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

HIGHLIGHTS AND OVERVIEW

On December 1, 2008, the Company acquired San Juans which accounted for an increase in total assets of $158 million, including loans, net of the related ALLL, of $139 million, and deposits of $119 million. The acquisition was the first entry into the state of Colorado for the Company. On April 30, 2008, Whitefish merged into Glacier with operations conducted under the Glacier charter. Prior period activity of Whitefish has been combined and included in Glacier's historical results.

On November 19, 2008, the Company completed the common stock offering of 6,325,000 shares generating net proceeds, after underwriter discounts and offering expenses, of $94.0 million. The proceeds are available to fund possible future acquisitions and for general corporate purposes. Such offering was completed pursuant to the $250 million shelf registration filed with the SEC on November 3, 2008.

The Company experienced strong loan growth with gross loans outstanding increasing by $519 million, or 14 percent from the prior year. Without the acquisition, loans increased $377 million, or 10 percent. Investments, including interest bearing deposits and fed funds sold, increased $218 million, or 28 percent, from the prior year.

Non-interest bearing deposits decreased $41 million, or 5 percent, during the year. The Company increased interest bearing deposits by $119 million, or 5 percent. The acquisition of San Juans contributed $22 million and $97 million of the non-interest bearing and interest-bearing deposit growth, respectively. FHLB advances and U. S. Treasury Tax & Loan decreased $200 million and $215 million, respectively, while FRB discount window increased $914 million for a net increase of $499 million as a result of the increase in loan growth exceeding the deposit growth.

Stockholders' equity increased $148 million, or 28 percent, during the year and the Company and each of the bank subsidiaries have remained above the well capitalized levels required by regulators. The primary reasons for the increase include the $94 million common stock offering, earnings retention, acquisition of San Juans, and stock options exercised.

Net earnings for 2008 were $65.657 million, which is a decrease of $2.946 million, or 4 percent, over the prior year. Diluted earnings per share of $1.19 is a decrease of 7 percent from the $1.28 earned in 2007. Included in net earnings for 2008 is a nonrecurring charge of $4.602 million ($7.6 million pre-tax) for other than temporary impairment with respect to investments in Federal Home Loan Mortgage Corporation ("Freddie Mac") preferred stock and Federal National Mortgage Association ("Fannie Mae") common stock and a nonrecurring gain of $1.0 million ($1.7 million pre-tax) from the sale and relocation of Mountain West's office facility in Ketchum, Idaho. Included in 2007 net earnings is a nonrecurring $1.0 million gain ($1.6 million pre-tax) from the sale of Western's Lewistown, Montana branch.

Net interest income for 2008 increased $29 million, or 16 percent, over the prior year. The net interest margin as a percentage of earning assets, on a tax equivalent basis, was 4.70 percent, an increase of 20 basis points over the 4.50 percent for 2007.

Excluding nonrecurring items, the efficiency ratio (non-interest expense / net interest income plus non-interest income) decreased from 56 percent to 52 percent during 2008, a four percentage point improvement.

Looking forward, the Company's future performance will depend on many factors including economic conditions, including the markets the Company serves, interest rate changes, increasing competition for deposits and quality loans, and regulatory burden. The Company's goal of its asset and liability management practices is to maintain or increase the level of net interest income within an acceptable level of interest rate risk.

FINANCIAL CONDITION

ASSETS

The results of operations and financial condition include the acquisition of San Juans from December 1, 2008. Cash of $9.0 million and 640,000 shares of the Company's common stock were issued in the acquisition. The Company is currently evaluating the fair values of the assets and liabilities acquired. Adjustment of the allocated purchase price may be required for pre-acquisition contingencies of the acquired entity known or discovered during the allocation period, the period of time required to identify and measure the fair values of the assets and liabilities acquired in the business combination. The allocation period is generally limited to one year following consummation of a business combination.

The following table provides information on selected classifications of assets and liabilities acquired:

(UNAUDITED - $ IN THOUSANDS)       San Juans
Acquisition Date                December 1, 2008
----------------------------    ----------------
Total assets                         157,648
Investments                            1,060
Loans, net of ALLL                   139,376
Non-interest bearing deposits         21,453
Interest bearing deposits             97,481

As reflected in the following table, total assets at December 31, 2008 were $5.554 billion, an increase of $737 million, or 15 percent, over the total assets of $4.817 billion at December 31, 2007.

