Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q 
 	 	 	
[X]	 	Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
	
 	 	For the quarterly period ended June 30, 2002
	
[   ]	 	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
	
 	 	For the transition period from       to      	
COMMISSION FILE 0-18911 
GLACIER BANCORP, INC.

(Exact name of registrant as specified in its charter) 
 	 	 	
DELAWARE	 	81-0519541	
	
(State or other jurisdiction of incorporation or organization)	 	(IRS Employer Identification No.)
	
49 Commons Loop, Kalispell, Montana	 	59901	
	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code (406) 756-4200 

N/A 

(Former name, former address, and former fiscal year, if changed since last report) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]      No [   ] 
The number of shares of Registrant’s common stock outstanding on July 31, 2002 was 17,209,265. No preferred shares are issued or outstanding. 

TABLE OF CONTENTS
									
		Consolidated Statements of Financial Condition	
		Consolidated Statements of Operations	
		Consolidated Statements of Stockholders’ Equity and Comprehensive Income	
		Consolidated Statements of Cash Flows	
		Notes to Consolidated Financial Statements	
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	
	Item 3. Quantitative and Qualitative Disclosure About Market Risk	
PART II — OTHER INFORMATION	
	Item 1. Legal Proceedings	
	Item 2. Changes in Securities and Use of Proceeds	
	Item 3. Defaults upon Senior Securities	
	Item 4. Submission of Matters to a Vote of Securities Holders	
	Item 5. Other Information	
	Item 6. Exhibits and Reports on Form 8-K.	
SIGNATURES	
EXHIBIT 99	

Table of Contents
GLACIER BANCORP, INC.
Quarterly Report on Form 10-Q 
Index 
 	 	 	 	 	 	 		 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	Page #	
 	 	 	 	 	 	 	 	 	 		
Part I.	 	 	 	 	 	Financial Information	 	 	 	 	
 	
 	 	 	 	Item 1  —	 	Financial Statements	 	 	 	 	
 	
 	 	 	 	 	 	 	 	Consolidated Statements of Financial Condition June 30, 2002, December 31, and June 30, 2001 (unaudited)	 	 	3	 	
 	
 	 	 	 	 	 	 	 	Consolidated Statements of Operations — Three and Six months ended June 30, 2002 and 2001 (unaudited)	 	 	4	 	
 	
 	 	 	 	 	 	 	 	Consolidated Statements of Stockholders’ Equity and Comprehensive Income — Year ended December 31, 2001 and Six months ended June 30, 2002 (unaudited)	 	 	5	 	
 	
 	 	 	 	 	 	 	 	Consolidated Statements of Cash Flows — Six months ended June 30, 2002 and 2001 (unaudited)	 	 	6	 	
 	
 	 	 	 	 	 	 	 	Notes to Consolidated Financial Statements (unaudited)	 	 	7	 	
 	
 	 	 	 	Item 2  —	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	19	 	
 	
 	 	 	 	Item 3  —	 	Quantitative and Qualitative Disclosure about Market Risk	 	 	24	 	
 	
Part II.	 	 	 	 	 	Other Information	 	 	25	 	
 	
 	 	 	 	Item 1  —	 	Legal Proceedings	 	 	25	 	
 	
 	 	 	 	Item 2  —	 	Changes in Securities and Use of Proceeds	 	 	25	 	
 	
 	 	 	 	Item 3  —	 	Defaults Upon Senior Securities	 	 	25	 	
 	
 	 	 	 	Item 4  —	 	Submission of Matters to a Vote of Security Holders	 	 	25	 	
 	
 	 	 	 	Item 5  —	 	Other Information	 	 	26	 	
 	
 	 	 	 	Item 6  —	 	Exhibits and Reports on Form 8-K	 	 	26	 	
 	
 	 	 	 	Signatures	 	 	 	26	 	

Table of Contents
Glacier Bancorp, Inc.
Consolidated Statements of Financial Condition 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	June 30,	 	December 31,	 	June 30,	
(Unaudited - dollars in thousands except per share data)	 	2002	 	2001	 	2001	
	 		 		 		
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Cash on hand and in banks	 	$	59,812	 	 	 	73,456	 	 	 	69,446	 	
 	Interest bearing cash deposits	 	 	7,410	 	 	 	23,970	 	 	 	18,938	 	
 	 	 		 	 	 		 	 	 		 	
 	 	Cash and cash equivalents	 	 	67,222	 	 	 	97,426	 	 	 	88,384	 	
 	 	 		 	 	 		 	 	 		 	
 	Investments:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Investment securities, available-for-sale	 	 	213,752	 	 	 	158,036	 	 	 	156,525	 	
 	 	Mortgage backed securities, available-for-sale	 	 	403,029	 	 	 	350,542	 	 	 	352,267	 	
 	 	 	 		 	 	 		 	 	 		 	
 	 	     Total investments	 	 	616,781	 	 	 	508,578	 	 	 	508,792	 	
 	 	 	 		 	 	 		 	 	 		 	
 	Net loans receivable:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Real estate loans	 	 	372,318	 	 	 	421,996	 	 	 	484,959	 	
 	 	Commercial Loans	 	 	650,749	 	 	 	620,134	 	 	 	590,021	 	
 	 	Consumer and other loans	 	 	292,639	 	 	 	298,851	 	 	 	317,289	 	
 	 	Allowance for loan losses	 	 	(19,941	)	 	 	(18,654	)	 	 	(18,465	)	
 	 	 	 		 	 	 		 	 	 		 	
 	 	     Total loans, net	 	 	1,295,765	 	 	 	1,322,327	 	 	 	1,373,804	 	
 	 	 	 		 	 	 		 	 	 		 	
 	Premises and equipment, net	 	 	47,455	 	 	 	50,566	 	 	 	52,376	 	
 	Real estate and other assets owned, net	 	 	699	 	 	 	593	 	 	 	462	 	
 	Federal Home Loan Bank of Seattle stock, at cost	 	 	37,093	 	 	 	32,822	 	 	 	31,146	 	
 	Federal Reserve stock, at cost	 	 	4,250	 	 	 	4,185	 	 	 	4,428	 	
 	Accrued interest receivable	 	 	13,047	 	 	 	12,409	 	 	 	13,896	 	
 	Core deposit intangible, net	 	 	7,541	 	 	 	8,261	 	 	 	9,013	 	
 	Goodwill, net	 	 	32,692	 	 	 	33,510	 	 	 	35,544	 	
 	Other assets	 	 	15,023	 	 	 	15,070	 	 	 	16,251	 	
 	 	 	 		 	 	 		 	 	 		 	
 	 	 	$	2,137,568	 	 	 	2,085,747	 	 	 	2,134,096	 	
 	 	 	 		 	 	 		 	 	 		 	
Liabilities and stockholders’ equity:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Deposits — non-interest bearing	 	$	256,519	 	 	 	234,318	 	 	 	231,007	 	
 	Deposits — interest bearing	 	 	1,175,893	 	 	 	1,211,746	 	 	 	1,212,343	 	
 	Advances from Federal Home Loan Bank of Seattle	 	 	406,603	 	 	 	367,295	 	 	 	416,222	 	
 	Securities sold under agreements to repurchase	 	 	34,744	 	 	 	32,585	 	 	 	30,741	 	
 	Other borrowed funds	 	 	8,457	 	 	 	1,060	 	 	 	11,480	 	
 	Accrued interest payable	 	 	6,452	 	 	 	9,179	 	 	 	11,211	 	
 	Current income taxes	 	 	538	 	 	 	95	 	 	 	182	 	
 	Deferred tax liability	 	 	5,083	 	 	 	1,780	 	 	 	1,244	 	
 	Trust preferred securities	 	 	35,000	 	 	 	35,000	 	 	 	35,000	 	
 	Minority interest	 	 	—	 	 	 	—	 	 	 	353	 	
 	Other liabilities	 	 	13,471	 	 	 	15,706	 	 	 	18,953	 	
 	 	 	 		 	 	 		 	 	 		 	
 	 	     Total liabilities	 	 	1,942,760	 	 	 	1,908,764	 	 	 	1,968,736	 	
 	 	 	 		 	 	 		 	 	 		 	
 	Preferred shares, 1,000,000 shares authorized. None outstanding	 	 	—	 	 	 	—	 	 	 	—	 	
 	Common stock, $.01 par value per share 50,000,000 shares authorized	 	 	172	 	 	 	169	 	 	 	166	 	
 	Paid-in capital	 	 	170,894	 	 	 	167,371	 	 	 	162,572	 	
 	Retained earnings — substantially restricted	 	 	16,926	 	 	 	7,687	 	 	 	563	 	
 	Accumulated other comprehensive income	 	 	6,816	 	 	 	1,756	 	 	 	2,059	 	
 	 	 	 		 	 	 		 	 	 		 	
 	 	     Total stockholders’ equity	 	 	194,808	 	 	 	176,983	 	 	 	165,360	 	
 	 	 	 		 	 	 		 	 	 		 	
 	 	 	$	2,137,568	 	 	 	2,085,747	 	 	 	2,134,096	 	
 	 	 	 		 	 	 		 	 	 		 	
 	Number of shares outstanding	 	 	17,180,089	 	 	 	16,874,422	 	 	 	16,613,425	 	
 	Book value of equity per share	 	$	11.34	 	 	 	10.49	 	 	 	9.95	 	
 	Tangible book value per share	 	$	9.00	 	 	 	8.01	 	 	 	7.27	 	
See accompanying notes to consolidated financial statements 
3 

Table of Contents
Glacier Bancorp, Inc
Consolidated Statements of Operations 
 	 	 	 	 	 	 	 	 	 	 	 	 	 		
 	 	 	Three months ended June 30,	 	Six months ended June 30,	
 	 	 		 		
(unaudited - dollars in thousands except per share data)	 	2002	 	2001	 	2002	 	2001	
	 		 		 		 		
