GLACIER BANCORP INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934


		For the quarterly period ended March 31, 2004


o		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 o

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

The number of shares of Registrant’s common stock outstanding on May 4, 2004 was 24,487,471. No preferred shares are issued or outstanding.

Glacier Bancorp, Inc.

Consolidated Statements of Financial Condition


	March 31,		December 31,		March 31,
(Unaudited - dollars in thousands, except per share data)	2004		2003		2003
Assets:
Cash on hand and in banks	$	53,213		77,093		71,092
Interest bearing cash deposits		27,432		9,047		15,536

Cash and cash equivalents		80,645		86,140		86,628
Investment securities, available-for-sale		1,109,585		1,050,311		783,897
Federal Home Loan Bank stock, at cost		42,113		41,235		38,922
Federal Reserve Bank stock, at cost		5,829		5,408		5,053
Net loans receivable		1,449,535		1,413,392		1,253,730
Loans held for sale		16,609		16,973		37,509
Premises and equipment, net		52,936		53,251		48,436
Real estate and other assets owned		516		587		1,077
Accrued interest receivable		14,187		14,941		12,403
Core deposit intangible, net		5,571		5,865		6,484
Goodwill		36,951		36,951		33,189
Other assets		14,564		14,579		15,178

	$	2,829,041		2,739,633		2,322,506

Liabilities and stockholders’ equity:
Non-interest bearing deposits	$	366,277		369,052		307,659
Interest bearing deposits		1,225,169		1,228,573		1,168,443
Advances from Federal Home Loan Bank of Seattle		801,679		777,294		500,425
Securities sold under agreements to repurchase		63,453		56,968		59,518
Other borrowed funds		5,122		8,018		2,357
Accrued interest payable		5,080		4,353		5,425
Current income taxes		5,661		826		3,818
Deferred taxes		10,983		7,369		7,839
Subordinated debentures		80,000		35,000		35,000
Other liabilities		12,716		14,341		12,244

Total liabilities		2,576,140		2,501,794		2,102,728

Preferred shares, 1,000,000 shares authorized. None outstanding		—		—		—
Common stock, $.01 par value per share. 50,000,000 shares authorized		245		242		241
Paid-in capital		225,597		222,588		220,078
Retained earnings (deficit) - substantially restricted		14,888		8,393		(9,340	)
Accumulated other comprehensive income		12,171		6,616		8,799

Total stockholders’ equity		252,901		237,839		219,778

	$	2,829,041		2,739,633		2,322,506

Number of shares outstanding		24,450,706		24,203,338		24,056,473
Book value per share	$	10.34		9.83		9.14
Tangible book value per share	$	8.60		8.06		7.49

See accompanying notes to consolidated financial statements.

Glacier Bancorp, Inc.

Consolidated Statements of Operations


	Three months ended March 31,
(unaudited - dollars in thousands, except per share data)	2004			2003
Interest income:
Real estate loans	$	5,281			6,252
Commercial loans		13,223			11,617
Consumer and other loans		4,836			5,102
Investment securities and other		12,125			9,091

Total interest income		35,465			32,062

Interest expense:
Deposits		3,483			4,947
Federal Home Loan Bank of Seattle advances		4,445			4,212
Securities sold under agreements to repurchase		157			158
Subordinated debentures		962			904
Other borrowed funds		29			9

Total interest expense		9,076			10,230

Net interest income		26,389			21,832
Provision for loan losses		830			841

Net interest income after provision for loan losses		25,559			20,991

Non-interest income:
Service charges and other fees		4,073			3,589
Miscellaneous loan fees and charges		1,019			1,030
Gains on sale of loans		1,771			2,271
Gains on sale of investments, net of impairment charge		—			(437	)
Other income		548			560

Total non-interest income		7,411			7,013

Non-interest expense:
Compensation, employee benefits and related expenses		9,806			7,979
Occupancy and equipment expense		2,631			2,435
Outsourced data processing expense		413			562
Core deposit intangibles amortization		294			338
Other expenses		4,282			3,569

Total non-interest expense		17,426			14,883

Earnings before income taxes		15,544			13,121
Federal and state income tax expense		4,934			4,273

Net earnings	$	10,610			8,848

Basic earnings per share	$	0.44			0.37
Diluted earnings per share	$	0.43			0.36
Dividends declared per share	$	0.17			0.13
Return on average assets (annualized)		1.55	%		1.58	%
Return on average equity (annualized)		17.28	%		16.41	%
Return on tangible average equity (annualized)		20.89	%		20.08	%
Average outstanding shares - basic		24,346,473			23,943,456
Average outstanding shares - diluted		24,768,669			24,272,608

See accompanying notes to consolidated financial statements.

Glacier Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity
and Comprehensive Income

Year ended December 31, 2003 and Three months ended March 31, 2004


							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, 2002		23,768,000		238		216,927		(15,027	)		10,111			212,249
Comprehensive income:
Net earnings		—		—		—		38,008			—			38,008
Unrealized loss on securities, net of reclassification adjustment		—		—		—		—			(3,495	)		(3,495	)

Total comprehensive income														34,513

Cash dividends declared ($.60 per share)		—		—		—		(14,573	)		—			(14,573	)
Stock options exercised		435,338		4		4,670		—			—			4,674
Acquisition of fractional shares		—		—		—		(15	)		—			(15	)
Tax benefit from stock related compensation		—		—		991		—			—			991

Balance at December 31, 2003		24,203,338		242		222,588		8,393			6,616			237,839
Comprehensive income:
Net earnings		—		—		—		10,610			—			10,610
Unrealized gain on securities, net of reclassification adjustment and taxes		—		—		—		—			5,555			5,555

Total comprehensive income														16,165

Cash dividends declared ($.17 per share)		—		—		—		(4,115	)		—			(4,115	)
Stock options exercised		247,368		3		3,009		—			—			3,012

Balance at March 31, 2004		24,450,706	$	245		225,597		14,888			12,171			252,901

See accompanying notes to consolidated financial statements.

