approval of the shareholders of the Bank.

   82

                                                                      APPENDIX A

================================================================================

                      PLAN AND AGREEMENT OF SHARE EXCHANGE

                                     BETWEEN

                              GLACIER BANCORP, INC.

                                       AND

                              BIG SKY WESTERN BANK

================================================================================

                          DATED AS OF OCTOBER 20, 1998

   83

                                TABLE OF CONTENTS

                                                                                Page
                                                                                ----
                                                                          
SECTION. 1  TERMS OF TRANSACTION.................................................2

        1.1    Transaction.......................................................2
               1.1.1  Events of Closing..........................................2
               1.1.2  Effect on Glacier Common Stock.............................2
        1.2    Consideration.....................................................2
               1.2.1  Purchase Price.............................................2
               1.2.2  Exchange Ratio.............................................2
               1.2.4  Big Sky Expense Limitation.................................3
               1.2.5  Change in Equity Capital...................................3
               1.2.6  No Fractional Shares.......................................3
               1.2.7  Certificates...............................................4
        1.3    Payment to Dissenting Stockholders................................5
        1.4    Alternative Structures............................................5
        1.5    Letter of Transmittal.............................................5
        1.6    Undelivered Certificates..........................................5

SECTION 2  CLOSING OF THE TRANSACTION............................................5

        2.1    Closing...........................................................5
        2.2    Events of Closing.................................................6
        2.3    Place of Closing..................................................6

SECTION 3  REPRESENTATIONS AND WARRANTIES........................................6

        3.1    Representations of Glacier and Big Sky............................6
               3.1.1  Corporate Organization and Qualification...................6
               3.1.2  Subsidiaries...............................................6
               3.1.3  Capital Stock..............................................6
               3.1.4  Corporate Authority........................................8
               3.1.5  Reports and Financial Statements...........................8
               3.1.6  Absence of Certain Events and Changes.....................10
               3.1.7  Material Agreements.......................................10
               3.1.8  Knowledge as to Conditions................................10
               3.1.9  Brokers and Finders.......................................10
               3.1.10 Year 2000 Compliance......................................10
        3.2    Big Sky's Additional Representations.............................11
               3.2.1  Loan and Lease Losses.....................................11
               3.2.2  No Stock Option Plans.....................................11
               3.2.3  Governmental Filings; No Violations.......................11
               3.2.4  Asset Classification......................................12
               3.2.5  Investments...............................................12
               3.2.6  Properties................................................12
               3.2.7  Anti-takeover Provisions..................................12
               3.2.8  Compliance with Laws......................................13

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                                                                                Page
                                                                                ----
                                                                          
               3.2.9  Litigation................................................13
               3.2.10 Taxes.....................................................13
               3.2.11 Insurance.................................................14
               3.2.12 Labor Matters.............................................14
               3.2.13 Employee Benefits.........................................15
               3.2.14 Environmental Matters.....................................16
        3.3    Exceptions to Representations and Warranties.....................17
               3.3.1  Disclosure of Exceptions..................................17
               3.3.2  Nature of Exceptions......................................17

SECTION 4  CONDUCT AND TRANSACTIONS BEFORE CLOSING..............................17

        4.1    Conduct of Big Sky's Business Before Closing.....................17
               4.1.1  Availability of Big Sky's Books, Records and Properties...18
               4.1.2  Ordinary and Usual Course.................................18
               4.1.3  Conduct Regarding Representations and Warranties..........19
               4.1.4  Maintenance of Properties.................................19
               4.1.5  Preservation of Business Organization.....................20
               4.1.6  Senior Management.........................................20
               4.1.7  Compensation and Employment Agreements....................20
               4.1.8  Update of Financial Statements............................20
               4.1.9  No Solicitation...........................................20
               4.1.10 Title Policies on Leased Property.........................21
               4.1.11 Review of Loans...........................................21
        4.2    Registration Statement...........................................21
               4.2.1  Preparation of Registration Statement.....................21
               4.2.2  Submission to Stockholders................................22
        4.3    Accounting Treatment.............................................22
               4.3.1  Pooling of Interests......................................22
               4.3.2  Affiliate List............................................22
               4.3.3  Restrictive Legends.......................................22
               4.3.4  Retention of Certificates.................................22
        4.4    Submission to Regulatory Authorities.............................23
        4.5    Announcements....................................................23
        4.6    Consents.........................................................23
        4.7    Further Actions..................................................23
        4.8    Notice...........................................................23
        4.9    Confidentiality..................................................23
        4.10   Update of Financial Statements...................................23
        4.11   Availability of Glacier's Books, Records and Properties..........24

SECTION 5  APPROVALS AND CONDITIONS.............................................24

        5.1    Required Approvals...............................................24
        5.2    Conditions to Glacier's Obligations..............................24
               5.2.1  Representations...........................................24
               5.2.2  Compliance................................................24
               5.2.3  Equity Capital Requirement................................24
               5.2.4  Transaction Fees Statements...............................25

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                                                                                Page
                                                                                ----
                                                                          
               5.2.5  Audit Report..............................................25
               5.2.6  No Material Adverse Effect................................25
               5.2.7  Financial Condition.......................................25
               5.2.8  No Change in Loan Review..................................25
               5.2.9  No Governmental Proceedings...............................25
               5.2.10 Approval by Counsel.......................................26
               5.2.11 Receipt of Title Policy...................................26
               5.2.12 Corporate and Stockholder Action..........................26
               5.2.13 Tax Opinion...............................................26
               5.2.14 Opinion of Counsel........................................26
               5.2.15 Cash Paid.................................................27
               5.2.16 Affiliate Letters.........................................27
               5.2.17 Registration Statement....................................27
               5.2.18 Consents..................................................27
               5.2.19 Updated Fairness Opinion..................................27
               5.2.20 Accounting Treatment......................................27
               5.2.21 Solicitation of Employees.................................27
               5.2.22 Other Matters.............................................27
        5.3    Conditions to Big Sky's Obligations..............................27
               5.3.1  Representations...........................................27
               5.3.2  Compliance................................................28
               5.3.3  No Material Adverse Effect................................28
               5.3.4  No Governmental Proceedings...............................28
               5.3.5  Corporate and Stockholder Action..........................28
               5.3.6  Tax Opinion...............................................28
               5.3.7  Opinion of Counsel........................................28
               5.3.8  Fairness Opinion..........................................29
               5.3.9  Cash Paid.................................................29
               5.3.10 Registration Statement....................................29

SECTION 6  DIRECTORS, OFFICERS AND EMPLOYEES....................................29

        6.1    Directors........................................................29
        6.2    Employment Agreement.............................................29
        6.3    Employees........................................................29
        6.4    Employee Benefit Issues..........................................29
               6.4.1  Comparability of Benefits.................................29
               6.4.2  Termination and Transfer/Merger of Plans..................30
               6.4.3  No Contract Created.......................................30

SECTION 7  TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSACTION..............30

        7.1    Termination by Reason of Lapse of Time...........................30
        7.2    Other Grounds for Termination....................................30
               7.2.1  Mutual Consent............................................30
               7.2.2  Big Sky's Conditions Not Met..............................30
               7.2.3  Glacier's Conditions Not Met..............................30
               7.2.4  Big Sky Fails to Recommend Stockholder Approval...........30
               7.2.5  Impracticability..........................................30

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                                                                                Page
                                                                                ----
                                                                          
        7.3    Big Sky Termination Fee..........................................31
        7.4    Glacier Termination Fee..........................................31
        7.5    Cost Allocation Upon Termination.................................31

SECTION 8  MISCELLANEOUS........................................................31

        8.1    Notices..........................................................31
        8.2    Waivers and Extensions...........................................32
        8.3    General Interpretation...........................................32
        8.4    Construction and Execution in Counterparts.......................32
        8.5    Survival of Representations and Covenants........................32
        8.6    Attorneys' Fees and Costs........................................33
        8.7    Arbitration......................................................33
        8.8    Governing Law and Venue..........................................33
        8.9    Severability.....................................................33

SECTION 9  AMENDMENTS...........................................................33

EXHIBITS AND SCHEDULES:

EXHIBIT A             Form Affiliate Letter

TRANSITION PLAN SCHEDULE

SCHEDULE 1            Exceptions to Representations
SCHEDULE 2            Glacier Stock Plans
SCHEDULE 3            Big Sky Stock Options
SCHEDULE 4            Big Sky's Convertible Securities
SCHEDULE 5            Material Contracts
SCHEDULE 6            Big Sky's Required Third Party Consents
SCHEDULE 7            Big Sky's Asset Classification List
SCHEDULE 8            Big Sky's Investments
SCHEDULE 9            Big Sky's Property Encumbrances
SCHEDULE 10           Big Sky's Real Property
SCHEDULE 11           Big Sky's Offices and Branches
SCHEDULE 12           Big Sky's Compliance with Laws
SCHEDULE 13           Big Sky's Litigation Disclosure
SCHEDULE 14           Big Sky's Insurance Policies
SCHEDULE 15           Big Sky's Employee Benefit Plans

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                              INDEX OF DEFINITIONS

TERMS                                                       SECTION
- -----                                                       -------
                                                         
Agreement                                                   Intro. Paragraph

Acquisition Proposal                                        4.1.9

ASR                                                         4.3.2

Asset Classification                                        3.2.4

BHCA                                                        Recital A

Big Sky                                                     Intro. Paragraph

Big Sky Common Stock                                        3.1.3(b)(1)

Big Sky Financial Statements                                3.1.5(d)(4)

Closing                                                     1.1.1

Company Common Stock                                        3.1.3(a)(1)

Compensation Plans                                          3.2.13(b)

Continuing Employees                                        6.3

Contracts                                                   3.2.3(b)

Debentures                                                  1.2.3

Determination Date Closing Price                            1.2.3

Dissenting Shares                                           1.3

Effective Date                                              2.1

Employees                                                   3.2.13(b)

Environmental Laws                                          3.2.14(a)(2)

ERISA                                                       3.2.13(a)

Exchange Act                                                3.1.5(b)

Exchange Agent                                              1.2.7(a)

Exchange Ratio                                              1.2.2

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TERMS                                                       SECTION
- -----                                                       -------
                                                         
Executive Officer                                           3.1.8

Federal Reserve Board                                       Recital D

Financial Statements                                        3.1.5(d)(1)

GAAP                                                        3.1.5(d)

Glacier                                                     Intro. Paragraph

Glacier Common Stock                                        3.1.3(a)(1)

Glacier Financial Statements                                3.1.5(d)(2)

Glacier Preferred Stock                                     3.1.3(a)(1)

Glacier Shares                                              1.2.2

Glacier Stock Plans                                         3.1.3(a)(2)

Governmental Entity                                         3.2.3(a)

Hazardous Substances                                        3.2.14(a)(3)

HOLA                                                        Recital A

Information Technology                                      3.1.10

IRC                                                         Recital H

Knowledge                                                   3.2.14(a)

Liens                                                       3.1.3(a)(5)

Material Adverse Effect                                     3.1.6

MBCA                                                        1.1.1

OTS                                                         Recital D.4

Parties                                                     1.2.3

Pension Plan                                                3.2.13(c)

Plan/Plans                                                  3.2.13(a)

Prospectus/Proxy Statement                                  4.2.1(a)

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TERMS                                                       SECTION
- -----                                                       -------
                                                         
Purchase Price                                              1.2.1

Registration Statement                                      4.2.1(a)

Regulatory Approvals                                        Recital D

Reports                                                     3.1.5(b)

SEC                                                         3.1.5(a)

Securities Act                                              3.1.5(b)

Securities Laws                                             3.1.5(b)

Share Exchange                                              Recital B

Subject Property                                            3.2.14(a)(1)

Subsequent Big Sky Financial Statements                     3.1.5(d)(5)

Subsequent Glacier Financial Statements                     3.1.5(d)(3)

Subsidiary/Subsidiaries                                     3.1.2

Tangible Equity Capital                                     5.2.3

Tax                                                         3.2.10

Termination Date                                            2.1

Transaction                                                 1.1

Transaction Fees                                            1.2.3

Year 2000 Compliance                                        3.1.10

                                     A-vii

   90

                      PLAN AND AGREEMENT OF SHARE EXCHANGE
                                     BETWEEN
                              GLACIER BANCORP, INC.
                                       AND
                              BIG SKY WESTERN BANK

      This Plan and Agreement of Share Exchange ("Agreement"), dated as of
October 20, 1998, is between GLACIER BANCORP, INC. ("Glacier"), a Delaware
corporation and BIG SKY WESTERN BANK ("Big Sky"), a Montana commercial banking
corporation.

                                    PREAMBLE

      The management and boards of directors of Glacier and Big Sky,
respectively, believe that the share exchange between Glacier and Big Sky, on
the terms and conditions set forth in this Agreement, is in the best interests
of Glacier's and Big Sky's stockholders.

                                    RECITALS

A.    THE PARTIES. Glacier is a corporation duly organized and validly existing
      under Delaware law and is a registered bank holding company under the Bank
      Holding Company Act of 1956, as amended ("BHCA"). Glacier's principal
      office is located in Kalispell, Montana. Glacier owns (1) all of the
      outstanding common stock of Glacier Bank, First Security Bank of Missoula,
      and Valley Bank of Helena; and (2) 94% and 98% of the outstanding common
      stock of Glacier Bank of Whitefish and Glacier Bank of Eureka,
      respectively. Big Sky is a state-chartered commercial banking corporation
      duly organized and validly existing under Montana law with its principal
      office located in Big Sky, Montana.

B.    THE SHARE EXCHANGE. On the Effective Date, all of the outstanding shares
      of Big Sky common stock will be exchanged for shares of Glacier common
      stock, and Big Sky will become a wholly-owned subsidiary of Glacier.

C.    BOARD APPROVALS. Glacier's and Big Sky's respective boards of directors
      have approved this Agreement and authorized its execution and delivery.

D.    OTHER APPROVALS. The Share Exchange is subject to:

      (a)   satisfaction of the conditions described in this Agreement;

      (b)   approval by Big Sky's stockholders; and

      (c)   approval or acquiescence, as appropriate, by (a) the Board of
            Governors of the Federal Reserve System ("Federal Reserve Board")
            and (b) the State of Montana (collectively, "Regulatory Approvals").

E.    EMPLOYMENT AGREEMENT. Big Sky has entered into an employment agreement,
      effective as of the Effective Date, with Michael F. Richards, Big Sky's
      President.

F.    DIRECTOR NONCOMPETITION AGREEMENT. Each Director of Big Sky's board of
      directors has signed a Director Noncompetition Agreement. These
      noncompetition agreements will take effect on the Effective Date.

G.    FAIRNESS OPINION. Big Sky has received from Professional Bank Services and
      delivered to Glacier an opinion to the effect that the financial terms of
      the Transaction are financially fair to Big Sky's

                                      A-1

   91

      stockholders. As a condition to Closing of the Transaction, Professional
      Bank Services will update this fairness opinion immediately before Big Sky
      mails the Prospectus/Proxy Statement to its stockholders and immediately
      before the Effective Date.

H.    INTENTION OF THE PARTIES--ACCOUNTING AND TAX TREATMENT. The parties intend
      the Share Exchange to qualify, for accounting purposes, as a "pooling of
      interests." The parties intend the Share Exchange to qualify, for federal
      income tax purposes, as a tax-free reorganization under Section 368 of the
      Internal Revenue Code of 1986, as amended ("IRC").

                                    AGREEMENT

Glacier and Big Sky agree as follows:

                                    SECTION 1
                              TERMS OF TRANSACTION

1.1   TRANSACTION. Under and subject to this Agreement and the other documents
      referred to in this Agreement, Glacier will acquire all of the outstanding
      common stock shares of Big Sky ("Big Sky Common Stock"). All outstanding
      shares of Big Sky Common Stock will be exchanged for common stock shares
      of Glacier ("Glacier Common Stock"). The term "Transaction" means the
      Share Exchange transaction contemplated by this Agreement, subject to any
      modifications Glacier elects in accordance with Subsection 1.4.

      1.1.1 EVENTS OF CLOSING. Closing of the Transaction will take place in
            accordance with Section 2 ("Closing"). All shares, other than
            Dissenting Shares, of Big Sky Common Stock issued and outstanding
            immediately before Closing will be exchanged at Closing for shares
            of Glacier Common Stock in accordance with Subsection 1.2 and in
            accordance with the Montana Business Corporation Act ("MBCA"), Part
            8, Sections 35-1-814, et. seq. by operation of law and without
            any further action required by the holders of Big Sky Common Stock.
            At the time of Closing, all then outstanding shares of Big Sky
            Common Stock will be owned by Glacier. The Board of Directors of Big
            Sky immediately after the Effective Date will consist of Big Sky's
            directors immediately before the Share Exchange with the addition of
            two additional directors designated by Glacier and reasonably
            acceptable to Big Sky. These individuals will serve on Big Sky's
            board of directors until the next annual meeting of stockholders or
            until their successors have been elected and qualified. Nothing in
            this Agreement is intended to restrict any rights of Big Sky's
            stockholder and directors at any time after the Effective Date to
            nominate, elect, select, or remove directors.

      1.1.2 EFFECT ON GLACIER COMMON STOCK. Glacier Common Stock shares issued
            and outstanding immediately before the Effective Date will remain
            outstanding and unchanged after the Share Exchange.

1.2   CONSIDERATION.

      1.2.1 PURCHASE PRICE. Except as otherwise provided in this Subsection 1.2
            and subject to Subsection 1.3, the aggregate consideration Big Sky's
            stockholders will be entitled to receive from Glacier in connection
            with the Transaction (the "Purchase Price") will be 250,000 shares
            of Glacier Common Stock.

      1.2.2 EXCHANGE RATIO. Subject to the conditions and limitations in this
            Agreement, holders of Big Sky Common Stock will receive Glacier
            Common Stock in exchange for their Big Sky Common

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            Stock. The number of Glacier Common Stock shares each holder will
            receive in exchange for each Big Sky Common Stock share he or she
            holds of record on the Effective Date will be determined according
            to a ratio (the "Exchange Ratio") computed as follows: the quotient
            of the Purchase Price divided by the aggregate number of shares of
            Big Sky Common Stock that on the Effective Date are issued and
            outstanding (rounded to 2 decimals, rounding down if the third
            decimal is four or less or up if it is five or more). The shares of
            Glacier Common Stock to be issued to Big Sky Common Stockholders
            under this Agreement in connection with the Transaction are referred
            to as the "Glacier Shares."

      1.2.3 CONVERTIBLE DEBENTURES. Big Sky currently has issued 7.5%
            Convertible Debentures due December 31, 2001 in the aggregate
            principal amount of $350,000 (the "Debentures"). If any of the
            Debentures are not converted into Big Sky Common Stock prior to the
            Effective Date, then before the Exchange Ratio is calculated, the
            Purchase Price will be reduced by the number of Glacier Common Stock
            Shares equal in value to the aggregate principal amount of the
            Debentures which have not been converted. For purposes of
            determining this reduction in the Purchase Price, Glacier Common
            Stock shares will be valued at the Determination Date Closing Price.
            "Determination Date Closing Price" means the midpoint of the closing
            bid and ask prices per share of Glacier Common Stock as reported on
            the Nasdaq National Market or such successor exchange on which
            Glacier Common Stock may then be traded (as reported in The Wall
            Street Journal or, if not reported therein, in another mutually
            agreed upon authoritative source) on the third business day before
            the Effective Date. Glacier will cause to be mailed to each
            Debenture holder a copy of the Prospectus/Proxy Statement and will
            provide to each Debenture holder, on or prior to the Effective Date,
            its written assurance that it has assumed the obligation to deliver
            shares of Glacier Common Stock as required pursuant to paragraph
            4(d)(ii) of the Debentures if the Debentures remain outstanding
            until their maturity.