                                                    December 31,
                                              -----------------------
ASSETS ($ IN THOUSANDS)                          2008         2007       $ change    % change
-------------------------------------------   ----------   ----------   ----------   --------
Cash on hand and in banks                     $  125,123   $  145,697   $  (20,574)    -14%
Investments, interest bearing deposits,
   FHLB stock, FRB stock, and Fed Funds        1,000,224      782,236      217,988      28%
Loans:
   Real estate                                   838,375      725,854      112,521      16%
   Commercial                                  2,575,828    2,247,303      328,525      15%
   Consumer                                      715,990      638,378       77,612      12%
                                              ----------   ----------   ----------     ---
      Total loans                              4,130,193    3,611,535      518,658      14%
   Allowance for loan and lease losses           (76,739)     (54,413)     (22,326)     41%
                                              ----------   ----------   ----------     ---
      Total loans net of allowance for loan
         and lease losses                      4,053,454    3,557,122      496,332      14%
                                              ----------   ----------   ----------     ---
Other assets                                     375,169      332,275       42,894      13%
                                              ----------   ----------   ----------     ---
   Total Assets                               $5,553,970   $4,817,330   $  736,640      15%
                                              ==========   ==========   ==========     ===

At December 31, 2008, total loans were $4.130 billion, an increase of $519 million, or 14 percent, over total loans of $3.612 billion at December 31, 2007. Excluding the loan growth attributable to San Juans of $145 million, the loan portfolio increased organically 10 percent for 2008. During the year, commercial loans grew the most with an increase of $329 million, or 15 percent, followed by real estate loans, which increased $113 million, or 16 percent, and consumer loans, which are primarily comprised of home equity loans, increasing by $78 million, or 12 percent from the December 31, 2007.

Investment securities, including interest bearing deposits in other financial institutions and federal funds sold, have increased $218 million, or 28 percent, from December 31, 2007. Investment securities represented 18 percent of total assets at December 31, 2008, versus 16 percent of total assets the prior year.

The following table summarizes the major asset components as a percentage of total assets as of December 31, 2008, 2007, and 2006:

                                                               December 31,
                                                          ---------------------
ASSETS:                                                    2008    2007    2006
-------                                                   -----   -----   -----
Cash, and cash equivalents, investment securities, FHLB
   and FRB stock ......................................    20.3%   19.2%   22.3%
Real estate loans .....................................    15.0%   15.0%   17.5%
Commercial loans ......................................    45.3%   45.8%   40.6%
Consumer loans ........................................    12.7%   13.1%   12.7%
Other assets ..........................................     6.7%    6.9%    6.9%
                                                          -----   -----   -----
                                                          100.0%  100.0%  100.0%
                                                          =====   =====   =====

The mix of assets has remained relatively stable with the largest change of 1.1 percent increase in cash, cash equivalents, investment securities, FHLB and FRB stock.

LIABILITIES

The following table summarizes the liability balances as of December 31, 2008
and 2007, the amount of change, and percentage change during 2008:

                                               December 31,
                                         -----------------------
LIABILITIES ($ IN THOUSANDS)                2008         2007       $ change   % change
--------------------------------------   ----------   ----------   ---------   --------
Non-interest bearing deposits            $  747,439   $  788,087   $ (40,648)     -5%
Interest-bearing deposits                 2,515,036    2,396,391     118,645       5%
Advances from Federal Home Loan Bank        338,456      538,949    (200,493)    -37%
Securities sold under agreements to
   repurchase and other borrowed funds    1,110,731      401,621     709,110     177%
Other liabilities                            44,331       45,147        (816)     -2%
Subordinated debentures                     121,037      118,559       2,478       2%
                                         ----------   ----------   ---------     ---
      Total liabilities                  $4,877,030   $4,288,754   $ 588,276      14%
                                         ==========   ==========   =========     ===

As of December 31, 2008, non-interest bearing deposits decreased $41 million, or 5 percent, from December 31, 2007. Interest bearing deposits increased $119 million, or 5 percent for the year. FHLB advances at December 31, 2008 decreased $200 million, or 37 percent, from December 31, 2007. Repurchase agreements and other borrowed funds were $1.1 billion at December 31, 2008, an increase of $709 million, or 177 percent, from December 31, 2007. Included in this latter category are U.S. Treasury Tax and Loan funds of $6 million at December 31, 2008, a decrease of $215 million from December 31, 2007. Also, included in this category are FRB discount window borrowings of $914 million at December 31, 2008. There were no FRB discount window borrowings at December 31, 2007.