Glacier Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows


	Three months ended March 31,
(Unaudited - dollars in thousands)	2004			2003
OPERATING ACTIVITIES :
Net cash provided by operating activities	$	20,178			31,575

INVESTING ACTIVITIES:
Proceeds from sales, maturities and prepayments of investments available-for-sale		57,513			48,770
Purchases of investments available-for-sale		(110,191	)		(97,982	)
Principal collected on installment and commercial loans		138,037			149,045
Installment and commercial loans originated or acquired		(175,943	)		(178,524	)
Principal collections on mortgage loans		57,666			67,195
Mortgage loans originated or acquired		(56,735	)		(43,620	)
Net purchase of FHLB and FRB stock		(886	)		(475	)
Net addition of premises and equipment		(826	)		(2,252	)

NET CASH USED IN INVESTING ACTIVITIES		(91,365	)		(57,843	)

FINANCING ACTIVITIES:
Net (decrease) increase in deposits		(6,179	)		16,179
Net increase in FHLB advances and other borrowed funds		21,489			4,035
Net increase in securities sold under repurchase agreements		6,485			13,312
Proceeds from issuance of subordinated debentures		45,000			—
Cash dividends paid to stockholders		(4,115	)		(3,161	)
Proceeds from exercise of stock options		3,012			3,154

NET CASH PROVIDED BY FINANCING ACTIVITIES		65,692			33,519

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(5,495	)		7,251
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		86,140			79,377

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	80,645			86,628

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the period for: Interest	$	8,349			10,896
Income taxes	$	100			(354	)

See accompanying notes to consolidated financial statements.

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 March 31, 2004, December 31, 2003, and March 31, 2003, stockholders’ equity for the three months ended March 31, 2004 and the year ended December 31, 2003, the results of operations and cash flows for the three months ended March 31, 2004 and 2003.

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, 2003. Operating results for the three months ended March 31, 2004 are not necessarily indicative of the results anticipated for the year ending December 31, 2004. Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 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 seven wholly owned banking 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”), and Glacier Bank of Whitefish (“Whitefish”), all located in Montana, and Mountain West Bank (“Mountain West”) which is located in Idaho, Utah, and Washington. In addition, the Company formed two subsidiaries, Glacier Capital Trust I (“Glacier Trust I”), and Glacier Capital Trust II (“Glacier Trust II”), for the purpose of issuing trust preferred securities. The Company does not have any off-balance sheet entities.

On March 24, 2004, the Company formed Glacier Trust II and subordinated debentures in the form of trust preferred securities of $45 million, with an interest rate of 5.79 percent, were issued by the Company. The proceeds will be used for general corporate purposes.

The following abbreviated organizational chart illustrates the various relationships:

(ORGANIZATIONAL CHART)

3) Ratios:

Returns on average assets and average equity were calculated based on daily averages.

4) Dividends Declared:

On April 28, 2004, the Board of Directors declared a five-for-four stock split payable May 20, 2004 to owners of record on May 11, 2004, and all per share amounts have been restated to reflect the effects of the stock split. On March 10, 2004, the Board of Directors declared a $.17 per share quarterly cash dividend to stockholders of record on April 13, 2004, payable on April 22, 2004.

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
	months ended		months ended
	March 31, 2004		March 31, 2003
Net earnings available to common stockholders	$	10,610,000		8,848,000
Average outstanding shares - basic		24,346,473		23,943,456
Add: Dilutive stock options		422,196		329,152

Average outstanding shares - diluted		24,768,669		24,272,608

Basic earnings per share	$	0.44		0.37

Diluted earnings per share	$	0.43		0.36

6) Investments:

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

INVESTMENTS AS OF MARCH 31, 2004


											Estimated
	Weighted			Amortized		Gross Unrealized					Fair
(Dollars in thousands)	Yield			Cost		Gains		Losses			Value
U.S. Government and Federal Agencies
maturing within one year		1.29	%		257		—		(1	)		256
maturing five years through ten years		3.90	%		189		7		—			196
maturing after ten years		2.34	%		734		8		(1	)		741

		2.37	%		1,180		15		(2	)		1,193

State and Local Governments and other issues:
maturing within one year		5.06	%		1,055		15		—			1,070
maturing one year through five years		4.31	%		5,869		81		(55	)		5,895
maturing five years through ten years		5.37	%		6,503		352		—			6,855
maturing after ten years		5.15	%		297,424		15,167		(379	)		312,212

		5.14	%		310,851		15,615		(434	)		326,032

Mortgage-Backed Securities		4.83	%		69,909		1,498		(199	)		71,208
Real Estate Mortgage Investment Conduits		3.26	%		707,559		5,748		(2,155	)		711,152
FHLB and FRB stock, at cost		4.24	%		47,942		—		—			47,942

Total Investments		3.91	%	$	1,137,441		22,876		(2,790	)		1,157,527

INVESTMENTS AS OF DECEMBER 31, 2003


											Estimated
(Dollars in thousands)	Weighted			Amortized		Gross Unrealized					Fair
	Yield			Cost		Gains		Losses			Value
U.S. Government and Federal Agencies
maturing within one year		0.85	%	$	352		—		—			352
maturing one year through five years		1.29	%		259		—		(1	)		258
maturing after ten years		2.97	%		957		15		(1	)		971

		2.22	%		1,568		15		(2	)		1,581

State and Local Governments and other issues:
maturing within one year		5.69	%		4,346		41		—			4,387
maturing one year through five years		4.30	%		5,485		84		(102	)		5,467
maturing five years through ten years		5.35	%		4,910		197		—			5,107
maturing after ten years		5.13	%		296,237		10,170		(1,683	)		304,724

		5.13	%		310,978		10,492		(1,785	)		319,685

Mortgage-Backed Securities		4.30	%		64,123		1,465		(342	)		65,246
Real Estate Mortgage Investment Conduits		4.03	%		662,727		4,983		(3,911	)		663,799
FHLB and FRB stock, at cost		5.34	%		46,643		—		—			46,643

Total Investments		4.41	%	$	1,086,039		16,955		(6,040	)		1,096,954

Interest income includes tax-exempt interest for the three months ended March 31, 2004 and 2003 of $3,465,000 and $2,590,000, respectively.