      1.2.4 BIG SKY EXPENSE LIMITATION. If Big Sky's Transaction Fees exceed
            $100,000, then before the Exchange Ratio is calculated, the Purchase
            Price will be reduced by the number of Glacier Common Stock shares
            equal in value to the excess, based on the Determination Date
            Closing Price. "Transaction Fees" means all costs and expenses, not
            including the exercise of options, incurred by Big Sky or owed or
            paid by Big Sky to third parties in connection with the preparation,
            negotiation and execution of this Agreement and related documents
            and the consummation of the Transaction, including expenses incurred
            by Big Sky in connection with obtaining approvals for the
            Transaction from regulators and stockholders, expenses related to
            the audits of the Big Sky Financial Statements required under this
            Agreement and expenses related to obtaining a fairness opinion from
            Professional Bank Services.

      1.2.5 CHANGE IN EQUITY CAPITAL. If, after the date of this Agreement but
            before the Effective Date, Glacier's or Big Sky's Common Stock
            issued and outstanding increases or decreases in number or is
            changed into or exchanged for a different kind or number of
            securities, through a recapitalization, reclassification, stock
            dividend, stock split, reverse stock split or other similar change
            in capitalization (not including increases in number due to
            issuances of shares upon exercise of any outstanding options to
            purchase Glacier Common Stock shares) of Glacier or Big Sky, as the
            case may be, then, as appropriate, the parties will make the
            proportionate adjustment to the Purchase Price.

      1.2.6 NO FRACTIONAL SHARES. No fractional shares of Glacier Corporation
            Common Stock will be issued. In lieu of fractional shares, if any,
            each stockholder of Big Sky who is otherwise entitled to receive a
            fractional share of Glacier Common Stock will receive an amount of
            cash equal to

                                      A-3

   93

            the product of such fraction times the Determination Date Closing
            Price. Such fractional share interest will not include the right to
            vote or receive dividends or any interest on dividends.

      1.2.7 CERTIFICATES.

            (a)   Surrender of Certificates. Each certificate evidencing Big Sky
                  Common Stock shares (other than Dissenting Shares) will, on
                  and after the Effective Date, be deemed for all corporate
                  purposes to represent and evidence only the right to receive a
                  certificate representing the Glacier Shares (or to receive the
                  cash for fractional shares) to which the Big Sky Common Stock
                  shares converted in accordance with the provisions of this
                  Subsection 1.2. Following the Effective Date, Big Sky
                  stockholders shall exchange Big Sky Common Stock certificates
                  by surrendering them to the agent ("Exchange Agent")
                  designated by Glacier and Big Sky to effect the exchange of
                  Big Sky Common Stock certificates for certificates
                  representing Glacier Shares (or for cash in lieu of fractional
                  shares), in accordance with any instructions provided by the
                  Exchange Agent and together with a properly completed and
                  executed form of transmittal letter. Until a holder's
                  certificate evidencing Big Sky Common Stock is so surrendered,
                  the holder will not be entitled to receive any certificates
                  evidencing Glacier Shares or cash in lieu of fractional
                  shares.

            (b)   Issuance of Certificates in Other Names. Any person requesting
                  that any certificate evidencing Glacier Shares be issued in a
                  name other than the name in which the surrendered Big Sky
                  Common Stock certificate is registered, must: (1) establish to
                  the Exchange Agent's satisfaction the right to receive the
                  certificate evidencing Glacier Shares and (2) either pay to
                  the Exchange Agent any applicable transfer or other taxes or
                  establish to the Exchange Agent's satisfaction that all
                  applicable taxes have been paid or are not required.

            (c)   Lost, Stolen, and Destroyed Certificates. The Exchange Agent
                  will be authorized to issue a certificate representing Glacier
                  Shares in exchange for a Big Sky Common Stock certificate that
                  has been lost, stolen or destroyed, if the holder provides the
                  Exchange Agent with: (1) satisfactory evidence that the holder
                  owns Big Sky Common Stock and that the certificate
                  representing this ownership is lost, stolen, or destroyed, (2)
                  any appropriate affidavit the Exchange Agent may require, and
                  (3) any indemnification assurances that the Exchange Agent may
                  require.

            (d)   Rights to Dividends and Distributions. After the Effective
                  Date, no holder of a certificate evidencing Big Sky Common
                  Stock shares will be entitled to receive any dividends or
                  other distributions otherwise payable to holders of record of
                  Glacier Common Stock on any date after the Effective Date,
                  unless the holder (1) is entitled by this Agreement to receive
                  a certificate representing Glacier Shares and (2) has
                  surrendered in accordance with this Agreement his or her Big
                  Sky Common Stock certificates (or has met the requirements of
                  Subsection 1.2.7(c) above) in exchange for certificates
                  representing Glacier Shares. Surrender of Big Sky Common Stock
                  certificates will not deprive the holder of any dividends or
                  distributions that the holder is entitled to receive as a
                  record holder of Big Sky Common Stock on a date before the
                  Effective Date. When the holder surrenders his or her
                  certificates, the holder will receive the amount, without
                  interest, of any cash dividends and any other distributions
                  distributed after the Effective Date on the whole number of
                  shares of Glacier Shares into which the holder's Big Sky
                  Common Stock was converted at the Effective Date.

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            (e)   Checks in Other Names. Any person requesting that a check for
                  cash in lieu of fractional shares be issued in a name other
                  than the name in which the Big Sky Common Stock certificate
                  surrendered in exchange for the cash is registered, must
                  establish to the Exchange Agent's satisfaction the right to
                  receive this cash.

1.3   PAYMENT TO DISSENTING STOCKHOLDERS. For purposes of this Agreement,
      "Dissenting Shares" means those shares of Big Sky Common Stock as to which
      stockholders have properly taken all steps necessary to perfect their
      dissenters' rights under MBCA Sections 35-1-826 through 35-1-839. Each
      outstanding Dissenting Share of Big Sky Common Stock will be converted at
      Closing into the rights provided under those sections of the MBCA.

1.4   ALTERNATIVE STRUCTURES. Subject to the conditions set forth below, Glacier
      may in its sole discretion elect to consummate the Transaction by means
      other than those specified in this Section 1. If Glacier so elects, any
      means, procedures, or amendments necessary or desirable to consummate the
      Transaction, in the opinion of Glacier's counsel, will supersede any
      conflicting, undesirable or unnecessary provisions of this Agreement. But,
      unless this Agreement is amended in accordance with Section 9, the
      following conditions will apply: (1) the type and amount of consideration
      set forth in Subsection 1.2 will not be modified and (2) the tax
      consequences to Big Sky and its stockholders will not be adversely
      affected. If Glacier elects an alternative structure under this Subsection
      1.4, Big Sky will cooperate with and assist Glacier with the following:
      (1) any amendments to this Agreement necessary or desirable in the opinion
      of Glacier's counsel and (2) the preparation and filing of any
      applications, documents, instruments and notices necessary or desirable,
      in the opinion of Glacier's counsel, to effect the alternative structure
      and to obtain the necessary stockholder; provided, however, that to the
      extent such alternative structure results in Big Sky incurring costs and
      expenses totaling more than $100,000, Glacier shall reimburse Big Sky for
      such additional expenses and costs.

1.5   LETTER OF TRANSMITTAL. Glacier will prepare a transmittal letter form
      reasonably acceptable to Big Sky for use by stockholders holding Big Sky
      Common Stock. Certificates representing shares of Big Sky Common Stock
      must be delivered for payment in the manner provided in the transmittal
      letter form. On or about the Effective Date, Glacier will mail the
      transmittal letter form to Big Sky stockholders.

1.6   UNDELIVERED CERTIFICATES. If outstanding certificates for Big Sky Common
      Stock are not surrendered or the payment for them is not claimed before
      those payments would escheat or become the property of any governmental
      unit or agency, the unclaimed items will, to the extent permitted by
      abandoned property or any other applicable law, become the property of
      Glacier (and to the extent not in its possession will be paid over to
      Glacier), free and clear of all claims or interests of any person
      previously entitled to such items. But, neither Glacier nor Big Sky will
      be liable to any holder of Big Sky Common Stock for any amount paid to any
      governmental unit or agency having jurisdiction over any such unclaimed
      items under the abandoned property or other applicable law of the
      jurisdiction, and Glacier will pay no interest on amounts owed to
      stockholders for shares of Big Sky Common Stock.

                                    SECTION 2
                           CLOSING OF THE TRANSACTION

2.1   CLOSING. Closing will occur on the Effective Date. If Closing does not
      occur on or before June 30, 1999 ("Termination Date"), either Glacier or
      Big Sky may terminate this Agreement in accordance with Section 7. Unless
      Glacier and Big Sky agree upon a later date, the Effective Date will be a
      date mutually acceptable to Glacier and Big Sky within 30 calendar days
      after the following:

      (a) each condition precedent set forth in Section 5 has been either
      fulfilled or waived; and

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      (b) each approval required by Section 5 has been granted, and all
      applicable waiting periods have expired.

2.2   EVENTS OF CLOSING. On the Effective Date, all properly executed documents
      required by this Agreement will be delivered to the proper party in form
      consistent with this Agreement. If any party fails to deliver a required
      document on the Effective Date or otherwise defaults under this Agreement
      on or before the Effective Date, then the Transaction will not occur
      unless the adversely affected party waives the default.

2.3   PLACE OF CLOSING. Unless Glacier and Big Sky agree otherwise, Closing will
      occur on the Effective Date at Glacier's main office, 202 Main Street,
      Kalispell, Montana.

                                    SECTION 3
                                 REPRESENTATIONS

3.1   REPRESENTATIONS OF GLACIER AND BIG SKY. Subject to Subsection 3.3 and
      except as expressly set forth in Schedule 1, Glacier represents to Big
      Sky, and Big Sky represents to Glacier, the following:

      3.1.1 CORPORATE ORGANIZATION AND QUALIFICATION.

            (a)   It is a corporation duly organized and validly existing under
                  the state laws of either Montana or Delaware (as applicable),
                  and its activities do not require it to be qualified in any
                  jurisdiction other than Montana.

            (b)   It has the requisite corporate power and authority to own or
                  lease its properties and assets and to carry on its businesses
                  as they are now being conducted.

            (c)   It has made available to the other party to this Agreement a
                  complete and correct copy of its certificate or articles of
                  incorporation and bylaws, each as amended to date and
                  currently in full force and effect.

      3.1.2 SUBSIDIARIES. With respect to Big Sky only, it has no Subsidiaries
            as of the date of this Agreement. A company is considered to be a
            "Subsidiary" of a party if that party or any of its Subsidiaries
            (individually or together with the party) directly or indirectly
            owns, controls, or has the ability to exercise 50% or more of the
            voting power of such company. In this Agreement, the term
            "Subsidiary" with respect to a party means any corporation,
            partnership, financial institution, trust company, or other entity
            owned or controlled by that party or any of its subsidiaries or
            affiliates (or owned or controlled by that party together with one
            or more of its subsidiaries or affiliates).

      3.1.3 CAPITAL STOCK.

            (a)   Glacier. Glacier represents:

                  (1)   as of the date of this Agreement, Glacier's authorized
                        capital stock consists of 16 million shares divided into
                        two classes: (i) 15 million shares of common stock, par
                        value $.01 per share ("Company Common Stock"), 8,335,485
                        shares of which are issued and outstanding and (ii) 1
                        million shares of blank-check preferred stock, par value
                        $.01 per share, none of which is outstanding ("Glacier
                        Preferred Stock");

                  (2)   options or rights to acquire not more than an aggregate
                        of 494,744 Company Common Stock shares (subject to
                        adjustment on the terms set forth in the Glacier

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                        Stock Plans) are outstanding under the stock option
                        plans listed in Schedule 2 ("Glacier Stock Plans");

                  (3)   No Company Common Stock shares are reserved for
                        issuance, other than the shares reserved for issuance
                        under the Glacier Stock Plans, and Glacier has no shares
                        of Glacier Preferred Stock reserved for issuance;

                  (4)   all outstanding shares of Company Common Stock have been
                        duly authorized and validly issued and are fully paid
                        and nonassessable;

                  (5)   all outstanding shares of capital stock of each of
                        Glacier's Subsidiaries owned by Glacier or a Subsidiary
                        of Glacier have been duly authorized and validly issued
                        and are fully paid and nonassessable, except to the
                        extent any assessment is required under federal law, and
                        are owned by Glacier or a Subsidiary of Glacier free and
                        clear of all liens, pledges, security interests, claims,
                        proxies, preemptive or subscriptive rights or other
                        encumbrances or restrictions of any kind (collectively,
                        "Liens"); and

                  (6)   except as set forth in this Agreement or in the Glacier
                        Stock Plans, there are no preemptive rights or any
                        outstanding subscriptions, options, warrants, rights,
                        convertible securities, or other agreements or
                        commitments of Glacier or any of its Subsidiaries of any
                        character relating to the issued or unissued capital
                        stock or other equity securities of Glacier (including
                        those relating to the issuance, sale, purchase,
                        redemption, conversion, exchange, registration, voting
                        or transfer of such stock or securities).

            (b)   Big Sky. Big Sky represents:

                  (1)   as of the date this Agreement, Big Sky's authorized
                        capital stock consists of 22,900 shares of common stock,
                        $40 par value per share ("Big Sky Common Stock"), 20,400
                        shares of which are issued and outstanding and 2,500 of
                        which are reserved for issuance pursuant to the
                        Debentures;

                  (2)   no options or rights to acquire Big Sky Common Stock
                        shares are outstanding, except as expressly set forth in
                        Schedule 3;

                  (3)   Except as expressly set forth in Schedule 4, Big Sky
                        does not have any stock option plans, employee stock
                        purchase plans, or other plans or agreements providing
                        for the grant of options or other rights to acquire Big
                        Sky Common Stock shares, and no Big Sky Common Stock
                        shares are reserved for issuance, except as expressly
                        set forth in Schedule 3;

                  (4)   all outstanding Big Sky Common Stock shares have been
                        duly authorized and validly issued and are fully paid
                        and nonassessable;

                  (5)   There are no preemptive rights or any outstanding
                        subscriptions, options, warrants, rights, convertible
                        securities, or other agreements or commitments of Big
                        Sky of any character relating to the issued or unissued
                        capital stock or other equity securities of Big Sky
                        (including those relating to the issuance, sale,
                        purchase, redemption, conversion, exchange,
                        registration, voting or transfer of such stock or
                        securities), except as expressly set forth in Schedules
                        3 and 4.

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      3.1.4 CORPORATE AUTHORITY.

            (a)   It has the requisite corporate power and authority and has
                  taken all corporate action necessary in order to execute and
                  deliver this Agreement and to complete the Transaction,
                  subject (in Big Sky's case) only to the approval by Big Sky's
                  stockholders of the plan of Share Exchange contained in this
                  Agreement to the extent required by MBCA Section 35-1-815.

            (b)   This Agreement is a valid and legally binding agreement of it,
                  enforceable in accordance with the terms of this Agreement.

      3.1.5 REPORTS AND FINANCIAL STATEMENTS.

            (a)   Filing of Reports. Since January 1, 1995, it and each of its
                  Subsidiaries (if any) has filed all reports and statements,
                  together with any required amendments to these reports and
                  statements, that it was required to file with (1) the
                  Securities and Exchange Commission ("SEC"), (2) the Federal
                  Reserve Board, (3) the FDIC, and (4) any other applicable
                  federal or state banking, insurance, securities, or other
                  regulatory authorities. Each of these reports and statements,
                  including the related financial statements and exhibits,
                  complied (or will comply, in the case of reports or statements
                  filed after the date of this Agreement) as to form in all
                  material respects with all applicable statutes, rules and
                  regulations as of their respective dates (and, in the case of
                  reports or statements filed before the date of this Agreement,
                  without giving effect to any amendments or modifications filed
                  after the date of this Agreement).

            (b)   Delivery to Other Party of Reports. It has delivered to the
                  other party a copy of each registration statement, offering
                  circular, report, definitive proxy statement or information
                  statement under the Securities Act of 1933, as amended,
                  ("Securities Act"), the Securities Exchange Act of 1934, as
                  amended, ("Exchange Act"), and state securities and "Blue Sky"
                  laws (collectively, the "Securities Laws") filed, used or
                  circulated by it with respect to periods since January 1,
                  1995, through the date of this Agreement. It will promptly
                  deliver to the other party each such registration statement,
                  offering circular, report, definitive proxy statement or
                  information statement filed, used or circulated after the date
                  of this Agreement (collectively, its "Reports"), each in the
                  form (including related exhibits and amendments) filed with
                  the SEC (or if not so filed, in the form used or circulated).

            (c)   Compliance with Securities Laws. As of their respective dates
                  (and without giving effect to any amendments or modifications
                  filed after the date of this Agreement), each of the Reports,
                  including the related financial statements, exhibits and
                  schedules, filed, used or circulated before the date of this
                  Agreement complied (and each of the Reports filed after the
                  date of this Agreement, will comply) in all material respects
                  with applicable Securities Laws, and did not (or in the case
                  of reports, statements, or circulars filed after the date of
                  this Agreement, will not) contain any untrue statement of a
                  material fact or omit to state a material fact required to be
                  stated therein or necessary to make the statements made
                  therein, in light of the circumstances under which they were
                  made, not misleading.

            (d)   Financial Statements. Each of its balance sheets included in
                  the Financial Statements fairly presents (or, in the case of
                  Financial Statements for periods ending on a date following
                  the date of this Agreement, will fairly present) the
                  consolidated financial

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                  position of it and its Subsidiaries as of the date of the
                  balance sheet. Each of the consolidated statements of income,
                  cash flows and stockholders' equity included in the Financial
                  Statements fairly presents (or, in the case of Financial
                  Statements for periods ending on a date following the date of
                  this Agreement, will fairly present) the consolidated results
                  of operations, retained earnings and cash flows, as the case
                  may be, of it and its Subsidiaries for the periods set forth
                  in these statements (subject, in the case of unaudited
                  statements, to normal year-end audit adjustments), in each
                  case in accordance with generally accepted accounting
                  principles, consistently applied ("GAAP"), except as may be
                  noted in these statements.

                  (1)   "Financial Statements" means: (i) in Glacier's case, the
                        Glacier Financial Statements (or for periods ending on a
                        date following the date of this Agreement, the
                        Subsequent Glacier Financial Statements); and (ii) in
                        Big Sky's case, the Big Sky Financial Statements (or for
                        periods ending on a date following the date of this
                        Agreement, the Subsequent Big Sky Financial Statements).

                  (2)   "Glacier Financial Statements" means Glacier's (i)
                        audited consolidated statements of financial condition
                        as of December 31, 1997 and 1996, and the related
                        audited statements of income, cashflows and changes in
                        stockholders' equity for each of the years ended
                        December 31, 1997 and 1996; and (ii) unaudited
                        consolidated statements of financial condition as of the
                        end of each fiscal quarter following December 31, 1997
                        but preceding the date of this Agreement, and the
                        related unaudited statements of income, cashflows and
                        changes in stockholders' equity for each such quarter.