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Real estate loans	 	$	7,225	 	 	 	10,291	 	 	 	15,063	 	 	 	16,980	 	
 	Commercial loans	 	 	11,649	 	 	 	12,323	 	 	 	23,081	 	 	 	21,700	 	
 	Consumer and other loans	 	 	5,686	 	 	 	7,436	 	 	 	11,499	 	 	 	12,488	 	
 	Investments	 	 	8,947	 	 	 	8,723	 	 	 	16,942	 	 	 	13,980	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	     Total interest income	 	 	33,507	 	 	 	38,773	 	 	 	66,585	 	 	 	65,148	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Interest expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Deposits	 	 	6,673	 	 	 	13,064	 	 	 	14,115	 	 	 	21,798	 	
 	FHLB Advances	 	 	4,181	 	 	 	5,226	 	 	 	8,366	 	 	 	8,837	 	
 	Securities sold under agreements to repurchase	 	 	133	 	 	 	262	 	 	 	289	 	 	 	525	 	
 	Trust preferred securities	 	 	903	 	 	 	905	 	 	 	1,807	 	 	 	1,506	 	
 	Other borrowed funds	 	 	16	 	 	 	79	 	 	 	40	 	 	 	143	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	     Total interest expense	 	 	11,906	 	 	 	19,536	 	 	 	24,617	 	 	 	32,809	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Net interest income	 	 	21,601	 	 	 	19,237	 	 	 	41,968	 	 	 	32,339	 	
 	Provision for loan losses	 	 	1,260	 	 	 	1,838	 	 	 	2,560	 	 	 	2,423	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	     Net interest income after provision for loan losses	 	 	20,341	 	 	 	17,399	 	 	 	39,408	 	 	 	29,916	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Non-interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Service charges and other fees	 	 	3,443	 	 	 	3,549	 	 	 	6,606	 	 	 	5,992	 	
 	Miscellaneous loan fees and charges	 	 	1,182	 	 	 	1,070	 	 	 	2,025	 	 	 	1,763	 	
 	Gains on sale of loans	 	 	1,175	 	 	 	943	 	 	 	2,272	 	 	 	1,410	 	
 	Gains on sale of investments, net	 	 	2	 	 	 	—	 	 	 	2	 	 	 	64	 	
 	Other income	 	 	532	 	 	 	938	 	 	 	1,278	 	 	 	1,398	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	     Total non-interest income	 	 	6,334	 	 	 	6,500	 	 	 	12,183	 	 	 	10,627	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Non-interest expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Compensation, employee benefits and related expenses	 	 	7,533	 	 	 	6,908	 	 	 	15,315	 	 	 	12,165	 	
 	Occupancy and equipment expense	 	 	2,324	 	 	 	2,531	 	 	 	4,625	 	 	 	3,990	 	
 	Outsourced data processing expense	 	 	515	 	 	 	976	 	 	 	961	 	 	 	1,237	 	
 	Core deposit intangibles amortization	 	 	360	 	 	 	406	 	 	 	721	 	 	 	574	 	
 	Goodwill amortization	 	 	249	 	 	 	513	 	 	 	498	 	 	 	737	 	
 	Other expenses	 	 	3,610	 	 	 	3,862	 	 	 	7,085	 	 	 	6,993	 	
 	Minority interest	 	 	—	 	 	 	20	 	 	 	—	 	 	 	35	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	     Total non-interest expense	 	 	14,591	 	 	 	15,216	 	 	 	29,205	 	 	 	25,731	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Earnings before income taxes	 	 	12,084	 	 	 	8,683	 	 	 	22,386	 	 	 	14,812	 	
 	Federal and state income tax expense	 	 	4,105	 	 	 	3,075	 	 	 	7,659	 	 	 	5,290	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Net earnings	 	$	7,979	 	 	 	5,608	 	 	 	14,727	 	 	 	9,522	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Basic earnings per share	 	$	0.47	 	 	 	0.34	 	 	 	0.86	 	 	 	0.65	 	
Diluted earnings per share	 	$	0.46	 	 	 	0.33	 	 	 	0.85	 	 	 	0.63	 	
Dividends declared per share	 	$	0.16	 	 	 	0.15	 	 	 	0.32	 	 	 	0.30	 	
Return on average assets (annualized)	 	 	1.51	%	 	 	1.04	%	 	 	1.41	%	 	 	1.08	%	
Return on average equity (annualized)	 	 	16.77	%	 	 	14.03	%	 	 	15.78	%	 	 	13.64	%	
Return on tangible average equity (annualized)	 	 	21.40	%	 	 	17.82	%	 	 	20.31	%	 	 	16.34	%	
Average outstanding shares — basic	 	 	17,139,048	 	 	 	16,336,932	 	 	 	17,076,598	 	 	 	14,678,575	 	
Average outstanding shares — diluted	 	 	17,451,887	 	 	 	16,770,005	 	 	 	17,378,301	 	 	 	15,189,394	 	
See accompanying notes to consolidated financial statements 
4 

Table of Contents
Glacier Bancorp, Inc.
Consolidated Statements of Stockholders’ Equity
and Comprehensive Income
Year ended December 31, 2001 and Six months ended June 30, 2002 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Retained	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	earnings	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(accumulated	 	Accumulated	 	Total	
 	 	 	Common Stock	 	 	 	 	 	deficit)	 	other comp-	 	stock-	
 	 	 		 	Paid-in	 	substantially	 	rehensive	 	holders'	
(Unaudited - dollars in thousands except per share data)	 	Shares	 	Amount	 	capital	 	restricted	 	income	 	equity	
	 		 		 		 		 		 		
Balance at December 31, 2000	 	 	11,447,150	 	 	 	114	 	 	 	101,828	 	 	 	(4,087	)	 	 	258	 	 	 	98,113	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net earnings	 	 	—	 	 	 	—	 	 	 	—	 	 	 	21,689	 	 	 	—	 	 	 	21,689	 	
 	Unrealized gain on securities, net of reclassification adjustment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,498	 	 	 	1,498	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	23,187	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Cash dividends declared ($.60 per share)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(9,915	)	 	 	—	 	 	 	(9,915	)	
Stock options exercised	 	 	864,571	 	 	 	9	 	 	 	6,755	 	 	 	—	 	 	 	—	 	 	 	6,764	 	
Tax benefit from stock related compensation	 	 	—	 	 	 	—	 	 	 	2,778	 	 	 	—	 	 	 	—	 	 	 	2,778	 	
Conversion of debentures	 	 	32,239	 	 	 	1	 	 	 	341	 	 	 	—	 	 	 	—	 	 	 	342	 	
Stock issued in connection with merger of WesterFed Financial Corporation	 	 	4,530,462	 	 	 	45	 	 	 	55,669	 	 	 	—	 	 	 	—	 	 	 	55,714	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Balance at December 31, 2001	 	 	16,874,422	 	 	 	169	 	 	 	167,371	 	 	 	7,687	 	 	 	1,756	 	 	 	176,983	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net earnings	 	 	—	 	 	 	—	 	 	 	—	 	 	 	14,727	 	 	 	—	 	 	 	14,727	 	
 	Unrealized gain on securities, net of reclassification adjustment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	5,060	 	 	 	5,060	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	19,787	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		 	
Cash dividends declared ($.32 per share)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(5,488	)	 	 	—	 	 	 	(5,488	)	
Stock options exercised	 	 	305,667	 	 	 	3	 	 	 	3,523	 	 	 	—	 	 	 	—	 	 	 	3,526	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Balance at June 30, 2002	 	 	17,180,089	 	 	$	172	 	 	 	170,894	 	 	 	16,926	 	 	 	6,816	 	 	 	194,808	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
See accompanying notes to consolidated financial statements 
5 

Table of Contents
Glacier Bancorp, Inc.
Consolidated Statements of Cash Flows 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	Six months ended June 30,	
 	 	 	 	 	 	 		
(Unaudited - dollars in thousands except per share data)	 	 	 	 	 	2002	 	2001	
	 	 	 	 	 		 		
OPERATING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net cash provided by (used in) operating activities	 	 	 	 	 	$	29,305	 	 	 	(7,196	)	
INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Proceeds from sales, maturities and prepayments of investments available-for-sale	 	 	 	 	 	 	105,754	 	 	 	115,613	 	
 	Purchases of investments available-for-sale	 	 	 	 	 	 	(208,096	)	 	 	(233,276	)	
 	Principal collected on installment and commercial loans	 	 	 	 	 	 	303,572	 	 	 	204,562	 	
 	Installment and commercial loans originated or acquired	 	 	 	 	 	 	(327,974	)	 	 	(231,066	)	
 	Principal collections on mortgage loans	 	 	 	 	 	 	134,549	 	 	 	131,482	 	
 	Mortgage loans originated or acquired	 	 	 	 	 	 	(99,352	)	 	 	(106,590	)	
 	Net purchase of FHLB and FRB stock	 	 	 	 	 	 	(3,359	)	 	 	(3,551	)	
 	Acquisition of WesterFed Financial Corporation and several branches	 	 	 	 	 	 	—	 	 	 	107,568	 	
 	Sale of branches	 	 	 	 	 	 	—	 	 	 	(53,131	)	
 	Net decrease in premises and equipment	 	 	 	 	 	 	2,148	 	 	 	1,167	 	
 	 	 	 	 	 	 		 	 	 		 	
 	     NET CASH USED IN INVESTING ACTIVITIES	 	 	 	 	 	 	(92,758	)	 	 	(67,222	)	
 	 	 	 	 	 	 		 	 	 		 	
FINANCING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net (decrease) increase in deposits	 	 	 	 	 	 	(13,652	)	 	 	15,834	 	
 	Net increase in FHLB advances and other borrowed funds	 	 	 	 	 	 	46,704	 	 	 	61,223	 	
 	Net increase (decrease) in securities sold under repurchase agreements	 	 	 	 	 	 	2,159	 	 	 	(1,987	)	
 	Proceeds from issuance of trust preferred securities	 	 	 	 	 	 	—	 	 	 	35,000	 	
 	Cash dividends paid to stockholders	 	 	 	 	 	 	(5,488	)	 	 	(4,136	)	
 	Proceeds from exercise of stock options and other stock issued	 	 	 	 	 	 	3,526	 	 	 	5,082	 	
 	 	 	 	 	 	 		 	 	 		 	
 	     NET CASH PROVIDED BY FINANCING ACTIVITIES	 	 	 	 	 	 	33,249	 	 	 	111,016	 	
 	 	 	 	 	 	 		 	 	 		 	
 	     NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	 	 	 	 	 	 	(30,204	)	 	 	36,598	 	
 	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	 	 	 	 	 	 	97,426	 	 	 	51,786	 	
 	 	 	 	 	 	 		 	 	 		 	
 	CASH AND CASH EQUIVALENTS AT END OF PERIOD	 	 	 	 	 	$	67,222	 	 	 	88,384	 	
 	 	 	 	 	 	 		 	 	 		 	
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION	 	 	 	 	 	 	 	 	 	 	 	 	
 	Cash paid during the period for:	Interest	 	$	27,345	 	 	 	33,777	 	
 	Income taxes	 	$	7,219	 	 	 	5,970	 	
OPERATING ACTIVITY DISCLOSURE 
In addition to net earnings of $14.727 million, the 2002 increase in net cash provided by operations is primarily the result of activity in mortgage loans held for sale. Loan origination activity was strong during the first six months, however, the balance of loans held for sale declined by $13.206 million due to the timing of when loan sales were completed. During the first six months of 2001, mortgage loans held for sale increased $12.014 million and other liabilities were reduced, partially offsetting this use of cash was net operating earnings of $9.522 million. 
See accompanying notes to consolidated financial statements. 
6 

Table of Contents
Notes to Consolidated Financial Statements 
1)	  	Basis of Presentation:	
 		
 	  	In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of Glacier Bancorp Inc.’s (the “Company”) financial condition as of June 30, 2002, December 31, 2001, and June 30, 2001, stockholders’ equity for the six months ended June 30, 2001 and the year ended December 31, 2001, and the results of operations for the three and six months ended June 30, 2002 and 2001, and the cash flows for the six months ended June 30, 2002 and 2001.	
 		
 	  	The accompanying consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. Operating results for the six months ended June 30, 2002 are not necessarily indicative of the results anticipated for the year ending December 31, 2002. Certain reclassifications have been made to the 2001 financial statements to conform to the 2002 presentation.	
 		
