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10-K 1 d257028d10k.htm FORM 10K FORM 10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-18911

GLACIER BANCORP, INC.

(Exact name of registrant as specified in its charter)


MONTANA		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)

(406) 756-4200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Common Stock, $0.01 par value per share		NASDAQ Global Select Market
(Title of each class)		(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes ¨ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes x No

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

The aggregate market value of the voting common equity held by non-affiliates of the Registrant at June 30, 2011 (the last business day of the most recent second quarter), was $941,037,169 (based on the average bid and ask price as quoted on the NASDAQ Global Select Market at the close of business on that date).

As of February 14, 2012, there were issued and outstanding 71,915,073 shares of the Registrant’s common stock. No preferred shares are issued or outstanding.

Document Incorporated by Reference

Portions of the 2012 Annual Meeting Proxy Statement dated March 28, 2012 are incorporated by reference into Part III of this Form 10-K.

GLACIER BANCORP, INC.

FORM 10-K ANNUAL REPORT

For the Year ended December 31, 2011

TABLE OF CONTENTS


		Page
PART I

Item 1	Business		3
Item 1A	Risk Factors		15
Item 1B	Unresolved Staff Comments		20
Item 2	Properties		20
Item 3	Legal Proceedings		21

PART II

Item 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
Item 6	Selected Financial Data		23
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 7A	Quantitative and Qualitative Disclosure about Market Risk		63
Item 8	Financial Statements and Supplementary Data		65
Item 9	Changes in and Disagreements with Accountants in Accounting and Financial Disclosures		117
Item 9A	Controls and Procedures		117
Item 9B	Other Information		117

PART III

Item 10	Directors, Executive Officers and Corporate Governance		118
Item 11	Executive Compensation		118
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		118
Item 13	Certain Relationships and Related Transactions, and Director Independence		118
Item 14	Principal Accounting Fees and Services		118

PART IV

Item 15	Exhibits, Financial Statement Schedules		119

PART I

Item 1.

Business

GENERAL DEVELOPMENT OF BUSINESS

Glacier Bancorp, Inc. (the “Company”), headquartered in Kalispell, Montana, is a Montana corporation incorporated in 2004 as a successor corporation to the Delaware corporation originally incorporated in 1990. The Company is a regional multi-bank holding company providing commercial banking services from 106 locations in Montana, Idaho, Wyoming, Colorado, Utah and Washington. The Company offers a wide range of banking products and services, including transaction and savings deposits, real estate, commercial, agriculture, and consumer loans, mortgage origination services, and retail brokerage services. The Company serves individuals, small to medium-sized businesses, community organizations and public entities. For information regarding the Company’s lending, investment and funding activities, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Subsidiaries

The Company includes the parent holding company (“Parent”) and the following wholly-owned nineteen subsidiaries which consist of eleven bank subsidiaries (collectively referred to hereafter as the “Banks”) and eight other subsidiaries.


Bank Subsidiaries

Montana Glacier Bank (“Glacier”) founded in 1955 First Security Bank of Missoula (“First Security”) founded in 1973 Western Security Bank (“Western”) founded in 2001 Big Sky Western Bank (“Big Sky”) founded in 1990 Valley Bank of Helena (“Valley”) founded in 1978 First Bank of Montana (“First Bank-MT”) founded in 1924 Colorado Bank of the San Juans (“San Juans”) founded in 1998		Idaho Mountain West Bank (“Mountain West”) founded in 1993 Citizens Community Bank (“Citizens”) founded in 1996 Wyoming 1^st Bank (“1^st Bank”) founded in 1989 First Bank of Wyoming (“First Bank-WY”) founded in 1912
Other Subsidiaries GBCI Other Real Estate (“GORE”) Glacier Capital Trust II (“Glacier Trust II”) Glacier Capital Trust III (“Glacier Trust III”) Glacier Capital Trust IV (“Glacier Trust IV”) Citizens (ID) Statutory Trust I (“Citizens Trust I”) Bank of the San Juans Bancorporation Trust I (“San Juans Trust I”) First Company Statutory Trust 2001 (“First Co Trust 01”) First Company Statutory Trust 2003 (“First Co Trust 03”)

The Company formed GORE to isolate certain bank foreclosed properties for legal protection and administrative purposes. The foreclosed properties were sold to GORE at fair market value in 2011 and 2010 by bank subsidiaries and properties remaining are currently held for sale.

The Company formed or acquired Glacier Trust II, Glacier Trust III, Glacier Trust IV, Citizens Trust I, San Juans Trust I, First Co Trust 01, and First Co Trust 03 as financing subsidiaries. The trusts were formed for the purpose of issuing trust preferred securities and the subsidiaries are not consolidated into the Company’s financial statements. The preferred securities entitle the shareholder to receive cumulative cash distributions from payments on subordinated debentures of the Company. For additional information regarding the subordinated debentures, see Note 10 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”

The Company provides full service brokerage services (selling products such as stocks, bonds, mutual funds, limited partnerships, annuities and other insurance products) through Raymond James Financial Services, a non-affiliated company, at Glacier and Big Sky. The Company shares in the commissions generated, without devoting significant employee time to this portion of the business.

In January 2012, the Company announced that it plans to combine its eleven bank subsidiaries into a single commercial bank. The bank subsidiaries will operate as separate divisions of Glacier under the same names, management teams and divisions as before the consolidation. As part of the consolidation, the Company will file with the appropriate federal and state bank regulators an application to merge the bank subsidiaries. The resulting bank Board of Directors and executive officers will be the Board of Directors and senior management team of the Parent. The consolidation is expected to be completed early in the second quarter of 2012, following regulatory approvals.

Acquisitions

The Company’s strategy has been to profitably grow its business through internal growth and selective acquisitions. The Company continues to look for profitable expansion opportunities in existing markets and new markets in the Rocky Mountain states. During the last five years, the Company has completed the following acquisitions: On October 2, 2009, First Company and its subsidiary, First Bank of Wyoming, formerly First National Bank & Trust, was acquired by the Company. On December 1, 2008, Bank of the San Juans Bancorporation and its subsidiary, Bank of the San Juans in Durango, Colorado, was acquired by the Company. On April 30, 2007, North Side State Bank (“North Side”) in Rock Springs, Wyoming was acquired and became a part of 1^st Bank.

Bank Locations at December 31, 2011

The following is a list of the Parent and bank subsidiaries’ main office locations as of December 31, 2011. See “Item 2. Properties.”


Glacier Bancorp, Inc.	49	Commons Loop, Kalispell, MT 59901	(406) 756-4200
Glacier	202	Main Street, Kalispell, MT 59901	(406) 756-4200
Mountain West	125	Ironwood Drive, Coeur d’Alene, Idaho 83814	(208) 765-0284
First Security	1704	Dearborn, Missoula, MT 59801	(406) 728-3115
Western	2812	1^st Avenue North, Billings, MT 59101	(406) 371-8258
1^st Bank	1001	Main Street, Evanston, WY 82930	(307) 789-3864
Valley	3030	North Montana Avenue, Helena, MT 59601	(406) 495-2400
Big Sky	4150	Valley Commons, Bozeman, MT 59718	(406) 587-2922
First Bank-WY	245	East First Street, Powell, WY 82435	(307) 754-2201
Citizens	280	South Arthur, Pocatello, ID 83204	(208) 232-5373
First Bank–MT	224	West Main, Lewistown, MT 59457	(406) 538-7471
San Juans	144	East Eighth Street, Durango, CO 81301	(970) 247-1818

Financial Information about Segments

The following schedules provide selected financial data for the Company’s operating segments:

		278,927			278,927			278,927			278,927			278,927			278,927			278,927			278,927			278,927
	Glacier									Mountain West									First Security
(Dollars in thousands)	2011			2010			2009			2011			2010			2009			2011			2010			2009
Condensed Income Statements
Net interest income		49,220			50,260			57,139			42,603			47,786			53,302			38,224			35,676			35,788
Non-interest income		15,571			15,272			15,387			22,608			26,148			27,882			7,384			7,799			8,103

Total revenues		64,791			65,532			72,526			65,211			73,934			81,184			45,608			43,475			43,891
Provision for loan losses		(16,800	)		(20,050	)		(32,000	)		(30,100	)		(45,000	)		(50,500	)		(9,950	)		(8,100	)		(10,450	)
Core deposit intangibles amortization		(119	)		(192	)		(330	)		(66	)		(172	)		(184	)		(261	)		(425	)		(468	)
Goodwill impairment charge		—			—			—			(23,159	)		—			—			—			—			—
Other non-interest expense		(30,537	)		(29,113	)		(27,325	)		(52,769	)		(51,203	)		(51,525	)		(20,548	)		(21,842	)		(18,897	)

Income (loss) before income taxes		17,335			16,177			12,871			(40,883	)		(22,441	)		(21,025	)		14,849			13,108			14,076
Income tax (expense) benefit		(3,386	)		(2,989	)		(2,803	)		16,087			10,262			9,764			(2,936	)		(2,798	)		(3,372	)

Net income (loss)		13,949			13,188			10,068			(24,796	)		(12,179	)		(11,261	)		11,913			10,310			10,704


Average Balance Sheet Data
Total assets		1,359,602			1,331,845			1,249,755			1,139,673			1,198,523			1,219,435			1,065,487			934,513			916,115
Total loans and loans held for sale		808,415			889,644			967,239			739,092			906,484			976,132			571,802			574,734			580,401
Total deposits		745,608			724,076			605,928			795,677			804,161			709,834			714,286			673,633			567,649
Stockholders’ equity		181,483			162,116			137,188			175,355			175,059			135,932			130,402			127,915			122,153

End of Year Balance Sheet Data
Total assets		1,376,715			1,374,067			1,325,039			1,130,766			1,164,903			1,172,331			1,102,203			1,004,835			890,672
Total loans, net of ALLL		749,032			822,476			895,489			636,601			752,964			892,804			544,838			548,258			547,050
Total deposits		807,505			740,391			726,403			806,039			770,058			793,006			732,672			713,098			588,858
Stockholders’ equity		190,359			172,224			139,799			159,219			178,765			146,720			136,835			122,807			120,044