                  (3)   "Subsequent Glacier Financial Statements" means balance
                        sheets and related statements of income and
                        stockholders' equity for each of the fiscal quarters
                        ending after the date of this Agreement and before
                        Closing.

                  (4)   "Big Sky Financial Statements" means (i) Big Sky's
                        statements of financial condition as of December 31,
                        1997 (unaudited as of execution of this Agreement,
                        audited as of three days before Glacier files the
                        Registration Statement with the SEC) and as of December
                        31, 1996 and 1995 (unaudited), and the related
                        statements of income, cashflows and changes in
                        stockholders' equity for each of the years ended
                        December 31, 1997 (unaudited as of execution of this
                        Agreement, audited as of three days before Glacier files
                        the Registration Statement with the SEC) and December
                        31, 1996 and 1995 (unaudited); and (ii) Big Sky's
                        unaudited statements of financial condition as of the
                        end of each fiscal quarter following December 31, 1997
                        but preceding the date of this Agreement, and the
                        related unaudited statements of income, cashflows and
                        changes in stockholders' equity for each such quarter.

                  (5)   "Subsequent Big Sky Financial Statements" means (i)
                        unaudited balance sheets and related statements of
                        income and stockholders' equity for each of Big Sky's
                        fiscal quarters ending after the date of this Agreement
                        and before Closing, and (ii) [if the Transaction does
                        not close before February 15, 1999], Big Sky's audited
                        statements of financial condition as of December 31,
                        1998, and the related audited statements of income,
                        cashflows, and changes in stockholders' equity for the
                        year ended December 31, 1998.

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      3.1.6 ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as disclosed in its
            Financial Statements and Reports, since December 31, 1997: (1) it
            and its Subsidiaries have conducted their respective businesses only
            in the ordinary and usual course of the businesses and (2) no change
            or development or combination of changes or developments has
            occurred that, individually or in the aggregate, is reasonably
            likely to result in a Material Adverse Effect with respect to it or
            its Subsidiaries. For purposes of this Agreement, "Material Adverse
            Effect" with respect to any corporation means an effect that: (1) is
            materially adverse to the business, financial condition, results of
            operations or prospects of the corporation and its Subsidiaries
            taken as a whole; (2) significantly and adversely affects the
            ability of the corporation to consummate the transactions
            contemplated by this Agreement by the Termination Date or to perform
            its material obligations under this Agreement; or (3) enables any
            persons to prevent the consummation by the Termination Date of the
            transactions contemplated by this Agreement. No Material Adverse
            Effect will be deemed to have occurred on the basis of any effect
            resulting from actions or omissions of the corporation taken with
            the explicit prior consent of the other party to this Agreement.

      3.1.7 MATERIAL AGREEMENTS.

            (a)   Except for the Glacier Stock Plans (in Glacier's case) and
                  arrangements made after the date and in accordance with the
                  terms of this Agreement, it and its Subsidiaries are not bound
                  by any material contract (as defined in Item 601(b)(10) of
                  Regulation S-K under the Securities Act) that: (1) is to be
                  performed after the date of this Agreement and (2) has not
                  been filed with or incorporated by reference in its Reports or
                  set forth in Schedule 5.

            (b)   Neither it nor any of its Subsidiaries is in default under any
                  contract, agreement, commitment, arrangement, lease, insurance
                  policy, or other instrument.

      3.1.8 KNOWLEDGE AS TO CONDITIONS. Its President, Chief Executive Officer,
            and Chief Financial Officer (collectively, "Executive Officers")
            know of no reason the Regulatory Approvals and, to the extent
            necessary, any other approvals, authorizations, filings,
            registrations, and notices should not be obtained without the
            imposition of any condition or restriction that is reasonably likely
            to have a Material Adverse Effect with respect to it, its
            Subsidiaries, or the Continuing Corporation, or the opinion of the
            tax experts referred to in Subsection 5.2.13.

      3.1.9 BROKERS AND FINDERS. Neither it, its Subsidiaries, nor any of their
            respective officers, directors or employees has employed any broker
            or finder or incurred any liability for any brokerage fees,
            commissions or finder's fees in connection with the transactions
            contemplated in this Agreement, except for payments made by Big Sky
            to Professional Bank Services pursuant to their brokerage agreement.

      3.1.10 YEAR 2000 COMPLIANCE. It is in full compliance with all applicable
            regulatory requirements, guidelines and timetables regarding systems
            assessment, systems testing, third-party assessment, and other
            matters related to preparation for Year 2000 Compliance. Based on
            its assessment and testing conducted to date, it is not aware of
            anything that cause it to believe that (1) it will fail in any
            material way not to timely achieve Year 2000 Compliance, or (2)
            expenses related to achieving Year 2000 Compliance will have a
            material effect on its operations or financial condition. For
            purposes of this Agreement, "Year 2000 Compliance" means that its
            Information Technology will be capable of use prior to, during, and
            after the calendar year 2000 A.D., and that the Information
            Technology used during each such time period will accurately
            receive, provide and process date/time data (including, but not
            limited to, calculating, comparing and

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            sequencing) from, into and between the twentieth and twenty-first
            centuries, including the years 1999 and 2000, and leap year
            calculations and will not malfunction, cease to function, or provide
            invalid or incorrect results as a result of date/time data. For
            purposes of this Agreement, "Information Technology" includes
            computer software, computer firmware, computer hardware (whether
            general or specific purpose) or other similar or related automated
            or computerized items that are used or relied on by it in the
            conduct of its business.

3.2   BIG SKY'S ADDITIONAL REPRESENTATIONS. Subject to Subsection 3.3 and except
      as expressly set forth in Schedule 1, Big Sky represents to Glacier, the
      following:

      3.2.1 LOAN AND LEASE LOSSES. Its Executive Officers know of no reason why
            the allowance for loan and lease losses shown in the balance sheets
            included in the Financial Statements for the periods ended December
            31, 1997, March 31, 1998, June 30, 1998, and September 30, 1998, was
            not adequate as of those dates, respectively, to provide for
            estimable and probable losses, net of recoveries relating to loans
            not previously charged off, inherent in its loan portfolio.

      3.2.2 NO STOCK OPTION PLANS. It has not adopted any stock option plans or
            granted any options or rights to acquire any shares of Big Sky
            Common Stock, except as expressly set forth in Schedules 3 and 4.

      3.2.3 GOVERNMENTAL FILINGS; NO VIOLATIONS.

            (a)   Filings. Other than the Regulatory Approvals and other than as
                  required under the Securities Act, the Exchange Act, and state
                  securities and "Blue Sky" laws, no notices, reports or other
                  filings are required to be made by it with, nor are any
                  consents, registrations, approvals, permits or authorizations
                  required to be obtained by it from, any governmental or
                  regulatory authority, agency, court, commission or other
                  entity, domestic or foreign ("Governmental Entity"), in
                  connection with the execution, delivery or performance of this
                  Agreement by it and the consummation by it of the Transaction.

            (b)   Violations. The execution, delivery and performance of this
                  Agreement does not and will not, and the consummation by it of
                  the Transaction will not, constitute or result in: (1) a
                  breach or violation of, or a default under, its articles of
                  incorporation or bylaws; (2) a breach or violation of, or a
                  default under, or the acceleration of or the creation of a
                  Lien (with or without the giving of notice, the lapse of time
                  or both) under, any provision of any agreement, lease,
                  contract, note, mortgage, indenture, arrangement or other
                  obligation ("Contracts") of it; or (3) a violation of any law,
                  rule, ordinance or regulation or judgment, decree, order,
                  award, or governmental or non-governmental permit or license
                  to which it is subject; or (4) any change in the rights or
                  obligations of any party under any of the Contracts. Schedule
                  6 contains a list of all consents it must obtain from third
                  parties under any Contracts before consummation of the
                  Transaction.

      3.2.4 ASSET CLASSIFICATION.

            (a)   Schedule 7 sets forth a list, accurate and complete as of
                  September 30, 1998, except as otherwise expressly noted in
                  Schedule 7, and separated by category of classification or
                  criticism ("Asset Classification"), of the aggregate amounts
                  of loans, extensions of credit and other assets of it that
                  have been criticized or classified by any Governmental Entity,
                  by any outside auditor, or by any internal audit.

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            (b)   Except as shown on Schedule 7, no amounts of loans, extensions
                  of credit or other assets that have been classified or
                  criticized by any representative of any Governmental Entity as
                  "Other Assets Especially Mentioned," "Substandard,"
                  "Doubtful," "Loss" or words of similar effect are excluded
                  from the amounts disclosed in the Asset Classification, other
                  than amounts of loans, extensions of credit or other assets
                  that were paid off or charged off by it before the date of
                  this Agreement.

      3.2.5 INVESTMENTS. Schedule 8 lists all investments (except investments in
            securities issued by federal state or local government or any
            subdivision or agency thereof) made by it in an amount greater than
            $25,000 or which represent an ownership interest of more than 5% in
            any corporation, company, partnership, or other entity. All
            investments comply with all applicable laws and regulations.

      3.2.6 PROPERTIES.

            (a)   Except as disclosed or reserved against in its Financial
                  Statements or in Schedule 9, it has good and marketable title,
                  free and clear of all Liens (other than Liens for current
                  taxes not yet delinquent or pledges to secure deposits) to all
                  of the properties and assets, tangible or intangible,
                  reflected in its Reports as being owned or leased by it as of
                  the date of this Agreement.

            (b)   To the knowledge of its Executive Officers, all buildings and
                  all fixtures, equipment and other property and assets that are
                  material to its business and are held under leases or
                  subleases by it are held under valid leases or subleases,
                  enforceable in accordance with their respective terms (except
                  as may be limited by applicable bankruptcy, insolvency,
                  reorganization, moratorium or other laws affecting creditors'
                  rights generally or by general equity principles). Schedule 10
                  lists all real property which it owns or leases.

            (c)   Schedule 11 lists all its existing branches and offices and
                  all new branches or offices it has applied to establish or
                  purchase, along with the cost to establish or purchase those
                  branches.

            (d)   It has provided to Glacier a copy of the existing title policy
                  held in its files on unimproved real estate it owns in
                  Bozeman, Montana, and no exceptions, reservations, or
                  encumbrances have arisen or been created since the date of
                  issuance of that policy. At Closing and upon Glacier's
                  request, Big Sky will provide Glacier with update
                  endorsements, dated as of the Effective Date, to such title
                  policy.

      3.2.7 ANTI-TAKEOVER PROVISIONS. It has taken all necessary action to
            exempt the Transaction and this Agreement from (a) all applicable
            Montana State law anti-takeover provisions, if any, and (b) any
            takeover-related provisions of its articles of incorporation or
            bylaws.

      3.2.8 COMPLIANCE WITH LAWS. Except as disclosed in Schedule 12, Big Sky:

            (a)   is in material compliance, in the conduct of its business,
                  with all applicable federal, state, local, and foreign
                  statutes, laws, regulations, ordinances, rules, judgments,
                  orders or decrees, including the Bank Secrecy Act, the Truth
                  in Lending Act, the Equal Credit Opportunity Act, the Fair
                  Housing Act, the Community Reinvestment Act, the Home Mortgage
                  Disclosure Act and all applicable fair lending laws or other
                  laws relating to discrimination;

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            (b)   has all permits, licenses, certificates of authority, orders,
                  and approvals of, and has made all filings, applications, and
                  registrations with, federal, state, local, and foreign
                  governmental or regulatory bodies (including the Federal
                  Reserve) that are required in order to permit it to carry on
                  its business as it is presently conducted;

            (c)   has received since January 1, 1995, no notification or
                  communication from any Governmental Entity (including any
                  bank, insurance and securities regulatory authorities) or its
                  staff (1) asserting a failure to comply with any of the
                  statutes, regulations or ordinances that such Governmental
                  Entity enforces, (2) threatening to revoke any license,
                  franchise, permit or governmental authorization, or (3)
                  threatening or contemplating revocation or limitation of, or
                  that would have the effect of revoking or limiting, FDIC
                  deposit insurance (nor, to the knowledge of its Executive
                  Officers, do any grounds for any of the foregoing exist); and

            (d)   is not required to notify any federal banking agency before
                  adding directors to its board of directors or employing senior
                  executives.

      3.2.9 LITIGATION. Except as disclosed in its Financial Statements or in
            Schedule 13, before the date of this Agreement:

            (a)   no criminal or administrative investigations or hearings,
                  before or by any Governmental Entity, or civil, criminal or
                  administrative actions, suits, claims or proceedings, before
                  or by any person (including any Governmental Entity) are
                  pending or, to the knowledge of its Executive Officers,
                  threatened, against it (including under the Truth in Lending
                  Act, the Equal Credit Opportunity Act, the Fair Housing Act,
                  the Community Reinvestment Act, the Home Mortgage Disclosure
                  Act, or any other fair lending law or other law relating to
                  discrimination); and

            (b)   neither it (nor any officer, director, controlling person or
                  property of it) is a party to or is subject to any order,
                  decree, agreement, memorandum of understanding or similar
                  arrangement with, or a commitment letter or similar submission
                  to, any Governmental Entity charged with the supervision or
                  regulation of depository institutions or engaged in the
                  insurance of deposits (including the FDIC) or the supervision
                  or regulation of it, and it has not has been advised by any
                  such Governmental Entity that such Governmental Entity is
                  contemplating issuing or requesting (or is considering the
                  appropriateness of issuing or requesting) any such order,
                  decree, agreement, memorandum of understanding, commitment
                  letter or similar submission.

      3.2.10 TAXES. For purposes of this Subsection 3.2.10, "Tax" includes any
            tax or similar governmental charge, impost, or levy (including
            income taxes, franchise taxes, transfer taxes or fees, stamp taxes,
            sales taxes, use taxes, excise taxes, ad valorem taxes, withholding
            taxes, worker's compensation, payroll taxes, unemployment insurance,
            social security, minimum taxes, or windfall profits taxes), together
            with any related liabilities, penalties, fines, additions to tax, or
            interest, imposed by the United States or any state, county,
            provincial, local or foreign government or subdivision or agency of
            the United States.

            (a)   All federal, state and local Tax returns, including all
                  information returns, it is required to file have been timely
                  filed or requests for extensions have been timely filed. If
                  any extensions were filed, they have been or will be granted
                  by Closing and will not have expired. All filed returns are
                  complete and accurate in all material respects.

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            (b)   Except as disclosed in its Financial Statements:

                  (1)   all taxes attributable to it that are or were due or
                        payable (without regard to whether such taxes have been
                        assessed) have been paid in full or have been adequately
                        provided for in its Financial Statements in accordance
                        with GAAP;

                  (2)   adequate provision in accordance with GAAP has been made
                        in its Financial Statements relating to all Taxes for
                        the periods covered by such Financial Statements that
                        were not yet due and payable as of the date of this
                        Agreement, regardless of whether the liability for such
                        Taxes is disputed;

                  (3)   as of the date of this Agreement and except as disclosed
                        in its Financial Statements, there is no outstanding
                        audit examination, deficiency, refund litigation or
                        outstanding waiver or agreement extending the applicable
                        statute of limitations for the assessment or collection
                        of any Taxes for any period with respect to any of its
                        Taxes;

                  (4)   all Taxes with respect to completed and settled
                        examinations or concluded litigation relating to it have
                        been paid in full or have been recorded on its Financial
                        Statements (in accordance with GAAP);

                  (5)   it is not a party to a Tax sharing or similar agreement
                        or any agreement under which it has indemnified any
                        other party with respect to Taxes; and

                  (6)   the proper and accurate amounts have been withheld from
                        all employees (and timely paid to the appropriate
                        Governmental Entity or set aside in an account for these
                        purposes) for all periods through the Effective Date in
                        compliance with all Tax withholding provisions of
                        applicable federal, state, local and foreign laws
                        (including income, social security and employment tax
                        withholding for all types of compensation).

      3.2.11 INSURANCE. It has taken all requisite action (including the making
            of claims and the giving of notices) under its directors' and
            officers' liability insurance policy or policies in order to
            preserve all rights under such policies with respect to all matters
            known to it (other than matters arising in connection with, and the
            transactions contemplated by, this Agreement). Schedule 14 lists all
            directors' and officers' liability insurance policies and other
            insurance policies it maintains.

      3.2.12 LABOR MATTERS. It is not a party to, or is not bound by, any
            collective bargaining agreement, contract or other agreement or
            understanding with any labor union or labor organization. It is not
            the subject of any proceeding: (1) asserting that it has committed
            an unfair labor practice or (2) seeking to compel it to bargain with
            any labor organization as to wages or conditions of employment. No
            strike involving it is pending or, to the knowledge of its Executive
            Officers, threatened. Its Executive Officers are not aware of any
            activity involving its employees seeking to certify a collective
            bargaining unit or engaging in any other organizational activity.

      3.2.13 EMPLOYEE BENEFITS.

            (a)   For purposes of this Agreement, "Plan" or "Plans",
                  individually or collectively, means any "employee benefit
                  plan," as defined in Section 3(3) of the Employee Retirement
                  Income Security Act of 1974, ("ERISA"), as amended, maintained
                  by Big Sky. Big Sky 

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                  is not now nor has it ever been a contributing employer to or
                  sponsor of a multi-employer plan or a single employer plan
                  subject to Title IV of ERISA.

            (b)   Schedule 15 sets forth a list, as of the date of this
                  Agreement, of (1) all Plans, stock purchase plans, restricted
                  stock and stock option plans, and other deferred compensation
                  arrangements, (2) all other material employee benefit plans
                  that cover employees or former employees of Big Sky (its
                  "Compensation Plans"). True and complete copies of the
                  Compensation Plans (and, as applicable, copies of summary plan
                  descriptions, annual reports on Form 5500, actuarial reports
                  and reports under Financial Accounting Standards Board
                  Statement No. 106 relating to such Compensation Plans)
                  covering current or former employees or directors of Big Sky
                  (its "Employees"), including Plans and related amendments,
                  have been made available to Glacier.

            (c)   All Plans (other than "multi-employer plans" within the
                  meaning of ERISA Sections 3(37) or 4001(a)(3)), to the extent
                  subject to ERISA, are in substantial compliance with ERISA.
                  Each Plan that is an "employee pension benefit plan" within
                  the meaning of ERISA Section 3(2) ("Pension Plan") and that is
                  intended to be qualified under IRC Section 401(a), has
                  received a favorable determination letter from the Internal
                  Revenue Service, and it is not aware of any circumstances
                  likely to result in revocation of any such favorable
                  determination letter. No litigation relating to Plans is
                  pending or, to the knowledge of its Executive Officers,
                  threatened. Big Sky has not engaged in a transaction with
                  respect to any Plan that could subject it to a Tax or penalty
                  imposed by either IRC Section 4975 or ERISA Section 502(i).

            (d)   All material contributions that it is or was required to make
                  under the terms of any Plans have been timely made or have
                  been reflected in its Financial Statements. None of its Plans
                  has an "accumulated funding deficiency" (whether or not
                  waived) within the meaning of IRC Section 412 or ERISA Section
                  302. It has not provided, or is required to provide, security
                  to any Pension Plan under IRC Section 401(a)(29), IRC Section
                  412(f)(3), or ERISA Sections 306, 307 or 4204. 

            (e)   Except as disclosed in its Financial Statements, it does not
                  have any obligations for retiree health and life benefits.