2)	  	Organizational Structure:	
 		
 	  	The Company, headquartered in Kalispell, Montana, is a Delaware corporation incorporated in 1990, pursuant to the reorganization of Glacier Bank, FSB into a bank holding company. The Company is the parent company for nine wholly owned operating subsidiaries: Glacier Bank (“Glacier”), First Security Bank of Missoula (“First Security”), Western Security Bank (“Western”), Big Sky Western Bank (“Big Sky”), Valley Bank of Helena (“Valley”), Glacier Bank of Whitefish (“Whitefish”), Community First, Inc. (“CFI”), and Glacier Capital Trust I (“Glacier Trust”), all located in Montana, and Mountain West Bank (“Mountain West”) which is located in Idaho and Utah.	
 		
 	  	CFI provides full service brokerage services through Raymond James Financial Services, Inc.	
 		
 	  	The following abbreviated organizational chart illustrates the various relationships:	
 
7 

Table of Contents
3)	  	Ratios:	
 		
 	  	Returns on average assets and average equity were calculated based on daily averages.	
 		
4)	  	Cash Dividend Declared:	
 		
 	  	On June 26, 2002, the Board of Directors declared a $.16 per share quarterly cash dividend to stockholders of record on July 9, 2002, payable on July 18, 2002.	
 		
5)	  	Computation of Earnings Per Share:	
 		
 	  	Basic earnings per common share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period presented. Diluted earnings per share is computed by including the net increase in shares if dilutive outstanding stock options were exercised, using the treasury stock method.	
 		
 	  	The following schedule contains the data used in the calculation of basic and diluted earnings per share.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Three	 	Three	 	Six	 	Six	
 	 	 	 	months ended	 	months ended	 	months ended	 	months ended	
 	 	 	 	June 30, 2002	 	June 30, 2001	 	June 30, 2002	 	June 30, 2001	
 	 	 	 		 		 		 		
Net earnings available to common stockholders, basic	 	$	7,979,282	 	 	 	5,608,078	 	 	 	14,727,112	 	 	 	9,522,344	 	
 	After tax effect of interest on convertible subordinated debentures	 	 	—	 	 	 	4,000	 	 	 	—	 	 	 	8,000	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Net earnings available to common stockholders, diluted	 	$	7,979,282	 	 	 	5,612,078	 	 	 	14,727,112	 	 	 	9,530,344	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Average outstanding shares — basic	 	 	17,139,048	 	 	 	16,336,932	 	 	 	17,076,598	 	 	 	14,678,575	 	
Add: Dilutive stock options	 	 	312,839	 	 	 	400,048	 	 	 	301,703	 	 	 	477,794	 	
 	 	Convertible subordinated debentures	 	 	—	 	 	 	33,025	 	 	 	—	 	 	 	33,025	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Average outstanding shares — diluted	 	 	17,451,887	 	 	 	16,770,005	 	 	 	17,378,301	 	 	 	15,189,394	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Basic earnings per share	 	$	0.47	 	 	 	0.34	 	 	 	0.86	 	 	 	0.65	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Diluted earnings per share	 	$	0.46	 	 	 	0.33	 	 	 	0.85	 	 	 	0.63	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
6)	  	Investments:	
 		
 	  	A comparison of the amortized cost and estimated fair value of the Company’s investments is as follows:	
8 

Table of Contents
INVESTMENTS AS OF JUNE 30, 2002 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	Gross Unrealized	 	Estimated	
 	 	 	 	Weighted	 	Amortized	 		 	Fair	
(Dollars in thousands)	 	Yield	 	Cost	 	Gains	 	Losses	 	Value	
	 		 		 		 		 		
U.S. Government and Federal Agencies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	maturing after ten years	 	 	2.85	%	 	$	1,141	 	 	 	9	 	 	 	(2	)	 	 	1,148	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	2.85	%	 	 	1,141	 	 	 	9	 	 	 	(2	)	 	 	1,148	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
State and Local Governments and other issues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	maturing within one year	 	 	5.65	%	 	 	3,654	 	 	 	74	 	 	 	—	 	 	 	3,728	 	
 	maturing one year through five years	 	 	5.47	%	 	 	11,173	 	 	 	236	 	 	 	(112	)	 	 	11,297	 	
 	maturing five years through ten years	 	 	5.67	%	 	 	3,143	 	 	 	77	 	 	 	—	 	 	 	3,220	 	
 	maturing after ten years	 	 	5.60	%	 	 	191,098	 	 	 	4,179	 	 	 	(918	)	 	 	194,359	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	5.59	%	 	 	209,068	 	 	 	4,566	 	 	 	(1,030	)	 	 	212,604	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
Mortgage-Backed Securities	 	 	5.54	%	 	 	106,191	 	 	 	2,245	 	 	 	(57	)	 	 	108,379	 	
Real Estate Mortgage Investment Conduits	 	 	5.83	%	 	 	289,117	 	 	 	5,733	 	 	 	(200	)	 	 	294,650	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total Available-for-Sale Investments	 	 	5.69	%	 	$	605,517	 	 	 	12,553	 	 	 	(1,289	)	 	 	616,781	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
INVESTMENTS AS OF DECEMBER 31, 2001 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	Gross Unrealized	 	Estimated	
 	 	 	 	Weighted	 	Amortized	 		 	Fair	
(Dollars in thousands)	 	Yield	 	Cost	 	Gains	 	Losses	 	Value	
	 		 		 		 		 		
U.S. Government and Federal Agencies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	maturing after ten years	 	 	2.77	%	 	$	1,330	 	 	 	12	 	 	 	(3	)	 	 	1,339	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	2.77	%	 	 	1,330	 	 	 	12	 	 	 	(3	)	 	 	1,339	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
State and Local Governments and other issues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	maturing within one year	 	 	3.25	%	 	 	4,639	 	 	 	28	 	 	 	—	 	 	 	4,667	 	
 	maturing one year through five years	 	 	5.36	%	 	 	13,774	 	 	 	291	 	 	 	(65	)	 	 	14,000	 	
 	maturing five years through ten years	 	 	5.50	%	 	 	2,349	 	 	 	57	 	 	 	(6	)	 	 	2,400	 	
 	maturing after ten years	 	 	5.81	%	 	 	135,789	 	 	 	1,563	 	 	 	(1,722	)	 	 	135,630	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	 	5.67	%	 	 	156,551	 	 	 	1,939	 	 	 	(1,793	)	 	 	156,697	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
Mortgage-Backed Securities	 	 	6.08	%	 	 	129,322	 	 	 	1,868	 	 	 	(126	)	 	 	131,064	 	
Real Estate Mortgage Investment Conduits	 	 	6.11	%	 	 	218,470	 	 	 	2,941	 	 	 	(1,933	)	 	 	219,478	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total Available for Sale Investments	 	 	5.96	%	 	$	505,673	 	 	 	6,760	 	 	 	(3,855	)	 	 	508,578	 	
 	 	 	 	 	 	 		 	 	 		 	 	 		 	 	 		 	
9 

Table of Contents
7)	  	Loans	
 		
 	  	The following table summarizes the Company’s loan portfolio. The loans mature or are repriced at various times.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	At	 	At	
 	 	 	 	06/30/02	 	12/31/2001	
TYPE OF LOAN	 		 		
(Dollars in Thousands)	 	Amount	 	Percent	 	Amount	 	Percent	
	 		 		 		 		
Real Estate Loans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Residential first mortgage loans	 	$	358,831	 	 	 	27.7	%	 	$	395,417	 	 	 	29.9	%	
 	Loans held for sale	 	 	14,196	 	 	 	1.1	%	 	 	27,403	 	 	 	2.1	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total	 	 	373,027	 	 	 	28.8	%	 	 	422,820	 	 	 	32.0	%	
Commercial Loans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Real estate	 	 	381,333	 	 	 	29.4	%	 	 	379,346	 	 	 	28.7	%	
 	Other commercial loans	 	 	270,566	 	 	 	20.9	%	 	 	241,811	 	 	 	18.3	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total	 	 	651,899	 	 	 	50.3	%	 	 	621,157	 	 	 	47.0	%	
Installment and Other Loans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Consumer loans	 	 	130,855	 	 	 	10.1	%	 	 	142,875	 	 	 	10.8	%	
 	Home equity loans	 	 	161,932	 	 	 	12.5	%	 	 	156,140	 	 	 	11.8	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total	 	 	292,787	 	 	 	22.6	%	 	 	299,015	 	 	 	22.6	%	
 	Net deferred loan fees, premiums and discounts	 	 	(2,007	)	 	 	-0.2	%	 	 	(2,011	)	 	 	-0.2	%	
 	Allowance for Losses	 	 	(19,941	)	 	 	-1.5	%	 	 	(18,654	)	 	 	-1.4	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Net Loans	 	$	1,295,765	 	 	 	100.0	%	 	$	1,322,327	 	 	 	100.0	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	  	The following table sets forth information regarding the Company’s non-performing assets at the dates indicated:	
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	At	 	At	
(Dollars in Thousands)	 	6/30/2002	 	12/31/2001	
	 		 		
Non-accrual loans:	 	 	 	 	 	 	 	 	
 	 	Mortgage loans	 	$	3,677	 	 	 	4,044	 	
 	 	Commercial loans	 	 	3,002	 	 	 	4,568	 	
 	 	Consumer loans	 	 	522	 	 	 	620	 	
 	 	 		 	 	 		 	
 	 	 	Total	 	$	7,201	 	 	 	9,232	 	
Accruing Loans 90 days or more overdue:	 	 	 	 	 	 	 	 	
 	 	Mortgage loans	 	 	537	 	 	 	818	 	
 	 	Commercial loans	 	 	640	 	 	 	376	 	
 	 	Consumer loans	 	 	137	 	 	 	243	 	
 	 	 		 	 	 		 	
 	 	 	Total	 	$	1,314	 	 	 	1,437	 	
Real estate and other assets owned, net	 	 	699	 	 	 	593	 	
 	 	 		 	 	 		 	
Total non-performing loans, and real estate and other assets owned, net	 	$	9,214	 	 	 	11,262	 	
 	 	 		 	 	 		 	
 	As a percentage of total assets	 	 	0.43	%	 	 	0.53	%	
Interest Income (1)	 	$	274	 	 	 	658	 	

(1)	 	This is the amount of interest that would have been recorded on loans accounted for on a non-performing basis as of the end of each period if such loans had been current for the entire period.	
10 

Table of Contents
 	  	The following table illustrates th eloan loss experience:	
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Six months ended	 	Year ended	
 	 	 	 	 	June 30,	 	December 31,	
(Dollars in Thousands)	 	2002	 	2001	
	 		 		
Balance at beginning of period	 	$	18,654	 	 	 	7,799	 	
 	Charge offs:	 	 	 	 	 	 	 	 	
 	 	Residential real estate	 	 	(494	)	 	 	(677	)	
 	 	Commercial loans	 	 	(772	)	 	 	(723	)	
 	 	Consumer loans	 	 	(672	)	 	 	(2,029	)	
 	 	 		 	 	 		 	