Gross proceeds from sales of investment securities for the three months ended March 31, 2004 and 2003 were $0, and $2,031,000 respectively, resulting in gross gains of approximately $0, and $17,000, respectively. The cost of any investment sold is determined by specific identification.

There was an impairment charge for the three months ended March 31, 2003, of $454,000, for the impairment of value on collateralized mortgage obligations. The impairment charge is included in the net gain on sale of investments.

7) Loans

The following table summarizes the Company’s loan portfolio.


TYPE OF LOAN	At						At						At
(Dollars in thousands)	3/31/2004						12/31/2003						03/31/2003
	Amount			Percent			Amount			Percent			Amount			Percent
Real Estate Loans:
Residential first mortgage loans	$	300,278			20.5	%	$	301,511			21.1	%	$	286,379			22.2	%
Loans held for sale		16,609			1.1	%		16,973			1.2	%		37,509			2.9	%

Total		316,887			21.6	%		318,484			22.3	%		323,888			25.1	%
Commercial Loans:
Real estate		497,059			33.9	%		483,684			33.8	%		427,420			33.1	%
Other commercial loans		378,133			25.8	%		359,030			25.1	%		278,544			21.6	%

Total		875,192			59.7	%		842,714			58.9	%		705,964			54.7	%
Consumer and Other Loans:
Consumer loans		94,310			6.4	%		95,739			6.7	%		106,158			8.2	%
Home equity loans		206,608			14.1	%		199,693			14.0	%		178,728			13.8	%

Total		300,918			20.5	%		295,432			20.7	%		284,886			22.0	%
Net deferred loan fees, premiums and discounts		(2,284	)		-0.1	%		(2,275	)		-0.2	%		(1,872	)		-0.1	%
Allowance for Losses		(24,569	)		-1.7	%		(23,990	)		-1.7	%		(21,627	)		-1.7	%

Net Loans	$	1,466,144			100.0	%	$	1,430,365			100.0	%	$	1,291,239			100.0	%

The following table sets forth information regarding the Company’s non-performing assets at the dates indicated:



NONPERFORMING ASSETS	At			At			At
(Dollars in thousands)	3/31/2004			12/31/2003			3/31/2003
Non-accrual loans:
Real estate loans	$	1,191			1,129			2,341
Commercial loans		8,287			8,246			5,283
Consumer and other loans		409			687			416

Total	$	9,887			10,062			8,040
Accruing Loans 90 days or more overdue:
Real estate loans		249			379			140
Commercial loans		701			1,798			654
Consumer and other loans		288			242			116

Total	$	1,238			2,419			910
Real estate and other assets owned		516			587			1,076

Total non-performing loans, and real estate and other assets owned	$	11,641			13,068			10,026

As a percentage of total assets		0.42	%		0.48	%		0.43	%
Interest Income (1)	$	154			665			140

(1) This is the amount of interest that would have been recorded on loans accounted for on a non-accrual basis for the three months ended March 31, 2004 and 2003 and the year ended December 31, 2003, if such loans had been current for the entire period.

The following table illustrates the loan loss experience:


	Three months ended			Year ended			Three months ended
ALLOWANCE FOR LOAN LOSS	March 31,			December 31,			March 31,
(Dollars in thousands)	2004			2003			2003
Balance at beginning of period	$	23,990			20,944			20,944
Charge offs:
Real estate loans		(137	)		(416	)		(124	)
Commercial loans		(140	)		(912	)		(32	)
Consumer and other loans		(166	)		(1,078	)		(227	)

Total charge offs	$	(443	)		(2,406	)		(383	)

Recoveries:
Real estate loans		42			126			61
Commercial loans		24			274			79
Consumer and other loans		126			284			85

Total recoveries	$	192			684			225

Chargeoffs, net of recoveries		(251	)		(1,722	)		(158	)
Acquisition (1)		—			959			—
Provision		830			3,809			841

Balance at end of period	$	24,569			23,990			21,627

Ratio of net charge offs to average loans outstanding during the period		0.02	%		0.12	%		0.01	%

(1) Acquisition of Pend Oreille Bancorp, Inc.

The following table summarizes the allocation of the allowance for loan losses:


	March 31, 2004					December 31, 2003					March 31, 2003
			Percent					Percent					Percent
			of loans in					of loans in					of loans in
(Dollars in thousands)	Allowance		category			Allowance		category			Allowance		category
Real estate loans	$	2,154		21.2	%		2,147		21.8	%		2,029		24.6	%
Commercial real estate		7,650		33.3	%		7,464		33.2	%		7,170		32.5	%
Other commercial		10,339		25.3	%		9,951		24.7	%		8,023		21.2	%
Consumer and other loans		4,426		20.2	%		4,428		20.3	%		4,405		21.7	%

Totals	$	24,569		100.0	%		23,990		100.0	%		21,627		100.0	%

8) Intangible Assets

The following table sets forth information regarding the Company’s core deposit intangibles and mortgage servicing rights as of March 31, 2004:


	Core Deposit			Mortgage
(Dollars in thousands)	Intangible			Servicing Rights (1)		Total
Gross carrying value	$	10,122
Accumulated Amortization		(4,551	)

Net carrying value	$	5,571			1,335		6,906

Weighted-Average amortization period
(Period in years)		10.0			9.6		9.9
Aggregate Amortization Expense
For the three months ended March 31, 2004	$	294			89		383
Estimated Amortization Expense
For the year ended December 31, 2004	$	1,061			157		1,218
For the year ended December 31, 2005		891			88		979
For the year ended December 31, 2006		818			86		904
For the year ended December 31, 2007		800			83		883
For the year ended December 31, 2008		790			80		870

(1) The mortgage servicing rights are included in other assets and the gross carrying value and accumulated amortization are not readily available.