            (f)   No restrictions exist on its rights to amend or terminate any
                  Plan without incurring liability under the Plan in addition to
                  normal liabilities for benefits.

            (g)   Except as disclosed in its Financial Statements or as provided
                  in a Schedule to this Agreement, the transactions contemplated
                  by this Agreement and the Stock Plans will not result in: (1)
                  vesting, acceleration, or increase of any amounts payable
                  under any Compensation Plan, (2) any material increase in
                  benefits under any Compensation Plan or (3) payment of any
                  severance or similar compensation under any Compensation Plan.

      3.2.14 ENVIRONMENTAL MATTERS.

            (a)   For purposes of this Subsection 3.2.14, the following
                  definitions apply:

                  (1)   "Subject Property" with respect to a party means (i) all
                        real property at which the businesses of Big Sky has
                        been conducted, and any property where under any
                        Environmental Law it is deemed to be the owner or
                        operator of the property; (ii) any facility in which it
                        participates in the management, including participating

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                        in the management of the owner or operator of the
                        property; and (iii) all other real property that it, for
                        purposes of any Environmental Law, otherwise could be
                        deemed to be an owner or operator of or as otherwise
                        having control over.

                  (2)   "Environmental Laws" means any federal, state, local or
                        foreign law, regulation, agency policy, order, decree,
                        judgment, judicial opinion, or any agreement with any
                        Governmental Entity, presently in effect or subsequently
                        adopted relating to: (i) the manufacture, generation,
                        transport, use, treatment, storage, recycling, disposal,
                        release, threatened release or presence of Hazardous
                        Substances, or (ii) the preservation, restoration or
                        protection of the environment, natural resources or
                        human health.

                  (3)   "Hazardous Substances" means any hazardous or toxic
                        substance, material or waste that is regulated by any
                        local governmental authority, any state government or
                        the United States Government, including any material or
                        substance that is (a) defined as a "hazardous substance"
                        in 42 USC Section 9601(14), (b) defined as a "pollutant
                        or contaminant" in 42 USC Section 9604(a)(2), or (c)
                        defined as a "hazardous waste" in 42 USC Section
                        6903(5).

                  (4)   "Knowledge," with respect to a particular fact, means
                        that (i) a person is actually aware of such fact or (ii)
                        a prudent person could be expected to discover or
                        otherwise become aware of such fact or other matter in
                        the course of conducting a reasonably comprehensive
                        investigation concerning the existence of such fact.

            (b)   To the Knowledge of its Executive Officers, it and the Subject
                  Property are, and have been, in compliance with all applicable
                  Environmental Laws, and no circumstances exist that with the
                  passage of time or the giving of notice would be reasonably
                  likely to result in noncompliance with such Environmental
                  Laws.

            (c)   To the Knowledge of its Executive Officers, none of the
                  following, and no reasonable basis for any of the following,
                  exists: pending or threatened claims, actions, investigations,
                  notices of non-compliance, information requests or notices of
                  potential responsibility or proceedings involving it or any
                  Subject Property, relating to:

                  (1)   an asserted liability of Big Sky or any prior owner,
                        occupier or user of Subject Property under any
                        applicable Environmental Law or the terms and conditions
                        of any permit, license, authority, settlement,
                        agreement, decree or other obligation arising under any
                        applicable Environmental Law;

                  (2)   the handling, storage, use, transportation, removal or
                        disposal of Hazardous Substances;

                  (3)   the actual or threatened discharge, release or emission
                        of Hazardous Substances from, on or under or within
                        Subject Property into the air, water, surface water,
                        ground water, land surface or subsurface strata; or

                  (4)   personal injuries or damage to property related to or
                        arising out of exposure to Hazardous Substances.

            (d)   To the Knowledge of its Executive Officers, (i) no storage
                  tanks underground or otherwise are present on the Subject
                  Property or, if present, none of such tanks are 

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                  leaking and each of them is in full compliance with all
                  applicable Environmental Laws; (ii) it does not own, possess
                  or control any PCBs, PCB-contaminated fluids, wastes or
                  equipment, or any material amount of asbestos or
                  asbestos-containing material, and (iii) no Hazardous
                  Substances have been used, handled, stored, discharged,
                  released or emitted, or are threatened to be discharged,
                  released or emitted, at or on any Subject Property, except for
                  those types and quantities of Hazardous Substances typically
                  used in an office environment and that have not created
                  conditions requiring remediation under any applicable
                  Environmental Law.

            (e)   Except for the investigation or monitoring by the
                  Environmental Protection Agency or similar state agencies in
                  the ordinary course, no part of the Subject Property has been
                  or is scheduled for investigation or monitoring under any
                  applicable Environmental Law.

3.3   EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES.

      3.3.1 DISCLOSURE OF EXCEPTIONS. Each exception set forth in a Schedule is
            disclosed only for purposes of the representations and warranties
            referenced in that exception; but the following conditions apply:

            (a)   no exception is required to be set forth in a Schedule if its
                  absence would not result in the related representation or
                  warranty being found untrue or incorrect under the standard
                  established by Subsection 3.3.2; and

            (b)   the mere inclusion of an exception in a Schedule is not an
                  admission by a party that such exception represents a material
                  fact, material set of facts, or material event or would result
                  in a Material Adverse Effect with respect to that party.

      3.3.2 NATURE OF EXCEPTIONS. No representation or warranty contained in
            Subsections 3.1 or 3.2 will be found untrue or incorrect and no
            party to this Agreement will have breached a representation or
            warranty due to the following: the existence of any fact, set of
            facts, or event, if the fact or event individually or taken together
            with other facts or events would not, or, in the case of Subsection
            3.2.9, is not reasonably likely to, have a Material Adverse Effect
            with respect to such party.

                                    SECTION 4
                            CONDUCT AND TRANSACTIONS
                                 BEFORE CLOSING

4.1   CONDUCT OF BIG SKY'S BUSINESS BEFORE CLOSING. Before Closing, Big Sky
      promises as follows:

      4.1.1 AVAILABILITY OF BIG SKY'S BOOKS, RECORDS AND PROPERTIES.

            (a)   Big Sky will make its books, records, properties, contracts
                  and documents available at all reasonable times to Glacier and
                  its counsel, accountants and other representatives. These
                  items will be open for inspection, audit and direct
                  verification of: (1) loan or deposit balances, (2) collateral
                  receipts and (3) any other transactions or documentation
                  Glacier may find reasonably relevant to the Transaction. Big
                  Sky will cooperate fully in any such inspection, audit, or
                  direct verification procedures, and Big Sky will make
                  available all information reasonably required by or on behalf
                  of Glacier.

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            (b)   At Glacier's request, Big Sky will request any third parties
                  involved in the preparation or review of (1) Big Sky Financial
                  Statements, (2) Subsequent Big Sky Financial Statements, or
                  (3) any audits of Big Sky's operations, loan portfolios or
                  other assets, to disclose to Glacier the work papers or any
                  similar materials related to these items.

      4.1.2 ORDINARY AND USUAL COURSE. Big Sky will conduct business only in the
            ordinary and usual course and, without the prior written consent of
            Glacier, will not do any of the following:

            (a)   effect any stock split or other recapitalization with respect
                  to Big Sky Common Stock or issue, pledge, redeem, or encumber
                  in any way any shares of Big Sky's capital stock; or grant any
                  option or other right to shares of Big Sky's capital stock;

            (b)   declare or pay any dividend, or make any other distribution,
                  either directly or indirectly, with respect to Big Sky Common
                  Stock; provided, however, that if the Closing occurs after
                  December 31, 1998, Big Sky will be permitted to declare and
                  pay a dividend consistent with its prior year-end practices so
                  long as it does not affect the treatment of the Share Exchange
                  as a "pooling of interests" for accounting purposes;

            (c)   acquire, sell, transfer, assign, encumber or otherwise dispose
                  of assets or make any commitment with respect to its assets
                  other than in the ordinary and usual course of business;

            (d)   solicit or accept deposit accounts of a different type from
                  accounts previously accepted by it or at rates materially in
                  excess of rates previously paid by it, except to reflect
                  changes in prevailing interest rates, or incur any
                  indebtedness greater than $25,000 (except for borrowings from
                  the Federal Home Loan Bank in the ordinary course of business
                  and consistent with past practices);

            (e)   acquire an ownership interest or a leasehold interest in any
                  Property or any other real property, whether by foreclosure or
                  otherwise, without: (1) making an appropriate environmental
                  evaluation in advance of obtaining the interest and providing
                  the evaluation to Glacier and (2) providing Glacier with at
                  least 30 days' advance written notice before it acquires the
                  interest;

            (f)   enter into or recommend the adoption by Big Sky's stockholders
                  of any agreement involving a possible merger or other business
                  combination or asset sale by Big Sky not involving the
                  Transaction;

            (g)   enter into, renew, or terminate any contracts (including real
                  property leases and data or item processing agreements) with
                  or for a term of one-year or more, except for its contracts of
                  deposit and agreements to lend money not otherwise restricted
                  under this Agreement and (1) entered into in the ordinary
                  course of business, (2) consistent with past practices, and
                  (3) providing for not less (in the case of loans) or more (in
                  the case of deposits) than prevailing market rates of
                  interest;

            (h)   enter into or amend any contract (other than contracts for
                  deposits or agreements to lend money not otherwise restricted
                  by this Agreement) calling for a payment by it of more than
                  $25,000, unless the contract may be terminated without cause
                  or penalty upon 30 days notice or less;

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            (i)   enter into any personal services contract with any person or
                  firm, except contracts, agreements, or arrangements for legal,
                  accounting, investment advisory, or tax services entered into
                  directly to facilitate the Transaction;

            (j)   (1) sell any securities, whether held for investment or sale,
                  other than in the ordinary course of business or sell any
                  securities, whether held for investment or sale, even in the
                  ordinary course of business, if the aggregate gain realized
                  from all sales after the date of this Agreement would be more
                  than $25,000 or (2) transfer any investment securities between
                  portfolios of securities available for sale and portfolios of
                  securities to be held to maturity;

            (k)   amend its articles of incorporation, bylaws, or other
                  formation agreements, or convert its charter or form of
                  entity;

            (l)   implement or adopt any material changes in its operations,
                  policies, or procedures, including loan loss reserve policies,
                  unless the changes are requested by Glacier or are necessary
                  or advisable, on the advice of legal counsel, to comply with
                  applicable laws, regulations, or regulatory policies; 

            (m)   implement or adopt any change in its accounting principles,
                  practices or methods, other than as may be required (1) by
                  GAAP, (2) for tax purposes, or (3) to take advantage of any
                  beneficial tax or accounting methods;

            (n)   increase the number of full-time or equivalent employees of
                  Big Sky above 20;

            (o)   other than in accordance with binding commitments existing on
                  the date of this Agreement, make any capital expenditures in
                  excess of $10,000 per project or related series of projects or
                  $25,000 in the aggregate, except for expenses reasonably
                  related to completion of the Transaction, which expenses may
                  not exceed $100,000; or

            (p)   enter into any other transaction or make any expenditure other
                  than in the ordinary and usual course of its business and made
                  or entered into in a manner consistent with its
                  well-established practices or as required by this Agreement.

      4.1.3 CONDUCT REGARDING REPRESENTATIONS AND WARRANTIES. Big Sky will not
            do or cause to be done anything that would cause any representation
            or warranty in Subsection 3.1 or 3.2 to be untrue in any material
            respect at Closing, except as otherwise contemplated or required by
            this Agreement or consented to in writing by Glacier.

      4.1.4 MAINTENANCE OF PROPERTIES. Big Sky will maintain its properties and
            equipment (and related insurance or its equivalent) in accordance
            with good business practice.

      4.1.5 PRESERVATION OF BUSINESS ORGANIZATION. Big Sky will use all
            reasonable efforts to:

            (a)   preserve its business organization;

            (b)   retain the services of present management; and

            (c)   preserve the goodwill of suppliers, customers and others with
                  whom it has business relationships.

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      4.1.6 SENIOR MANAGEMENT. Big Sky will obtain Glacier's approval before
            making any change, including hiring of replacements, with respect to
            present management personnel having the rank of vice-president or
            higher.

      4.1.7 COMPENSATION AND EMPLOYMENT AGREEMENTS. Big Sky will not permit any
            increase in the current or deferred compensation payable or to
            become payable by Big Sky to any of its directors, officers,
            employees, agents, or consultants other than normal increments in
            compensation in accordance with Big Sky's past practices with
            respect to the timing and amounts of such increments. Without the
            prior written approval of Glacier, Big Sky will not commit to,
            execute or deliver any employment agreement with any party not
            terminable upon two weeks' notice and without expense.

      4.1.8 UPDATE OF FINANCIAL STATEMENTS. Big Sky will promptly deliver its
            Financial Statements to Glacier. Big Sky will deliver Subsequent Big
            Sky Financial Statements to Glacier by the earlier of: (1) 5 days
            after Big Sky has prepared and issued them or (2) 60 days after
            year-end for year-end statements and 30 days after the end of the
            quarter for quarterly statements. The Subsequent Big Sky Financial
            Statements:

            (a)   will be prepared from the books and records of Big Sky;

            (b)   will present fairly the financial position and operating
                  results of Big Sky at the times indicated and for the periods
                  covered;

            (c)   will be prepared in accordance with GAAP (except for the
                  absence of notes) and with the regulations promulgated by
                  applicable regulatory authorities, to the extent then
                  applicable, subject to normal year-end adjustments; and

            (d)   will reflect all Big Sky's liabilities, contingent or
                  otherwise, on the respective dates and for the respective
                  periods covered, except for liabilities: (1) not required to
                  be so reflected in accordance with GAAP or (2) not significant
                  in amount.

      4.1.9 NO SOLICITATION.

            (a)   Neither Big Sky nor any of its officers or directors, directly
                  or indirectly, will solicit, encourage, entertain, or
                  facilitate any other proposals or inquiries for an acquisition
                  of the shares or assets of Big Sky or enter into discussions
                  concerning any such acquisition ("Acquisition Proposal"),
                  except as otherwise required to comply with the fiduciary
                  responsibilities of Big Sky's board of directors. No such
                  party will make available to any person not affiliated with
                  Big Sky or Glacier any information about its business or
                  organization that is not either routinely made available to
                  the public generally or required by law.

            (b)   If (1) an Acquisition Proposal occurs prior to the Termination
                  Date, (2) the approval of the Big Sky shareholders
                  contemplated in this Agreement is not obtained at the special
                  meeting of Big Sky's shareholders, and (3) prior to April 15,
                  2000, a third party acquires control of Big Sky by merger,
                  purchase of assets, acquisition of stock or otherwise, then
                  unless the representations and warranties of Glacier in this
                  Agreement were false in any material respect as of the date of
                  Big Sky's special meeting of shareholders or Glacier was in
                  material default of its covenants in this Agreement as of such
                  date, Big Sky will promptly pay to Glacier the amount of
                  $400,000. For the purposes of this paragraph, a third party
                  will be deemed to have acquired control of Big Sky when the
                  third party 

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                  possesses, directly or indirectly, the power to direct or
                  cause the direction of the management and policies of Big Sky,
                  whether through the ownership of voting interests, by
                  contract, or otherwise.

      4.1.10 TITLE POLICIES ON LEASED PROPERTY. At Glacier's request, Big Sky
            will provide Glacier with leasehold title reports issued by a title
            insurance company reasonably satisfactory to Glacier. These title
            reports must show unencumbered leasehold interest in all real
            property leased by Big Sky, and these title reports may contain only
            such exceptions, reservations, and encumbrances as may be consented
            to in writing by Glacier, which consent Glacier may not unreasonably
            withhold.

      4.1.11 REVIEW OF LOANS. Big Sky will permit Glacier to conduct an
            examination of its loans to determine credit quality and the
            adequacy of its allowance for loan losses. Glacier will have
            continued access to Big Sky's loans through Closing to update the
            examination. At Glacier's reasonable request, Big Sky will provide
            Glacier with current reports updating the information set forth in
            Schedule 7.

4.2   REGISTRATION STATEMENT.

      4.2.1 PREPARATION OF REGISTRATION STATEMENT.

            (a)   A Registration Statement on Form S-4 ("Registration
                  Statement") will be filed by Glacier with the SEC under the
                  Securities Act for registration of the Glacier Shares, and the
                  parties will prepare a related prospectus/proxy statement
                  ("Prospectus/Proxy Statement") to be mailed together with any
                  amendments and supplements to Big Sky's stockholders.

            (b)   The parties will cooperate with each other in preparing the
                  Registration Statement and Prospectus/Proxy Statement, and
                  will use their best efforts to: (1) file the Registration
                  Statement with the SEC within 60 days following the date on
                  which this Agreement is executed, and (2) obtain the clearance
                  of the SEC, any appropriate state securities regulators and
                  any other required regulatory approvals, to issue the
                  Prospectus/Proxy Statement.

            (c)   Nothing will be included in the Registration Statement or the
                  Prospectus/Proxy Statement or any proxy solicitation materials
                  with respect to any party to this Agreement unless approved by
                  that party, which approval will not be unreasonably withheld.

            (d)   Glacier will pay all costs associated with the preparation by
                  Glacier's counsel and the filing of the Registration
                  Statement. Big Sky will pay all costs associated with the
                  review and preparation by Big Sky's counsel of the
                  Registration Statement and the Prospectus/Proxy. Big Sky will
                  pay the costs associated with the printing and mailing of the
                  Prospectus/Proxy Statement to its stockholders and any other
                  direct costs incurred by it in connection with the
                  Prospectus/Proxy Statement.

      4.2.2 SUBMISSION TO STOCKHOLDERS.

            (a)   Glacier and Big Sky will submit the Prospectus/Proxy Statement
                  to, and will use their best efforts in good faith to obtain
                  the prompt approval of the Prospectus/Proxy 

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                  Statement by, all applicable regulatory authorities. The
                  parties will provide each other with copies of such
                  submissions for review.

            (b)   Big Sky will promptly take the actions necessary in accordance
                  with applicable law and its Articles of Incorporation and
                  Bylaws to convene a stockholders' meeting to consider the
                  approval of this Agreement and to authorize the transactions
                  contemplated by this Agreement. This stockholders' meeting
                  will be held on the earliest practical date after the date the
                  Prospectus/Proxy Statement may first be sent to Big Sky's
                  stockholders without objection by applicable governmental
                  authorities; but Big Sky will have at least 20 business days
                  to solicit proxies. Except as otherwise required to comply
                  with the fiduciary responsibilities of its board of directors,
                  Big Sky's board of directors and officers will recommend
                  approval of the Transaction to Big Sky's stockholders.

4.3   ACCOUNTING TREATMENT.

      4.3.1 POOLING OF INTERESTS. The parties intend the Merger to be treated as
            a "pooling of interests" for accounting purposes. From the date of
            this Agreement through the Effective Date, neither Glacier nor Big
            Sky nor any of their respective Subsidiaries or other affiliates (a)
            will knowingly take any action or enter into any contract,
            agreement, commitment or arrangement that would jeopardize the
            treatment of the Merger as a "pooling of interests;" or (b) will
            knowingly fail to take any action that would preserve the treatment
            of the Merger as a "pooling of interests." No action or omission by
            either party will constitute a breach of this Subsection 4.3.1 if
            the action is permitted or required under this Agreement or is made
            with the other party's written consent, or is required by applicable
            laws or regulations.