 	 	 	Total charge offs	 	$	(1,938	)	 	 	(3,429	)	
 	 	 		 	 	 		 	
 	Recoveries:	 	 	 	 	 	 	 	 	
 	 	Residential real estate	 	 	99	 	 	 	33	 	
 	 	Commercial loans	 	 	165	 	 	 	266	 	
 	 	Consumer loans	 	 	401	 	 	 	567	 	
 	 	 		 	 	 		 	
 	 	 	Total recoveries	 	$	665	 	 	 	866	 	
 	 	 		 	 	 		 	
 	Chargeoffs, net of recoveries	 	 	(1,273	)	 	 	(2,563	)	
 	Purchased reserve	 	 	—	 	 	 	8,893	 	
 	Provision	 	 	2,560	 	 	 	4,525	 	
 	 	 		 	 	 		 	
Balance at end of period	 	$	19,941	 	 	 	18,654	 	
 	 	 		 	 	 		 	
Ratio of net charge offs to average loans outstanding during the period	 	 	0.19	%	 	 	0.20	%	
 	  	The following table summarizes the allocation of the allowance for loan losses:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	June 30, 2002	 	December 31, 2001	
 	 	 		 		
 	 	 	 	 	 	 	Percent	 	 	 	 	 	Percent	
 	 	 	 	 	 	 	of loans in	 	 	 	 	 	of loans in	
(Dollars in thousands)	 	Allowance	 	category	 	Allowance	 	category	
	 		 		 		 		
Residential first mortgage	 	$	2,517	 	 	 	28.3	%	 	 	2,722	 	 	 	31.5	%	
Commercial real estate	 	 	6,319	 	 	 	29.0	%	 	 	5,906	 	 	 	28.3	%	
Other commercial	 	 	7,369	 	 	 	20.5	%	 	 	6,225	 	 	 	18.0	%	
Consumer	 	 	3,736	 	 	 	22.2	%	 	 	3,801	 	 	 	22.2	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Totals	 	$	19,941	 	 	 	100.0	%	 	 	18,654	 	 	 	100.0	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	
8)	  	Deposits	
 		
 	  	The following table illustrates the amounts outstanding for deposits greater than $100,000 at June 30, 2002, according to the time remaining to maturity:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Certificates	 	Demand	 	 	 	 	
(Dollars in thousands)	 	of Deposit	 	Deposits	 	Totals	
	 		 		 		
Within three months	 	$	34,990	 	 	 	351,987	 	 	 	386,977	 	
Three to six months	 	 	19,727	 	 	 	—	 	 	 	19,727	 	
Seven to twelve months	 	 	13,534	 	 	 	—	 	 	 	13,534	 	
Over twelve months	 	 	13,563	 	 	 	—	 	 	 	13,563	 	
 	 	 		 	 	 		 	 	 		 	
 	Totals	 	$	81,814	 	 	 	351,987	 	 	 	433,801	 	
 	 	 		 	 	 		 	 	 		 	
11 

Table of Contents
9)	  	Advances and Other Borrowings	
 		
 	  	The following chart illustrates the average balances and the maximum outstanding month-end balances for FHLB advances and repurchase agreements:	
 	 	 	 	 	 	 	 	 	 	 		
 	 	 	June 30,	December 31,	
 	(Dollars in thousands)	 	2002	 	2001		
	 		 			
FHLB Advances	 	 	 	 	 	 	 	 		
 	Amount outstanding at end of period	 	$	406,603	 	 	 	367,295	 		
 	Average balance	 	$	385,472	 	 	 	349,023	 		
 	Maximum outstanding at any month-end	 	$	433,262	 	 	 	416,222	 		
 	Weighted average interest rate	 	 	4.38	%	 	 	5.24	%		
Repurchase Agreements:	 	 	 	 	 	 	 	 		
 	Amount outstanding at end of period	 	$	34,744	 	 	 	32,585	 		
 	Average balance	 	$	33,471	 	 	 	27,375	 		
 	Maximum outstanding at any month-end	 	$	41,113	 	 	 	37,814	 		
 	Weighted average interest rate	 	 	1.73	%	 	 	2.11	%		
10)	  	Stockholders’ Equity:	
 		
 	  	The Federal Reserve Board has adopted capital adequacy guidelines that are used to assess the adequacy of capital in supervising a bank holding company. The following table illustrates the Federal Reserve Board’s capital adequacy guidelines and the Company’s compliance with those guidelines as of June 30, 2002:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CONSOLIDATED	 	Tier 1 (Core)	 	Tier 2 (Total)	 	Leverage	
(Dollars in thousands)	 	Capital	 	Capital	 	Capital	
	 		 		 		
GAAP Capital	 	$	194,808	 	 	 	194,808	 	 	 	194,808	 	
Less: Goodwill and intangibles	 	 	(40,233	)	 	 	(40,233	)	 	 	(40,233	)	
 	Accumulated other comprehensive gain on AFS securities	 	 	(6,816	)	 	 	(6,816	)	 	 	(6,816	)	
Less: Net unrealized loss on AFS equity securities	 	 	(32	)	 	 	(32	)	 	 	(32	)	
Plus: Allowance for loan losses	 	 	—	 	 	 	18,433	 	 	 	—	 	
 	Trust preferred securities	 	 	35,000	 	 	 	35,000	 	 	 	35,000	 	
 	 	 		 	 	 		 	 	 		 	
Regulatory capital computed	 	$	182,727	 	 	 	201,160	 	 	 	182,727	 	
 	 	 		 	 	 		 	 	 		 	
Risk weighted assets	 	$	1,473,105	 	 	 	1,473,105	 	 	 	 	 	
 	 	 		 	 	 		 	 	 	 	 	
Total average assets	 	 	 	 	 	 	 	 	 	$	2,092,097	 	
 	 	 	 	 	 	 	 	 	 	 		 	
Capital as % of defined assets	 	 	12.40	%	 	 	13.66	%	 	 	8.73	%	
Regulatory “well capitalized” requirement	 	 	6.00	%	 	 	10.00	%	 	 	5.00	%	
 	 	 		 	 	 		 	 	 		 	
Excess over “well capitalized” requirement	 	 	6.40	%	 	 	3.66	%	 	 	3.73	%	
 	 	 		 	 	 		 	 	 		 	
12 

Table of Contents
11)	  	Comprehensive Earnings:	
 		
 	  	The Company’s only component of other comprehensive earnings is the unrealized gains and losses on available-for-sale securities.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
 	 	 	 	For the three months	For the six months	
 	 	 	 	ended June 30,	 	ended June 30,		
 	 	 	 		 			
Dollars in thousands	 	2002	 	2001	 	2002	 	2001		
	 		 		 		 			
Net earnings	 	$	7,979	 	 	 	5,608	 	 	 	14,727	 	 	 	9,522	 		
Unrealized holding gain (loss) arising during the period	 	 	9,199	 	 	 	(1,345	)	 	 	8,365	 	 	 	2,867	 		
Tax (expense) benefit	 	 	(3,634	)	 	 	560	 	 	 	(3,306	)	 	 	(1,105	)		
 	 	 		 	 	 		 	 	 		 	 	 		 		
 	Net after tax	 	 	5,565	 	 	 	(785	)	 	 	5,059	 	 	 	1,762	 		
Reclassification adjustment for gains included in net income	 	 	2	 	 	 	—	 	 	 	2	 	 	 	64	 		
Tax expense	 	 	(1	)	 	 	—	 	 	 	(1	)	 	 	(25	)		
 	 	 		 	 	 		 	 	 		 	 	 		 		
 	Net after tax	 	 	1	 	 	 	—	 	 	 	1	 	 	 	39	 		
 	Net unrealized gain (loss) on securities	 	 	5,566	 	 	 	(785	)	 	 	5,060	 	 	 	1,801	 		
 	 	 		 	 	 		 	 	 		 	 	 		 		
 	 	Total comprehensive earnings	 	$	13,545	 	 	 	4,823	 	 	 	19,787	 	 	 	11,323	 		
 	 	 		 	 	 		 	 	 		 	 	 		 		
12)	  	Segment Information	
 		
 	  	The Company evaluates segment performance internally based on individual bank charter, and thus the operating segments are so defined. The following schedule provides selected financial data for the Company’s operating segments. Centrally provided services to the Banks are allocated based on estimated usage of those services. The operating segment identified as “Other” includes the Parent, non-bank units, and eliminations of transactions between segments. During the third quarter of 2001, certain branches of Western were transferred to other Company owned banks located in the same geographic area which accounted for the change in activity for certain segments.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Six months ended and as of June 30, 2002	
 	 	 		
 	 	 	 	 	 	 	First	 	 	 	 	 	Mountain	 	 	 	 	
(Dollars in thousands)	 	Glacier	 	Security	 	Western	 	West	 	Big Sky	
	 		 		 		 		 		
Revenues from external customers	 	$	18,656	 	 	 	17,018	 	 	 	13,661	 	 	 	12,453	 	 	 	6,285	 	
Intersegment revenues	 	 	170	 	 	 	49	 	 	 	8	 	 	 	—	 	 	 	—	 	
Expenses	 	 	13,989	 	 	 	13,174	 	 	 	11,070	 	 	 	10,878	 	 	 	5,007	 	
Intercompany eliminations	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Net income	 	$	4,837	 	 	 	3,893	 	 	 	2,599	 	 	 	1,575	 	 	 	1,278	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	$	477,718	 	 	 	449,117	 	 	 	388,613	 	 	 	361,026	 	 	 	169,094	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total	
 	 	 	Valley	 	Whitefish	 	Other	 	Consolidated	
 	 	 		 		 		 		
Revenues from external customers	 	 	6,417	 	 	 	4,183	 	 	 	95	 	 	 	78,768	 	
Intersegment revenues	 	 	70	 	 	 	—	 	 	 	19,017	 	 	 	19,314	 	
Expenses	 	 	5,327	 	 	 	3,168	 	 	 	1,428	 	 	 	64,041	 	
Intercompany eliminations	 	 	—	 	 	 	—	 	 	 	(19,314	)	 	 	(19,314	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Net income	 	 	1,160	 	 	 	1,015	 	 	 	(1,630	)	 	 	14,727	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	 	176,176	 	 	 	124,319	 	 	 	(8,495	)	 	 	2,137,568	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
13 

Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Six months ended and as of June 30, 2001	
 	 	 		
 	 	 	 	 	 	 	First	 	 	 	 	 	Mountain	 	 	 	 	
(Dollars in thousands)	 	Glacier	 	Security	 	Western	 	West	 	Big Sky	
	 		 		 		 		 		
Revenues from external customers	 	$	19,792	 	 	 	10,322	 	 	 	23,713	 	 	 	9,406	 	 	 	3,593	 	
Intersegment revenues	 	 	459	 	 	 	11	 	 	 	8	 	 	 	192	 	 	 	—	 	
Expenses	 	 	16,682	 	 	 	8,213	 	 	 	20,680	 	 	 	9,493	 	 	 	3,189	 	
Intercompany eliminations	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Net income	 	$	3,569	 	 	 	2,120	 	 	 	3,041	 	 	 	105	 	 	 	404	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	$	487,522	 	 	 	229,601	 	 	 	807,438	 	 	 	301,383	 	 	 	88,010	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total	
 	 	 	Valley	 	Whitefish	 	Other	 	Consolidated	
 	 	 		 		 		 		