Ratios and Other
Return on average assets		1.03	%		0.99	%		0.81	%		-2.18	%		-1.02	%		-0.92	%		1.12	%		1.10	%		1.17	%
Return on average equity		7.69	%		8.13	%		7.34	%		-14.14	%		-6.96	%		-8.28	%		9.14	%		8.06	%		8.76	%
Tier I risk-based capital ratio		18.67	%		16.61	%		12.33	%		19.13	%		18.81	%		13.39	%		15.91	%		15.35	%		14.91	%
Total risk-based capital ratio		19.95	%		17.89	%		13.61	%		20.42	%		20.09	%		14.67	%		17.18	%		16.62	%		16.18	%
Leverage capital ratio		13.00	%		11.98	%		10.09	%		12.81	%		13.29	%		10.98	%		10.49	%		10.82	%		11.32	%
Full time equivalent employees		262			266			274			361			377			376			185			187			178
Locations		17			16			17			28			28			29			13			13			13

		278,927			278,927			278,927			278,927			278,927			278,927			278,927			278,927			278,927
	Western									1st Bank									Valley
(Dollars in thousands)	2011			2010			2009			2011			2010			2009			2011			2010			2009
Condensed Income Statements
Net interest income		21,236			20,519			21,233			22,251			22,796			24,057			14,303			13,611			14,051
Non-interest income		8,949			9,857			8,631			4,900			4,934			4,628			5,130			6,913			5,717

Total revenues		30,185			30,376			29,864			27,151			27,730			28,685			19,433			20,524			19,768
Provision for loan losses		(550	)		(950	)		(3,200	)		(1,950	)		(2,150	)		(10,800	)		—			(500	)		(1,200	)
Core deposit intangibles amortization		(332	)		(519	)		(571	)		(530	)		(591	)		(652	)		(9	)		(42	)		(42	)
Goodwill impairment charge		—			—			—			(17,000	)		—			—			—			—			—
Other non-interest expense		(17,113	)		(17,257	)		(16,342	)		(16,009	)		(17,197	)		(14,943	)		(9,562	)		(9,252	)		(9,229	)

Income (loss) before income taxes		12,190			11,650			9,751			(8,338	)		7,792			2,290			9,862			10,730			9,297
Income tax (expense) benefit		(2,622	)		(3,112	)		(2,813	)		(1,928	)		(2,080	)		(309	)		(2,778	)		(3,272	)		(2,740	)

Net income (loss)		9,568			8,538			6,938			(10,266	)		5,712			1,981			7,084			7,458			6,557


Average Balance Sheet Data
Total assets		777,489			662,391			604,020			760,357			653,143			606,649			417,688			351,608			312,273
Total loans and loans held for sale		278,927			315,663			344,456			254,914			280,954			312,372			188,441			189,443			195,007
Total deposits		569,799			527,135			410,490			506,231			448,003			414,059			286,075			257,660			196,506
Stockholders’ equity		90,768			88,276			87,837			105,196			106,426			97,859			34,164			32,240			34,246

End of Year Balance Sheet Data
Total assets		808,512			766,367			624,077			785,730			717,120			650,072			462,300			394,220			351,228
Total loans, net of ALLL		248,167			288,005			304,291			232,708			254,047			283,138			185,261			174,354			178,745
Total deposits		550,725			577,147			504,619			535,670			468,966			421,271			304,418			276,567			211,935
Stockholders’ equity		92,490			86,606			85,259			94,027			107,234			101,789			34,780			31,784			30,585

Ratios and Other
Return on average assets		1.23	%		1.29	%		1.15	%		-1.35	%		0.87	%		0.33	%		1.70	%		2.12	%		2.10	%
Return on average equity		10.54	%		9.67	%		7.90	%		-9.76	%		5.37	%		2.02	%		20.74	%		23.13	%		19.15	%
Tier I risk-based capital ratio		15.82	%		15.30	%		14.67	%		18.22	%		17.60	%		14.99	%		12.76	%		13.82	%		13.11	%
Total risk-based capital ratio		17.07	%		16.56	%		15.93	%		19.48	%		18.87	%		16.26	%		14.01	%		15.08	%		14.37	%
Leverage capital ratio		8.28	%		9.21	%		10.19	%		8.49	%		9.42	%		9.74	%		6.94	%		8.05	%		8.57	%
Full time equivalent employees		155			163			161			139			144			141			89			85			85
Locations		8			8			8			12			12			12			6			6			6

		218,148			218,148			218,148			218,148			218,148			218,148			218,148			218,148			218,148
	Big Sky									First Bank-WY									Citizens
(Dollars in thousands)	2011			2010			2009			2011			2010			2009 ¹			2011			2010			2009
Condensed Income Statements
Net interest income		13,803			14,168			15,700			10,643			10,315			3,964			11,368			10,591			10,437
Non-interest income		3,619			3,427			3,564			2,684			3,072			4,187			3,641			5,003			4,235

Total revenues		17,422			17,595			19,264			13,327			13,387			8,151			15,009			15,594			14,672
Provision for loan losses		(2,350	)		(3,475	)		(9,200	)		(700	)		(1,453	)		(1,683	)		(1,300	)		(2,000	)		(2,800	)
Core deposit intangibles amortization		(5	)		(23	)		(23	)		(577	)		(577	)		(144	)		(75	)		(93	)		(111	)
Goodwill impairment charge		—			—			—			—			—			—			—			—			—
Other non-interest expense		(9,887	)		(10,411	)		(8,441	)		(7,929	)		(8,752	)		(2,011	)		(8,174	)		(8,631	)		(7,992	)

Income (loss) before income taxes		5,180			3,686			1,600			4,121			2,605			4,313			5,460			4,870			3,769
Income tax (expense) benefit		(1,457	)		(945	)		(121	)		(770	)		(498	)		(230	)		(1,716	)		(1,700	)		(1,332	)

Net income (loss)		3,723			2,741			1,479			3,351			2,107			4,083			3,744			3,170			2,437


Average Balance Sheet Data
Total assets		368,377			366,749			340,827			368,274			305,977			72,641			327,185			263,466			234,382
Total loans and loans held for sale		238,955			262,342			287,338			136,738			150,029			39,416			161,892			168,498			168,675
Total deposits		210,420			209,786			178,465			281,881			245,583			60,832			226,802			192,357			146,780
Stockholders’ equity		67,074			61,063			45,683			42,217			38,371			7,870			36,334			33,627			30,814

End of Year Balance Sheet Data
Total assets		385,434			362,416			368,571			390,917			351,624			295,953			362,420			289,507			241,807
Total loans, net of ALLL		218,148			236,373			258,817			128,238			139,300			150,155			149,818			154,914			151,731
Total deposits		221,541			199,599			184,278			288,482			258,454			247,256			238,314			207,473			159,763
Stockholders’ equity		67,652			64,656			51,614			43,774			40,322			31,364			38,058			34,215			31,969

Ratios and Other
Return on average assets		1.01	%		0.75	%		0.43	%		0.91	%		0.69	%		5.62	%		1.14	%		1.20	%		1.04	%
Return on average equity		5.55	%		4.49	%		3.24	%		7.94	%		5.49	%		51.88	%		10.30	%		9.43	%		7.91	%
Tier I risk-based capital ratio		24.15	%		21.95	%		16.06	%		18.90	%		18.74	%		15.98	%		12.58	%		11.85	%		11.32	%
Total risk-based capital ratio		25.43	%		23.23	%		17.34	%		19.95	%		19.98	%		16.89	%		13.85	%		13.12	%		12.59	%
Leverage capital ratio		17.33	%		17.43	%		13.67	%		10.40	%		11.77	%		10.38	%		7.65	%		8.86	%		9.62	%
Full time equivalent employees		89			85			83			78			80			75			71			71			70
Locations		5			5			5			4			4			3			6			6			6

		218,148			218,148			218,148			218,148			218,148			218,148			218,148			218,148			218,148
	First Bank-MT									San Juans									GORE
(Dollars in thousands)	2011			2010			2009			2011			2010			2009			2011			2010			2009
Condensed Income Statements
Net interest income		7,994			7,457			7,900			8,070			7,562			8,021			—			—			—
Non-interest income		946			1,144			929			1,687			1,727			1,329			915			258			—

Total revenues		8,940			8,601			8,829			9,757			9,289			9,350			915			258			—
Provision for loan losses		—			(265	)		(985	)		(800	)		(750	)		(1,800	)		—			—			—
Core deposit intangibles amortization		(266	)		(312	)		(358	)		(233	)		(234	)		(233	)		—			—			—
Goodwill impairment charge		—			—			—			—			—			—			—			—			—
Other non-interest expense		(3,276	)		(3,163	)		(3,189	)		(7,158	)		(5,419	)		(5,435	)		(5,380	)		(2,315	)		—

Income (loss) before income taxes		5,398			4,861			4,297			1,566			2,886			1,882			(4,465	)		(2,057	)		—
Income tax (expense) benefit		(1,508	)		(1,590	)		(1,426	)		(374	)		(1,045	)		(551	)		1,737			806			—

Net income (loss)		3,890			3,271			2,871			1,192			1,841			1,331			(2,728	)		(1,251	)		—


Average Balance Sheet Data
Total assets		249,842			209,189			179,885			225,013			198,415			175,107			17,320			12,561			—
Total loans and loans held for sale		113,397			114,310			119,840			138,286			146,911			149,665			—			—			—
Total deposits		176,319			153,132			121,770			180,845			162,745			140,528			—			—			—
Stockholders’ equity		34,753			33,742			30,955			26,418			25,887			23,396			18,567			12,683			—

End of Year Balance Sheet Data
Total assets		265,621			239,667			217,379			243,723			230,345			184,528			7,195			20,610			—
Total loans, net of ALLL		109,495			106,290			114,113			131,327			139,014			144,655			—			—			—
Total deposits		186,361			165,816			143,552			195,067			184,217			148,474			—			—			—
Stockholders’ equity		35,449			33,151			32,627			27,294			25,595			25,410			9,581			21,199			—