      4.3.2 AFFILIATE LIST. Certain persons may be deemed "affiliates" of Big
            Sky under Securities Act Rule 145, the SEC's Accounting Series
            Releases ("ASR") 130 and 135, or other rules and releases related to
            "pooling of interests" accounting treatment. Within thirty days
            following the date this Agreement is signed, Big Sky will deliver to
            Glacier, after consultation with legal counsel, a list of names and
            addresses of Big Sky's "affiliates" with respect to the Transaction
            within the meaning of Rule 145 or ASR 130 and 135. By the Effective
            Date, Big Sky will deliver, or cause to be delivered, to Glacier a
            letter from each of these "affiliates," and any additional person
            who becomes an "affiliate" before the Effective Date and after the
            date of the list, dated as of the date of its delivery and in the
            form attached as Exhibit A.

      4.3.3 RESTRICTIVE LEGENDS. Glacier will place a restrictive legend on all
            certificates representing Glacier Shares to be received by an
            "affiliate," so as to preclude their transfer or disposition in
            violation of the affiliate letters. Glacier will also instruct its
            transfer agent not to permit the transfer of those shares, and to
            take any other steps reasonably necessary to ensure compliance with
            the Securities Act Rule 145 or the SEC's ASR 130 and 135 or other
            rules and releases related to "pooling of interests" accounting
            treatment.

      4.3.4 RETENTION OF CERTIFICATES. Except as otherwise permitted in Exhibit
            A, by a date at least 30 days before the Effective Date, all stock
            certificates evidencing ownership of Big Sky Common Stock by
            "affiliates" will be delivered to Big Sky. Big Sky (before the
            Effective Date) and Glacier (after the Effective Date) will retain
            those certificates, and subsequently the certificates representing
            Glacier shares for which they are exchanged, until financial results
            covering at least 30 days of combined operations following the
            Effective Date have been published, at which time the certificates
            will be released.

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4.4   SUBMISSION TO REGULATORY AUTHORITIES. Representatives of Glacier, at
      Glacier's expense, will prepare and file with applicable regulatory
      agencies, applications for approvals, waivers or other actions their
      counsel finds necessary or desirable in order to consummate the
      Transaction. Glacier will provide copies of these applications for Big
      Sky's review. These applications and filings are expected to include:

      (a)   an application to the Federal Reserve; and

      (b)   any filings required under the MBCA or the Montana Bank Act;

4.5   ANNOUNCEMENTS. The parties will cooperate and consult with each other in
      the development and distribution of all news releases and other public
      information disclosures with respect to this Agreement or the Transaction,
      unless otherwise required by law.

4.6   CONSENTS. Glacier and Big Sky will use their best efforts to obtain the
      consent or approval of any person, organization or other entity whose
      consent or approval is required in order to consummate the Transaction.

4.7   FURTHER ACTIONS. Glacier and Big Sky, respectively, in the name and on
      behalf of those respective parties, will use their best efforts in good
      faith to make all such arrangements, do or cause to be done all such acts
      and things, and execute and deliver all such certificates and other
      instruments and documents as may be reasonably necessary or appropriate in
      order to consummate the Transaction as promptly as practicable.

4.8   NOTICE. Big Sky will provide Glacier with prompt written notice of the
      following:

      (a)   any events, individually or in the aggregate, that could have a
            Material Adverse Effect with respect to Big Sky;

      (b)   the commencement of any proceeding against Big Sky, or any of its
            affiliates, by or before any court or governmental agency that,
            individually or in the aggregate, might have a Material Adverse
            Effect with respect to Big Sky; or

      (c)   any acquisition of an ownership or leasehold interest in real
            property, other than an acquisition in good faith of real property
            to satisfy a debt previously contracted for.

4.9   CONFIDENTIALITY. Glacier and Big Sky each will hold in confidence all
      nonpublic information obtained from the other in connection with the
      Transaction, other than information that: (1) is required by law to be
      disclosed; (2) is otherwise available on a nonconfidential basis; (3) has
      become public without fault of the disclosing party; or (4) is necessary
      to the defense of one of the parties in a legal or administrative action
      brought against that party by the other party. If the Transaction is not
      completed, Glacier and Big Sky will: (1) each return to the others all
      confidential documents obtained from them and (2) not use any nonpublic
      information obtained under this Agreement or in connection with the
      Transaction.

4.10  UPDATE OF FINANCIAL STATEMENTS. Glacier will promptly deliver its
      Financial Statements to Big Sky. Glacier will deliver Subsequent Glacier
      Financial Statements to Big Sky by the earlier of: (1) 5 days after
      Glacier prepares and issues them or (2) 60 days after year-end for
      year-end statements and 30 days after the end of the quarter for quarterly
      statements. The Subsequent Glacier Financial Statements will:

      (a)   be prepared from the books and records of Glacier;

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      (b)   present fairly the financial position and operating results of
            Glacier at the times indicated and for the periods covered;

      (c)   be prepared in accordance with GAAP (except for the absence of
            notes) and with the regulations promulgated by applicable regulatory
            authorities, to the extent then applicable, subject to normal
            year-end adjustments; and

      (d)   reflect all liabilities, contingent or otherwise, of Glacier on the
            respective dates and for the respective periods covered, except for
            liabilities not required to be so reflected in accordance with GAAP
            or not significant in amount.

4.11  AVAILABILITY OF GLACIER'S BOOKS, RECORDS AND PROPERTIES. Glacier will make
      available to Big Sky true and correct copies of its Certificate of
      Incorporation and Bylaws. At Big Sky's reasonable request, Glacier will
      also provide Big Sky with copies of: (1) reports filed with the SEC or
      banking regulators, (2) Glacier's stock option plans, and (3) any other
      information that the parties agree upon.

                                    SECTION 5
                            APPROVALS AND CONDITIONS

5.1   REQUIRED APPROVALS. The obligations of the parties to this Agreement are
      subject to the approval of the Agreement and the Transaction by all
      appropriate regulatory agencies having jurisdiction with respect to the
      Transaction.

5.2   CONDITIONS TO GLACIER'S OBLIGATIONS. All Glacier's obligations under this
      Agreement are subject to satisfaction of the following conditions at or
      before Closing:

      5.2.1 REPRESENTATIONS. Big Sky's representations in this Agreement and in
            any certificate or other instrument delivered in connection with
            this Agreement are true and correct in all material respects at
            Closing (except (i) the representations in Subsections 3.2.8(a) and
            3.2.14, which representations are true in all respects at Closing;
            and (ii) to the extent that the representations expressly relate to
            an earlier date, in which case they are true in all material
            respects as of that earlier date). These representations have the
            same force and effect as if they had been made at Closing. Big Sky
            has delivered to Glacier its certificate, executed by a duly
            authorized officer of Big Sky and dated as of Closing, stating that
            these representations comply with this Subsection 5.2.1.

      5.2.2 COMPLIANCE. Big Sky has performed and complied with all material
            terms, covenants and conditions of this Agreement. Big Sky has
            delivered to Glacier its certificate, executed by a duly authorized
            officer of Big Sky and dated as of Closing, stating that Big Sky is
            in compliance with this Subsection 5.2.2.

      5.2.3 EQUITY CAPITAL REQUIREMENT. The Tangible Equity Capital, determined
            in accordance with GAAP, of Big Sky as of the Effective Date is at
            least $2.9 million (not including capital from the conversion of
            Debentures). Big Sky's certificate referred to in Subsection 5.2.2
            must confirm that this condition is satisfied. Tangible Equity
            Capital means common stock, paid in capital, retained earnings, plus
            (or minus) net unrealized gain (or loss) on available for sale
            securities and minus goodwill and any other intangible assets.

      5.2.4 TRANSACTION FEES STATEMENTS. Big Sky has delivered to Glacier a
            statement, in a form reasonably satisfactory to Glacier, from each
            third party to whom Big Sky has paid or owes Transaction Fees. Each
            statement must set forth the total costs and expenses paid or owing
            to the 

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            third party in connection with the Transaction's consummation. Big
            Sky has delivered to Glacier its certificate, executed by a duly
            authorized officer of Big Sky and dated as of Closing, stating the
            total Transaction Fees incurred by Big Sky and certifying that Big
            Sky is in compliance with Subsection 1.2.3 and this Subsection
            5.2.4.

      5.2.5 AUDIT REPORT. Big Sky has delivered (no later than three days before
            Glacier filed the Registration Statement with the SEC) to Glacier
            the completed and certified audit report of KPMG Peat Marwick LLP,
            its independent certified public accountants, with respect to Big
            Sky's statements of financial condition as of December 31, 1997
            (audited) and 1996 (unaudited), and the related statements of
            income, cashflows and changes in stockholders' equity for both of
            the years ended December 31, 1997 (audited) and 1996 (unaudited).

      5.2.6 NO MATERIAL ADVERSE EFFECT. No damage, destruction, or loss (whether
            or not covered by insurance) or other event or sequence of events
            has occurred which, individually or in the aggregate, has had or
            potentially may have a Material Adverse Effect with respect to Big
            Sky. Big Sky's certificate referred to in Subsection 5.2.1 states
            that the conditions identified in this Subsection 5.2.6 are
            satisfied.

      5.2.7 FINANCIAL CONDITION. The following are true, and Big Sky's
            certificate referred to in Section 5.2.1 confirms the truth of the
            following:

            (a)   Big Sky's allowance for possible loan and lease losses at
                  Closing was and is adequate to absorb the anticipated loan and
                  lease losses (taking into account any recommendations made by
                  Big Sky's certified public accountants);

            (b)   the reserves set aside for the contingent liabilities
                  reflected in the Subsequent Big Sky Financial Statements are
                  adequate to absorb all reasonably anticipated losses;

            (c)   Big Sky's deposits at Closing total at least $28 million; and

            (d)   Big Sky has provided Glacier with the audited Big Sky
                  Financial Statements required by this Agreement, and the audit
                  has revealed no required adjustment to previously unaudited
                  Big Sky Financial Statements that would have a Material
                  Adverse Effect upon Big Sky.

      5.2.8 NO CHANGE IN LOAN REVIEW. Big Sky has provided to Glacier the
            reports reasonably requested by Glacier under Subsection 4.1.11, and
            neither these reports nor any examinations conducted by Glacier
            under Subsection 4.1.11 reveal a material adverse change in either:
            (1) the information set forth in Schedule 7 or (2) information
            revealed during Glacier's previous examinations of Big Sky's loans.

      5.2.9 NO GOVERNMENTAL PROCEEDINGS. No action or proceeding has been
            commenced or threatened by any governmental agency to restrain or
            prohibit or invalidate the Transaction.

      5.2.10 APPROVAL BY COUNSEL. All actions, proceedings, instruments, and
            documents required in connection with this Agreement, the
            Transaction, and all other related legal matters have been approved
            by Glacier's counsel.

      5.2.11 RECEIPT OF TITLE POLICY. Glacier has received all title insurance
            reports requested under Subsection 4.1.10 and the update endorsement
            required by Subsection 3.2.6.

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      5.2.12 CORPORATE AND STOCKHOLDER ACTION. Big Sky's board of directors and
            stockholders, respectively, have approved the Transaction.

      5.2.13 TAX OPINION. Glacier has, at Glacier's expense, obtained from
            Graham & Dunn, P.C. and delivered to Big Sky, an opinion addressed
            to Big Sky and in form and substance reasonably satisfactory to Big
            Sky and its counsel, to the effect that consummation of the
            Transaction will not result in a taxable event for Big Sky or
            Glacier, and otherwise will have each of the effects specified
            below:

            (a)   The Transaction will qualify as a reorganization within the
                  meaning of IRC Section 368(a)(1)(B).

            (b)   Under IRC Section 354(a)(i), Big Sky's stockholders who, in
                  accordance with Section 1, exchange their Big Sky Common Stock
                  shares solely for Glacier Common Stock shares will not
                  recognize gain or loss on the exchange.

            (c)   Cash payments to Big Sky's stockholders in lieu of a
                  fractional share of Glacier Common Stock will be treated as
                  distributions in redemption of the fractional share interest,
                  subject to the limitations of IRC Section 302.

      5.2.14 OPINION OF COUNSEL. Big Sky has obtained from Crowley, Haughey,
            Hanson, Toole & Dietrich, P.L.L.P., and delivered to Glacier an
            opinion of counsel, addressed to Glacier, to the effect that:

            (a)   Big Sky is a Montana state-chartered commercial bank validly
                  existing and in good standing under Montana law;

            (b)   Big Sky has the corporate power and authority to execute,
                  deliver, and perform this Agreement;

            (c)   the execution, delivery, and performance of this Agreement
                  have been duly authorized by all necessary corporate action on
                  the part of Big Sky, and this Agreement constitutes Big Sky's
                  legal, binding, and valid obligation, enforceable in
                  accordance with its terms, except to the extent that
                  enforcement (but not validity) may be limited by bankruptcy,
                  insolvency, reorganization, moratorium, or similar laws
                  generally affecting the enforcement of the rights of creditors
                  and by generally applicable principles of equity;

            (d)   all issued and outstanding shares of Big Sky's capital stock
                  have been duly authorized and are validly issued, fully paid,
                  non-assessable, free of preemptive or similar rights arising
                  by operation of law or otherwise, and have been issued in
                  compliance with all applicable federal and applicable state
                  securities laws;

            (e)   No options or other rights to acquire Big Sky Common Stock are
                  outstanding other than as expressly set forth in Schedule 4,
                  and Big Sky does not have any stock option or other plans or
                  agreements granting options or other rights to acquire Big Sky
                  Common Stock; and 

            (f)   execution of this Agreement and consummation of the
                  Transaction will not violate Big Sky's articles of
                  incorporation or bylaws or the terms of any material contract
                  or other obligation entered into before the date of this
                  opinion.

      5.2.15 CASH PAID. The aggregate of the cash paid for fractional shares and
            Dissenting Shares to holders of Big Sky Common Stock under this
            Agreement and applicable law will not exceed 10% of the 

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            cash value of the Purchase Price, as it may be adjusted under this
            Agreement. The cash value of the purchase price will be determined
            using the Determination Date Closing Price.

      5.2.16 AFFILIATE LETTERS. Glacier has received the affiliate list and
            letters specified in 4.3.2.

      5.2.17 REGISTRATION STATEMENT. The Registration Statement, as it may have
            been amended, required in connection with the Glacier shares to be
            issued to stockholders under 1.2, and as described in 4.2, has
            become effective, and no stop order suspending the effectiveness of
            such Registration Statement has been issued or remains in effect,
            and no proceedings for that purpose have been initiated or
            threatened by the SEC the basis for which still exists.

      5.2.18 CONSENTS. Big Sky has obtained the consents as indicated in
            Schedule 6.

      5.2.19 UPDATED FAIRNESS OPINION. Big Sky has provided to Glacier copies of
            Professional Bank Services' updated fairness opinion issued by
            Professional Bank Services to Big Sky, dated immediately before Big
            Sky mails the Prospectus/Proxy Statement to its stockholders and
            dated as of or immediately before the Effective Date, to the effect
            that the financial terms of the Transaction are financially fair to
            Big Sky's stockholders.

      5.2.20 ACCOUNTING TREATMENT. It has been determined to Glacier's
            satisfaction that the Transaction will be treated for accounting
            purposes as a "pooling of interests" in accordance with APB Opinion
            No. 16, and Glacier has received a letter to this effect from KPMG
            Peat Marwick LLP, certified public accountants.

      5.2.21 SOLICITATION OF EMPLOYEES. Neither any member of Big Sky's board of
            directors nor any entity with which any such director is affiliated
            has solicited any employee of Big Sky or Glacier with the intention
            of causing the employee to terminate her employment with Big Sky or
            Glacier, as the case may be.

      5.2.22 OTHER MATTERS. Glacier has received any other opinions,
            certificates, and documents that Glacier reasonably requests in
            connection with this Agreement and the Transaction.

5.3   CONDITIONS TO BIG SKY'S OBLIGATIONS. All Big Sky's obligations under this
      Agreement are subject to satisfaction of the following conditions at or
      before Closing:

      5.3.1 REPRESENTATIONS. Glacier's representations and warranties in this
            Agreement and in any certificate or other instrument delivered in
            connection with this Agreement are true and correct in all material
            respects at Closing (except to the extent that they expressly relate
            to an earlier date, in which case they are true in all material
            respects as of that earlier date). These representations and
            warranties have the same force and effect as if they had been made
            at Closing. Glacier has delivered to Big Sky its certificate,
            executed by a duly authorized officer of Glacier and dated as of
            Closing, stating that these representations and warranties comply
            with this Subsection 5.3.1.

      5.3.2 COMPLIANCE. Glacier has performed and complied in all material
            respects with all terms, covenants and conditions of this Agreement.
            Glacier has delivered to Big Sky its certificate, executed by a duly
            authorized officer of Glacier and dated as of Closing, stating that
            Glacier is in compliance with this Subsection 5.3.2.

      5.3.3 NO MATERIAL ADVERSE EFFECT. No damage, destruction, loss or other
            event or sequence of events has occurred which, individually or in
            the aggregate, has had or potentially may have a Material 

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            Adverse Effect with respect to Glacier. Glacier's certificate
            referred to in Subsection 5.3.1 states that the conditions
            identified in this Subsection 5.3.3 are satisfied.

      5.3.4 NO GOVERNMENTAL PROCEEDINGS. No action or proceeding has been
            commenced or threatened by any governmental agency to restrain,
            prohibit or invalidate the Transaction.

      5.3.5 CORPORATE AND STOCKHOLDER ACTION. Glacier's board of directors and
            Big Sky's stockholders have each approved the Transaction.

      5.3.6 TAX OPINION. The tax opinion specified in Subsection 5.2.13 has been
            delivered to Big Sky.

      5.3.7 OPINION OF COUNSEL. Glacier has obtained from Graham & Dunn, P.C.
            and delivered to Big Sky an opinion, addressed to Big Sky, to the
            effect that:

            (a)   Glacier is a corporation validly existing and in good standing
                  under Delaware law;

            (b)   Glacier has the corporate power and authority to execute,
                  deliver, and perform this Agreement;

            (c)   the execution, delivery, and performance of this Agreement
                  have been duly authorized by all necessary corporate action on
                  Glacier's part, and this Agreement constitutes Glacier's
                  legal, binding, and valid obligation, enforceable in
                  accordance with its terms, except to the extent that
                  enforcement (but not validity) may be limited by bankruptcy,
                  insolvency, reorganization, moratorium, or similar laws
                  generally affecting the enforcement of the rights of creditors
                  and by generally applicable principles of equity;

            (d)   the Glacier Shares have been duly authorized and, when issued
                  as contemplated by this Agreement, will be validly issued,
                  fully paid and nonassessable;

            (e)   the Registration Statement became effective under the
                  Securities Act on ____________, 1998, and, to the best of
                  counsel's knowledge, no stop order suspending the
                  effectiveness of such Registration Statement has been issued
                  and no proceedings for that purpose have been instituted or
                  threatened by the Securities and Exchange Commission;

            (f)   execution of this Agreement and consummation of the
                  Transaction will not violate Glacier's articles of
                  incorporation or bylaws; and

            (g)   Counsel's opinion will be governed by and interpreted in
                  accordance with the Legal Opinion Accord of the ABA section of
                  Business Law (1991), together with the related commentary, as
                  published in The Business Lawyer, Volume 47, No. 1, and any
                  amendments or modifications thereto.