Revenues from external customers	 	 	4,688	 	 	 	4,006	 	 	 	255	 	 	 	75,775	 	
Intersegment revenues	 	 	66	 	 	 	6	 	 	 	12,659	 	 	 	13,401	 	
Expenses	 	 	3,981	 	 	 	3,204	 	 	 	811	 	 	 	66,253	 	
Intercompany eliminations	 	 	—	 	 	 	—	 	 	 	(13,401	)	 	 	(13,401	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Net income	 	 	773	 	 	 	808	 	 	 	(1,298	)	 	 	9,522	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	 	145,945	 	 	 	95,859	 	 	 	(21,662	)	 	 	2,134,096	 	

 	 	 	Three months ended and as of June 30, 2002	
 	 	 		
 	 	 	 	 	 	 	First	 	 	 	 	 	Mountain	 	 	 	 	
(Dollars in thousands)	 	Glacier	 	Security	 	Western	 	West	 	Big Sky	
	 		 		 		 		 		
Revenues from external customers	 	$	9,499	 	 	 	8,536	 	 	 	6,809	 	 	 	6,503	 	 	 	3,066	 	
Intersegment revenues	 	 	69	 	 	 	42	 	 	 	2	 	 	 	—	 	 	 	—	 	
Expenses	 	 	7,001	 	 	 	6,554	 	 	 	5,408	 	 	 	5,547	 	 	 	2,399	 	
Intercompany eliminations	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	 	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Net income	 	$	2,567	 	 	 	2,024	 	 	 	1,403	 	 	 	956	 	 	 	667	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	$	477,718	 	 	 	449,117	 	 	 	388,613	 	 	 	361,026	 	 	 	169,094	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total	
 	 	 	Valley	 	Whitefish	 	Other	 	Consolidated	
 	 	 		 		 		 		
Revenues from external customers	 	 	3,270	 	 	 	2,128	 	 	 	30	 	 	 	39,841	 	
Intersegment revenues	 	 	51	 	 	 	—	 	 	 	10,144	 	 	 	10,308	 	
Expenses	 	 	2,711	 	 	 	1,574	 	 	 	668	 	 	 	31,862	 	
Intercompany eliminations	 	 	—	 	 	 	—	 	 	 	(10,308	)	 	 	(10,308	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Net income	 	 	610	 	 	 	554	 	 	 	(802	)	 	 	7,979	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	 	176,176	 	 	 	124,319	 	 	 	(8,495	)	 	 	2,137,568	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
14 

Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Three months ended and as of	
 	 	 	June 30, 2001	
 	 	 		
 	 	 	 	 	 	 	First	 	 	 	 	 	Mountain	 	 	 	 	
(Dollars in thousands)	 	Glacier	 	Security	 	Western	 	West	 	Big Sky	
	 		 		 		 		 		
Revenues from external customers	 	$	10,305	 	 	 	5,254	 	 	 	17,433	 	 	 	5,690	 	 	 	1,879	 	
Intersegment revenues	 	 	148	 	 	 	1	 	 	 	8	 	 	 	49	 	 	 	—	 	
Expenses	 	 	8,509	 	 	 	4,115	 	 	 	15,200	 	 	 	5,799	 	 	 	1,641	 	
Intercompany eliminations	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Net income	 	$	1,944	 	 	 	1,140	 	 	 	2,241	 	 	 	(60	)	 	 	238	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	$	487,522	 	 	 	229,601	 	 	 	807,438	 	 	 	301,383	 	 	 	88,010	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total	
 	 	 	Valley	 	Whitefish	 	Other	 	Consolidated	
 	 	 		 		 		 		
Revenues from external customers	 	 	2,651	 	 	 	2,032	 	 	 	29	 	 	 	45,273	 	
Intersegment revenues	 	 	35	 	 	 	3	 	 	 	7,415	 	 	 	7,659	 	
Expenses	 	 	2,240	 	 	 	1,588	 	 	 	573	 	 	 	39,665	 	
Intercompany eliminations	 	 	—	 	 	 	—	 	 	 	(7,659	)	 	 	(7,659	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Net income	 	 	446	 	 	 	447	 	 	 	(788	)	 	 	5,608	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	 	145,945	 	 	 	95,859	 	 	 	(21,662	)	 	 	2,134,096	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
13)	  	Rate/Volume Analysis	
 		
 	  	Net interest income can be evaluated from the perspective of relative dollars of change in each period. Interest income and interest expense, which are the components of net interest income, are shown in the following table on the basis of the amount of any increases (or decreases) attributable to changes in the dollar levels of the Company’s interest-earning assets and interest-bearing liabilities (“Volume”) and the yields earned and rates paid on such assets and liabilities (“Rate”). The change in interest income and interest expense attributable to changes in both volume and rates has been allocated proportionately to the change due to volume and the change due to rate.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Six Months Ended June 30,	
 	 	 	2002 vs. 2001	
 	 	 	Increase (Decrease) due to:	
 	 	 		
(Dollars in Thousands)	 	Volume	 	Rate	 	Net	
	 		 		 		
Interest Income	 	 	 	 	 	 	 	 	 	 	 	 	
Real Estate Loans	 	$	(913	)	 	 	(1,004	)	 	 	(1,917	)	
Commercial Loans	 	 	5,812	 	 	 	(4,431	)	 	 	1,381	 	
Consumer and Other Loans	 	 	556	 	 	 	(1,545	)	 	 	(989	)	
Investment Securities	 	 	5,280	 	 	 	(2,318	)	 	 	2,962	 	
 	 	 		 	 	 		 	 	 		 	
 	Total Interest Income	 	 	10,735	 	 	 	(9,298	)	 	 	1,437	 	
Interest Expense	 	 	 	 	 	 	 	 	 	 	 	 	
NOW Accounts	 	 	238	 	 	 	(817	)	 	 	(579	)	
Savings Accounts	 	 	274	 	 	 	(787	)	 	 	(513	)	
Money Market Accounts	 	 	1,767	 	 	 	(3,186	)	 	 	(1,419	)	
Certificates of Deposit	 	 	(292	)	 	 	(4,880	)	 	 	(5,172	)	
FHLB Advances	 	 	1,756	 	 	 	(2,227	)	 	 	(471	)	
Other Borrowings and Repurchase Agreements	 	 	438	 	 	 	(476	)	 	 	(38	)	
 	 	 		 	 	 		 	 	 		 	
 	Total Interest Expense	 	 	4,181	 	 	 	(12,373	)	 	 	(8,192	)	
 	 	 		 	 	 		 	 	 		 	
Net Interest Income	 	$	6,554	 	 	 	3,075	 	 	 	9,629	 	
 	 	 		 	 	 		 	 	 		 	
15 

Table of Contents
14)	  	Average Balance Sheet	
 		
 	  	The following schedule provides (i) the total dollar amount of interest and dividend income of the Company for earning assets and the resultant average yield; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rate; (iii) net interest and dividend income; (iv) interest rate spread; and (v) net interest margin. Non-accrual loans are included in the average balance of the loans.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	For the Six months ended 6-30-02	 	For the year ended 12-31-01	
 	 	 	 		 		
 	 	 	 	 	 	 	 	Interest	 	Average	 	 	 	 	 	Interest	 	Average	
AVERAGE BALANCE SHEET	 	Average	 	and	 	Yield/	 	Average	 	and	 	Yield/	
(Dollars in Thousands)	 	Balance	 	Dividends	 	Rate	 	Balance	 	Dividends	 	Rate	
	 		 		 		 		 		 		
ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Real Estate Loans	 	$	389,073	 	 	 	15,063	 	 	 	7.74	%	 	$	428,999	 	 	 	34,012	 	 	 	7.93	%	
 	Commercial Loans	 	 	627,319	 	 	 	23,081	 	 	 	7.42	%	 	 	556,907	 	 	 	48,292	 	 	 	8.67	%	
 	Consumer and Other Loans	 	 	290,026	 	 	 	11,499	 	 	 	8.00	%	 	 	292,732	 	 	 	25,528	 	 	 	8.72	%	
 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	
 	 	Total Loans	 	 	1,306,418	 	 	 	49,643	 	 	 	7.66	%	 	 	1,278,638	 	 	 	107,832	 	 	 	8.43	%	
 	Investment Securities	 	 	620,196	 	 	 	16,942	 	 	 	5.46	%	 	 	501,927	 	 	 	30,088	 	 	 	5.99	%	
 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	
 	 	Total Earning Assets	 	 	1,926,614	 	 	 	66,585	 	 	 	6.91	%	 	 	1,780,565	 	 	 	137,920	 	 	 	7.75	%	
 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	
 	Non-Earning Assets	 	 	167,809	 	 	 	 	 	 	 	165,687	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	
 	 	TOTAL ASSETS	 	$	2,094,423	 	 	 	 	 	 	$	1,946,252	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	NOW Accounts	 	$	204,046	 	 	 	399	 	 	 	0.39	%	 	$	183,399	 	 	 	1,758	 	 	 	0.96	%	
 	Savings Accounts	 	 	126,514	 	 	 	464	 	 	 	0.74	%	 	 	102,736	 	 	 	1,855	 	 	 	1.81	%	
 	Money Market Accounts	 	 	339,964	 	 	 	3,496	 	 	 	2.07	%	 	 	287,150	 	 	 	9,575	 	 	 	3.33	%	
 	Certificates of Deposit	 	 	511,466	 	 	 	9,756	 	 	 	3.85	%	 	 	552,469	 	 	 	29,504	 	 	 	5.34	%	
 	FHLB Advances	 	 	385,473	 	 	 	8,366	 	 	 	4.38	%	 	 	349,023	 	 	 	18,280	 	 	 	5.24	%	
 	Repurchase Agreements and Other Borrowed Funds	 	 	73,238	 	 	 	2,136	 	 	 	5.88	%	 	 	66,658	 	 	 	4,574	 	 	 	6.86	%	
 	 	 		 	 	 		 	 	 	 	 	 	 		 	 	 		 	 	 	 	 	
 	 	Total Interest Bearing Liabilities	 	 	1,640,701	 	 	 	24,617	 	 	 	3.03	%	 	 	1,541,435	 	 	 	65,546	 	 	 	4.25	%	
 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	
 	 	Non-interest Bearing Deposits	 	 	236,299	 	 	 	 	 	 	 	216,238	 	 	 	 	 	
 	 	Other Liabilities	 	 	30,790	 	 	 	 	 	 	 	27,847	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	
 	 	Total Liabilities	 	 	1,907,790	 	 	 	 	 	 	 	1,785,520	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	
 	Common Stock	 	 	171	 	 	 	 	 	 	 	157	 	 	 	 	 	
 	Paid-In Capital	 	 	169,027	 	 	 	 	 	 	 	152,420	 	 	 	 	 	
 	Retained Earnings	 	 	14,178	 	 	 	 	 	 	 	5,929	 	 	 	 	 	
 	Accumulated Other Comprehensive Earnings	 	 	3,257	 	 	 	 	 	 	 	2,226	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	
 	 	Total Stockholders’ Equity	 	 	186,633	 	 	 	 	 	 	 	160,732	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	
 	 	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	 	$	2,094,423	 	 	 	 	 	 	$	1,946,252	 	 	 	 	 	
 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	
 	Net Interest Income	 	 	 	$	41,968	 	 	 	 	 	 	$	72,374	 	 	 	
 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	
 	Net Interest Spread	 	 	 	 	 	 	3.88	%	 	 	 	 	 	 	3.49	%	
 	Net Interest argin on average earning assets	 	 	 	 	 	 	4.36	%	 	 	 	 	 	 	4.06	%	
 	Return on Average Assets	 	 	 	 	 	 	1.41	%	 	 	 	 	 	 	1.11	%	
 	Return on Average Equity	 	 	 	 	 	 	15.78	%	 	 	 	 	 	 	13.49	%	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
16 

Table of Contents
15)	  	Recently Issued Accounting Standards	
 		
 	  	In July 2001, the Financial Accounting Standards Board (FASB) issued Statement 141, Business Combinations, and Statement 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. However, goodwill recognized in connection with a branch acquisition will continue to be subject to provisions of Statement 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions. Statement 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with Statement 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company adopted the provisions of Statement 141 immediately, and Statement 142 and 144 effective January 1, 2002.	
 		