Ratios and Other
Return on average assets		1.56	%		1.56	%		1.60	%		0.53	%		0.93	%		0.76	%
Return on average equity		11.19	%		9.69	%		9.27	%		4.51	%		7.11	%		5.69	%
Tier I risk-based capital ratio		13.79	%		13.93	%		12.73	%		12.36	%		11.76	%		11.11	%
Total risk-based capital ratio		15.05	%		15.19	%		13.99	%		13.63	%		13.03	%		12.37	%
Leverage capital ratio		8.33	%		9.18	%		9.19	%		8.48	%		8.83	%		10.33	%
Full time equivalent employees		39			39			40			44			46			41
Locations		3			3			3			3			3			3


	Parent									Eliminations and Other									Total Consolidated
(Dollars in thousands)	2011			2010			2009			2011			2010			2009			2011			2010			2009
Condensed Income Statements
Net interest income		(4,102	)		(5,973	)		(6,265	)		2			—			—			235,615			234,768			245,327
Non-interest income		35,082			61,924			52,466			(34,917	)		(59,932	)		(50,584	)		78,199			87,546			86,474

Total revenues		30,980			55,951			46,201			(34,915	)		(59,932	)		(50,584	)		313,814			322,314			331,801
Provision for loan losses		—			—			—			—			—			—			(64,500	)		(84,693	)		(124,618	)
Core deposit intangibles amortization		—			—			—			—			—			—			(2,473	)		(3,180	)		(3,116	)
Goodwill impairment charge		—			—			—			—			—			—			(40,159	)		—			—
Other non-interest expense		(16,065	)		(14,613	)		(13,769	)		14,915			14,400			13,396			(189,492	)		(184,768	)		(165,702	)

Income (loss) before income taxes		14,915			41,338			32,432			(20,000	)		(45,532	)		(37,188	)		17,190			49,673			38,365
Income tax (expense) benefit		2,176			1,374			1,942			(244	)		244			—			281			(7,343	)		(3,991	)

Net income (loss)		17,091			42,712			34,374			(20,244	)		(45,288	)		(37,188	)		17,471			42,330			34,374


Average Balance Sheet Data
Total assets		995,355			949,597			824,527			(1,148,846	)		(1,130,937	)		(1,043,687	)		6,922,816			6,307,040			5,691,929
Total loans and loans held for sale		—			—			—			(5,068	)		—			—			3,625,791			3,999,012			4,140,541
Total deposits		—			—			—			(24,372	)		(39,887	)		(59,234	)		4,669,571			4,358,384			3,493,607
Stockholders’ equity		857,625			817,496			691,922			(942,731	)		(897,405	)		(753,933	)		857,625			817,496			691,922

End of Year Balance Sheet Data
Total assets		990,634			978,875			832,916			(1,124,264	)		(1,135,269	)		(962,778	)		7,187,906			6,759,287			6,191,795
Total loans, net of ALLL		—			—			—			(5,014	)		(3,813	)		—			3,328,619			3,612,182			3,920,988
Total deposits		—			—			—			(45,581	)		(39,884	)		(29,263	)		4,821,213			4,521,902			4,100,152
Stockholders’ equity		850,227			838,583			685,890			(929,518	)		(918,937	)		(797,180	)		850,227			838,204			685,890

Ratios and Other
Return on average assets																				0.25	%		0.67	%		0.60	%
Return on average equity																				2.04	%		5.18	%		4.97	%
Tier I risk-based capital ratio																				18.99	%		18.24	%		14.02	%
Total risk-based capital ratio																				20.27	%		19.51	%		15.29	%
Leverage capital ratio																				11.81	%		12.71	%		11.20	%
Full time equivalent employees		141			131			119												1,653			1,674			1,643
Locations		1			1			1												106			105			106

¹	The average balance sheet data is based on daily averages for the entire year, with First Bank-WY having been acquired October 2, 2009.

WEB SITE ACCESS

Copies of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the Company’s website (www.glacierbancorp.com) as soon as reasonably practicable after the Company has filed the material with, or furnished it to, the Securities and Exchange Commission (“SEC”). Copies can also be obtained by accessing the SEC’s website (www.sec.gov).

MARKET AREA

The Company has 106 locations, of which 9 are loan or administration offices, in 35 counties within 6 states including Montana, Idaho, Wyoming, Colorado, Utah, and Washington. The Company has 53 locations in Montana, 29 locations in Idaho, 14 locations in Wyoming, 3 locations in Colorado, 4 locations in Utah and 3 locations in Washington.

The market area’s economic base primarily focuses on tourism, energy, construction, mining, manufacturing, service industry, and health care. The tourism industry is highly influenced by two national parks, several ski resorts, significant lakes, and rural scenic areas.

COMPETITION

Based on the Federal Deposit Insurance Corporation (“FDIC”) summary of deposits survey as of June 30, 2011, the Company has approximately 26 percent of the total FDIC insured deposits in the 13 counties that it services in Montana. In Idaho, the Company has approximately 7 percent of the deposits in the 9 counties that it services. In Wyoming, the Company has 26 percent of the deposits in the 6 counties it services. In Colorado, the Company has 12 percent of the deposits in the 2 counties it serves. In Utah, the Company has 13 percent of the deposits in the 3 counties it services.

There are a large number of depository institutions including thrifts, commercial banks, and credit unions in the markets in which the Company has offices. The Banks, like other depository institutions, operate in a rapidly changing environment. Non-depository financial service institutions, primarily in the securities and insurance industries, have become competitors for retail savings and investment funds. In addition to offering competitive interest rates, the principal methods used by the Banks to attract deposits include the offering of a variety of services including on-line banking and convenient office locations and business hours. The primary factors in competing for loans are interest rates and rate adjustment provisions, loan maturities, loan fees, and the quality of service to borrowers and brokers.

EMPLOYEES

As of December 31, 2011, the Company employed 1,653 persons, 1,507 of whom were employed full time, none of whom were represented by a collective bargaining group. The Company provides its employees with a comprehensive benefit program, including medical and dental insurance, life and accident insurance, long-term disability coverage, sick leave, 401(k) and profit sharing plan, and a stock-based compensation plan. The Company considers its employee relations to be excellent. See Note 16 in the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” for detailed information regarding employee benefit plans and eligibility requirements.

SUPERVISION AND REGULATION

Introduction

The following discussion provides an overview of certain elements of the extensive regulatory framework applicable to the Company and the Banks. This regulatory framework is primarily designed for the protection of depositors, the federal Deposit Insurance Fund and the banking system as a whole, rather than specifically for the protection of shareholders. Due to the breadth and growth of this regulatory framework, the costs of compliance continue to increase in order to monitor and satisfy these requirements.

To the extent that this section describes statutory and regulatory provisions, it is qualified by reference to those provisions. These statutes and regulations, as well as related policies, are subject to change by Congress, state legislatures and federal and state regulators. Changes in statutes, regulations or regulatory policies applicable to the Company, including the interpretation or implementation thereof, could have a material effect on the Company’s business or operations. In light of the recent financial crisis, numerous changes to the statutes, regulations or regulatory policies applicable to the Company and Banks have been made or proposed. The full extent to which these changes will impact the Company and the Banks is not yet known. However, continued efforts to monitor and comply with new regulatory requirements add to the complexity and cost of the Company’s business.

The Company recently announced plans to consolidate into Glacier its bank subsidiaries which operate throughout the states of Montana, Colorado, Idaho, Utah, Washington and Wyoming. The transaction is currently expected to close early in the second quarter of 2012. After this transaction is consummated, Glacier will be the sole bank subsidiary of the Company and will be subject to regulation and supervision by the Montana Department of Administration’s Banking and Financial Institutions Division and the FDIC. With respect to divisions of Glacier outside of Montana, they will be subject to applicable state laws.

Bank Holding Company Regulation

General. The Company is a bank holding company as defined in the Bank Holding Company Act of 1956, as amended (“BHCA”), due to its ownership of the bank subsidiaries. Glacier, First Security, Western, Valley, Big Sky, and First Bank-MT are Montana state-chartered banks; Mountain West and Citizens are Idaho state-chartered banks; 1st Bank and First Bank-WY are Wyoming state-chartered banks; and San Juans is a Colorado state-chartered bank. Customer deposits of the Banks are insured by the FDIC.

As a bank holding company, the Company is subject to regulation, supervision and examination by the Federal Reserve. In general, the BHCA limits the business of bank holding companies to owning or controlling banks and engaging in other activities closely related to banking. The Company must also file reports with and provide additional information to the Federal Reserve. Under the Financial Services Modernization Act of 1999, a bank holding company may apply to the Federal Reserve to become a financial holding company, and thereby engage (directly or through a subsidiary) in certain expanded activities deemed financial in nature, such as securities and insurance underwriting.

Holding Company Bank Ownership. The BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before 1) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5 percent of such shares; 2) acquiring all or substantially all of the assets of another bank or bank holding company; or 3) merging or consolidating with another bank holding company.

Holding Company Control of Nonbanks. With some exceptions, the BHCA also prohibits a bank holding company from acquiring or retaining direct or indirect ownership or control of more than 5 percent of the voting shares of any company that is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities that, by federal statute, agency regulation or order, have been identified as activities closely related to the business of banking or of managing or controlling banks.

Transactions with Affiliates. Bank subsidiaries of a bank holding company are subject to restrictions imposed by the Federal Reserve Act on extensions of credit to the holding company or its subsidiaries, on investments in securities, and on the use of securities as collateral for loans to any borrower. These regulations and restrictions may limit the Company’s ability to obtain funds from the bank subsidiaries for its cash needs, including funds for payment of dividends, interest and operational expenses.

Tying Arrangements. The Company is prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, sale or lease of property or furnishing of services. For example, with certain exceptions, neither the Company nor the Banks may condition an extension of credit to a customer on either 1) a requirement that the customer obtain additional services provided by the Company or the Banks or 2) an agreement by the customer to refrain from obtaining other services from a competitor.

Support of Bank Subsidiaries. Under Federal Reserve policy and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the Company is expected to act as a source of financial and managerial strength to its Banks. This means that the Company is required to commit, as necessary, resources to support the Banks. Any capital loans a bank holding company makes to its bank subsidiaries are subordinate to deposits and to certain other indebtedness of the bank subsidiaries.

State Law Restrictions. As a Montana corporation, the Company is subject to certain limitations and restrictions under applicable Montana corporate law. For example, state law restrictions in Montana include limitations and restrictions relating to indemnification of directors, distributions to shareholders, transactions involving directors, officers or interested shareholders, maintenance of books, records and minutes, and observance of certain corporate formalities.