      5.3.8 FAIRNESS OPINION. Big Sky has received from Professional Bank
            Services the updated fairness opinions, dated immediately before Big
            Sky mails the Prospectus/Proxy Statement to its stockholders and an
            updated fairness opinion dated as of or immediately before the
            Effective Date, each to the effect that the financial terms of the
            Transaction are financially fair to Big Sky's stockholders.

      5.3.9 CASH PAID. The aggregate of the cash paid to holders of Big Sky
            Common Stock under this Agreement and applicable law will not exceed
            10% of the Purchase Price, as it may be adjusted under this
            Agreement.

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      5.3.10 REGISTRATION STATEMENT. The Registration Statement, as it may have
            been amended, required in connection with the Glacier shares to be
            issued to stockholders under Subsection 1.2, and as described in
            Subsection 4.2, has become effective, and no stop order suspending
            the effectiveness of such Registration Statement has been issued or
            remains in effect, and no proceedings for that purpose have been
            initiated or threatened by the SEC the basis for which still exists.

                                    SECTION 6
                        DIRECTORS, OFFICERS AND EMPLOYEES

6.1   DIRECTORS. As a condition to the execution of this Agreement, each member
      of Big Sky's board of directors has entered into a written noncompetition
      agreement with Glacier and Big Sky on or before the date this Agreement is
      signed. These noncompetition agreements will take effect on the Effective
      Date.

6.2   EMPLOYMENT AGREEMENT. As a condition to the execution of this Agreement,
      Glacier has entered into an employment agreement, effective as of the
      Effective Date, with Michael F. Richards, Big Sky's President. As part of
      the employment agreement, Mr. Richards waives all rights he may have under
      any previous employment agreements with Big Sky.

6.3   EMPLOYEES. Glacier presently intends to allow Big Sky's employees who are
      employed with Big Sky following the Transaction ("Continuing Employees")
      to participate in certain employee benefit plans in which employees of
      Glacier currently participate. Glacier intends to grant Continuing
      Employees credit for prior service with Big Sky for purposes of
      determining eligibility and vesting, but Continuing Employees will not
      receive this credit for purposes of determining benefit accruals. Benefits
      for Continuing Employees will begin accruing under Glacier's plans as soon
      as practicable after Closing. This expression of intent is not a contract
      with Big Sky's employees and will not be construed to create a contract or
      employment right with Big Sky's employees.

6.4   EMPLOYEE BENEFIT ISSUES.

      6.4.1 COMPARABILITY OF BENEFITS. Glacier confirms to Big Sky its present
            intention to provide Continuing Employees with employee benefit
            programs which, in the aggregate, are generally competitive with
            employee benefit programs offered by financial institutions of
            comparable size located in Glacier's market area.

      6.4.2 TERMINATION AND TRANSFER/MERGER OF PLANS. As soon as practicable
            after Closing, all employee benefit plans of Big Sky will be
            terminated and the interests of Continuing Employees in those plans
            will be transferred or merged into Glacier's employee benefit plans.

      6.4.3 NO CONTRACT CREATED. Nothing in this Agreement gives any employee of
            Big Sky a right to continuing employment.

                                    SECTION 7
                          TERMINATION OF AGREEMENT AND
                           ABANDONMENT OF TRANSACTION

7.1   TERMINATION BY REASON OF LAPSE OF TIME. If Closing does not occur before
      the Termination Date, either Glacier or Big Sky may terminate this
      Agreement and the Transaction if all of the following conditions are
      present:

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      (a)   the terminating party's board of directors decides to terminate by a
            majority vote of its members;

      (b)   the terminating party delivers to the other party written notice
            that its board of directors has voted in favor of termination; and

      (c)   the failure to consummate the Transaction by the Termination Date is
            not due to a breach by the party seeking termination of any of its
            obligations, covenants, or representations in this Agreement.

7.2   OTHER GROUNDS FOR TERMINATION. This Agreement and the Transaction may be
      terminated at any time before Closing (whether before or after applicable
      approval of this Agreement by Big Sky's stockholders, unless otherwise
      provided) as follows:

      7.2.1 MUTUAL CONSENT. By mutual consent of Big Sky and Glacier, if the
            boards of directors of each party agrees to terminate by a majority
            vote of its members.

      7.2.2 BIG SKY'S CONDITIONS NOT MET. By Glacier's board of directors if, by
            June 30, 1999, any condition set forth in Subsections 5.1 or 5.2 has
            not been satisfied.

      7.2.3 GLACIER'S CONDITIONS NOT MET. By Big Sky's board of directors if, by
            June 30, 1999, any condition set forth in Subsections 5.1 or 5.3 has
            not been satisfied.

      7.2.4 BIG SKY FAILS TO RECOMMEND STOCKHOLDER APPROVAL. By Glacier's board
            of directors before Big Sky's stockholders approve the Transaction,
            if Big Sky's board of directors: (a) fails to recommend to its
            stockholders the approval of the Transaction or (b) modifies,
            withdraws or changes in a manner adverse to Glacier its
            recommendation to stockholders to approve the Transaction.

      7.2.5 IMPRACTICABILITY. By either Glacier or Big Sky, upon written notice
            given to the other party, if the board of directors of the party
            seeking termination under this Subsection 7.2.5 has determined in
            its sole judgment, made in good faith and after due consideration
            and consultation with counsel, that the Transaction has become
            inadvisable or impracticable by reason of the institution of
            litigation by the federal government or the government of the State
            of Montana to restrain or invalidate the Transaction or this
            Agreement.

7.3   BIG SKY TERMINATION FEE. Big Sky acknowledges that Glacier has incurred
      expenses, direct and indirect, in negotiating and executing this Agreement
      and in taking steps to effect the Transaction. Accordingly, subject to
      Subsection 4.1.9, Big Sky will pay to Glacier $300,000, if (1) this
      Agreement terminates because Big Sky does not use all reasonable efforts
      to consummate the Transaction in accordance with the terms of this
      Agreement; (2) Big Sky terminates this Agreement for any reason other than
      the grounds for termination set forth in Subsections 7.1, 7.2.1, 7.2.3 or
      7.2.5; or (3) Glacier terminates this Agreement under Subsection 7.2.2 or
      7.2.4. If this termination fee becomes payable, it will be payable on
      Glacier's demand and must be paid by Big Sky within 3 business days of the
      date Glacier makes the demand.

7.4   GLACIER TERMINATION FEE. Due to expenses, direct and indirect, incurred by
      Big Sky in negotiating and executing this Agreement and in taking steps to
      effect the Transaction, Glacier will pay to Big Sky $125,000 if (1)
      Glacier terminates this Agreement for any reason other than the grounds
      for termination set forth in Subsections 7.1, 7.2.1, 7.2.2, 7.2.4 or 7.2.5
      or (2) Big Sky terminates this Agreement under Subsection 7.2.3 (other
      than for failure of a condition set forth in 5.1, 5.3.4, 5.3.6, 5.3.7,
      5.3.9 and 5.3.10, unless the failure of any of those conditions is due to
      Glacier's fault). If this termination fee becomes 

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      payable, it will be payable on Big Sky's demand and must be paid by
      Glacier within 3 business days of the date Big Sky makes the demand.

7.5   COST ALLOCATION UPON TERMINATION. In connection with the termination of
      this Agreement under this Subsection 7.5, except as provided in
      Subsections 7.3 and 7.4, Glacier and Big Sky will each pay their own
      out-of-pocket costs incurred in connection with this Agreement, and will
      have no other liability to the other party.

                                    SECTION 8
                                  MISCELLANEOUS

8.1   NOTICES. Any notice, request, instruction or other document given under
      this Agreement must be in writing and must either be delivered personally
      or via facsimile transmission or be sent by registered or certified mail,
      postage prepaid, and addressed as follows (or to any other address or
      person representing any party as designated by that party through written
      notice to the other party):

      Glacier                        Glacier Bancorp, Inc.
                                     P.O. Box 27
                                     202 Main Street
                                     Kalispell, MT  59903-0027
                                     Attn: Michael J. Blodnick

              with a copy to:        Stephen M. Klein, Esq.
                                     Graham & Dunn, P.C.
                                     1420 Fifth Avenue, 33rd Floor
                                     Seattle, WA  98101-2390

      Big Sky                        Big Sky Western Bank
                                     P.O. Box 160489
                                     135 Big Sky Road
                                     Big Sky, MT  59716
                                     Attn: Michael F. Richards

              with a copy to:        William D. Lamdin III, Esq.
                                     Crowley, Haughey, Hanson, Toole & Dietrich
                                     PLLP 490 North 31st Street
                                     Billings, Montana  59101

8.2   WAIVERS AND EXTENSIONS. Subject to Section 9, Glacier or Big Sky may grant
      waivers or extensions to the other party, but only through a written
      instrument executed by the Chief Executive Officer or President of the
      party granting the waiver or extension. Waivers or extensions which do not
      comply with the preceding sentence are not effective. In accordance with
      this Section 8, a party may extend the time for the performance of any of
      the obligations or other acts of any other party, and may waive:

      (a)   any inaccuracies of any other party in the representations and
            warranties contained in this Agreement or in any document delivered
            in connection with this Agreement;

      (b)   compliance with any of the covenants of any other party; and

      (c)   any other party's performance of any obligations under this
            Agreement and any other condition precedent set out in Section 5.

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8.3   GENERAL INTERPRETATION. Except as otherwise expressly provided in this
      Agreement or unless the context clearly requires otherwise: (1) the
      defined terms defined in this Agreement include the plural as well as the
      singular and (2) references in this Agreement to Sections, Subsections,
      Schedules, and Exhibits refer to Sections and Subsections of and Schedules
      and Exhibits to this Agreement. Whenever the words "include", "includes",
      or "including" are used in this Agreement, the parties intend them to be
      interpreted as if they are followed by the words "without limitation." All
      accounting terms used in this Agreement that are not expressly defined in
      this Agreement have the respective meanings given to them in accordance
      with GAAP.

8.4   CONSTRUCTION AND EXECUTION IN COUNTERPARTS. Except as otherwise expressly
      provided in this Agreement, this Agreement: (1) contains the parties'
      entire understanding, and no modification or amendment of its terms or
      conditions will be effective unless in writing and signed by the parties,
      or their respective duly authorized agents; (2) will not be interpreted by
      reference to any of the titles or headings to the Sections or Subsections,
      which have been inserted for convenience only and are not deemed a
      substantive part of this Agreement; (3) includes all amendments to this
      Agreement, each of which is made a part of this Agreement by this
      reference; and (4) may be executed in one or more counterparts, each of
      which will be deemed an original, but all of which taken together will
      constitute one and the same document.

8.5   SURVIVAL OF REPRESENTATIONS AND COVENANTS. The representations and
      covenants in this Agreement will not survive Closing or termination of
      this Agreement, except that (1) Subsection 4.9 (confidentiality),
      Subsection 7.3 (termination fee), and Subsection 7.5 (expense allocation)
      will survive termination and Closing, and (2) the covenants in this
      Agreement that impose duties or obligations on the parties following
      Closing will survive Closing.

8.6   ATTORNEYS' FEES AND COSTS. In the event of any dispute or litigation with
      respect to the terms and conditions or enforcement of rights or
      obligations arising by reason of this Agreement or the Transaction, the
      prevailing party in any such litigation will be entitled to reimbursement
      from the other party for its costs and expenses, including reasonable
      judicial and extra-judicial attorneys' fees, expenses and disbursements,
      and fees, costs and expenses relating to any mediation or appeal.

8.7   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.

8.8   GOVERNING LAW AND VENUE. This Agreement will be governed by and construed
      in accordance with Montana law, except to the extent that certain matters
      may be governed by federal law. The parties must bring any legal
      proceeding arising out of this Agreement in Flathead County, Montana.

8.9   SEVERABILITY. If a court determines that any term of this Agreement is
      invalid or unenforceable under applicable law, the remainder of this
      Agreement is not affected, and each remaining term is valid and
      enforceable to the fullest extent permitted by law.

                                      A-32

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                                    SECTION 9
                                   AMENDMENTS

        At any time before the Effective Date, whether before or after the
parties have obtained any applicable stockholder approvals of the Transaction,
the boards of directors of Glacier and Big Sky may: (1) amend or modify this
Agreement or any attached Exhibit or Schedule and (2) grant waivers or time
extensions in accordance with Subsection 8.2. But, after Big Sky's stockholders
have approved this Agreement, the parties' boards of directors may not without
Big Sky stockholder approval amend or waive any provision of this Agreement if
the amendment or waiver would reduce the amount or change the form of
consideration Big Sky stockholders will receive in the Transaction. All
amendments, modifications, extensions and waivers must be in writing and signed
by the party agreeing to the amendment, modification, extension or waiver.
Failure by any party to insist on strict compliance by the other party with any
of its obligations, agreements or conditions under this Agreement, does not,
without a writing, operate as a waiver or estoppel with respect to that or any
other obligation, agreement, or condition.

                                      A-33

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Signed as of October 20, 1998:

                                        GLACIER BANCORP, INC.

                                        By      /s/ Michael J. Blodnick
                                          --------------------------------------
                                        Name: Michael J. Blodnick
                                        Title: President and CEO

                                        BIG SKY WESTERN BANK

                                        By      /s/ Robert L. Kester
                                          --------------------------------------
                                        Name: Robert L. Kester
                                        Title: Chairman and CEO

                                      A-34

   124

STATE OF MONTANA      )
                      ) ss.
COUNTY OF FLATHEAD    )

        On this 20th day of October, 1998, before me personally appeared Michael
J. Blodnick, to me known to be the President and Chief Executive Officer of
GLACIER BANCORP, INC., the corporation that executed the foregoing instrument,
who acknowledged said instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes mentioned there, and who stated on
oath that he was authorized to execute said instrument, and that the seal
affixed (if any) was the official seal of said corporation.

        IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.

                                       /s/
                                       -----------------------------------------
                                          NOTARY PUBLIC in and for the 
                                          State of Montana, residing
                                          at                                   .
                                            -----------------------------------

                                       Title:
                                             ----------------------------------.

                                        My commission expires:
                                          -------------------------------------.

STATE OF MONTANA      )
                      ) ss.
COUNTY OF GALLATIN    )

        On this 20th day of October, 1998, before me personally appeared Robert
L. Kester, to me known to be the Chairman and CEO of BIG SKY WESTERN BANK, the
corporation that executed the foregoing instrument, who acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes mentioned there, and who stated on oath that he was
authorized to execute said instrument, and that the seal affixed (if any) was
the official seal of said corporation.

        IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.

                                       /s/
                                       -----------------------------------------
                                          NOTARY PUBLIC in and for the 
                                          State of Montana, residing
                                          at                                   .
                                            -----------------------------------

                                       Title:
                                             ----------------------------------.

                                        My commission expires:
                                          -------------------------------------.

                                      A-35

   125

        The undersigned, all being officers or members of the board of directors
of Big Sky Western Bank ("Big Sky"), hereby consent to the Plan and Agreement of
Share Exchange (the "Agreement"), dated as of October 20, 1998, between Glacier
Bancorp, Inc. and Big Sky, and individually and as a group agree to vote in
favor of the Agreement the shares of capital stock each beneficially owns and,
subject to the good faith exercise of their fiduciary duties in accordance with
the advice of counsel, to support and recommend the Agreement's adoption by the
other stockholders of Big Sky.

        Except as otherwise required by law, the undersigned hereby,
individually and as a group, further agree to refrain from (a) negotiating or
accepting any offer of merger, consolidation, or acquisition of any of the
shares or all or substantially all of the assets of Big Sky from the date of the
Agreement through the meeting of the stockholders of Big Sky at which the
transactions contemplated by the Agreement will be considered, and (b) any other
actions or omissions inconsistent with the transactions contemplated by the
Agreement.

                                    
/s/ George B. Hagar                    /s/ Herbert A. Kern
- -----------------------------------    -----------------------------------------
George B. Hagar                        Herbert A. Kern

/s/ Robert L. Kester                   /s/ Stewart R. Kester
- -----------------------------------    -----------------------------------------
Robert L. Kester                       Stewart R. Kester

/s/ O. Taylor Middleton                /s/ Michael F. Richards
- -----------------------------------    -----------------------------------------
O. Taylor Middleton                    Michael F. Richards

/s/ Michael Scholz                     /s/ Beatrice R. Taylor
- -----------------------------------    -----------------------------------------
Michael Scholz                         Beatrice R. Taylor

                                      A-36

   126

                                                                      APPENDIX B

                                October 19, 1998

Board of Directors
Big Sky Western Bank
135 Big Sky Road
Big Sky, MT  59716

Dear Members of the Board:

You have requested our opinion as investment bankers as to the fairness, from a
financial perspective, to the common shareholders of Big Sky Western Bank, Big
Sky, Montana (the "Company") of the proposed merger of the Company with Glacier
Bancorp, Inc. ("Glacier"). In the proposed merger, Company shareholders will
receive an aggregate of 250,000 Glacier common shares for all 20,400 Company
common shares outstanding and 2,500 common shares resulting from conversion of
convertible debentures as further defined in the Plan and Agreement of Share
Exchange between Glacier and the Company (the "Agreement"). On October 16, 1998,
the proposed consideration to be received represents an aggregate value of
$5,093,750 or $22.43 per Company common share based on the average between the
bid and ask prices of Glacier's common stock which was $20.375 as quoted on the
Nasdaq National Market.

Professional Bank Services, Inc. ("PBS") is a bank consulting firm and as part
of its investment banking business is continually engaged in reviewing the
fairness, from a financial perspective, of bank acquisition transactions and in
the valuation of banks and other businesses and their securities in connection
with mergers, acquisitions, estate settlements and other purposes. We are
independent with respect to the parties of the proposed transaction.

For purposes of this opinion, PBS performed a review and analysis of the
historic performance of the Company, contained in (i) the December 31, 1997 and
June 30, 1998 Consolidated Reports of Condition and Income filed by the Bank
with the FDIC; (ii) June 30, 1998 Uniform Bank Performance Report of the Bank;
and (iii) financial data supplied by SNL Securities Financial Datasource. We
have reviewed and tabulated statistical data regarding the loan portfolio,
securities portfolio and other performance ratios and statistics. Financial
projections were prepared and analyzed as well as other financial studies,
analyses and investigations as deemed relevant for the purposes of this opinion.
In review of the aforementioned information, we have taken into account our
assessment of general market and financial conditions, our experience in other
transactions, and our knowledge of the banking industry generally.

We have not compiled, reviewed or audited the financial statements of the
Company or Glacier, nor have we independently verified any of the information
reviewed; we have relied upon such 

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Board of Directors
Big Sky Western Bank
135 Big Sky Road
Big Sky, MT  59716
Page 2

information as being complete and accurate in all material respects. We have not
made independent evaluation of the assets of the Company or Glacier.

Based on the foregoing and all other factors deemed relevant, it is our opinion
as investment bankers, that, as of the date hereof, the consideration proposed
to be received by the shareholders of the Company under the Agreement is fair
and equitable from a financial perspective.

                                       Very truly yours,

                                       /s/ Professional Bank Services, Inc.

                                       Professional Bank Services, Inc.

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                                                                      APPENDIX C

                               "DISSENTERS RIGHTS"

        35-1-826. Definitions. As used in 35-1-826 through 35-1-839, the
following definitions apply:

        (1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.

        (2) "Corporation" includes the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.

        (3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under 35-1-827 and who exercises that right when and in the
manner required by 35-1-829 through 35-1-837.

        (4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.