 	  	Statement 141 required upon adoption of Statement 142 that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. The Company was required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption (March 31, 2002). In addition, to the extent an intangible asset was identified as having an indefinite useful life, the Company was required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss would be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.	
 		
 	  	In connection with the transitional goodwill impairment evaluation, Statement 142 required the Company to perform an assessment of whether there was an indication that goodwill was impaired as of the date of adoption. To accomplish this, the Company identified its reporting units and determined the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company had up to six months from the date of adoption (June 30, 2002) to determine the fair value of each reporting unit and compare it to the reporting unit’s carrying amount. To the extent a reporting unit’s carrying amount exceeded its fair value, an indication exists that the reporting unit’s goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s fair value to all of its assets and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption (January 1, 2002). This second step, if necessary, is required to be completed as soon as possible, but no later than the end of the year of adoption (December 31, 2002). Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company’s consolidated statements of operations.	
 		
 	  	As of June 30, 2002, the Company has identified its reporting units as its banking subsidiaries and has allocated goodwill accordingly. Intangibles with definite useful lives have been re-assessed and the useful lives and residual values were determined to be adequate. Intangibles with indefinite useful lives have been tested for impairment loss. The Company estimated the fair value of each reporting unit, and determined	
17 

Table of Contents
 	  	that each unit’s fair value exceeds the carrying value of each reporting unit, and consequently no impairment is evident at this time. On an annual basis, prior to the end of the third quarter, the Company will revaluate the useful lives, residual value, and test goodwill for impairment, as required by Statement 142.	
 		
 	  	The following table sets forth information regarding the Company’s core deposit intangibles, amortizable goodwill, and mortgage servicing rights:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	As of June 30, 2002	
 	 	 		
 	 	 	Core Deposit	 	Amortizable	 	Mortgage	 	 	 	 	
(Dollars in thousands)	 	Intangible	 	Goodwill	 	Servicing Rights(1)	 	Total	
	 		 		 		 		
 	Gross carrying value	 	$	9,836	 	 	 	20,489	 	 	 	 	 	 	 	 	 	
 	Accumulated Amortization	 	 	(2,295	)	 	 	(1,491	)	 	 	 	 	 	 	 	 	
 	 	 		 	 	 		 	 	 	 	 	 	 	 	 	
 	Net carrying value	 	$	7,541	 	 	 	18,998	 	 	 	2,188	 	 	 	28,727	 	
 	 	 		 	 	 		 	 	 	 	 	 	 	 	 	
Weighted-Average amortization period (Period in years)	 	 	10.0	 	 	 	23.6	 	 	 	24.3	 	 	 	20.1	 	
Aggregate Amortization Expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	For the three months ended June 30, 2002	 	$	360	 	 	 	249	 	 	 	95	 	 	 	704	 	
 	For the six months ended June 30, 2002	 	$	721	 	 	 	498	 	 	 	186	 	 	 	1,405	 	
Estimated Amortization Expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	For the year ended December 31, 2002	 	$	1,439	 	 	 	995	 	 	 	300	 	 	 	2,734	 	
 	For the year ended December 31, 2003	 	 	1,219	 	 	 	995	 	 	 	286	 	 	 	2,500	 	
 	For the year ended December 31, 2004	 	 	1,011	 	 	 	995	 	 	 	272	 	 	 	2,278	 	
 	For the year ended December 31, 2005	 	 	847	 	 	 	995	 	 	 	258	 	 	 	2,100	 	
 	For the year ended December 31, 2006	 	 	779	 	 	 	995	 	 	 	244	 	 	 	2,018	 	

(1)	 	Gross carrying value and accumulated amortization are not readily available	
 	  	At June 30, 2002, the Company’s goodwill totaled $32.692 million, of which $13.694 million represents goodwill that is no longer being amortized as of January 1, 2002 pursuant to Statement 142. The changes in the carrying amount of goodwill for the six months ended June 30, 2002 are as follows.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Balance	 	Goodwill	 	Amortization	 	Balance	
 	 	At	 	Adjustments	 	for six months	 	At	
(Dollars in thousands)	 	12/31/2001	 	2002(1)	 	ended 6/30/02	 	6/30/2002	
	 		 		 		 		
Parent	 	$	2,151	 	 	 	—	 	 	 	—	 	 	 	2,151	 	
Glacier Bank	 	 	4,074	 	 	 	9	 	 	 	(59	)	 	 	4,024	 	
First Security	 	 	3,796	 	 	 	—	 	 	 	—	 	 	 	3,796	 	
Western	 	 	4,193	 	 	 	(329	)	 	 	—	 	 	 	3,864	 	
Mountain	 	 	16,818	 	 	 	—	 	 	 	(439	)	 	 	16,379	 	
Big Sky	 	 	1,752	 	 	 	—	 	 	 	—	 	 	 	1,752	 	
Valley	 	 	726	 	 	 	—	 	 	 	—	 	 	 	726	 	
Whitefish	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	$	33,510	 	 	 	(320	)	 	 	(498	)	 	 	32,692	 	

(1)	 	Adjustments are purchase accounting adjustments related to the WesterFed Financial Corporation acquisition on February 28, 2001.	
18 

Table of Contents
 	 	The following pro forma information presents the consolidated results of operations as if the adoption of Statement 142 had occurred on January 1, 2001. The table is for comparison purposes only:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	For the Three Months	 	For the Six Months	
 	 	Ended June 30,	 	Ended June 30,	
 	 		 		
(Dollars in thousands)	 	2002	 	2001	 	2002	 	2001	
	 		 		 		 		
Reported net income	 	$	7,979	 	 	 	5,608	 	 	 	14,727	 	 	 	9,522	 	
Add back goodwill amortization, net of tax	 	 	—	 	 	 	161	 	 	 	—	 	 	 	241	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Adjusted net income	 	$	7,979	 	 	 	5,769	 	 	 	14,727	 	 	 	9,763	 	

 	 	For the Three Months Ended June 30,	
 	 		
 	 	2002	 	2001	
 	 		 		
 	 	Basic EPS	 	Diluted EPS	 	Basic EPS	 	Diluted EPS	
 	 		 		 		 		
Reported net income	 	$	0.47	 	 	 	0.46	 	 	 	0.34	 	 	 	0.33	 	
Add back goodwill amortization, net of tax	 	 	—	 	 	 	—	 	 	 	0.01	 	 	 	0.01	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Adjusted net income	 	$	0.47	 	 	 	0.46	 	 	 	0.35	 	 	 	0.34	 	

 	 	For the Six Months Ended June 30,	
 	 		
 	 	2002	 	2001	
 	 		 		
 	 	Basic EPS	 	Diluted EPS	 	Basic EPS	 	Diluted EPS	
 	 		 		 		 		
Reported net income	 	$	0.86	 	 	 	0.85	 	 	 	0.65	 	 	 	0.63	 	
Add back goodwill amortization, net of tax	 	 	—	 	 	 	—	 	 	 	0.02	 	 	 	0.01	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Adjusted net income	 	$	0.86	 	 	 	0.85	 	 	 	0.67	 	 	 	0.64	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
Financial Condition 
This section discusses the changes in Statement of Financial Condition items from June 30, 2001 and December 31, 2001, to June 30, 2002. 
Assets
($ in thousands) 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$ change from	 	$ change from	
 	 	 	 	June 30,	 	December 31,	 	June 30,	 	December 31,	 	June 30,	
 	 	 	 	2002	 	2001	 	2001	 	2001	 	2001	
 	 	 	 		 		 		 		 		
Cash on hand and in banks	 	$	59,812	 	 	 	73,456	 	 	 	69,446	 	 	 	(13,644	)	 	 	(9,634	)	
Investment securities and interest bearing deposits	 	 	624,191	 	 	 	532,548	 	 	 	527,730	 	 	 	91,643	 	 	 	96,461	 	
Loans:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Real estate	 	 	372,318	 	 	 	421,996	 	 	 	484,959	 	 	 	(49,678	)	 	 	(112,641	)	
 	Commercial and Agricultural	 	 	650,749	 	 	 	620,134	 	 	 	590,021	 	 	 	30,615	 	 	 	60,728	 	
 	Consumer	 	 	292,639	 	 	 	298,851	 	 	 	317,289	 	 	 	(6,212	)	 	 	(24,650	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total loans	 	 	1,315,706	 	 	 	1,340,981	 	 	 	1,392,269	 	 	 	(25,275	)	 	 	(76,563	)	
 	Allowance for loan losses	 	 	(19,941	)	 	 	(18,654	)	 	 	(18,465	)	 	 	(1,287	)	 	 	(1,476	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	 	Total loans net of allowance for loan losses	 	 	1,295,765	 	 	 	1,322,327	 	 	 	1,373,804	 	 	 	(26,562	)	 	 	(78,039	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Other assets	 	 	157,800	 	 	 	157,416	 	 	 	163,116	 	 	 	384	 	 	 	(5,316	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total Assets	 	$	2,137,568	 	 	 	2,085,747	 	 	 	2,134,096	 	 	 	51,821	 	 	 	3,472	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
19 