The Bank Subsidiaries

Glacier, First Security, Western, Valley, Big Sky, and First Bank-MT are subject to regulation and supervision by the Montana Department of Administration’s Banking and Financial Institutions Division and the FDIC.

Mountain West and Citizens are subject to regulation and supervision by the Idaho Department of Finance and by the FDIC. In addition, Mountain West’s Utah and Washington branches are subject to regulation by the Utah Department of Financial Institutions and the Washington Department of Financial Institutions, respectively.

1st Bank and First Bank-WY are subject to regulation and supervision by the Wyoming Division of Banking and by the FDIC. In addition, 1st Bank’s Utah branches are subject to regulation by the Utah Department of Financial Institutions.

San Juans is subject to regulation by the Colorado Department of Regulatory Agencies-Division of Banking and by the FDIC.

The federal laws that apply to the Banks regulate, among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds, and the nature, amount of, and collateral for loans. Federal laws also regulate community reinvestment and insider credit transactions and impose safety and soundness standards.

Consumer Protection. The Banks are subject to a variety of federal and state consumer protection laws and regulations that govern their relationship with consumers including laws and regulations that impose certain disclosure requirements and regulate the manner in which they take deposits, make and collect loans, and provide other services. Failure to comply with these laws and regulations may subject the Banks to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages, and the loss of certain contractual rights.

Community Reinvestment. The Community Reinvestment Act of 1977 requires that, in connection with examinations of financial institutions within their jurisdiction, federal bank regulators must evaluate the record of financial institutions in meeting the credit needs of their local communities, including low and moderate-income neighborhoods, consistent with the safe and sound operation of those banks. A bank’s community reinvestment record is also considered by the applicable banking agencies in evaluating mergers, acquisitions, and applications to open a branch or facility.

Insider Credit Transactions. Banks are also subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders, and their related interests. Extensions of credit 1) must be made on substantially the same terms, including interest rates and collateral, and follow credit underwriting procedures that are at least as stringent, as those prevailing at the time for comparable transactions with persons not related to the lending bank; and 2) must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to certain lending limits and restrictions on overdrafts to insiders. A violation of these restrictions may result in the assessment of substantial civil monetary penalties, regulatory enforcement actions, and other regulatory sanctions.

Regulation of Management. Federal law 1) sets forth circumstances under which officers or directors of a bank may be removed by the institution’s federal supervisory agency; 2) places restraints on lending by a bank to its executive officers, directors, principal shareholders, and their related interests; and 3) generally prohibits management personnel of a bank from serving as directors or in other management positions of another financial institution whose assets exceed a specified amount or which has an office within a specified geographic area.

Safety and Soundness Standards. Certain non-capital safety and soundness standards are also imposed upon the Banks. These standards cover, among other things, internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings and stock valuation. An institution that fails to meet these standards may be subject to regulatory sanctions.

Interstate Banking and Branching

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Act”) together with the Dodd-Frank Act relaxed prior interstate branching restrictions under federal law by permitting, subject to regulatory approval, state and federally chartered commercial banks to establish branches in states where the laws permit banks chartered in such states to establish branches. The Interstate Act requires regulators to consult with community organizations before permitting an interstate institution to close a branch in a low-income area. Federal bank regulations prohibit banks from using their interstate branches primarily for deposit production and federal bank regulatory agencies have implemented a loan-to-deposit ratio screen to ensure compliance with this prohibition.

Dividends

A principal source of the Company’s cash is from dividends received from the Banks, which are subject to government regulation and limitation. Regulatory authorities may prohibit banks and bank holding companies from paying dividends in a manner that would constitute an unsafe or unsound banking practice. In addition, a bank may not pay cash dividends if that payment could reduce the amount of its capital below that necessary to meet minimum applicable regulatory capital requirements. State law limits a bank’s ability to pay dividends that are greater than a certain amount without approval of the applicable agency. Additionally, current guidance from the Federal Reserve provides, among other things, that dividends per share on the Company’s common stock generally should not exceed earnings per share, measured over the previous four fiscal quarters.

Capital Adequacy

Regulatory Capital Guidelines. Federal bank regulatory agencies use capital adequacy guidelines in the examination and regulation of bank holding companies and banks. The guidelines are “risk-based,” meaning that they are designed to make capital requirements more sensitive to differences in risk profiles among banks and bank holding companies.

Tier I and Tier II Capital. Under the guidelines, an institution’s capital is divided into two broad categories, Tier I capital and Tier II capital. Tier I capital generally consists of common shareholders’ equity, (including surplus and undivided profits), qualifying non-cumulative perpetual preferred stock, and qualified minority interests in the equity accounts of consolidated subsidiaries. Tier II capital generally consists of the allowance for loan and lease losses, hybrid capital instruments, and qualifying subordinated debt. The sum of Tier I capital and Tier II capital represents an institution’s total capital. The guidelines require that at least 50 percent of an institution’s total capital consist of Tier I capital.

Risk-based Capital Ratios. The adequacy of an institution’s capital is gauged primarily with reference to the institution’s risk-weighted assets. The guidelines assign risk weightings to an institution’s assets in an effort to quantify the relative risk of each asset and to determine the minimum capital required to support that risk. An institution’s risk-weighted assets are then compared with its Tier I capital and total capital to arrive at a Tier I risk-based capital ratio and a total risk-based capital ratio, respectively. The guidelines provide that an institution must have a minimum Tier I risk-based capital ratio of 4 percent and a minimum total risk-based capital ratio of 8 percent.

Leverage Ratio. The guidelines also employ a leverage ratio, which is Tier I capital as a percentage of average total assets, less intangibles. The principal objective of the leverage ratio is to constrain the maximum degree to which banks may leverage its equity capital base. The minimum leverage ratio is 4 percent.

Prompt Corrective Action. Under the guidelines, an institution is assigned to one of five capital categories depending on its total risk-based capital ratio, Tier I risk-based capital ratio, and leverage ratio, together with certain subjective factors. The categories range from “well capitalized” to “critically undercapitalized.” Institutions that are “undercapitalized” or lower are subject to certain mandatory supervisory corrective actions. At each successively lower capital category, an insured bank is subject to increased restrictions on its operations. During these challenging economic times, the federal banking regulators have actively enforced these provisions.

Regulatory Oversight and Examination

The Federal Reserve conducts periodic inspections of bank holding companies, which are performed both onsite and offsite. The supervisory objectives of the inspection program are to ascertain whether the financial strength of a bank holding company is maintained on an ongoing basis and to determine the effects or consequences of transactions between a bank holding company or its non-banking subsidiaries and its bank subsidiaries. For bank holding companies under $10 billion in assets, the inspection type and frequency varies depending on asset size, complexity of the organization, and the bank holding company’s rating at its last inspection.

Banks are subject to periodic examinations by their primary regulators. Bank examinations have evolved from reliance on transaction testing in assessing a bank’s condition to a risk-focused approach. These examinations are extensive and cover the entire breadth of operations of a bank. Generally, safety and soundness examinations occur on an 18-month cycle for banks under $500 million in total assets that are well capitalized and without regulatory issues, and 12-months otherwise. Examinations alternate between the federal and state bank regulatory agency or may occur on a combined schedule. The frequency of consumer compliance and CRA examinations is linked to the size of the institution and its compliance and CRA ratings at its most recent examinations. However, the examination authority of the Federal Reserve and the FDIC allows them to examine supervised banks as frequently as deemed necessary based on the condition of the bank or as a result of certain triggering events.

Corporate Governance and Accounting

Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 (the “Act”) addresses, among other things, corporate governance, auditing and accounting, enhanced and timely disclosure of corporate information, and penalties for non-compliance. Generally, the Act 1) requires chief executive officers and chief financial officers to certify to the accuracy of periodic reports filed with the SEC; 2) imposes specific and enhanced corporate disclosure requirements; 3) accelerates the time frame for reporting of insider transactions and periodic disclosures by public companies; 4) requires companies to adopt and disclose information about corporate governance practices, including whether or not they have adopted a code of ethics for senior financial officers and whether the audit committee includes at least one “audit committee financial expert;” and 5) requires the SEC, based on certain enumerated factors, to regularly and systematically review corporate filings.

As a publicly reporting company, the Company is subject to the requirements of the Act and related rules and regulations issued by the SEC and NASDAQ. After enactment, the Company updated its policies and procedures to comply with the Act’s requirements and has found that such compliance, including compliance with Section 404 of the Act relating to the Company’s internal control over financial reporting, has resulted in significant additional expense for the Company. The Company anticipates that it will continue to incur such additional expense in its ongoing compliance.

Anti-Terrorism

USA Patriot Act of 2001. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, intended to combat terrorism, was renewed with certain amendments in 2006 (the “Patriot Act”). The Patriot Act, in relevant part, 1) prohibits banks from providing correspondent accounts directly to foreign shell banks; 2) imposes due diligence requirements on banks opening or holding accounts for foreign financial institutions or wealthy foreign individuals; 3) requires financial institutions to establish an anti-money-laundering compliance program; and 4) eliminates civil liability for persons who file suspicious activity reports.

Financial Services Modernization

Gramm-Leach-Bliley Act of 1999. The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (the “GLB Act”) brought about significant changes to the laws affecting banks and bank holding companies. Generally, the GLB Act 1) repeals historical restrictions on preventing banks from affiliating with securities firms; 2) provides a uniform framework for the activities of banks, savings institutions and their holding companies; 3) broadens the activities that may be conducted by national banks and banking subsidiaries of bank holding companies; 4) provides an enhanced framework for protecting the privacy of consumer information and requires notification to consumers of bank privacy policies; and 5) addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions. Bank holding companies that qualify and elect to become financial holding companies can engage in a wider variety of financial activities than permitted under previous law, particularly with respect to insurance and securities underwriting activities.

The Emergency Economic Stabilization Act of 2008

Emergency Economic Stabilization Act of 2008. In response to market turmoil and financial crises affecting the overall banking system and financial markets in the United States, the Emergency Economic Stabilization Act of 2008 (the “EESA”) was enacted on October 3, 2008. EESA provides the United States Treasury Department (the “Treasury”) with broad authority to implement certain actions intended to help restore stability and liquidity to the U.S. financial markets.