The following table summarizes the major liability and equity components as a percentage of total liabilities and equity as of December 31, 2008, 2007, and 2006:

                                                     December 31,
                                                ---------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:            2008    2007    2006
-------------------------------------           -----   -----   -----
Deposit accounts ............................    58.7%   66.1%   71.7%
FHLB advances ...............................     6.1%   11.2%    6.9%
FRB discount window .........................    16.5%    0.0%    0.0%
U.S. Treasury Tax and Loan funds ............     0.1%    4.6%    3.7%
Other borrowings and repurchase agreements ..     3.4%    3.7%    3.9%
Subordinated debentures .....................     2.2%    2.5%    2.6%
Other liabilities ...........................     0.8%    0.9%    0.9%
Stockholders' equity ........................    12.2%   11.0%   10.3%
                                                -----   -----   -----
                                                100.0%  100.0%  100.0%
                                                =====   =====   =====

The deposits have decreased from 66.1 percent at December 31, 2007 to 58.7 percent at December 31, 2008. Although the Banks remain focused on growing and retaining deposits, the increased need for funding asset growth was met with alternative low cost borrowings. This resulted in the change in the percentage relationships among the funding sources since prior year. Stockholders' equity as a percentage of total liabilities and stockholders' equity increased throughout the year, primarily a result of the $94 million common stock offering, the acquisition of San Juans and retention of earnings.

                                                              December 31,
STOCKHOLDERS' EQUITY                                     ---------------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)                     2008        2007     $ change   % change
---------------------------------------                  ---------   ---------   --------   --------
Common equity                                            $ 678,183   $ 525,459   $152,724      29%
Accumulated other comprehensive (loss) income               (1,243)      3,117     (4,360)   -140%
                                                         ---------   ---------   --------
   Total stockholders' equity                              676,940     528,576    148,364      28%
Core deposit intangible, net, and goodwill                (159,765)   (154,264)    (5,501)      4%
                                                         ---------   ---------   --------
   Tangible stockholders' equity                         $ 517,175   $ 374,312   $142,863      38%
                                                         =========   =========   ========
Stockholders' equity to total assets                         12.19%      10.97%
Tangible stockholders' equity to total tangible assets        9.59%       8.03%
Book value per common share                              $   11.04   $    9.85   $   1.19      12%
Tangible book value per common share                     $    8.43   $    6.98   $   1.45      21%
Market price per share at end of year                    $   19.02   $   18.74   $   0.28       1%

STOCKHOLDERS' EQUITY

Total stockholders' equity and book value per share amounts have increased $148 million and $1.19 per share, respectively, from December 31, 2007, the result of earnings retention and exercised stock options, common stock issued for the acquisition of San Juans, and $94 million in net proceeds from the Company's November equity offering of 6,325,000 shares of common stock at a price of $15.50 per share. Tangible stockholders equity has increased $143 million, or 38 percent since December 31, 2007, with tangible stockholders' equity at 9.59 percent of total tangible assets at December 31, 2008, up from 8.03 percent at December 31, 2007. Accumulated other comprehensive income, representing net unrealized gains or losses (net of tax) on investment securities designated as available for sale, decreased $4 million from December 31, 2007.