Table of Contents
At June 30, 2002 total assets were $2.138 billion which is nearly the same level as June 30, 2001 assets of $2.134 billion, and is an increase of $51.821 million from December 31, 2001. 
Total loans, net of the reserve for loan losses, have decreased $78 million from June 30, 2001, with $26 million of the decrease occurring during the six months in 2002. With lower interest rates during the past year a large number of real estate loans have been refinanced, which coupled with our decision to sell the majority of the real estate loan production, has resulted in a reduction in real estate loans of $113 million, of which $50 million occurred in 2002. Commercial loans have increased $61 million, with approximately $30 million of the growth in 2002, and continue to be the lending focus. Consumer loans have declined $25 million with a significant portion of the decline attributed to the runoff in the WesterFed Financial Corporation dealer originated consumer loans. We have curtailed the origination and purchase of these loan types and are focusing on home-equity loans for the consumer loan portfolio. 
Investment securities, excluding interest bearing deposits in other financial institutions, have increased $108 million. Much of the cash received from the reduction in real estate loans has been redeployed in mortgage related investment securities with characteristics that result in less interest rate risk than retaining 30 year loans. 
The Company typically sells a majority of mortgage loans originated, retaining servicing only on loans sold to certain lenders. The sale of loans in the secondary mortgage market reduces the Company’s risk of increases in interest rates of holding long-term, fixed rate loans in the loan portfolio. The Company has also been active in generating commercial SBA loans. A portion of some of those loans are sold to other investors. The amount of loans sold and serviced for others on June 30, 2002 was approximately $265 million. 
Liabilities
($ in thousands) 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$ change from	 	$ change from	
 	 	 	June 30,	 	December 31,	 	June 30,	 	December 31,	 	June 30,	
 	 	 	2002	 	2001	 	2001	 	2001	 	2001	
 	 	 		 		 		 		 		
Deposits — non-interest bearing	 	$	256,519	 	 	 	234,318	 	 	 	231,007	 	 	 	22,201	 	 	 	25,512	 	
Deposits — interest bearing	 	 	1,175,893	 	 	 	1,211,746	 	 	 	1,212,343	 	 	 	(35,853	)	 	 	(36,450	)	
Advances from Federal Home Loan Bank	 	 	406,603	 	 	 	367,295	 	 	 	416,222	 	 	 	39,308	 	 	 	(9,619	)	
Other borrowed funds	 	 	43,201	 	 	 	33,645	 	 	 	42,221	 	 	 	9,556	 	 	 	980	 	
Other liabilities	 	 	25,544	 	 	 	26,760	 	 	 	31,943	 	 	 	(1,216	)	 	 	(6,399	)	
Trust preferred securities	 	 	35,000	 	 	 	35,000	 	 	 	35,000	 	 	 	—	 	 	 	—	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total liabilities	 	$	1,942,760	 	 	 	1,908,764	 	 	 	1,968,736	 	 	 	33,996	 	 	 	(25,976	)	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Total deposits have decreased $11 million from the June 30, 2001 balances, and are down $14 million from December 31, 2001. Non-interest bearing deposits are up $26 million, or 11 percent, and interest-bearing deposits are down $36 million, or 3 percent from June 30, 2001. The majority of the change in deposits has occurred since December 31, 2002. Much of the decline in interest-bearing deposits is the result of pricing strategies in the low interest rate environment. Federal home loan bank advances, other borrowed funds, and repurchase agreements, have also decreased $9 million. Other liabilities is comprised of accrued interest payable, current and deferred tax liability, merger related liabilities, and other miscellaneous liabilities. The decrease of $7 million, or 20 percent, of other liabilities is primarily the result of the decrease in accrued interest payable, which occurred due to a decrease in interest-bearing liabilities outstanding and a decrease in interest rates. In addition, merger related liabilities have been paid. 
Liquidity and Capital Resources 
The objective of liquidity management is to maintain cash flows adequate to meet current and future needs for credit demand, deposit withdrawals, maturing liabilities and corporate operating expenses. The principal source of the Company’s cash revenues is the dividends received from the Company’s banking subsidiaries. The payment of dividends is subject to government regulation, in that regulatory authorities may prohibit banks and bank holding companies from paying dividends which would constitute an unsafe or unsound banking practice. 
20 

Table of Contents
The subsidiaries source of funds is generated by deposits, principal and interest payments on loans, sale of loans and securities, short and long-term borrowings, and net income. In addition, all seven banking subsidiaries are members of the FHLB. As of June 30, 2002, the Company had $733 million of available FHLB line of which $407 million was utilized. Accordingly, management of the Company has a wide range of versatility in managing the liquidity and asset/liability mix for each individual institution as well as the Company as a whole. During 2002, all seven financial institutions maintained liquidity levels in excess of regulatory requirements and operational needs. 
Stockholders’ equity
($ in thousands except per share data) 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$ change from	 	$ change from	
 	 	 	June 30,	 	December 31,	 	June 30,	 	December 31,	 	June 30,	
 	 	 	2002	 	2001	 	2001	 	2001	 	2001	
 	 	 		 		 		 		 		
Common equity	 	$	187,992	 	 	 	175,227	 	 	 	163,301	 	 	 	12,765	 	 	 	24,691	 	
Net unrealized gain on securities	 	 	6,816	 	 	 	1,756	 	 	 	2,059	 	 	 	5,060	 	 	 	4,757	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
 	Total stockholders’ equity	 	$	194,808	 	 	 	176,983	 	 	 	165,360	 	 	 	17,825	 	 	 	29,448	 	
 	 	 		 	 	 		 	 	 		 	 	 		 	 	 		 	
Stockholders’ equity to total assets	 	 	9.11	%	 	 	8.49	%	 	 	7.75	%	 	 	 	 	 	 	 	 	
Tangible equity to total assets	 	 	7.37	%	 	 	6.62	%	 	 	5.78	%	 	 	 	 	 	 	 	 	
Book value per common share	 	$	11.34	 	 	 	10.49	 	 	 	9.95	 	 	 	0.85	 	 	 	1.39	 	
Tangible book value per common share	 	$	9.00	 	 	 	8.01	 	 	 	7.27	 	 	 	0.99	 	 	 	1.73	 	
Each of the equity ratios and book value per share amounts have increased substantially from the prior year and December 31, 2001, primarily the result of earnings retention, stock options exercised, and net unrealized gains on securities. Our equity to asset ratio is near historic highs for the Company. The increase in net unrealized gains on securities is a result of the overall market performance. 
Credit quality information ($ in thousands) 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	June 30,	 	March 31,	 	December 31,	 	June 30,	
 	 	2002	 	2002	 	2001	 	2001	
 	 		 		 		 		
Allowance for loan losses	 	$	19,941	 	 	 	19,498	 	 	 	18,654	 	 	 	18,465	 	
Non-performing assets	 	$	9,214	 	 	 	12,766	 	 	 	11,262	 	 	 	11,918	 	
Allowance as a percentage of non performing assets	 	 	216.42	%	 	 	152.73	%	 	 	165.64	%	 	 	154.93	%	
Non-performing assets as a percentage of total assets	 	 	0.43	%	 	 	0.61	%	 	 	0.53	%	 	 	0.55	%	
Allowance as a percentage of total loans	 	 	1.52	%	 	 	1.50	%	 	 	1.39	%	 	 	1.32	%	
Allowance for Loan Loss and Non-Performing Assets 
Non-performing assets as a percentage of total assets at June 30, 2002 were .43 percent versus .55 percent at the same time last year, which compares to the Peer Group average of .62 percent at March 31, 2002, the most recent information available. The allowance for loan losses was 216 percent of non-performing assets at June 30, 2002, up from 155 percent a year ago. 
With the continuing change in loan mix from residential real estate to commercial and consumer loans, which historically have greater credit risk, the Company has increased the balance in the allowance for loan losses account. The allowance balance has increased $1.476 million, or 8 percent, to $19.941 million. Allowance as a percentage of total loans is 1.52 percent, up from 1.32 percent a year ago and 1.39 percent at December 31, 2001. The provision for loan losses was $2.560 million which is an increase of $137 thousand over the first six months in 2001. Net charged off loans as a percentage of loans outstanding were .097 for the first six months of 2002 which is up from .046 during the same period in 2001. The 2002 charge off rate is about the same level as the charge off rate of .20 for the full 2001 year. 
21 

Table of Contents
Results of Operations — The three months ended June 30, 2002 compared to the three months ended June 30, 2001. 
Revenue summary
($ in thousands) 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Three months ended June 30,	
 	 	 	 		
 	 	 	 	2002	 	2001	 	$ change	 	% change	
 	 	 	 		 		 		 		
Net interest income	 	$	21,601	 	 	 	19,237	 	 	 	2,364	 	 	 	12.3	%	
Fees and other revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Service charges, loan fees, and other fees	 	 	4,625	 	 	 	4,619	 	 	 	6	 	 	 	0.1	%	
 	Gain on sale of loans	 	 	1,175	 	 	 	943	 	 	 	232	 	 	 	24.6	%	
 	Other income	 	 	534	 	 	 	938	 	 	 	(404	)	 	 	-43.1	%	
 	 	 		 	 	 		 	 	 		 	 	 	 	 	
 	 	Total non-interest income	 	 	6,334	 	 	 	6,500	 	 	 	(166	)	 	 	-2.6	%	
 	 	 		 	 	 		 	 	 		 	 	 	 	 	
 	Total revenue	 	$	27,935	 	 	 	25,737	 	 	 	2,198	 	 	 	8.5	%	
 	 	 		 	 	 		 	 	 		 	 	 	 	 	
Net interest margin	 	 	4.57	%	 	 	3.97	%	 	 	 	 	 	 	 	 	
 	 	 		 	 	 		 	 	 	 	 	 	 	 	 	
Net Interest Income 
Net interest income for the quarter increased $2.364 million, or 12 percent, over the same period in 2001. Total interest income is $5.266 million, or 14 percent lower than the same quarter in 2001, while total interest expense is $7.630 million, or 39 percent lower. The increase in non-interest bearing deposits and the decrease in interest bearing deposits contributed to the reduced interest expense. Lower interest rates in 2002 have also reduced interest income and interest expense. The net interest margin as a percentage of earning assets, on a tax equivalent basis, increased from 4.0 percent for the 2001 quarter to 4.6 percent in the quarter ended June 30, 2002. The ratio also is an increase from the 4.4 percent for the quarter ended March 31, 2002. 
Non-interest Income 
Fee income from operations was approximately the same amount in the second quarter of 2002 as in 2001. Gain on sale of loans increased $232 thousand, or 25 percent, resulting from increased real estate loan originations. Included in other income in 2001 was a $511 thousand gain-on-sale of the Glacier Bank Cut Bank branch office, as a result other income was $404 thousand lower in the second quarter of 2002. 
Non-interest expense summary
($ in thousands) 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Three months ended June 30,	
 	 	 		
 	 	 	2002	 	2001	 	$ change	 	% change	
 	 	 		 		 		 		
Compensation and employee benefits	 	$	7,533	 	 	 	6,908	 	 	 	625	 	 	 	9.0	%	
Occupancy and equipment expense	 	 	2,324	 	 	 	2,531	 	 	 	(207	)	 	 	-8.2	%	
Outsourced data processing expense	 	 	515	 	 	 	976	 	 	 	(461	)	 	 	-47.2	%	
Core deposit intangible amortization	 	 	360	 	 	 	406	 	 	 	(46	)	 	 	-11.3	%	
Goodwill amortization(a)	 	 	249	 	 	 	513	 	 	 	(264	)	 	 	-51.5	%	
Other expenses	 	 	3,610	 	 	 	3,882	 	 	 	(272	)	 	 	-7.0	%	
 	 	 		 	 	 		 	 	 		 	 	 	 	 	