9) Deposits

The following table illustrates the amounts outstanding for deposits greater than $100,000 at March 31, 2004, according to the time remaining to maturity:


	Certificates		Non-Maturity
(Dollars in thousands)	of Deposit		Deposits		Totals
Within three months	$	18,033		506,831		524,864
Three to six months		19,836		—		19,836
Seven to twelve months		16,225		—		16,225
Over twelve months		18,731		—		18,731

Totals	$	72,825		506,831		579,656

10) Advances and Other Borrowings

The following chart illustrates the average balances and the maximum outstanding month-end balances for Federal Home Loan Bank of Seattle (FHLB) advances and repurchase agreements:


	As of and			As of and			As of and
	for the three			for the twelve			for the three
(Dollars in thousands)	months ended			months ended			months ended
	March 31, 2004			December 31, 2003			March 31, 2003
FHLB Advances
Amount outstanding at end of period	$	801,679			777,294			500,425
Average balance	$	815,825			601,679			490,510
Maximum outstanding at any month-end	$	830,855			777,294			500,425
Weighted average interest rate		2.19	%		2.80	%		3.48	%
Repurchase Agreements:
Amount outstanding at end of period	$	63,453			56,968			59,518
Average balance	$	63,271			61,609			55,849
Maximum outstanding at any month-end	$	67,558			74,808			59,518
Weighted average interest rate		1.00	%		1.09	%		1.15	%

11) 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 March 31, 2004.


CONSOLIDATED	Tier 1 (Core)			Tier 2 (Total)			Leverage
(Dollars in thousands)	Capital			Capital			Capital
GAAP Capital	$	252,901			252,901			252,901
Less: Goodwill and intangibles		(42,522	)		(42,522	)		(42,522	)
Accumulated other comprehensive gain on AFS securities		(12,171	)		(12,171	)		(12,171	)
Plus: Allowance for loan losses		—			22,036			—
Subordinated debentures		80,000			80,000			80,000
Other adjustments		—			147			—

Regulatory capital computed	$	278,208			300,391			278,208

Risk weighted assets	$	1,762,881			1,762,881

Total average assets							$	2,720,291

Capital as % of defined assets		15.78	%		17.04	%		10.23	%
Regulatory “well capitalized” requirement		6.00	%		10.00	%		5.00	%

Excess over “well capitalized” requirement		9.78	%		7.04	%		5.23	%

12) 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 ended March 31,
Dollars in thousands	2004			2003
Net earnings	$	10,610			8,848
Unrealized holding gain (loss) arising during the period		9,169			(2,119	)
Tax (expense) benefit		(3,614	)		797

Net after tax		5,555			(1,322	)
Reclassification adjustment for gains included in net income		—			17
Tax expense		—			(7	)

Net after tax		—			10
Net unrealized gain (loss) on securities		5,555			(1,312	)

Total comprehensive earnings	$	16,165			7,536

13) Stock Based Compensation

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


		Three months ended March 31,
		2004			2003
Net earnings (in thousands):	As reported	$	10,610			8,848
	Compensation cost		(123	)		(187	)

	Pro forma		10,487			8,661

Basic earnings per share:	As reported		0.44			0.37
	Compensation cost		(0.01	)		(0.01	)

	Pro forma		0.43			0.36

Diluted earnings per share:	As reported		0.43			0.36
	Compensation cost		(0.01	)	—

	Pro forma		0.42			0.36

14) Segment Information

The Company evaluates segment performance internally based on individual bank charters, 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.


	Three months ended and as of March 31, 2004
				First						Mountain
(Dollars in thousands)	Glacier			Security			Western			West			Big Sky
Revenues from external customers	$	9,335			8,820			6,344			9,224			3,412
Intersegment revenues		68			4			2			—			—
Expenses		(6,719	)		(5,997	)		(4,618	)		(7,605	)		(2,518	)
Intercompany eliminations		—			—			—			—			—

Net income	$	2,684			2,827			1,728			1,619			894

Total Assets	$	603,740			598,702			449,044			558,012			214,116


										Total
	Valley			Whitefish			Other			Consolidated
Revenues from external customers		3,387			2,261			93			42,876
Intersegment revenues		36			—			13,137			13,247
Expenses		(2,525	)		(1,602	)		(682	)		(32,266	)
Intercompany eliminations		—			—			(13,247	)		(13,247	)

Net income		898			659			(699	)		10,610

Total Assets		220,461			155,173			29,793			2,829,041


	Three months ended and as of March 31, 2003
				First						Mountain
(Dollars in thousands)	Glacier			Security			Western			West			Big Sky
Revenues from external customers	$	9,080			8,360			6,162			7,056			3,094
Intersegment revenues		51			—			—			—			—
Expenses		(6,539	)		(5,961	)		(4,846	)		(5,730	)		(2,374	)
Intercompany eliminations		—			—			—			—			—

Net income	$	2,592			2,399			1,316			1,326			720

Total Assets	$	507,853			490,927			404,824			412,816			186,439


										Total
	Valley			Whitefish			Other			Consolidated
Revenues from external customers		3,246			2,017			60			39,075
Intersegment revenues		33			—			11,158			11,242
Expenses		(2,566	)		(1,502	)		(709	)		(30,227	)
Intercompany eliminations		—			—			(11,242	)		(11,242	)

Net income		713			515			(733	)		8,848

Total Assets		187,375			134,972			(2,700	)		2,322,506

15) 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.