Troubled Asset Relief Program. Under the EESA, the Treasury has authority, among other things, to purchase up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions pursuant to the Troubled Asset Relief Program (“TARP”). The purpose of TARP is to restore confidence and stability to the U.S. banking system and to encourage financial institutions to increase lending to customers and to each other. Pursuant to the EESA, the Treasury was initially authorized to use $350 billion for TARP. Of this amount, the Treasury allocated $250 billion to the TARP Capital Purchase Program (“CPP”), which funds were used to purchase preferred stock from qualifying financial institutions. After receiving preliminary approval from Treasury to participate in the program, the Company elected not to participate in light of its capital position and due to its ability to raise capital successfully in private equity markets.

Temporary Liquidity Guarantee Program. Another program established pursuant to the EESA is the Temporary Liquidity Guarantee Program (“TLGP”), which 1) removed the limit on FDIC deposit insurance coverage for non-interest bearing transaction accounts through December 31, 2009, and 2) provided FDIC backing for certain types of senior unsecured debt issued from October 14, 2008 through June 30, 2009. The end-date for issuing senior unsecured debt was later extended to October 31, 2009 and the FDIC also extended the Transaction Account Guarantee portion of the TLGP through December 31, 2010. In November 2010, the FDIC issued a final rule to implement provisions of the Dodd-Frank Act that provides for temporary unlimited coverage for non-interest-bearing transaction accounts. The separate coverage for non-interest-bearing transaction accounts became effective on December 31, 2010 and terminates on December 31, 2012.

Deposit Insurance

The bank subsidiaries’ deposits are insured under the Federal Deposit Insurance Act, up to the maximum applicable limits and are subject to deposit insurance assessments designed to tie what banks pay for deposit insurance more closely to the risks they pose. The Banks have prepaid their quarterly deposit insurance assessments for 2012 pursuant to applicable FDIC regulations. In February 2011, the FDIC approved new rules to, among other things, change the assessment base from one based on domestic deposits (as it has been since 1935) to one based on assets (average consolidated total assets minus average tangible equity). Since the new assessment base is larger than the base used under prior regulations, the rules also lower assessment rates, so that the total amount of revenue collected by the FDIC from the industry is not significantly altered. The rules also revise the deposit insurance assessment system for large financial institutions, defined as institutions with at least $10 billion in assets. The rules revise the assessment rate schedule, effective April 1, 2011, and adopt additional rate schedules that will go into effect when the Deposit Insurance Fund reserve ratio reaches various milestones. The Dodd-Frank Act requires the FDIC to increase the reserve ratio of the Deposit Insurance Fund from 1.15 percent to 1.35 percent of insured deposits by 2020 and eliminates the requirement that the FDIC pay dividends to insured depository institutions when the reserve ratio exceeds certain thresholds.

Insurance of Deposit Accounts. The EESA included a provision for a temporary increase from $100,000 to $250,000 per depositor in deposit insurance effective October 3, 2008 through December 31, 2010. On May 20, 2009, the temporary increase was extended through December 31, 2013. The Dodd-Frank Act permanently raises the current standard maximum deposit insurance amount to $250,000. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category. EESA also temporarily raised the limit on federal deposit insurance coverage to an unlimited amount for non-interest or low-interest bearing demand deposits. Pursuant to the Dodd-Frank Act, unlimited coverage for non-interest transaction accounts will continue until December 31, 2012.

Recent Legislation

Dodd-Frank Wall Street Reform and Consumer Protection Act. As a result of the recent financial crises, on July 21, 2010 the Dodd-Frank Act was signed into law. The Dodd-Frank Act is expected to have a broad impact on the financial services industry, including significant regulatory and compliance changes and changes to corporate governance matters affecting public companies. Not all of the regulations implementing these changes have been promulgated. As a result, the Company cannot determine the full impact on its business and operations at this time. However, the Dodd-Frank Act is expected to have a significant impact on the Company’s business operations as its provisions take effect. Some of the provisions of the Dodd-Frank Act that may impact the Company’s business are summarized below.

Holding Company Capital Requirements. Under the Dodd-Frank Act, trust preferred securities will generally be excluded from the Tier 1 capital of a Bank holding company between $500 million and $15 billion in assets unless such securities were issued prior to May 19, 2010.

Corporate Governance. The Dodd-Frank Act requires publicly traded companies to provide their shareholders with 1) a non-binding shareholder vote on executive compensation; 2) a non-binding shareholder vote on the frequency of such vote; 3) disclosure of “golden parachute” arrangements in connection with specified change in control transactions; and 4) a non-binding shareholder vote on golden parachute arrangements in connection with these change in control transactions. Except with respect to “smaller reporting companies” and participants in the CPP, the new rules applied to proxy statements relating to annual meetings of shareholders held after January 20, 2011. “Smaller reporting companies,” those with a public float of less than $75 million, are required to include the non-binding shareholder votes on executive compensation and the frequency thereof in proxy statements relating to annual meetings occurring on or after January 21, 2013.

Prohibition Against Charter Conversions of Troubled Institutions. The Dodd-Frank Act generally prohibits a depository institution from converting from a state to federal charter, or vice versa, while it is the subject to an enforcement action unless the depository institution seeks prior approval from its regulator and complies with specified procedures to ensure compliance with the enforcement action.

Debit Card Interchange Fees. The Dodd-Frank Act requires the amount of any interchange fee charged by a debit card issuer with respect to a debit card transaction to be reasonable and proportional to the cost incurred by the issuer. While the restrictions on interchange fees do not apply to banks that, together with their affiliates, have assets of less than $10 billion, the rule could affect the competitiveness of debit cards issued by smaller banks.

Bureau of Consumer Financial Protection. The Dodd-Frank Act creates a new, independent federal agency called the Bureau of Consumer Financial Protection (“CFPB”) within the Federal Reserve Board. The CFPB has broad rulemaking, supervision and enforcement authority for a wide range of consumer protection laws applicable to banks and thrifts with greater than $10 billion in assets. Smaller institutions are subject to certain rules promulgated by the CFPB but will continue to be examined and supervised by their federal banking regulators for compliance purposes.

Repeal of Demand Deposit Interest Prohibition. The Dodd-Frank Act repeals the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts.

Overdrafts. On November 17, 2009, the Board of Governors of the Federal Reserve System promulgated the Electronic Fund Transfer rule with an effective date of January 19, 2010 and a mandatory compliance date of July 1, 2010. The rule, which applies to all FDIC-regulated institutions, prohibits financial institutions from assessing an overdraft fee for paying automated teller machine (“ATM”) and one-time point-of-sale debit card transactions, unless the customer affirmatively opts in to the overdraft service for those types of transactions. The opt-in provision establishes requirements for clear disclosure of fees and terms of overdraft services for ATM and one-time debit card transactions. Since a percentage of the Company’s service charges on deposits are in the form of overdraft fees on point-of-sale transactions, this could have an adverse impact on the Company’s non-interest income.

Proposed Legislation

General. Proposed legislation is introduced in almost every legislative session. Such legislation could dramatically affect the regulation of the banking industry. The Company cannot predict if any such legislation will be adopted or if it is adopted how it would affect the business of the Company or the Banks. Past history has demonstrated that new legislation or changes to existing laws or regulations usually results in a greater compliance burden and, therefore, generally increases the cost of doing business.

Possible Changes to Capital Requirements Resulting from Basel III. Basel III updates and revises significantly the current international bank capital accords (so-called “Basel I” and “Basel II”). Basel III is intended to be implemented by participating countries for large, internationally active banks. However, standards consistent with Basel III will be formally implemented in the United States through a series of regulations, some of which may apply to other banks. Among other things, Basel III creates “Tier 1 common equity,” a new measure of regulatory capital closer to pure tangible common equity than the present Tier 1 definition. Basel III also increases minimum capital ratios. For the new concept of Tier 1 common equity, the minimum ratio is 4.5 percent of risk-weighted assets. For Tier 1 and total capital the Basel III minimums are 6 percent and 8 percent respectively. Capital buffers comprising common equity equal to 2.5 percent of risk-weighted assets are added to each of these minimums to enable banks to absorb losses during a stressed period while remaining above their regulatory minimum ratios. The Company cannot predict the extent to which Basel III will be adopted or, if adopted, how it will apply to the Company or the Banks.

Effects of Government Monetary Policy

The Company’s earnings and growth are affected not only by general economic conditions, but also by the fiscal and monetary policies of the federal government, particularly the Federal Reserve. The Federal Reserve implements national monetary policy for such purposes as curbing inflation and combating recession, but its open market operations in U.S. government securities, control of the discount rate applicable to borrowings from the Federal Reserve, and establishment of reserve requirements against certain deposits, influence the growth of bank loans, investments and deposits, and also affect interest rates charged on loans or paid on deposits. The nature and impact of future changes in monetary policies and their impact on the Company or the Banks cannot be predicted with certainty.

Item 1A.

Risk Factors

The Company and its eleven independent wholly-owned community bank subsidiaries are exposed to certain risks. The following is a discussion of the most significant risks and uncertainties that may affect the Company’s business, financial condition and future results.

The continued challenging economic environment could have a material adverse effect on the Company’s future results of operations or market price of stock.

The national economy, and the financial services sector in particular, are still facing significant challenges. Substantially all of the Company’s loans are to businesses and individuals in Montana, Idaho, Wyoming, Utah, Colorado and Washington, markets facing many of the same challenges as the national economy, including elevated unemployment and declines in commercial and residential real estate. Although some economic indicators are improving both nationally and in the Company’s markets, unemployment remains high and there remains substantial uncertainty regarding when and how strongly a sustained economic recovery will occur, and whether there will be another recession. These economic conditions can cause borrowers to be unable to pay their loans. The inability of borrowers to repay loans can erode earnings by reducing net interest income and by requiring the Company to add to its allowance for loan and lease losses. While the Company cannot accurately predict how long these conditions may exist, the challenging economy could continue to present risks for some time for the industry and Company. A further deterioration in economic conditions in the nation as a whole or in the Company’s markets could result in the following consequences, any of which could have an adverse impact, which may be material, on the Company’s business, financial condition, results of operations and prospects, and could also cause the market price of the Company’s stock to decline:

•

loan delinquencies may increase further;

•

problem assets and foreclosures may increase further;

•

collateral for loans made may decline further in value, in turn reducing customers’ borrowing power, reducing the value of assets and collateral associated with existing loans and increasing the potential severity of loss in the event of loan defaults;

•

demand for banking products and services may decline; and

•

low cost or non-interest bearing deposits may decrease.