RESULTS OF OPERATIONS

                                                    Years ended December 31,
REVENUE SUMMARY                            -----------------------------------------
($ IN THOUSANDS)                             2008       2007     $ change   % change
----------------------------------------   --------   --------   --------   --------
Net interest income
   Interest income                         $302,985   $304,760   $ (1,775)      -1%
   Interest expense                          90,372    121,291    (30,919)     -25%
                                           --------   --------   --------
      Total net interest income             212,613    183,469     29,144       16%
Non-interst income:
   Service charges, loan fees, and other
      fees                                   47,506     45,486      2,020        4%
   Gain on sale of loans                     14,849     13,283      1,566       12%
   Loss on investments                       (7,345)        (8)    (7,337)   91713%
   Other income                               6,024      6,057        (33)      -1%
                                           --------   --------   --------
      Total non-interest income              61,034     64,818     (3,784)      -6%
                                           --------   --------   --------
                                           $273,647   $248,287   $ 25,360       10%
                                           ========   ========   ========
Net interest margin (tax equivalent)           4.70%      4.50%
                                           ========   ========

NET INTEREST INCOME

Net interest income for the current year increased $29 million, or 16 percent, over the same period in 2007. Total interest income decreased $1.8 million, or 1 percent, for the current year, while total interest expense decreased $31 million, or 25 percent, over the same period in 2007. The decrease in interest expense is primarily attributable to the rate decreases on interest bearing deposits and lower cost borrowings. The net interest margin as a percentage of earning assets, on a tax equivalent basis, was 4.70 percent, an increase of 20 basis points from the 4.50 percent for the same period in 2007.

NON-INTEREST INCOME

Total non-interest income decreased $4 million, or 6 percent in 2008. Excluding the current year nonrecurring items, consisting of the $7.6 million charge for other than temporary impairment on the Freddie Mac and Fannie Mae securities, the $1.7 million gain from the sale and relocation of Mountain West's branch in Ketchum, Idaho, the first quarter $248 thousand combined gain from the sale of Principal Financial Group stock and mandatory redemption of a portion of Visa, Inc. shares, and also excluding the prior year nonrecurring $1.6 million gain from the first quarter sale of Western's Lewistown, Montana branch, non-interest income for 2008 increased $3.5 million from the same period in 2007. Fee income increased $2 million, or 4 percent, over last year, driven primarily by an increased number of loan and deposit accounts, as well as additional products and service offerings. Gain on sale of loans increased $2 million, or 12 percent, from last year.

                                                 Years ended December 31,
NON-INTEREST EXPENSE SUMMARY            -----------------------------------------
($ IN THOUSANDS)                          2008       2007     $ change   % change
-------------------------------------   --------   --------   --------   --------
Compensation and employee
   benefits and related expense         $ 82,027   $ 79,070    $ 2,957      4%
Occupancy and equipment expense           21,674     19,152      2,522     13%
Advertising and promotions                 6,989      6,306        683     11%
Outsourced data processing                 2,508      2,755       (247)    -9%
Core deposit intangibles amortization      3,051      3,202       (151)    -5%
Other expenses                            29,660     27,432      2,228      8%
                                        --------   --------    -------
      Total non-interest expense        $145,909   $137,917     $7,992      6%
                                        ========   ========    =======

NON-INTEREST EXPENSE

Non-interest expense increased in 2008 by $8 million, or 6 percent, compared to 2007. Included in 2007 is approximately $500,000 of non-recurring expenses and costs, including overtime, associated with the January 2007 merger of three of the five CDC subsidiaries into the Company's subsidiaries, and related operating system conversions. Compensation and employee benefit expense increased $3 million, or 4 percent, from 2007, such increase attributable to the increase in full-time equivalent employees from 1,480 to 1,571 in 2008. Occupancy and equipment expense increased $3 million, or 13 percent, while other expenses increased $2 million, or 8 percent, since December 31, 2007, reflecting the addition of San Juans in December, cost of additional locations and facility upgrades. Advertising and promotion

expense increased $683 thousand, or 11 percent, from 2007, due primarily to branch promotions and the banks continuing focus on attracting and retaining non-interest bearing and other low cost deposits.

EFFICIENCY RATIO

Excluding nonrecurring items, the efficiency ratio (non-interest expense / net
interest income plus non-interest income) decreased from 56 percent to 52
percent during 2008, a four percentage point improvement.