	Three Months Ended March 31,
	2004 vs. 2003
	Increase (Decrease) due to:
(Dollars in Thousands)	Volume			Rate			Net
Interest Income
Real Estate Loans	$	(446	)		(525	)		(971	)
Commercial Loans		2,916			(1,310	)		1,606
Consumer and Other Loans		228			(494	)		(266	)
Investment Securities		3,627			(593	)		3,034

Total Interest Income		6,325			(2,922	)		3,403
Interest Expense
NOW Accounts		23			(29	)		(6	)
Savings Accounts		28			(72	)		(44	)
Money Market Accounts		96			(414	)		(318	)
Certificates of Deposit		(266	)		(830	)		(1,096	)
FHLB Advances		2,793			(2,560	)		233
Other Borrowings and Repurchase Agreements		137			(60	)		77

Total Interest Expense		2,811			(3,965	)		(1,154	)

Net Interest Income	$	3,514			1,043			4,557

16) 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.

AVERAGE BALANCE SHEET
(Dollars in Thousands)


	For the Three months ended 3-31-04							For the Three months ended 3-31-03
			Interest		Average					Interest		Average
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Rate			Balance		Dividends		Rate
ASSETS
Real Estate Loans	$	312,096		5,281		6.77	%	$	336,018		6,252		7.44	%
Commercial Loans		859,587		13,223		6.19	%		687,118		11,617		6.86	%
Consumer and Other Loans		296,506		4,836		6.56	%		283,807		5,102		7.29	%

Total Loans		1,468,189		23,340		6.39	%		1,306,943		22,971		7.13	%
Tax -Exempt Investment Securities (1)		281,218		3,465		4.93	%		204,221		2,590		5.07	%
Investment Securities		834,147		8,660		4.15	%		593,105		6,501		4.38	%

Total Earning Assets		2,583,554		35,465		5.49	%		2,104,269		32,062		6.09	%

Non-Earning Assets		178,411							165,927

TOTAL ASSETS	$	2,761,965						$	2,270,196

LIABILITIES AND STOCKHOLDERS’ EQUITY
NOW Accounts	$	246,298		113		0.18	%	$	206,086		119		0.23	%
Savings Accounts		152,943		108		0.28	%		129,495		152		0.48	%
Money Market Accounts		389,865		857		0.88	%		360,443		1,175		1.32	%
Certificates of Deposit		432,271		2,405		2.24	%		467,744		3,501		3.04	%
FHLB Advances		815,825		4,445		2.19	%		490,510		4,212		3.48	%
Repurchase Agreements and Other Borrowed Funds		106,994		1,148		4.31	%		94,863		1,071		4.58	%

Total Interest Bearing Liabilities		2,144,196		9,076		1.70	%		1,749,141		10,230		2.37	%

Non-interest Bearing Deposits		343,350							274,226
Other Liabilities		27,464							28,203

Total Liabilities		2,515,010							2,051,570

Common Stock		195							174
Paid-In Capital		223,790							175,070
Retained Earnings		13,567							32,616
Accumulated Other Comprehensive Earnings		9,403							10,766

Total Stockholders’ Equity		246,955							218,626

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,761,965						$	2,270,196

Net Interest Income			$	26,389						$	21,832

Net Interest Spread						3.79	%						3.72	%
Net Interest Margin on average earning assets						4.11	%						4.21	%
Return on Average Assets						1.55	%						1.58	%
Return on Average Equity						17.28	%						16.41	%

(1) Excludes tax effect on non-taxable investment security income

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 March 31, 2003 and December 31, 2003, to March 31, 2004.


										$ change from			$ change from
	March 31,			December 31,			March 31,			December 31,			March 31,
Assets ($ in thousands)	2004			2003			2003			2003			2003
Cash on hand and in banks	$	53,213			77,093			71,092			(23,880	)		(17,879	)
Investment securities and interest bearing deposits		1,184,959			1,106,001			843,408			78,958			341,551
Loans:
Real estate		316,227			317,774			323,311			(1,547	)		(7,084	)
Commercial		873,743			841,306			704,751			32,437			168,992
Consumer		300,743			295,275			284,804			5,468			15,939

Total loans		1,490,713			1,454,355			1,312,866			36,358			177,847
Allowance for loan losses		(24,569	)		(23,990	)		(21,627	)		(579	)		(2,942	)

Total loans net of allowance for loan losses		1,466,144			1,430,365			1,291,239			35,779			174,905

Other assets		124,725			126,174			116,767			(1,449	)		7,958

Total Assets	$	2,829,041			2,739,633			2,322,506			89,408			506,535

At March 31, 2004 total assets were $2.829 billion which is $507 million greater than the March 31, 2003 assets of $2.323 billion, an increase of 22 percent, of which $89 million of the increase occurred in the first quarter 2004. In addition to the internal growth, the third quarter 2003 Pend Oreille Bank (POB) acquisition added $66 million to the asset base.

Total loans have increased $178 million from March 31, 2003 and $36 million from December 31, 2003, of which $50 million was from the POB acquisition. Commercial loans have increased $169 million, or 24 percent, and continue to be the focus of our lending. Real estate loan volume was at record levels through much of 2003, with $805 million originated for the year, up from $588 million in 2002. The majority of the real estate loan production was sold with loans held in the loan portfolio increasing by only $14 million from March 31, 2003. Loans held for sale declined $21 million from the March 31, 2003 total resulting in a net reduction of $7 million in real estate loan balances at March 31, 2004. Consumer loans have increased $16 million resulting from increases in home equity loans. Home-equity loans continue to be the primary source of our consumer loan originations and have increased approximately $28 million from a year ago.