        (5) "Interest" means interest from the effective date of the corporate
action until the date of payment at the average rate currently paid by the
corporation on its principal bank loans or, if the corporation has no loans, at
a rate that is fair and equitable under all the circumstances.

        (6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial shareholder to the
extent of the rights granted by a nominee certificate on file with a
corporation.

        (7) "Shareholder" means the record shareholder or the beneficial
shareholder.

        35-1-827. Right to dissent. (1) A shareholder is entitled to dissent
from and obtain payment of the fair value of the shareholder's shares in the
event of any of the following corporate actions:

        (a) consummation of a plan of merger to which the corporation is a party
if:

        (i) shareholder approval is required for the merger by 35-1-815 or the
articles of incorporation and the shareholder is entitled to vote on the merger;
or

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        (ii) the corporation is a subsidiary that is merged with its parent
corporation under 35-1-818;

        (b) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired if the shareholder is
entitled to vote on the plan;

        (c) consummation of a sale or exchange of all or substantially all of
the property of the corporation other than in the usual and regular course of
business if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution but not including a sale pursuant to court order
or a sale for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders within 1 year
after the date of sale;

        (d) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:

        (i) alters or abolishes a preferential right of the shares;

        (ii) creates, alters, or abolishes a right in respect of redemption,
including a provision with respect to a sinking fund for the redemption or
repurchase of the shares;

        (iii) alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;

        (iv) excludes or limits the right of the shares to be voted on any
matter or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or

        (v) reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share created is to be acquired for cash under
35-1-621; or

        (e) any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and to obtain payment for their shares.

        (2) A shareholder entitled to dissent and to obtain payment for shares
under 35-1-826 through 35-1-839 may not challenge the corporate action creating
the shareholder's entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.

        35-1-828. Dissent by nominees and beneficial owners. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.

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        (2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:

        (a) he submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and

        (b) he does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.

        35-1-829. Notice of dissenters' rights. (1) If a proposed corporate
action creating dissenters' rights under 35-1-827 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under 35-1-826 through 35-1-839 and
must be accompanied by a copy of 35-1-826 through 35-1-839.

        (2) If a corporate action creating dissenters' rights under 35-1-827 is
taken without a vote of shareholders, the corporation shall give written
notification to all shareholders entitled to assert dissenters' rights that the
action was taken and shall send them the dissenters' notice described in
35-1-831.

        35-1-830. Notice of intent to demand payment. (1) If proposed corporate
action creating dissenters' rights under 35-1-827 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert dissenters' rights:

        (a) shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and

        (b) may not vote his shares in favor of the proposed action.

        (2) A shareholder who does not satisfy the requirements of subsection
(1)(a) is not entitled to payment for his shares under 35-1-826 through
35-1-839.

        35-1-831. Dissenters' notice. (1) If proposed corporate action creating
dissenters' rights under 35-1-827 is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of 35-1-830.

        (2) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken and must:

        (a) state where the payment demand must be sent and where and when
certificates for certified shares must be deposited;

        (b) inform shareholders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment is received;

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   131

        (c) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the person asserting dissenters' rights to
certify whether or not he acquired beneficial ownership of the shares before
that date;

        (d) set a date by which the corporation must receive the payment demand,
which may not be fewer than 30 nor more than 60 days after the date the required
notice under subsection (1) is delivered; and

        (e) be accompanied by a copy of 35-1-826 through 35-1-839.

        35-1-832. Duty to demand payment. (1) A shareholder sent a dissenters'
notice described in 35-1-831 shall demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to 35-1-831(2)(c), and
deposit his certificates in accordance with the terms of the notice.

        (2) The shareholder who demands payment and deposits his certificates
under subsection (1) retains all other rights of a shareholder until these
rights are canceled or modified by taking of the proposed corporate action.

        (3) A shareholder who does not demand payment or deposit his
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under 35-1-826 through 35-1-839.

        35-1-833. Share restrictions. (1) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions are
released under 35-1-835.

        (2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.

        35-1-834. Payment. (1) Except as provided in 35-1-836, as soon as the
proposed corporate action is taken or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with 35-1-832 the amount the
corporation estimates to be the fair value of the dissenter's shares plus
accrued interest.
        (2)    The payment must be accompanied by:

        (a) the corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any;

        (b) a statement of the corporation's estimate of the fair value of the
shares;

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   132

        (c) an explanation of how the interest was calculated;

        (d) a statement of the dissenter's right to demand payment under
35-1-837; and

        (e) a copy of 35-1-826 through 35-1-839.

        35-1-835. Failure to take action. (1) If the corporation does not take
the proposed action within 60 days after the date set for demanding payment and
depositing certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.

        (2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under 35-1-831 and repeat the payment demand procedure.

        35-1-836. After-acquired shares. (1) A corporation may elect to withhold
payment required by 35-1-834 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.

        (2) To the extent the corporation elects to withhold payment under
subsection (1), after taking the proposed corporate action, the corporation
shall estimate the fair value of the shares plus accrued interest and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
35-1-837.

        35-1-837. Procedure if shareholder dissatisfied with payment or offer.
(1) A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and the amount of interest
due and may demand payment of the dissenter's estimate, less any payment under
35-1-834, or reject the corporation's offer under 35-1-836 and demand payment of
the fair value of the dissenter's shares and the interest due if:

        (a) the dissenter believes that the amount paid under 35-1-834 or
offered under 35-1-836 is less than the fair value of the dissenter's shares or
that the interest due is incorrectly calculated;

        (b) the corporation fails to make payment under 35-1-834 within 60 days
after the date set for demanding payment; or

        (c) the corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within 60 days after the date set for demanding
payment.

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   133

        (2) A dissenter waives the right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (1)
within 30 days after the corporation made or offered payment for his shares.

        35-1-838. Court action. (1) If a demand for payment under 35-1-837
remains unsettled, the corporation shall commence a proceeding within 60 days
after receiving the payment demand and shall petition the court to determine the
fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.

        (2) The corporation shall commence the proceeding in the district court
of the county where a corporation's principal office or, if its principal office
is not located in this state, where its registered office is located. If the
corporation is a foreign corporation without a registered office in this state,
it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.

        (3) The corporation shall make all dissenters whose demands remain
unsettled, whether or not residents of this state, parties to the proceeding as
in an action against their shares, and all parties must be served with a copy of
the petition. Nonresidents may be served by certified mail or by publication as
provided by law.

        (4) The jurisdiction of the district court in which the proceeding is
commenced under subsection (2) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.

        (5) Each dissenter made a party to the proceeding is entitled to
judgment:

        (a) for the amount, if any, by which the court finds the fair value of
the dissenter's shares plus interest exceeds the amount paid by the corporation;
or

        (b) for the fair value plus accrued interest of his after-acquired
shares for which the corporation elected to withhold payment under 35-1-836.

        35-1-839. Court costs and attorney fees. (1) The court in an appraisal
proceeding commenced under 35-1-838 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation, except that
the court may assess costs against all or some of the dissenters, in amounts the
court finds equitable, to the extent the court finds dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
35-1-837.

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        (2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:

        (a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of 35-1-829 through 35-1-837; or

        (b) against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by 35-1-826 through 35-1-839.

        (3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated and that the
fees for those services should not be assessed against the corporation, the
court may award the counsel reasonable attorney fees to be paid out of the
amounts awarded the dissenters who were benefited.

                                      C-7

   135

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.      INDEMNIFICATION OF DIRECTORS AND OFFICERS

         Section 145 of the DGCL provides that a corporation may indemnify
directors and officers as well as other employees and individuals against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation--a "derivative action"), if they acted in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred in
connection with the defense or settlement of such actions, and the statute
requires court approval before there can be any indemnification where the person
seeking indemnification has been found liable to the corporation. The statute
provides that it is not exclusive of other indemnification that may be granted
by a corporation's charter, bylaws, disinterested director vote, stockholder
vote, agreement or otherwise.

         Article VI of Glacier's Bylaws requires the indemnification of any
person made or threatened to be made party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer or employee of the Registrant or any predecessor of the Registrant, or
is or was serving at the request of the Registrant or any predecessor of the
Registrant as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines, excise taxes and amounts paid in
settlement in connection with such action, suit or proceeding to the fullest
extent authorized under Section 145 of the DGCL; provided however, that the
Registrant will not be liable for any amounts due in connection with a
settlement of any action, suit or proceeding effected without the Registrant's
prior written consent, or any action, suit or proceeding initiated by any person
seeking indemnification pursuant to the Bylaws without the prior written consent
of the Registrant.

         Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) payments of unlawful dividends or unlawful
stock repurchases or redemptions, or (iv) any transaction from which the
director derived an improper personal benefit.

         Article 8 of Glacier's Certificate of Incorporation provides that the
personal liability of the Registrant's directors and officers for monetary
damages shall be eliminated to the fullest extent permitted by the DGCL as it
exists or may thereafter be in effect. Any amendment to, modification or repeal
of such Article 8 shall not adversely affect the rights provided thereby with
respect to any claim, issue or matter in any proceeding that is based in any
respect on any alleged action or failure to act prior to any such amendment,
modification or repeal.

ITEM 21.      EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

         (a) The exhibits are listed on the accompanying "Exhibit Index".

         (b) Financial Statement Schedules. None.

         (c) The opinion of the financial advisor is set forth as APPENDIX B to
             this Prospectus/Proxy Statement

                                      II-1
   136

ITEM 22.      UNDERTAKINGS

         (a) The undersigned registrant hereby undertakes:

              (1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to;

                  (i) Include any prospectus required by Section 10(a)(3) of the
1933 Act;

                  (ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and

                  (iii) Include any additional or changed information on the
plan of distribution;

              (2) For determining liability under the 1933 Act, to treat each
such post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering.

              (3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.

         (b) To advise all directors and officers that insofar as
indemnification for liabilities arising under the 1933 Act may be permitted to
directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable.

         (c) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the Effective Date of the registration statement through the
date of responding to the request.

         (d) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

                                      II-2
   137

                                   SIGNATURES

         Pursuant to the requirements of the 1933 Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kalispell, State of
Montana on November 23, 1998.

                                        GLACIER BANCORP, INC.

                                        By:  /s/ MICHAEL J. BLODNICK
                                           -------------------------------------
                                             Michael J. Blodnick, President and
                                             Chief Executive Officer

         Pursuant to the requirements of the 1933 Act, this Registration
Statement has been signed by the following persons in the capacities indicated,
on the 23rd day of November, 1998.

                                        SIGNATURE AND TITLE

                                        By:  /s/ MICHAEL J. BLODNICK
                                           -------------------------------------
                                             Michael J. Blodnick, President and 
                                             Chief Executive Officer and 
                                             Director
                                             (Principal Executive Officer)

                                        By:  /s/ JAMES H. STROSAHL
                                           -------------------------------------
                                             James H. Strosahl, Chief Financial
                                             Officer (Principal Financial and 
                                             Accounting Officer)

                                        By:  /s/ JOHN S. MACMILLAN
                                           -------------------------------------
                                             John S. MacMillan, Chairman of the 
                                             Board and Director

                                        By:  /s/ WILLIAM L. BOUCHEE
                                           -------------------------------------
                                             William L. Bouchee, Director

                                        By:  /s/ FRED J. FLANDERS
                                           -------------------------------------
                                             Fred J. Flanders, Director

                                        By:  /s/ ALLEN J. FETSCHER
                                           -------------------------------------
                                             Allen J. Fetscher, Director

                                        By:  /s/ L. PETER LARSON
                                           -------------------------------------
                                             L. Peter Larson, Director

                                      II-3
   138

                                        By:  /s/ DARRELL R. MARTIN
                                           -------------------------------------
                                             Darrell R. (Bill) Martin, Director

                                        By: 
                                           -------------------------------------
                                             F. Charles Mercord, Director

                                        By:  /s/ EVERIT A. SLITER
                                           -------------------------------------
                                             Everit A. Sliter, Director

                                        By:  /s/ HAROLD A. TUTVEDT
                                           -------------------------------------
                                             Harold A. Tutvedt, Director

                                      II-4
   139

                                  EXHIBIT INDEX

Exhibit No.          Description of Exhibit
- -----------          ----------------------
            
2.1            Plan and Agreement of Share Exchange between Glacier and Big Sky
               dated as of October 20, 1998, as amended by First Amendment of
               Plan and Agreement of Share Exchange dated as of November 20,
               1998 (included in this Registration Statement as APPENDIX A to
               the Prospectus/Proxy Statement). 

3.1            Certificate of Incorporation(1)

3.2            Certificate of Merger (amending Certificate of Incorporation)(1)

3.3            Bylaws(2)

5.1            Opinion of Graham & Dunn, P.C. as to the legality of securities.

8.1            Form of Opinion of Graham & Dunn, P.C. as to federal income tax
               consequences of the Share Exchange.

10.1           Employment Agreement between Big Sky and Michael Richards dated
               as of October 20, 1998, effective as of Share Exchange Effective
               Date.

10.2           Form of Noncompetition Agreement among Glacier, Big Sky and each
               respective director of Big Sky, dated as of October 20, 1998.

21.1           List of Subsidiaries.

23.1           Consent of Graham & Dunn, P.C. (contained in its opinion filed as
               Exhibit 5.1).

23.2           Consent of Graham & Dunn, P.C. as to its tax opinion (contained
               in its opinion filed as Exhibit 8.1).

23.3           Consent of KPMG Peat Marwick LLP, Glacier's independent auditors.

23.4           Consent of KPMG Peat Marwick LLP, Big Sky's independent auditors.

23.5           Consent of PBS with respect to Big Sky fairness opinion.

99.1           Opinion of PBS to Big Sky (included as APPENDIX B to the
               Prospectus/Proxy Statement).

99.2           Form of proxy to be mailed to the stockholders of Big Sky.

(1)      Incorporated by reference to Exhibits 3.1 and 3.2, respectively, of the
         Registration Statement on Form S-4 filed by Registrant (Registration
         No. 333-58503)

(2)      Incorporated by reference to Exhibit 3.2 of the Registration Statement
         on Form S-4 filed by the Registrant (Registration No. 333-50965)

                                      II-5
   1

                                  EXHIBIT 5.1

November 23, 1998

The Board of Directors of
Glacier Bancorp, Inc.
202 Main Street
Kalispell, Montana  59903

        RE:    LEGAL OPINION REGARDING VALIDITY OF SECURITIES OFFERED

Ladies and Gentlemen:

        As you know, we are acting as counsel for Glacier Bancorp, Inc.
("Glacier"), a Delaware corporation and bank holding company ("Glacier"), in
connection with the registration under the Securities Act of 1933, as amended
("Act"), of a maximum of 222,707 shares of Glacier's common stock, $.01 par
value ("Shares"). A Registration Statement on Form S-4 ("Registration
Statement") is being filed with the Securities and Exchange Commission ("SEC")
under the Act with respect to the offering of the Shares pursuant to the
proposed acquisition of Big Sky Western Bank, a Montana banking corporation
("Big Sky").

        In connection with the offering of the Shares, we have examined: (a) the
Agreement and Plan of Share Exchange ("Share Exchange Agreement"), dated as of
October 20, 1998, between Glacier and Big Sky, attached as Appendix A to the
Prospectus/Proxy Statement included in the Registration Statement; (b) the
Registration Statement; and (c) such other documents as we have deemed necessary
to form the opinion expressed below. As to various questions of fact material to
such opinion, where relevant facts were not independently established, we have
relied upon statements of officers of Glacier.

        Based and relying solely upon the foregoing, we advise you that in our
opinion, the Shares, or any portion thereof, when issued pursuant to the Share
Exchange Agreement after the Registration Statement has become effective under
the Act, will be validly issued under the laws of the State of Delaware and will
be fully paid and nonassessable.

        Consent is hereby given to the filing of this opinion as an exhibit to
the Registration Statement and to the legal reference to this firm under the
caption "Certain Legal Matters" as having passed upon the validity of the
Shares. This consent shall not be construed to cause us to be in the category of

   2

November 23, 1998
Page 2

persons whose consent is required to be filed pursuant to Section 7 of the Act,
or the rules and regulations of the SEC promulgated under the Act.

                                            Very truly yours,

                                            GRAHAM & DUNN PC

                                            /s/ Graham & Dunn

   1

                              [FORM OF TAX OPINION]

[January 20, 1999]

Glacier Bancorp, Inc.                                    Big Sky Western Bank
49 Commons Loop                                          135 Big Sky Road
Kalispell, Montana  59903-0027                           Big Sky, Montana  59716

        Re:    Share Exchange / Tax Consequences

Ladies and Gentlemen:

        This letter responds to your request for our opinion as to certain of
the federal income tax consequences of the proposed share exchange ("Share
Exchange") between Glacier Bancorp, Inc. ("Glacier"), a Delaware corporation and
bank holding corporation, and Big Sky Western Bank ("Big Sky"), a Montana
commercial banking corporation.

        We have acted as legal counsel to Glacier in connection with the Share
Exchange. For the purpose of rendering this opinion, we have examined and relied
upon originals, certified copies, or copies otherwise identified to our
satisfaction as being true copies of the originals of the following documents,
including all exhibits and schedules attached to them:

        (a)     The Plan and Agreement of Share Exchange, dated as of October
                20, 1998, between Glacier and Big Sky (the "Exchange
                Agreement");

        (b)     Form S-4 Registration Statement of Glacier filed with the
                Securities and Exchange Commission on November ___, 1998;

        (c)     The Proxy Statement of Big Sky (included as part of the
                Registration Statement);

        (d)     The factual representations set forth in a letter from Glacier
                and Big Sky, dated [January 20, 1999]; and

        (e)     Such other documents, instruments, records and information
                pertaining to the Share Exchange as we have deemed necessary for
                rendering our opinion.

        We have assumed, without independent investigation or review, the
accuracy and completeness of the facts and representations and warranties
contained in those documents or otherwise made known to us, and that the Share
Exchange will be effected in accordance with the terms of the Exchange
Agreement.

        In connection with the Share Exchange and pursuant to the Exchange
Agreement, each share of Big Sky's outstanding common stock will be exchanged,
in accordance with the 

   2
[January 20, 1999]
Page 2

Exchange Ratio defined in the Exchange Agreement, for shares of Glacier's common
stock, and Glacier will become the sole shareholder of Big Sky. No fractional
shares will be involved. Big Sky shareholders who perfect their dissenters
rights under state law will be paid the cash value for their Big Sky shares.
Such payments will be made by Big Sky without reimbursement by Glacier. Upon the
consummation of the Share Exchange, Big Sky will continue its historic business.

        Based upon our review of the facts described above and our analysis of
the law, and subject to the qualifications and limitations set forth herein, and
the completion of the transactions described in the manner contemplated, it is
our opinion that with respect to the Share Exchange:

1.      The acquisition by Glacier of the outstanding shares of Big Sky, solely
        for Glacier common stock, as described above, will constitute a
        reorganization within the meaning of Section 368(a)(1)(B) of the
        Internal Revenue Code, as amended (the "Code"). Big Sky and Glacier will
        each be a "party to a reorganization" within the meaning of Section
        368(b) of the Code.

2.      No gain or loss will be recognized by Big Sky shareholders upon the
        receipt of Glacier common stock solely in exchange for their shares of
        Big Sky stock, pursuant to Section 354(a)(1) of the Code.