CREDIT QUALITY INFORMATION                  December 31,   December 31,
($ IN THOUSANDS)                               2008            2007
-----------------------------------------   ------------   ------------
Allowance for loan and lease losses           $76,739        $54,413
Real estate and other assets owned             11,539          2,043
Accruing Loans 90 days or more overdue          8,613          2,685
Non-accrual loans                              64,301          8,560
                                              -------        -------
   Total non-performing assets                 84,453         13,288
Allowance for loan and lease losses as
   a percentage of non-performing assets           91%           409%
Non-performing assets as a percentage of
   total bank assets                             1.46%          0.27%
Allowance for loan and lease losses as a
   percentage of total loans                     1.86%          1.51%
Net charge-offs as a percentage of loans        0.213%         0.060%
Accruing Loans 30-89 days or more overdue     $54,787        $45,490

PROVISION FOR LOAN AND LEASE LOSSES

At December 31, 2008, the ALLL was $76.739 million, an increase of $22 million, or 41 percent, from a year ago. The provision for loan and lease loss expense was $28.5 million for 2008, an increase of $21.8 million, or 326 percent, from 2007. Net charged-off loans for the year were $8.779 million, compared to $2.165 million of net charged-off loans during 2007. Loan portfolio growth, composition, average loan size, credit quality considerations, and other environmental factors will determine the level of additional provision expense.

Non-performing assets as a percentage of the Bank's assets at December 31, 2008 were 1.46 percent, up from .27 percent at December 31, 2007. These ratios compare favorably to the FRB peer group average of 1.97 percent at December 31, 2008 and the peer group average of .80 percent at December 31, 2007. Most of the Company's non-performing assets are secured by real estate. Based on the most current information available to management, including updated appraisals where appropriate, the Company believes the value of the underlying real estate collateral is adequate to minimize significant charge-offs or loss to the Company. For collateral dependent loans, impairment is measured by the fair value of the collateral.

The allowance was 1.86 percent of total loans outstanding at December 31, 2008, up from 1.51 percent at December 31, 2007. The allowance was 91 percent of non-performing assets at December 31, 2008, down from 409 percent a year ago.

For additional information regarding the loan portfolio and ALLL, see lending activity in "Item 1 - Business".

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
           YEAR ENDED DECEMBER 31, 2007 COMPARED TO DECEMBER 31, 2006

                                                         Years ended December 31,
REVENUE SUMMARY                                 ------------------------------------------
($ IN THOUSANDS)                                  2007       2006     $ change   % change
---------------------------------------------   --------   --------   --------   ---------
Net interest income
   Interest income                              $304,760   $253,326   $51,434        20%
   Interest expense                              121,291     95,038    26,253        28%
                                                --------   --------   -------
      Total net interest income                  183,469    158,288    25,181        16%
Fees and other revenue:
   Service charges, loan fees, and other fees     45,486     37,072     8,414        23%
   Gain on sale of loans                          13,283     10,819     2,464        23%
   Loss on sale of investments                        (8)        (3)       (5)      167%
   Other income                                    6,057      3,954     2,103        53%
                                                --------   --------   -------
      Total non-interest income                   64,818     51,842    12,976        25%
                                                --------   --------   -------
                                                $248,287   $210,130   $38,157        18%
                                                ========   ========   =======
Net interest margin (tax equivalent)                4.50%      4.44%
                                                ========   ========

NET INTEREST INCOME

Net interest income for the year increased $25.181 million, or 16 percent, over 2006. Total interest income increased $51.434 million, or 20 percent, while total interest expense increased $26.253 million, or 28 percent. The increase in interest expense is primarily attributable to the volume and rate increases in interest bearing deposits. The net interest margin as a percentage of earning assets, on a tax equivalent basis, was 4.50 percent which is an increase of 6 basis points over the 4.44 percent for 2006. The net interest margin calculation has been revised to account for intercompany elimination entries and previously reported net interest margins have been adjusted to reflect such change.

NON-INTEREST INCOME

Total non-interest income increased $12.976 million, or 25 percent in 2007. Fee income increased $8.414 million, or 23 percent, over last year, driven primarily by an increased number of loan and deposit accounts, acquisitions, and additional customer products and services offered. Gain on sale of loans increased $2.464 million, or 23 percent, from last year. Loan origination volume, especially in the first half of 2007, was robust versus historical standards. Other income increased $2.103 million, or 53 percent, over the same period in 2006. Such increase includes a gain of $1.6 million from the January 19, 2007 sale of Western's Lewistown branch, a regulatory requirement imposed to complete the acquisition of CDC.

                                                  Years ended December 31,
NON-INTEREST EXPENSE SUMMARY            -----------------------------------------
. . .