Investment securities, including interest bearing deposits in other financial institutions, have increased $342 million from March 31, 2003 and $79 million from December 31, 2003. Additional investments were made to utilize funding liquidity that exceeded loan growth opportunities, and to capture the value of the spread between short term funding rates and the rate on two-to-five year maturity assets.

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 holding long-term, fixed rate loans in the loan portfolio. Mortgage loans sold for the three months ended March 31, 2004 and 2003 were $67 million and $145 million, respectively. 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 March 31, 2004 was approximately $184 million.


							$ change from			$ change from
	March 31,		December 31,		March 31,		December 31,			March 31,
Liabilities ($ in thousands)	2004		2003		2003		2003			2003
Non-interest bearing deposits	$	366,277		369,052		307,659		(2,775	)		58,618
Interest bearing deposits		1,225,169		1,228,573		1,168,443		(3,404	)		56,726
Advances from Federal Home Loan Bank		801,679		777,294		500,425		24,385			301,254
Securities sold under agreements to repurchase and other borrowed funds		68,575		64,986		61,875		3,589			6,700
Other liabilities		34,440		26,889		29,326		7,551			5,114
Subordinated debentures		80,000		35,000		35,000		45,000			45,000

Total liabilities	$	2,576,140		2,501,794		2,102,728		74,346			473,412

Total deposits have increased $115 million from March 31, 2003, of which $59 million came with the POB acquisition, and there was a decrease of $6 million from December 31, 2003. There was an increase of $59 million, or 19 percent, in non-interest bearing deposits. This growth in low cost stable funding gives us increased flexibility in managing our asset mix. Interest-bearing deposits are up $57 million, or 5 percent, of which $49 million was added by the POB acquisition. Federal Home Loan Bank advances have also increased $301 million as we continue to take advantage of the flexibility of that funding source in this current period of low interest rates. On March 24, 2004 subordinated debentures in the form of trust preferred securities of $45 million, with an interest rate of 5.79 percent, were issued by the Company. The proceeds will be used for general corporate purposes.

Liquidity and Capital Resources

The objective of liquidity management is to maintain cash flows adequate to meet current and future needs for credit demand, deposit withdrawals, maturing liabilities and corporate operating expenses. The principal source of the Company’s cash revenues is the dividends received from the Company’s banking subsidiaries. The payment of dividends is subject to government regulation, in that regulatory authorities may prohibit banks and bank holding companies from paying dividends which would constitute an unsafe or unsound banking practice. The subsidiaries source of funds is generated by deposits, principal and interest payments on loans, sale of loans and securities, short and long-term borrowings, and net income. In addition, all seven banking subsidiaries are members of the FHLB. As of March 31, 2004, the Company had $1.045 billion of available FHLB line of which $802 million was utilized. Accordingly, management of the Company has a wide range of versatility in managing the liquidity and asset/liability mix for each individual institution as well as the Company as a whole. During 2004, all seven financial institutions maintained liquidity and regulatory capital levels in excess of regulatory requirements and operational needs.

Commitments

In the normal course of business, there are various outstanding commitments to extend credit, such as letters of credit and un-advanced loan commitments, which are not reflected in the accompanying consolidated financial statements. Management does not anticipate any material losses as a result of these transactions.


										$ change from			$ change from
Stockholders' equity	March 31,			December 31,			March 31,			December 31,			March 31,
($ in thousands except per share data)	2004			2003			2003			2003			2003
Common equity	$	240,730			231,223			210,979			9,507			29,751
Net unrealized gain on securities		12,171			6,616			8,799			5,555			3,372

Total stockholders’ equity	$	252,901			237,839			219,778			15,062			33,123

Stockholders’ equity to total assets		8.94	%		8.68	%		9.46	%
Tangible equity to total assets		7.55	%		7.23	%		7.89	%
Book value per common share	$	10.34			9.83			9.14			0.51			1.20
Tangible book value per common share	$	8.60			8.06			7.49			0.54			1.11
Market price per share at end of quarter	$	25.80			25.98			19.46			(0.18	)		6.34

Total equity and book value per share amounts have increased substantially from the prior year, primarily the result of earnings retention, and stock options exercised. Net unrealized gains on securities increased $3.4 million from a year ago primarily the result of intermediate term interest rate changes. On April 28, 2004, the Board of Directors declared a five-for-four stock split payable May 20, 2004 to owners of record on May 11, 2004, and all per share amounts have been restated to reflect the effects of the stock split. On April 28, 2004, the Board of Directors also authorized the repurchase of up to five percent of the Company’s common shares. Such repurchases will be effected from time to time in the open market at prices acceptable to the Company.


	March 31,			December 31,			March 31,
Credit quality information ($ in thousands)	2004			2003			2003
Allowance for loan losses	$	24,569			23,990			21,627
Non-performing assets	$	11,641			13,068			10,026
Allowance as a percentage of non performing assets		211	%		184	%		216	%
Non-performing assets as a percentage of total assets		0.42	%		0.48	%		0.43	%
Allowance as a percentage of total loans		1.65	%		1.65	%		1.65	%
Net charge-offs as a percentage of loans		0.02	%		0.12	%		0.01	%

Allowance for Loan Loss and Non-Performing Assets

Non-performing assets as a percentage of total assets at March 31, 2004 were at ..42 percent, a decrease from .43 percent at March 31, 2003 and from .48 percent at December 31, 2003. This compares to the Peer Group average of .62 percent at December 31, 2003, the most recent information available. The allowance for loan losses was 211 percent of non-performing assets at March 31, 2004, compared to 216 percent a year ago. The allowance has increased $2.942 million, or 14 percent, from a year ago to $24.569 million, remaining at 1.65 percent of total loans outstanding. The first quarter provision expense for loan losses was $830 thousand, a decrease of $11 thousand from the same quarter in 2003.

Results of Operations – The three months ended March 31, 2004 compared to the three months ended March 31, 2003.