3.      The basis of the shares of Glacier common stock received by Big Sky
        shareholders will be the same as the basis of the Big Sky stock
        surrendered in exchange therefor, pursuant to Section 358(a)(1) of the
        Code.

4.      The holding period of the shares of Glacier common stock received by Big
        Sky shareholders will include the holding period during which the Big
        Sky stock surrendered in exchange therefor was held, provided that the
        shares of Big Sky stock were held as a capital asset in the hands of the
        exchanging shareholders on the date of the exchange, pursuant to Section
        1223(1) of the Code.

5.      Where cash is received by any dissenting shareholder of Big Sky in
        exchange for the surrender of all of such shareholder's Big Sky stock,
        the cash will be treated as received by the shareholder as a
        distribution in redemption of his or her Big Sky stock, subject to the
        provisions and limitation of Section 302 of the Code.

6.      No gain or loss will be recognized by Glacier upon the receipt of the
        shares of Big Sky stock in exchange for shares of Glacier common stock,
        as described above, pursuant to Section 1032(a) of the Code.

   3
[January 20, 1999]
Page 3

7.      The basis of the shares of Big Sky stock received by Glacier will be the
        same as the basis of such Big Sky stock in the hands of the Big Sky
        shareholders immediately prior to the exchange, pursuant to Section
        362(b) of the Code.

8.      The holding period of the Big Sky stock received by Glacier will include
        the period during which the Big Sky stock was held by the Big Sky
        shareholders, pursuant to Section 1223(2) of the Code.

        Our opinion represents only our best legal judgment as to the probable
federal income tax consequences of the transaction described, based upon
existing law. Our opinion is not intended to be a conclusive statement as to all
of the tax consequences of the transaction and is expressly limited to the
matters addressed. Further, our opinion is not binding upon the Internal Revenue
Service (the "IRS") or any court and has no official status of any kind, and no
private ruling regarding the matters discussed has been or will be requested
from the IRS. The IRS has ruled in private rulings that transactions
substantially identical to the Share Exchange result in tax consequences
consistent with those described in this opinion. Although such rulings do not
constitute authority on which we can rely in expressing our opinion, such
rulings generally do reflect the position of the IRS. Each shareholder, however,
is urged to consult with his or her own tax advisor with respect to their
individual tax situation. Our opinion is intended solely for the benefit of
Glacier, the shareholders of Glacier and the shareholders of Big Sky, and may
not be relied upon for any other purpose or by any other person or entity or
made available to any other person or entity without our prior written consent.

                                        Sincerely,

                                        GRAHAM & DUNN

THN/thn
a:\Tax Opinion.doc

   1

                                  EXHIBIT 10.1

                              BIG SKY WESTERN BANK
                              EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT ("Agreement"), signed as of October ____,
1998, between BIG SKY WESTERN BANK ("Bank") and MICHAEL F. RICHARDS
("Executive") and ratified by GLACIER BANCORP, INC., takes effect on the
effective date of the Share Exchange ("Effective Date").

                                    RECITALS

A.      Glacier Bancorp, Inc. ("Glacier") has entered into a Plan and Agreement
        of Share Exchange ("Share Exchange Agreement") with the Bank, pursuant
        to which all of the outstanding shares of Bank common stock will be
        exchanged for shares of Glacier common stock ("Share Exchange"). As a
        result of the Share Exchange, the Bank will become a subsidiary of
        Glacier.

B.      Before the Share Exchange, Executive has served as President of the 
        Bank.

C.      Glacier and the Bank desire 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.

E.      Executive and Bank are parties to an Executive Salary Continuation
        Agreement dated March 20, 1996 ("Continuation Agreement"), and both
        parties desire that such agreement remain in full force and effect.

                                    AGREEMENT

        In consideration of the promises set forth in this Agreement, the
parties agree as follows.

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 of the Bank. During the
        Term of this Agreement, Executive will serve as a director of the Bank.

2.      EFFECTIVE DATE AND TERM.

        a.      Term. The term of this Agreement ("Term") is three years,
                beginning on the Effective Date.

                                       1

   2

        b.      Abandonment or Termination of the Share Exchange. This Agreement
                is void if the Share Exchange Agreement is terminated in
                accordance with its terms.

3.      DUTIES. The Bank will employ Executive as its President. 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 Glacier's and the Bank'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 Gallatin County,
                Montana.

        c.      Report to Board. Executive will report directly to the Bank's
                board of directors and to the Chief Executive Officer of
                Glacier. 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 Glacier. 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 and/or Glacier has an
        existing competitive or commercial relationship.

5.      SALARY. Initially, Executive will receive an annual salary of $95,000,
        to be paid in accordance with the Bank's regular payroll schedule.
        Subsequent salary increases are subject to the Bank's annual review of
        Executive's compensation and performance, but will not be less than five
        percent (5%) annually for the duration of this Agreement.

6.      INCENTIVE COMPENSATION. Each year during the Term, the Bank's board of
        directors, subject to ratification by Glacier'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, also taking into account the nature and extent of
        incentive bonuses paid to comparable senior 

                                       2

   3

        officers at Glacier. 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 Glacier'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.      EXECUTIVE EVALUATION. During the last year of this Agreement and upon
        Executive's request, Glacier will use its best efforts to review
        Executive's performance and to notify Executive whether this Agreement
        will be extended, modified or terminated. It will be the Executive's
        responsibility to request such evaluation from Glacier.

9.      VACATION AND BENEFITS.

        a.      Vacation and Holidays. Executive will receive the greater of (a)
                four weeks of paid vacation each year or (b) the vacation
                benefits set forth in Glacier's schedule for senior employees
                with Executive's years of service with the Bank, in addition to
                all holidays observed by the Bank. Each year, Executive may
                carry over up to two weeks of unused vacation to the following
                year. Any unused vacation time in excess of two weeks will not
                accumulate or carry over from one calendar year to the next.

        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 Glacier 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 or
                Glacier'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
                Bank will continue to operate under Executive's fully funded
                key-man life insurance policy in place on the Effective Date.
                Neither the Bank nor Glacier through this Agreement obligates
                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 Bank policy or the rules and
                regulations of the Internal Revenue Service.

10.     TERMINATION OF EMPLOYMENT.

        a.      Termination By Bank for Cause. If the Bank terminates
                Executive's employment for Cause (defined below) before this
                Agreement terminates, the Bank will pay 

                                       3

   4

                Executive the salary earned and expenses reimbursable under this
                Agreement incurred through the date of his termination, and the
                Continuation Agreement will remain in effect according to its
                terms. Executive will have no right to receive compensation or
                other benefits for any period after termination under this
                Section 10.

        b.      Other Termination By 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, and the
                Continuation Agreement will remain in effect according to its
                terms for the remainder of the Term.

        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 180 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 10(c), subject to the Continuation Agreement,
                Executive or his estate will be entitled to receive all
                compensation (less any long-term disability payments received by
                Executive) 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
                        greater of (1) the payment and benefits described in
                        Section 10(d)(3) 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 one year following a Change in Control, the Bank
                        will provide Executive with the payment and benefits
                        described in Section 10(d)(3).

                                       4

   5

                (3)     Payments. If Section 10(d)(1) or (2) is triggered in
                        accordance with its terms, the Bank will: (i) pay
                        Executive a single payment in an amount equal to
                        Executive's annual salary (determined as of the day
                        before the date Executive's employment was terminated)
                        and (ii) maintain and provide for one-year following
                        Executive's termination, at no cost to Executive, the
                        benefits described in Section 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 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 payments 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 Bank
                        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 Bank terminates Executive's employment for
                        Cause, or (ii) one year after a Change in 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 or Glacier. At the same time, Executive
                also must return to the Bank all originals and copies (whether
                in hard copy, electronic or other form) of any documents,
                drawings, notes, memoranda, designs, devices, diskettes, tapes,
                manuals, and specifications which constitute proprietary
                information or material of the Bank or Glacier. 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;

                                       5

   6

                (2)     Conviction of a crime, other than a misdemeanor traffic
                        violation, in connection with his duties;

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

                (4)     Subject to Section 10(c), 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
                        Bank employees (or employees 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;
                        or

                (3)     A relocation or transfer of Executive's principal place
                        of employment that would require Executive to commute on
                        a regular basis more than sixty (60) miles each way from
                        Big Sky, 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.

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 (which term is not intended to include his personal
        knowledge or experience) concerning the Bank or Glacier or their
        business operations, unless (1) the Bank or Glacier consents to the use
        or disclosure of their respective 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 concerning all aspects of current and future operations,
        nonpublic information on investment management practices, marketing
        plans, pricing structure and technology of either the Bank or Glacier.

                                       6
   7

        Executive will also treat the terms of this Agreement as confidential
        business information.

12.     NONCOMPETITION. During (i) the Term and the terms of any extensions or
        renewals of this Agreement; (ii) any time period during which Executive
        is receiving termination payments under Section 10 (except pursuant to
        the Continuation Agreement); and (iii) for a period of one year after
        Executive's employment with the Bank and/or Glacier has terminated for
        Cause pursuant to Section 10, 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 Gallatin County,
                Montana which is directly competitive with the business of the
                Bank or Glacier as conducted during the term of this Agreement
                or as conducted as of the date of termination of employment;

        b.      persuade or entice, or attempt to persuade or entice, any
                employee of the Bank or Glacier to terminate his/her employment
                with the Bank or Glacier; or

        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 Glacier.

13.     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 11 and 12
                (including without limitation their scope, duration and
                geographic extent) are fair and reasonably necessary for the
                protection of the Bank's and Glacier'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 Glacier to the maximum extent, in time, scope of
                activities, and geography, the court finds enforceable.

        b.      Executive acknowledges the Bank and Glacier 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 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.

                                       7

   8

14.     COVENANTS. Executive specifically acknowledges the receipt of adequate
        consideration for the covenants contained in Sections 11 and 12 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.

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 Bank 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 Bank's, Glacier's and Executive's heirs, legal
                representatives, successors and assigns.

                                       8

   9

        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 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 will be deemed an original, but all
                of which taken together will constitute one and the same
                document.

                      [SIGNATURES APPEAR ON FOLLOWING PAGE]

                                       9

   10

        Signed October ____, 1998:

                                            BIG SKY WESTERN BANK:

                                            By
                                                  ------------------------------
                                                  Robert L. Kester
                                            Its:  Chairman and CEO

                                            EXECUTIVE:

                                            ------------------------------------
                                            Michael F. Richards

        Ratified October ____, 1998

                                            GLACIER BANCORP, INC.

                                            By
                                                  ------------------------------
                                                  Michael J. Blodnick
                                            Its:  President and CEO

                                       10
   1

                                  EXHIBIT 10.2

                        DIRECTOR NONCOMPETITION AGREEMENT

        This Director Noncompetition Agreement ("Director Agreement"), dated as
of October 20, 1998, is between GLACIER BANCORP, INC. ("Glacier"), BIG SKY
WESTERN BANK ("Big Sky"), and the undersigned, each of whom is a Director
("Director") of Big Sky.

                                    RECITALS

A.      Glacier and Big Sky have entered into a Plan and Agreement of Share
        Exchange (the "Agreement"), dated as of October 20, 1998, under which
        all the outstanding shares of Big Sky common stock will be exchanged for
        common stock shares of Glacier.

B.      The obligation of Glacier to consummate the transactions contemplated by
        the Agreement are conditioned on its receipt of noncompetition
        agreements from all directors of Big Sky.

C.      Glacier, Big Sky, and Director believe that the future success and
        profitability of Big Sky require that existing directors of Big Sky be
        available to continue to serve as directors of Big Sky and not be
        affiliated in any substantial way with a Competing Business for a
        reasonable period of time after Closing.

                                    AGREEMENT

        In consideration of Glacier's performance under the Agreement, Director
agrees as follows:

1.      DEFINITIONS. Capitalized terms not defined in this Director
        Noncompetition Agreement ("Director Agreement"), have the meaning
        assigned to those terms in the Agreement. The following definitions also
        apply to this Director Agreement:

        a.      Competing Business. "Competing Business" means any financial
                institution or trust company that competes or will compete
                within the Covered Area with Glacier, Big Sky or any of their
                subsidiaries or affiliates. The term "Competing Business"
                includes, without limitation, any start-up or other financial
                institution or trust company in formation.

        b.      Covered Area. Flathead and Gallatin Counties in Montana.

        c.      Term. The Term of this Director Agreement begins at Closing and
                will end three years after Closing.

2.      AVAILABILITY. Director will be available to serve, at Glacier's request,
        as a director of Big Sky for a period of at least one year after
        Closing.

                                       1

   2

3.      PARTICIPATION IN COMPETING BUSINESS. Except as provided in Section 6,
        during the Term of this Director Agreement, Director will not become
        involved, directly or indirectly, as a stockholder, member, partner,
        director, officer, manager, investor, organizer, "founder", consultant,
        agent, or representative of a Competing Business.

4.      NO SOLICITATION. During the Term of this Director Agreement, Director
        will not directly or indirectly solicit or attempt to solicit (1) any
        employees of Big Sky, Glacier or any of its Subsidiaries, to leave their
        employment or participate in any manner in a Competing Business, or (2)
        any customers of Big Sky, Glacier or any of its Subsidiaries, to remove
        their business from Big Sky, Glacier or any of its Subsidiaries, or to
        participate in any manner in a Competing Business. Solicitation
        prohibited under this section includes solicitation by any means,
        including, without limitation, meetings, letters or other mailings,
        electronic communications of any kind, and internet communications.

5.      CONFIDENTIAL INFORMATION. During and after the Term of this Director
        Agreement, Director will not disclose any confidential information of
        Glacier, Big Sky or any of their Subsidiaries, obtained by the Director
        while serving as a director of Big Sky, Glacier or any of their
        Subsidiaries.

6.      EMPLOYMENT OUTSIDE COVERED AREA. Nothing in this Director Noncompetition
        Agreement prevents the Director from accepting employment outside the
        Covered Area from a Competing Business, if, during the Term, the
        Director: (a) will not act as an employee or other representative or
        agent of the Competing Business within the Covered Area and (b) will
        have no responsibilities for the Competing Business' operations within
        the Covered Area.

7.      PASSIVE INTEREST. Nothing in this Director Agreement prevents the
        Director from owning 2% or less of any class of security of a Competing
        Business.

8.      REMEDIES. Any breach of this Agreement by Director entitles Glacier and
        Big Sky, together with their successors and assigns, to injunctive
        relief and/or specific performance, as well as to any other legal or
        equitable remedies they may be entitled to.

9.      GOVERNING LAW AND ENFORCEABILITY. This Director Agreement is governed by
        Montana State law. If any court determines that the restrictions set
        forth in this Director Agreement are unenforceable, the maximum
        restrictions, term, scope or geographical area that is enforceable will
        be substituted in place of the unenforceable provisions.

                                       2
   3

10.     COUNTERPARTS. The parties may execute this Agreement in one or more
        counterparts. All the counterparts will be construed together and will
        constitute one Agreement.

SIGNED as of October 20, 1998:

                                                    
Director:

- ----------------------------------------------------    --------------------------------------------------
George B. Hagar                                         Herbert A. Kern

- ----------------------------------------------------    --------------------------------------------------
Robert L. Kester                                        Stewart R. Kester

- ----------------------------------------------------    --------------------------------------------------
O. Taylor Middleton                                     Michael F. Richards

- ----------------------------------------------------    --------------------------------------------------
Michael Scholz                                          Beatrice R. Taylor

GLACIER BANCORP, INC.

By /s/ MICHAEL J. BLODNICK
   --------------------------
Name: Michael J. Blodnick
Title: President and CEO
BIG SKY WESTERN BANK

By  /s/ ROBERT L. KESTER
    -------------------------
Name: Robert L. Kester
Title: Chairman and CEO

                                       3
   1
                                  EXHIBIT 21.1

                                 SUBSIDIARIES OF
                              GLACIER BANCORP, INC.

                                                                 Jurisdiction or
                                            Percentage           State of
Subsidiaries (a)                            of Ownership         Incorporation
- ----------------                            ------------         -------------
                                                                   
Glacier Bank                                   100%                  Montana
                                                                 
Glacier Bank of Whitefish                       94%(1)               Montana
                                                                 
Glacier Bank of Eureka                          98%(2)               Montana
                                                                 
First Security Bank of Missoula                100%                  Montana
                                                                 
Community First Inc.                           100%                  Montana
                                                                 
Valley Bank of Helena                          100%                  Montana

(1)     The remaining 6% of the shares are owned by minority shareholders

(2)     The remaining 2% of the shares are owned by minority shareholders

   1

                                  EXHIBIT 23.3

                              KPMG PEAT MARWICK LLP

                        Independent Accountants' Consent

The Board of Directors
Glacier Bancorp, Inc.:

We consent to the use of our report incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.

/s/ KPMG Peat Marwick LLP

Billings, Montana
November 20, 1998

   1

                                  EXHIBIT 23.4

                              KPMG PEAT MARWICK LLP

                        Independent Accountants' Consent

The Board of Directors
Big Sky Western Bank:

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

/s/ KPMG Peat Marwick LLP

Billings, Montana
November 20, 1998
   1
                                  EXHIBIT 23.5

                           PROFESSIONAL BANK SERVICES

                                November 20, 1998

Board of Directors
Big Sky Western Bank
135 Big Sky Road
Big Sky, MT  59716

Dear Members of the Board:

Professional Bank Services, Inc., as financial advisor to Big Sky Western Bank
(the "Company"), Big Sky, Montana, hereby consents to the reference to our firm
in the Company's Prospectus/Proxy Statement related to the proposed merger of
the Company with Glacier Bancorp, Inc. and to the inclusion of our opinion as an
exhibit to such Prospectus/Proxy Statement.

                                            Very truly yours,

                                            /s/ Anita G. Newcomb

                                            Professional Bank Services, Inc.

   1
                                  EXHIBIT 99.2

                                      PROXY

        The undersigned stockholder of Big Sky Western Bank appoints ROBERT L.
KESTER to vote as the undersigned's proxy, with the power to appoint his
substitute, and hereby authorizes said proxy to represent and to vote, all of
the shares of common stock of Big Sky Western Bank (BSWB) held of record by the
undersigned at the special meeting of shareholders of BSWB to be held in Big
Sky, Montana on January __, 1999, or at any adjournment thereof, upon the
following matters:

1.         To approve the Plan and Agreement of Share Exchange between Glacier
           Bancorp, Inc. and BSWB dated as of October 20, 1998, and amended as
           of November 25, 1998, providing for the acquisition of all BSWB
           common stock by Glacier Bancorp, Inc.

           Please mark only one of the following options:

                         [ ] For                 [ ] Against

2.         In his discretion, on such other business as may properly come before
           the meeting or any adjournment thereof.

        This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted for proposal No. 1.

        The undersigned may revoke this Proxy before its exercise at the special
meeting by (i) giving written notice of such revocation to Michael R. Scholz,
Secretary, Big Sky Western Bank, P.O. Box 160489, Big Sky, Montana 59716, or
(ii) by oral or written request of the undersigned at the special meeting.
Please note that attendance at the special meeting by a shareholder who has
executed or has delivered a valid proxy will not itself revoke that proxy.

        Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. Anyone signing as corporate officer, executor,
administrator, trustee, guardian, or in another representative capacity should
indicate office or capacity.

Dated:               , 199   .            -------------------------------------
     ----------------     ---
                                          -------------------------------------

Please mark, sign, date and return this Proxy 
promptly using the enclosed envelope.