The allowance for loan and lease losses may not be adequate to cover actual loan losses, which could adversely affect earnings.

The Company maintains an allowance for loan and lease losses (“ALLL” or “allowance”) in an amount that it believes is adequate to provide for losses in the loan portfolio. While the Company strives to carefully manage and monitor credit quality and to identify loans that may become non-performing, at any time there are loans included in the portfolio that will result in losses, but that have not been identified as non-performing or potential problem loans. With respect to real estate loans and property taken in satisfaction of such loans (“other real estate owned” or “OREO”), the Company can be required to recognize significant declines in the value of the underlying real estate collateral or OREO quite suddenly as values are updated through appraisals and evaluations performed in the normal course of monitoring the credit quality of the loans. There are many factors that can cause the value of real estate to decline, including declines in the general real estate market, changes in methodology applied by appraisers, and/or using a different appraiser than was used for the prior appraisal or evaluation. The Company’s ability to recover on real estate loans by selling or disposing of the underlying real estate collateral is adversely impacted by declining values, which increases the likelihood the Company will suffer losses on defaulted loans beyond the amounts provided for in the ALLL. This, in turn, could require material increases in the Company’s provision for loan losses and ALLL. By closely monitoring credit quality, the Company attempts to identify deteriorating loans before they become non-performing assets and adjust the ALLL accordingly. However, because future events are uncertain, and if difficult economic conditions continue or worsen, there may be loans that deteriorate to a non-performing status in an accelerated time frame. As a result, future additions to the ALLL may be necessary. Because the loan portfolio contains a number of loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in non-performing loans, requiring an increase to the ALLL. Additionally, future significant additions to the ALLL may be required based on changes in the mix of loans comprising the portfolio, changes in the financial condition of borrowers, which may result from changes in economic conditions, or changes in the assumptions used in determining the ALLL. Additionally, federal banking regulators, as an integral part of their supervisory function, periodically review the Company’s loan portfolio and the adequacy of the ALLL. These regulatory agencies may require the Company to recognize further loan loss provisions or charge-offs based upon their judgments, which may be different from the Company’s judgments. Any increase in the ALLL would have an adverse effect, which could be material, on the Company’s financial condition and results of operations.

The Company has a high concentration of loans secured by real estate, so any further deterioration in the real estate markets could require material increases in the ALLL and adversely affect the Company’s financial condition and results of operations.

The Company has a high degree of concentration in loans secured by real estate. A sluggish recovery, or a continuation of the downturn in the economic conditions or real estate values of the Company’s market areas, could adversely impact borrowers’ ability to repay loans secured by real estate and the value of real estate collateral, thereby increasing the credit risk associated with the loan portfolio. The Company’s ability to recover on these loans by selling or disposing of the underlying real estate collateral is adversely impacted by declining real estate values, which increases the likelihood that the Company will suffer losses on defaulted loans secured by real estate beyond the amounts provided for in the ALLL. This, in turn, could require material increases in the ALLL which would adversely affect the Company’s financial condition and results of operations, perhaps materially.

There can be no assurance the Company will be able to continue paying dividends on the common stock at recent levels.

The ability to pay dividends on the Company’s common stock depends on a variety of factors. The Company paid dividends of $0.13 per share in each quarter of 2009, 2010 and 2011. The Company may not be able to continue paying quarterly dividends commensurate with recent levels. In that regard, the Federal Reserve now is requiring the Company to provide prior written notice and related information for staff review before declaring or paying dividends. In addition, current guidance from the Federal Reserve provides, among other things, that dividends per share generally should not exceed earnings per share. As a result, future dividends will generally depend on the sufficiency of earnings. Furthermore, the Company’s ability to pay dividends depends on the amount of dividends paid to the Company by its subsidiaries, which is also subject to government regulation, oversight and review. In addition, the ability of some of the bank subsidiaries to pay dividends to the Company is subject to prior regulatory approval.

The Company may not be able to continue to grow organically or through acquisitions.

Historically, the Company has expanded through a combination of organic growth and acquisitions. If market and regulatory conditions remain challenging, the Company may be unable to grow organically or successfully complete potential future acquisitions. In particular, while the Company intends to focus any near-term acquisition efforts on FDIC-assisted transactions within its existing market areas, there can be no assurance that such opportunities will become available on terms that are acceptable to the Company. Furthermore, there can be no assurance that the Company can successfully complete such transactions, since they are subject to a formal bid process and regulatory review and approval.

The FDIC has increased insurance premiums to rebuild and maintain the federal Deposit Insurance Fund and there may be additional future premium increases and special assessments.

In 2009, the FDIC imposed a special deposit insurance assessment of five basis points on all insured institutions, and also required insured institutions to prepay estimated quarterly risk-based assessments for periods through 2012.

The Dodd-Frank Act established 1.35 percent as the minimum Deposit Insurance Fund reserve ratio. The FDIC has determined that the fund reserve ratio should be 2.0 percent and has adopted a plan under which it will meet the statutory minimum fund reserve ratio of 1.35 percent by the statutory deadline of September 30, 2020. The Dodd-Frank Act requires the FDIC to offset the effect on institutions with assets less than $10 billion of the increase in the statutory minimum fund reserve ratio to 1.35 percent from the former statutory minimum of 1.15 percent. The FDIC has not announced how it will implement this offset or how larger institutions will be affected by it.

Despite the FDIC’s actions to restore the Deposit Insurance Fund, the fund will suffer additional losses in the future due to failures of insured institutions. There could be additional significant deposit insurance premium increases, special assessments or prepayments in order to restore the insurance fund’s reserve ratio. Any significant premium increases or special assessments could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s loan portfolio mix increases the exposure to credit risks tied to deteriorating conditions.

The loan portfolio contains a high percentage of commercial, commercial real estate, real estate acquisition and development loans in relation to the total loans and total assets. These types of loans have historically been viewed as having more risk of default than residential real estate loans or certain other types of loans or investments. In fact, the FDIC has issued pronouncements alerting banks of its concern about banks with a heavy concentration of commercial real estate loans. These types of loans also typically are larger than residential real estate loans and other commercial loans. Because the Company’s loan portfolio contains a significant number of commercial and commercial real estate loans with relatively large balances, the deterioration of one or more of these loans may cause a significant increase in non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for loan losses, or an increase in loan charge-offs, which could have a material adverse impact on results of operations and financial condition.

Non-performing assets have increased and could continue to increase, which could adversely affect the Company’s results of operations and financial condition.

Non-performing assets (which include OREO) adversely affect the Company’s net income and financial condition in various ways. The Company does not record interest income on non-accrual loans or OREO, thereby adversely affecting its income. When the Company takes collateral in foreclosures and similar proceedings, it is required to mark the related asset to the then fair value of the collateral, less estimated cost to sell, which may result in a charge-off of the value of the asset and lead the Company to increase the provision for loan losses. An increase in the level of non-performing assets also increases the Company’s risk profile and may impact the capital levels its regulators believe are appropriate in light of such risks. Continued decreases in the value of these assets, or the underlying collateral, or in these borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond the Company’s control, could adversely affect the Company’s business, results of operations and financial condition, perhaps materially. In addition to the carrying costs to maintain OREO, the resolution of non-performing assets increases the Company’s loan administration costs generally, and requires significant commitments of time from management and the Company’s directors, which reduces the time they have to focus on profitably growing the Company’s business. The Company may experience further increases in non-performing assets in the future.

A decline in the fair value of the Company’s investment portfolio could adversely affect earnings.

The fair value of the Company’s investment securities could decline as a result of factors including changes in market interest rates, credit quality and credit ratings, lack of market liquidity and other economic conditions. An investment security is impaired if the fair value of the security is less than the carrying value. When a security is impaired, the Company determines whether the impairment is temporary or other-than-temporary. If an impairment is determined to be other-than temporary, an impairment loss is recognized by reducing the amortized cost only for the credit loss associated with the other-than-temporary loss with a corresponding charge to earnings for a like amount. Any such impairment charge would have an adverse effect, which could be material, on the Company’s results of operations and financial condition.

With relatively soft loan demand and increased market liquidity, the investment securities portfolio has grown significantly and represented 44 percent of total assets at December 31, 2011. While the Company believes that the term of such investments has been kept relatively short, the Company is subject to interest rate risk exposure if rates were to increase sharply. Further, the change in the mix of the Company’s assets to more investment securities presents a different type of asset quality risk than the loan portfolio. While the Company believes a relatively conservative approach has been applied to the investment portfolio, there is always potential loss exposure under changing economic conditions. The Company’s investment securities portfolio has increased and now constitutes a much larger portion of assets with any attendant risks of such investments.

Recent and/or future U.S. credit downgrades or changes in outlook by major credit rating agencies may have an adverse effect on financial markets, including financial institutions and the financial industry.

On August 5, 2011, Standard and Poor’s downgraded the United States long-term debt rating from its AAA rating to AA+. On August 8, 2011, Standard and Poor’s downgraded from AAA to AA+ the credit ratings of certain long-term debt instruments issued by Fannie Mae and Freddie Mac and other U.S. government agencies linked to long-term United States debt. It is difficult to predict the effect of these actions, or any future downgrades or changes in outlook by Standard & Poor’s or either of the other two major credit rating agencies. However, these events could impact the trading market for U.S. government securities, including U.S. agency securities, and the securities markets more broadly, and consequently could impact the value and liquidity of financial assets, including assets in the Company’s investment portfolio. These actions could also create broader financial turmoil and uncertainty, which may negatively affect the global banking system and limit the availability of funding, including borrowing under securities sold under agreements to repurchase (“repurchase agreements”), at reasonable terms. In turn, this could have a material adverse effect on the Company’s liquidity, financial condition and results of operations.

Fluctuating interest rates can adversely affect profitability.