Operating results for the three months ended March 31, 2004 include amounts related to the operation of the three branches acquired from the POB acquisition as of July 15, 2003.

The Company reported net quarterly earnings of $10.610 million which is an increase of $1.762 million, or 20 percent, over the $8.848 million for the first quarter of 2003. Diluted earnings per share of $.43, is an increase of 19 percent over the per share earnings of $.36 for the same quarter of 2003. Return on average assets and return on average equity for the quarter were 1.55 percent and 17.28 percent, respectively, which compares with prior year returns of 1.58 percent and 16.41 percent


Revenue summary	Three months ended March 31,
($ in thousands)	2004			2003			$ change			% change
Net interest income	$	26,389			21,832			4,557			20.9	%
Fees and other revenue:
Service charges, loan fees, and other fees		5,092			4,619			473			10.2	%
Gain on sale of loans		1,771			2,271			(500	)		-22.0	%
Gain on sale of investments, net of impairment charge		—			(437	)		437			-100.0	%
Other income		548			560			(12	)		-2.1	%

Total non-interest income		7,411			7,013			398			5.7	%

Total revenue	$	33,800			28,845			4,955			17.2	%

Tax equivalent net interest margin		4.29	%		4.35	%

Net Interest Income

Net interest income for the quarter increased $4.557 million, or 21 percent, over the same period in 2003. Total interest income was $3.403 million, or 11 percent higher than the same quarter in 2003, while total interest expense was $1.154 million or 11 percent lower. The decrease in interest expense is partly attributed to the increase in non-interest bearing deposits which reduced the need to borrow funds. The net interest margin as a percentage of earning assets, on a tax equivalent basis, decreased from 4.35 percent for the 2003 quarter to 4.29 percent for the first quarter of 2004. The net interest margin increased from the 4.17 percent for the fourth quarter of 2003 and was higher than any of the last three quarters of 2003. Premium amortization on mortgage related investments for the current quarter was $2.553 million, down from the $3.884 million during the fourth quarter of 2003, and approximately the same level as last year’s quarter. Mortgage security prepayments have slowed resulting in less amortization expense allowing our net interest margin to stabilize. We continue to deploy a strategy of investing in short term securities that carry lower current yields. We believe it is inappropriate in this rate environment to extend maturities in order to achieve higher yields.

Non-interest Income

Fee income increased 10 percent over the same period last year, driven primarily by an increased number of loan and deposit accounts. Gain on sale of loans decreased $500 thousand from the first quarter of last year and $163 thousand from the fourth quarter of 2003, reflecting the reduced mortgage loan refinancing activity. Other income, which includes a variety of activities, was $12 thousand lower than the prior year’s quarter. In the first quarter of 2003 a valuation impairment charge of $454 thousand, due to rapid prepayment of mortgage-backed securities, was netted against a $17 thousand gain on sale of investments and recorded as a net loss on sale of investments. There were no realized gains or losses on investments in the first quarter of 2004.


Non-interest expense summary	Three months ended March 31,
($ in thousands)	2004		2003		$ change			% change
Compensation and employee benefits	$	9,806		7,979		1,827			22.9	%
Occupancy and equipment expense		2,631		2,435		196			8.0	%
Outsourced data processing expense		413		562		(149	)		-26.5	%
Core deposit intangible amortization		294		338		(44	)		-13.0	%
Other expenses		4,282		3,569		713			20.0	%

Total non-interest expense	$	17,426		14,883		2,543			17.1	%

Non-interest Expense

Non-interest expense increased by $2.543 million, or 17 percent, from the same quarter of 2003. Current year includes expenses of the three branches from the POB acquisition, two additional branches in Boise, Idaho, and a new branch in downtown Bozeman, one of the fastest growing cities in Montana. Compensation and benefit expense increased $1.827 million, or 23 percent from the first quarter of 2003 with the additional bank branches, and normal compensation increases for job performance, accounting for the majority of the increase. Outsourced data processing expense decreased by $149 thousand, the result of bringing the core processing for all subsidiaries onto our in-house data system. Other expenses increased $713 thousand, or 20 percent, primarily from start up expenses on implementing the High Performance Checking program at the four banks not previously on the program, additional advertising expense, and costs associated with the new branch offices. The efficiency ratio (non-interest expense/net interest income + non-interest income) was 52 percent for the 2004 quarter the same as the 2003 quarter.

Critical Accounting Policies

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

Effect of inflation and changing prices

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

Forward Looking Statements

This Form 10-Q may be deemed to include forward looking statements, which management believes are a benefit to shareholders. These forward looking statements describe management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of the Company’s style of banking and the strength of the local economy. The words “will,” “believe,” “expect,” “should,” and “anticipate” and words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are

subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in the Company’s filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national, and international economic conditions are less favorable than expected or have a more direct and pronounced effect on the Company than expected and adversely affect the Company’s ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which the Company is engaged; and (7) the Company’s ability to realize the efficiencies it expects to receive from its investments in personnel and infrastructure.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Company believes that there has not been any material changes in information about the Company’s market risk that was provided in the Form 10-K report for the year ended December 31, 2003.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) as of the date of this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective and timely, providing them with material information relating to the Company required to be disclosed in the reports we file or submit under the Exchange Act.

Changes in Internal Controls

There have not been any significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. We are not aware of any significant deficiencies or material weaknesses, therefore no corrective actions were taken.

PART 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

None

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits


Exhibit 31.1 –		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

Exhibit 31.2 –		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

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

(b) Current Report on Form 8-K

On February 5, 2004, a Form 8-K was filed announcing fourth quarter financial results for 2003.

On March 24, 2004, a Form 8-K was filed announcing the completion of the private sale of $45 million in capital securities representing preferred beneficial interests in Glacier Capital Trust II.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GLACIER BANCORP, INC.