 	Total non-interest expense	 	$	14,591	 	 	 	15,216	 	 	 	(625	)	 	 	-4.1	%	

(a)	 	2001 amortization would have been $254 thousand if current accounting rules for goodwill amortization had been in place. See footnote 15 for additional information.	
22 

Table of Contents
Non-interest Expense 
Non-interest expense decreased by $625 thousand, or 4 percent, from the same quarter of 2001. However, 2001 includes $480 thousand in merger and conversion expense, so non-interest expense from operations is at a similar level as last year. During the third quarter of 2001 the data processing functions for Western Security Bank were converted to our in-house system. This has reduced the outsourced data processing costs and increased compensation and benefits expense. Compensation and benefit expense has increased $625 thousand, or 9 percent from the second quarter of 2001. Intangible asset amortization in the form of core deposit and goodwill was $360 thousand and $249 thousand, respectively, which is a decrease of $310 thousand from the prior year, primarily the result of the adoption of Statement of Financial Accounting Standard 142, see footnote 15 for further information. The efficiency ratio (non-interest expense/net interest income + non-interest income) was 52 percent for the second 2002 quarter which is an improvement over the 59 percent for the second quarter in 2001. 
Results of Operations — The six months ended June 30, 2002 compared to the six months ended June 30, 2001. 
Revenue summary
($ in thousands) 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Six months ended June 30,	
 	 	 	 		
 	 	 	 	2002	 	2001	 	$ change	 	% change	
 	 	 	 		 		 		 		
Net interest income	 	$	41,968	 	 	 	32,339	 	 	 	9,629	 	 	 	29.8	%	
Fees and other revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Service charges, loan fees, and other fees	 	 	8,631	 	 	 	7,755	 	 	 	876	 	 	 	11.3	%	
 	Gain on sale of loans	 	 	2,272	 	 	 	1,410	 	 	 	862	 	 	 	61.1	%	
 	Other income	 	 	1,280	 	 	 	1,462	 	 	 	(182	)	 	 	-12.4	%	
 	 	 		 	 	 		 	 	 		 	 	 	 	 	
 	 	Total non-interest income	 	 	12,183	 	 	 	10,627	 	 	 	1,556	 	 	 	14.6	%	
 	 	 		 	 	 		 	 	 		 	 	 	 	 	
 	Total revenue	 	$	54,151	 	 	 	42,966	 	 	 	11,185	 	 	 	26.0	%	
 	 	 		 	 	 		 	 	 		 	 	 	 	 	
 	Net interest margin	 	 	4.48	%	 	 	4.01	%	 	 	 	 	 	 	 	 	
 	 	 		 	 	 		 	 	 	 	 	 	 	 	 	
Net Interest Income 
Net interest income for the six months was $41.968 million, an increase of $9.629 million, or 30 percent over the same six months of 2001. The WesterFed acquisition on February 28, 2001, and the Idaho and Utah branch acquisitions in March 2001 are the primary reasons for the increase. Interest income has increased $1.437 million, or 2 percent, while interest expense has declined $8.192 million, or 25 percent. The increase in non-interest bearing deposits and decrease in interest bearing deposits, and significant reductions in rates paid on deposits and borrowed funds, are the primary reasons for the decreased interest expense. As a percentage of earning assets, on a tax equivalent basis, the year-to-date interest margin has improved from 4.0 percent to 4.5 percent. 
Non-interest Income 
Fee income increased $876 thousand, or 11 percent, primarily the result of the acquisition in the later part of the first quarter in 2001. Gain on sale of loans increased $862 thousand, or 61 percent, resulting from increased loan originations. Mortgage interest rates have been very attractive to consumers during the past year. Included in other income in 2001 was a $511 thousand gain-on-sale of the Glacier Bank Cut Bank branch office, as a result other income was $182 thousand lower this year. 
23 

Table of Contents
Non-interest expense summary
($ in thousands) 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Six months ended June 30,	
 	 	 		
 	 	 	2002	 	2001	 	$ change	 	% change	
 	 	 		 		 		 		
Compensation and employee benefits	 	$	15,315	 	 	 	12,165	 	 	 	3,150	 	 	 	25.9	%	
Occupancy and equipment expense	 	 	4,625	 	 	 	3,990	 	 	 	635	 	 	 	15.9	%	
Outsourced data processing expense	 	 	961	 	 	 	1,237	 	 	 	(276	)	 	 	-22.3	%	
Core deposit intangible amortization	 	 	721	 	 	 	574	 	 	 	147	 	 	 	25.6	%	
Goodwill amortization(a)	 	 	498	 	 	 	737	 	 	 	(239	)	 	 	-32.4	%	
Other expenses	 	 	7,085	 	 	 	7,028	 	 	 	57	 	 	 	0.8	%	
 	 	 		 	 	 		 	 	 		 	 	 	 	 	
 	Total non-interest expense	 	$	29,205	 	 	 	25,731	 	 	 	3,474	 	 	 	13.5	%	

(a)	 	2001 amortization would have been $351 thousand if current accounting rules for goodwill amortization had been in place. See footnote 15 for additional information.	
Non-interest Expense 
Non-interest expense increased $3.474 million, or 14 percent, over 2001. However, 2001 also includes $886 thousand in merger and conversion expense, so non-interest expense from operations has increased $4.360 million over last year. The 2001 acquisitions are much of the reason for this increase. During the third quarter of 2001 the data processing functions for Western Security Bank were converted to the in-house system. This has reduced the outsourced data processing costs and increased compensation and benefits expense. Intangible asset amortization in the form of core deposit and goodwill was $721 thousand and $498 thousand, respectively, which is an increase of $147 thousand in core deposit amortization, and a decrease of $239 thousand in goodwill amortization, primarily the result of the adoption of Statement of Financial Accounting Standard 142, see footnote 15 for additional information. The efficiency ratio in 2002 is 54 percent which is an improvement over the 60 percent ratio in 2001. 
Item 3. Quantitative and Qualitative Disclosure About Market Risk 
Market Risk: 
Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices such as interest rates, foreign currency exchange rates, commodity prices, and equity prices. The Company’s primary market risk exposure is interest rate risk. The ongoing monitoring and management of this risk is an important component of the Company’s asset/liability management process which is governed by policies established by its Board of Directors that are reviewed and approved annually. The Board of Directors delegates responsibility for carrying out the asset/liability management policies to the Asset/Liability committee (ALCO). In this capacity ALCO develops guidelines and strategies impacting the Company’s asset/liability management related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels/trends. 
Interest Rate Risk: 
Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change the interest income and expense streams associated with the Company’s financial instruments also change thereby impacting net interest income (NII), the primary component of the Company’s earnings. ALCO utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure of NII to sustained interest rate changes. While ALCO routinely monitors simulated NII sensitivity over a rolling two-year horizon, it also utilizes additional tools to monitor potential longer-term interest rate risk. 
The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all assets and liabilities reflected on the Company’s balance sheet. This sensitivity analysis is compared to ALCO policy limits which specify a maximum tolerance level for NII exposure over a one year 
24 

Table of Contents
horizon, assuming no balance sheet growth, given a 200 basis point (bp) upward and downward shift in interest rates. A parallel and pro rata shift in rates over a 12 month period is assumed. The following reflects the Company’s NII sensitivity analysis as of December 31, 2001, the most recent information available, as compared to the 10% Board approved policy limit (dollars in thousands). There have been no significant changes in operation or the market that would materially affect the estimated sensitivity. The table illustrates the estimated change in net interest income over a twelve month period based on the six months activity ended June 30, 2002. 
 	 	 	 	 	 	 	 	 	
Interest Rate Sensitivity	 	+200 bp	 	-200 bp	
	 		 		
Estimated sensitivity	 	 	-3.20	%	 	 	0.77	%	
Estimated increase (decrease) in net interest income	 	$	(2,686	)	 	 	646	 	
The preceding sensitivity analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including: the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of assets and liability cashflows, and others. While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change. 
Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes, and other internal/external variables. Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates. 
PART II — OTHER INFORMATION 
Item 1. Legal Proceedings 
     There are no pending material legal proceedings to which the registrant or its subsidiaries are a party. 
Item 2. Changes in Securities and Use of Proceeds 
     None 
Item 3. Defaults upon Senior Securities 
     None 
Item 4. Submission of Matters to a Vote of Securities Holders 
 	  	At the April 24, 2002 annual meeting of shareholders held in Kalispell, Montana, three proposals were voted on. The first proposal was for the election of directors, the second was the for the approval of an amendment to the 1995 employee stock option plan that would increase the number of shares available by 1,000,000 to an aggregate of 2,107,779 shares, and the third was for the approval of an amendment to the 1994 directors’ stock option plan that would increase the number of shares available by 500,000 to an aggregate of 690,750 shares. Following is a tabulation of the results:	
25 

Table of Contents
 	  	Proposal One — Election of Directors	
 	 	 	 	 	 	 	 	 	
Name	 	For	 	Abstain/Against	
	 		 		
Michael J. Blodnick	 	 	13,783,065	 	 	 	965,559	 	
Allen J. Fetscher	 	 	14,341,255	 	 	 	407,369	 	
Fred J. Flanders	 	 	14,391,885	 	 	 	356,739	 	
Jon W. Hippler	 	 	14,507,894	 	 	 	240,630	 	
 	  	Proposal Two — Amendment to the 1995 employee stock option plan	
 	 	 	 	 	 	 	 	 	
For	 	Against	 	Abstain	
	 		 		
9,254,570	 	 	1,040,628 	 	 	 	124,349	 	
 	  	Proposal Three — Amendment to the 1994 director stock option plan	
 	 	 	 	 	 	 	 	 	
For	 	Against	 	Abstain	
	 		 		
9,254,107	 	 	996,872 	 	 	 	168,568	 	
Item 5. Other Information 
     None 
Item 6. Exhibits and Reports on Form 8-K. 
       	(a)	  	Exhibits	
 		
       	 	  	Exhibit 99 — Certification of Chief Executive Officer and Chief Financial Officer	
 		
       	(b)	  	Current Report on Form 8-K None	
SIGNATURES 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly cause this report to be signed on its behalf by the undersigned thereunto duly authorized. 
 	 	 	 	 	
 	 	GLACIER BANCORP, INC.
	
August 12, 2002	 	By: 	 	/s/ Michael J. Blodnick	
 	 	 	 		
 	 	 	 	Michael J. Blodnick
President/CEO
	
August 12, 2002	 	By: 	 	/s/ James H. Strosahl	
 	 	 	 		
 	 	 	 	James H. Strosahl
Executive Vice President/CFO	
26 
 
Exhibit 99 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 
In connection with the Quarterly Report of Glacier Bancorp, Inc. (the “Company”) on form 10-Q for the period ended June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Michael J. Blodnick, President and Chief Executive Officer, and James H. Strosahl, Executive Vice President and Chief Financial Officer, of Glacier Bancorp, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 
       	(1)	  	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and	
 		
       	(2)	  	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
August 12, 2002 
 	 	 	
 	 	/s/ Michael J. Blodnick	
 	 		
 	 	Michael J. Blodnick
President/CEO
	
 	 	/s/ James H. Strosahl	
 	 		
 	 	James H. Strosahl
Executive Vice President/CFO