The Company’s profitability is dependent to a large extent upon net interest income, which is the difference (or “spread”) between the interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings, and other interest-bearing liabilities. Because of the differences in maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect the Company’s interest rate spread, and, in turn, profitability. The Company seeks to manage its interest rate risk within well established guidelines. Generally, the Company seeks an asset and liability structure that insulates net interest income from large deviations attributable to changes in market rates. However, the Company’s structures and practices to manage interest rate risk may not be effective in a highly volatile rate environment.

Interest rate swaps expose the Company to certain risks, and may not be effective in mitigating exposure to changes in interest rates.

Commencing in the fourth quarter of 2011, the Company entered into interest rate swap agreements in order to manage a portion of the risk to interest rate volatility. The Company anticipates that additional interest rate swaps may be entered into in the future. These swap agreements involve other risks, such as the risk that counterparties may fail to honor their obligations under these arrangements, leaving the Company vulnerable to interest rate movements. There can be no assurance that these arrangements will be effective in reducing the Company’s exposure to changes in interest rates.

If goodwill recorded in connection with acquisitions becomes additionally impaired, it could have an adverse impact on earnings and capital.

Accounting standards require the Company account for acquisitions using the acquisition method of accounting. Under acquisition accounting, if the purchase price of an acquired company exceeds the fair value of its net assets, the excess is carried on the acquirer’s balance sheet as goodwill. In accordance with accounting principles generally accepted in the United States of America, goodwill is not amortized but rather is evaluated for impairment on an annual basis or more frequently if events or circumstances indicate that a potential impairment exists. The Company has incurred an impairment of goodwill of $40.2 million ($32.6 million after-tax) during the third quarter of 2011. The Company continues to maintain $106 million in goodwill on its balance sheet and there can be no assurance that future evaluations of goodwill will not result in findings of additional impairment and write-downs, which could be material. While a non-cash item, additional impairment of goodwill could have a material adverse effect on the Company’s business, financial condition and results of operations. Furthermore, additional impairment of goodwill could subject the Company to regulatory limitations, including the ability to pay dividends on its common stock.

Growth through future acquisitions could, in some circumstances, adversely affect profitability or other performance measures.

The Company has in recent years acquired other financial institutions. The Company may in the future engage in selected acquisitions of additional financial institutions, including transactions that may receive assistance from the FDIC, although the Company may not be able to successfully complete any such transactions. There are risks associated with any such acquisitions that could adversely affect profitability and other performance measures. These risks include, among other things, incorrectly assessing the asset quality of a financial institution being acquired, encountering greater than anticipated cost of integrating acquired businesses into the Company’s operations, and being unable to profitably deploy funds acquired in an acquisition. The Company may not be able to continue to grow through acquisitions, and if it does, there is a risk of negative impacts of such acquisitions on the Company’s operating results and financial condition.

The Company anticipates that it might issue capital stock in connection with future acquisitions. Acquisitions and related issuances of stock may have a dilutive effect on earnings per share and the percentage ownership of current shareholders.

A tightening of the credit markets may make it difficult to obtain adequate funding for loan growth, which could adversely affect earnings.

A tightening of the credit markets and the inability to obtain or retain adequate funds for continued loan growth at an acceptable cost may negatively affect the Company’s asset growth and liquidity position and, therefore, earnings capability. In addition to core deposit growth, maturity of investment securities and loan payments, the Company also relies on alternative funding sources through correspondent banking, and borrowing lines with the Federal Reserve Bank and the FHLB to fund loans. In the event the current economic downturn continues, particularly in the housing market, these resources could be negatively affected, both as to price and availability, which would limit and or raise the cost of the funds available to the Company.

The Company may pursue additional capital in the future, which could dilute the holders of the Company’s outstanding common stock and may adversely affect the market price of common stock.

In the current economic environment, the Company believes it is prudent to consider alternatives for raising capital when opportunities to raise capital at attractive prices present themselves, in order to further strengthen the Company’s capital and better position itself to take advantage of opportunities that may arise in the future. Such alternatives may include issuance and sale of common or preferred stock or borrowings by the Company, with proceeds contributed to the bank subsidiaries. Any such capital raising alternatives could dilute the holders of the Company’s outstanding common stock, and may adversely affect the market price of the Company’s common stock and performance measures such as earnings per share.

Business would be harmed if the Company lost the services of any of the senior management team.

The Company believes its success to date has been substantially dependent on its Chief Executive Officer and other members of the executive management team, and on the Presidents of its bank subsidiaries. The loss of any of these persons could have an adverse effect on the Company’s business and future growth prospects.

Competition in the Company’s market areas may limit future success.

Commercial banking is a highly competitive business. The Company competes with other commercial banks, thrifts, credit unions, finance, insurance and other non-depository companies operating in its market areas. The Company is subject to substantial competition for loans and deposits from other financial institutions. Some of its competitors are not subject to the same degree of regulation and restriction as the Company. Some of the Company’s competitors have greater financial resources than the Company. If the Company is unable to effectively compete in its market areas, the Company’s business, results of operations and prospects could be adversely affected.

The Company operates in a highly regulated environment and changes or increases in, or supervisory enforcement of, banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect the Company.

The Company is subject to extensive regulation, supervision and examination by federal and state banking authorities. In addition, as a publicly-traded company, the Company is subject to regulation by the SEC. Any change in applicable regulations or federal, state or local legislation or in policies or interpretations or regulatory approaches to compliance and enforcement, income tax laws and accounting principles could have a substantial impact on the Company and its operations. Changes in laws and regulations may also increase expenses by imposing additional fees or taxes or restrictions on operations. Additional legislation and regulations that could significantly affect powers, authority and operations may be enacted or adopted in the future, which could have a material adverse effect on the Company’s financial condition and results of operations. Failure to appropriately comply with any such laws, regulations or principles could result in sanctions by regulatory agencies or damage to the Company’s reputation, all of which could adversely affect the Company’s business, financial condition or results of operations.

In that regard, sweeping financial regulatory reform legislation was enacted in July 2010. Among other provisions, the new legislation 1) creates a new Bureau of Consumer Financial Protection with broad powers to regulate consumer financial products such as credit cards and mortgages; 2) creates a Financial Stability Oversight Council comprised of the heads of other regulatory agencies; 3) will lead to new capital requirements from federal banking regulatory agencies; 4) places new limits on electronic debt card interchange fees; and 5) requires the SEC and national stock exchanges to adopt significant new corporate governance and executive compensation reforms. The new legislation and regulations are expected to increase the overall costs of regulatory compliance.

Further, regulators have significant discretion and authority to prevent or remedy unsafe or unsound practices or violations of laws or regulations by financial institutions and bank holding companies in the performance of their supervisory and enforcement duties. Recently, these powers have been utilized more frequently due to the challenging national, regional and local economic conditions. The exercise of regulatory authority may have a negative impact on the Company’s financial condition and results of operations. Additionally, the Company’s business is affected significantly by the fiscal and monetary policies of the U.S. federal government and its agencies, including the Federal Reserve Board.

The Company cannot accurately predict the full effects of recent legislation or the various other governmental, regulatory, monetary and fiscal initiatives which have been and may be enacted on the financial markets, on the Company and on its bank subsidiaries. The terms and costs of these activities, or the failure of these actions to help stabilize the financial markets, asset prices, market liquidity and a continuation or worsening of current financial market and economic conditions could materially and adversely affect the Company’s business, financial condition, results of operations, and the trading price of the Company’s common stock.

The Company has various anti-takeover measures that could impede a takeover.

The Company’s articles of incorporation include certain provisions that could make more difficult the acquisition of the Company by means of a tender offer, a proxy contest, merger or otherwise. These provisions include a requirement that any “Business Combination” (as defined in the articles of incorporation) be approved by at least 80 percent of the voting power of the then-outstanding shares, unless it is either approved by the Board of Directors or certain price and procedural requirements are satisfied. In addition, the authorization of preferred stock, which is intended primarily as a financing tool and not as a defensive measure against takeovers, may potentially be used by management to make more difficult uninvited attempts to acquire control of the Company. These provisions may have the effect of lengthening the time required for a person to acquire control of the Company through a tender offer, proxy contest or otherwise, and may deter any potentially unfriendly offers or other efforts to obtain control of the Company. This could deprive the Company’s shareholders of opportunities to realize a premium for their Glacier Bancorp, Inc. common stock, even in circumstances where such action is favored by a majority of the Company’s shareholders.

Item 1B.

Unresolved Staff Comments

None

Item 2.

Properties

At December 31, 2011, the Company owned 84 of its 106 offices. The remaining 22 offices were leased and include 5 offices in Montana, 12 offices in Idaho, 2 offices in Wyoming, 1 office in Colorado, 1 office in Utah, and 1 office in Washington. Including its headquarters, the aggregate book value of Company-owned offices is $119 million. The following schedule provides property information for the Company as of December 31, 2011.


(Dollars in thousands)	Properties Leased		Properties Owned		Net Book Value

Glacier		2		15	$	22,879
Mountain West		14		14		19,136
First Security		2		11		13,098
Western		1		7		14,439
1st Bank		1		11		10,313
Valley		—		6		7,749
Big Sky		—		5		9,848
First Bank-WY		1		3		6,360
Citizens		—		6		6,262
First Bank-MT		—		3		750
San Juans		1		2		2,949
Parent		—		1		4,776

		22		84	$	118,559

The Company believes that all of its facilities are well maintained, generally adequate and suitable for the current operations of its business, as well as fully utilized. In the normal course of business, new locations and facility upgrades occur as needed.

For additional information regarding the Company’s premises and equipment and lease obligations, see Notes 5 and 21 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”

Item 3.

Legal Proceedings

The Company and its subsidiaries are parties to various claims, legal actions and complaints in the ordinary course of their businesses. In the Company’s opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the consolidated financial position or results of operations of the Company.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s stock trades on the NASDAQ Global Select Market under the symbol: GBCI. The primary market makers during the year are listed below:


Barclays Capital Inc./Le	Credit Suisse Securities USA	D.A. Davidson & Co., Inc.
Deutsche Banc Alex Brown	Instinet, LLC	Knight Capital Americas, L.P.
Latour Trading LLC	Merrill Lynch, Pierce, Fenner	Morgan Stanley & Co. LLC
Octeg, LLC	Penson Financial Services	RBC Capital Markets Corp.
Tradebot Systems, Inc.	UBS Securities LLC	Wedbush Securities Inc.