May 6, 2004 /s/ Michael J. Blodnick
Michael J. Blodnick
President/CEO

May 6, 2004 /s/ James H. Strosahl
James H. Strosahl
Executive Vice President/CFO


	Page #
Part I. Financial Information
Item 1 – Financial Statements
Consolidated Statements of Financial Condition – March 31, 2004, December 31, 2003 and March 31, 2003 (unaudited)		3
Consolidated Statements of Operations – Three months ended March 31, 2004 and 2003 (unaudited)		4
Consolidated Statements of Stockholders’ Equity and Comprehensive Income – Year ended December 31, 2003 and three months ended March 31, 2004 (unaudited)		5
Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2004 and 2003 (unaudited)		6
Notes to Consolidated Financial Statements (unaudited)		7
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3 – Quantitative and Qualitative Disclosure about Market Risk		23
Item 4 – Controls and Procedures		23
Part II. Other Information		23
Item 1 – Legal Proceedings		23
Item 2 – Changes in Securities and Use of Proceeds		23
Item 3 – Defaults Upon Senior Securities		23
Item 4 – Submission of Matters to a Vote of Security Holders		23
Item 5 – Other Information		24
Item 6 – Exhibits and Reports on Form 8-K		24
Signatures		24
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

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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 March 31, 2004, December 31, 2003, and March 31, 2003, stockholders’ equity for the three months ended March 31, 2004 and the year ended December 31, 2003, the results of operations and cash flows for the three months ended March 31, 2004 and 2003.

		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, 2003. Operating results for the three months ended March 31, 2004 are not necessarily indicative of the results anticipated for the year ending December 31, 2004. Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 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 seven wholly owned banking 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”), and Glacier Bank of Whitefish (“Whitefish”), all located in Montana, and Mountain West Bank (“Mountain West”) which is located in Idaho, Utah, and Washington. In addition, the Company formed two subsidiaries, Glacier Capital Trust I (“Glacier Trust I”), and Glacier Capital Trust II (“Glacier Trust II”), for the purpose of issuing trust preferred securities. The Company does not have any off-balance sheet entities.

		On March 24, 2004, the Company formed Glacier Trust II and subordinated debentures in the form of trust preferred securities of $45 million, with an interest rate of 5.79 percent, were issued by the Company. The proceeds will be used for general corporate purposes.

		The following abbreviated organizational chart illustrates the various relationships:

3)		Ratios:

		Returns on average assets and average equity were calculated based on daily averages.

4)		Dividends Declared:

		On April 28, 2004, the Board of Directors declared a five-for-four stock split payable May 20, 2004 to owners of record on May 11, 2004, and all per share amounts have been restated to reflect the effects of the stock split. On March 10, 2004, the Board of Directors declared a $.17 per share quarterly cash dividend to stockholders of record on April 13, 2004, payable on April 22, 2004.

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.

6)		Investments:

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

		Gross proceeds from sales of investment securities for the three months ended March 31, 2004 and 2003 were $0, and $2,031,000 respectively, resulting in gross gains of approximately $0, and $17,000, respectively. The cost of any investment sold is determined by specific identification.

		There was an impairment charge for the three months ended March 31, 2003, of $454,000, for the impairment of value on collateralized mortgage obligations. The impairment charge is included in the net gain on sale of investments.

7)		Loans

		The following table summarizes the Company’s loan portfolio.

8)		Intangible Assets

		The following table sets forth information regarding the Company’s core deposit intangibles and mortgage servicing rights as of March 31, 2004:

9)		Deposits

		The following table illustrates the amounts outstanding for deposits greater than $100,000 at March 31, 2004, according to the time remaining to maturity:

10)		Advances and Other Borrowings

		The following chart illustrates the average balances and the maximum outstanding month-end balances for Federal Home Loan Bank of Seattle (FHLB) advances and repurchase agreements:

11)		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 March 31, 2004.

12)		Comprehensive Earnings:

		The Company’s only component of other comprehensive earnings is the unrealized gains and losses on available-for-sale securities.

13)		Stock Based Compensation

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

		At March 31, 2004 total assets were $2.829 billion which is $507 million greater than the March 31, 2003 assets of $2.323 billion, an increase of 22 percent, of which $89 million of the increase occurred in the first quarter 2004. In addition to the internal growth, the third quarter 2003 Pend Oreille Bank (POB) acquisition added $66 million to the asset base.

		Total loans have increased $178 million from March 31, 2003 and $36 million from December 31, 2003, of which $50 million was from the POB acquisition. Commercial loans have increased $169 million, or 24 percent, and continue to be the focus of our lending. Real estate loan volume was at record levels through much of 2003, with $805 million originated for the year, up from $588 million in 2002. The majority of the real estate loan production was sold with loans held in the loan portfolio increasing by only $14 million from March 31, 2003. Loans held for sale declined $21 million from the March 31, 2003 total resulting in a net reduction of $7 million in real estate loan balances at March 31, 2004. Consumer loans have increased $16 million resulting from increases in home equity loans. Home-equity loans continue to be the primary source of our consumer loan originations and have increased approximately $28 million from a year ago.

		Investment securities, including interest bearing deposits in other financial institutions, have increased $342 million from March 31, 2003 and $79 million from December 31, 2003. Additional investments were made to utilize funding liquidity that exceeded loan growth opportunities, and to capture the value of the spread between short term funding rates and the rate on two-to-five year maturity assets.

		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 holding long-term, fixed rate loans in the loan portfolio. Mortgage loans sold for the three months ended March 31, 2004 and 2003 were $67 million and $145 million, respectively. 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 March 31, 2004 was approximately $184 million.


	GLACIER BANCORP, INC.
May 6, 2004	/s/ Michael J. Blodnick
	Michael J. Blodnick
	President/CEO



May 6, 2004	/s/ James H. Strosahl
	James H. Strosahl
	Executive Vice President/CFO