The market range of high and low closing prices for the Company’s common stock for the periods indicated are shown below. As of December 31, 2011, there were approximately 1,473 shareholders of record for the Company’s common stock.


	2011				2010
Quarter	High		Low		High		Low
First	$	15.94	$	14.09	$	15.94	$	13.75
Second		15.29		12.97		18.88		14.67
Third		13.75		9.23		16.73		13.75
Fourth		12.51		9.09		15.76		13.00

The Company paid cash dividends on its common stock of $0.52 per share for the years ended December 31, 2011 and 2010. Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations.

On March 22, 2010, the Company completed the common stock offering of 10,291,465 shares generating net proceeds, after underwriter discounts and offering expenses, of $145.5 million.

Unregistered Securities

There have been no securities of the Company sold within the last three years which were not registered under the Securities Act.

Issuer Stock Purchases

The Company made no stock repurchases during 2011.

Equity Compensation Plan Information

The Company currently maintains the 2005 Employee Stock Incentive Plan which was approved by the shareholders and provides for the issuance of stock-based compensation to officers, other employees and directors. Although the 1994 Director Stock Option Plan and the 1995 Employee Stock Option Plan expired in March 2009 and April 2005, respectively, there are issued options outstanding under both plans that have not been exercised as of December 31, 2011.

The following table sets forth information regarding outstanding options and shares reserved for future issuance under the following plans as of December 31, 2011:


Plan Category	Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in Column (a)) (c)

Equity compensation plans approved by the shareholders		1,446,860	$	19.52		3,722,053

Stock Performance Graph

The following graphs compare the yearly cumulative total return of the Company’s common stock over both a five-year and ten-year measurement period with the yearly cumulative total return on the stocks included in 1) the Russell 2000 Index, and 2) the SNL Bank Index comprised of banks or bank holding companies with total assets between $5 billion and $10 billion. Each of the cumulative total returns are computed assuming the reinvestment of dividends at the frequency with which dividends were paid during the applicable years.

LOGO

Item 6.

Selected Financial Data

The following financial data of the Company are derived from the Company’s historical audited financial statements and related notes. The information set forth below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and related notes contained elsewhere in this report.


																Compounded Annual Growth Rate
	December 31,															1-Year 2011/2010			5-Year 2011/2007
(Dollars in thousands, except per share data)	2011			2010			2009			2008			2007			1-Year 2011/2010			5-Year 2011/2007
Summary of financial condition
Total assets	$	7,187,906			6,759,287			6,191,795			5,553,970			4,817,330			6.3	%		10.0	%
Investment securities, available-for-sale		3,126,743			2,461,119			1,506,394			990,092			700,324			27.0	%		30.5	%
Loans receivable, net		3,328,619			3,612,182			3,920,988			3,998,478			3,516,999			(7.9	%)		1.2	%
Allowance for loan and lease losses		(137,516	)		(137,107	)		(142,927	)		(76,739	)		(54,413	)		0.3	%		22.8	%
Goodwill and intangibles		114,384			157,016			160,196			159,765			154,264			(27.2	%)		(4.6	%)
Deposits		4,821,213			4,521,902			4,100,152			3,262,475			3,184,478			6.6	%		8.5	%
Federal Home Loan Bank advances		1,069,046			965,141			790,367			338,456			538,949			10.8	%		28.3	%
Securities sold under agreements to repurchase and other borrowed funds		268,638			269,408			451,251			1,110,731			401,621			(0.3	%)		(4.5	%)
Stockholders’ equity		850,227			838,204			685,890			676,940			528,576			1.4	%		13.3	%
Equity per share¹		11.82			11.66			11.13			11.04			9.85			1.4	%		6.3	%
Equity as a percentage of total assets		11.83	%		12.40	%		11.08	%		12.19	%		10.97	%		(4.6	%)		3.0	%


											Compounded Annual Growth Rate
	Years ended December 31,										1-Year			5-Year
(Dollars in thousands, except per share data)	2011		2010		2009		2008		2007		2011/2010			2011/2007
Summary of operations
Interest income	$	280,109		288,402		302,494		302,985		304,760		(2.9	%)		2.0	%
Interest expense		44,494		53,634		57,167		90,372		121,291		(17.0	%)		(14.1	%)

Net interest income		235,615		234,768		245,327		212,613		183,469		0.4	%		8.3	%
Provision for loan losses		64,500		84,693		124,618		28,480		6,680		(23.8	%)		65.5	%
Non-interest income		78,199		87,546		86,474		61,034		64,818		(10.7	%)		8.6	%
Non-interest expense ²		191,965		187,948		168,818		145,909		137,917		2.1	%		11.3	%

Income before income taxes ²		57,349		49,673		38,365		99,258		103,690		15.5	%		(9.1	%)
Income tax (benefit) expense ²		7,265		7,343		3,991		33,601		35,087		(1.1	%)		(25.3	%)

Net income ²		50,084		42,330		34,374		65,657		68,603		18.3	%		(3.9	%)

Basic earnings per share^1,²		0.70		0.61		0.56		1.20		1.29		14.8	%		(10.7	%)
Diluted earnings per share^1,²		0.70		0.61		0.56		1.19		1.28		14.8	%		(10.4	%)
Dividends declared per share¹		0.52		0.52		0.52		0.52		0.50		0.0	%		2.9	%


	At or for the Years ended December 31,
(Dollars in thousands)	2011			2010			2009			2008			2007
Ratios
Return on average assets ²		0.72	%		0.67	%		0.60	%		1.31	%		1.49	%
Return on average equity ²		5.78	%		5.18	%		4.97	%		11.63	%		13.82	%
Dividend payout ratio ²		74.29	%		85.25	%		92.86	%		43.33	%		38.76	%
Average equity to average asset ratio		12.39	%		12.96	%		12.16	%		11.23	%		10.78	%
Net interest margin on average earning assets (tax equivalent)		3.89	%		4.21	%		4.82	%		4.70	%		4.50	%
Efficiency ratio ³		49.76	%		49.88	%		46.44	%		49.68	%		53.24	%
Allowance for loan and lease losses as a percent of loans		3.97	%		3.66	%		3.52	%		1.88	%		1.52	%
Allowance for loan and lease losses as a percent of nonperforming loans		102	%		70	%		70	%		105	%		484	%

Other data
Loans originated and acquired	$	1,650,418			1,935,311			2,430,967			2,456,749			2,576,260
Number of full time equivalent employees		1,653			1,674			1,643			1,571			1,480
Number of locations		106			105			106			101			97

¹	Revised for stock splits and dividends.

²	Excludes goodwill impairment charge of $32.6 million ($40.2 million pre-tax). For additional information on the goodwill impairment charge see the Non-GAAP Financial Measures section below.

Non-interest expense before other real estate owned expenses, core deposit intangibles amortization, goodwill impairment charges, and non-recurring expense items as a percentage of fully taxable equivalent net interest income and non-interest income, excluding gains or losses on sale of investments, other real estate owned income, and non-recurring income items.

Non-GAAP Financial Measures

In addition to the results presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), this Form 10-K contains certain non-GAAP financial measures. The Company believes that providing these non-GAAP financial measures provides investors with information useful in understanding the Company’s financial performance, performance trends, and financial position. While the Company uses these non-GAAP measures in its analysis of the Company’s performance, this information should not be considered an alternative to measurements required by GAAP.


	December 31, 2011
	Goodwill Impairment Charge,
(Dollars in thousands, except per share data)	GAAP			Net of Tax			Non-GAAP

Non-interest expense	$	232,124			(40,159	)		191,965
Income before income taxes	$	17,190			40,159			57,349
Income tax (benefit) expense	$	(281	)		7,546			7,265
Net income	$	17,471			32,613			50,084
Basic earnings per share	$	0.24			0.46			0.70
Diluted earnings per share	$	0.24			0.46			0.70
Return on average assets		0.25	%		0.47	%		0.72	%
Return on average equity		2.04	%		3.74	%		5.78	%
Dividend payout ratio		216.67	%		-142.38	%		74.29	%

The reconciling item between the GAAP and non-GAAP financial measures was the third quarter of 2011 goodwill impairment charge (net of tax) of $32.6 million.

•

The goodwill impairment charge was $40.2 million with a tax benefit of $7.6 million which resulted in a goodwill impairment charge (net of tax) of $32.6 million. The tax benefit applied only to the $19.4 million of goodwill associated with taxable acquisitions and was determined based on the Company’s marginal income tax rate of 38.9 percent.

•

The basic and diluted earnings per share reconciling items were determined based on the goodwill impairment charge (net of tax) divided by the weighted average diluted shares of 71,915,073.

•

The goodwill impairment charge (net of tax) was included in determining earnings for both the GAAP return on average assets and GAAP return on average equity. The average assets used in the GAAP and non-GAAP return on average assets ratios were $6.923 billion and $6.931 billion for the year ended December 31, 2011, respectively. The average equity used in the GAAP and non-GAAP return on average equity ratios were $858 million and $866 million for the year ended December 31, 2011, respectively.

•

The dividend payout ratio is calculated by dividing dividends declared per share by basic earnings per share. The non-GAAP dividend payout ratio uses the non-GAAP basic earnings per share for calculating the ratio.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 Consolidated Financial Statements and the notes thereto included in “Item 8. Financial Statements and Supplementary Data.”

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about management’s plans, objectives, expectations and intentions that are not historical facts, and other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “should,” “projects,” “seeks,” “estimates” or words of similar meaning. These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations in the forward-looking statements, including those set forth in this Annual Report on Form 10-K, or the documents incorporated by reference:

•

the risks associated with lending and potential adverse changes of the credit quality of loans in the Company’s portfolio, including as a result of declines in the housing and real estate markets in its geographic areas;

•

increased loan delinquency rates;

•

the risks presented by a continued economic downturn, which could adversely affect credit quality, loan collateral values, other real estate owned values, investment values, liquidity and capital levels, dividends and loan originations;

•

changes in market interest rates, which could adversely affect the Company’s net interest income and profitability;

•

legislative or regulatory changes that adversely affect the Company’s business, ability to complete pending or prospective future acquisitions, limit certain sources of revenue, or increase cost of operations;

•

costs or difficulties related to the integration of acquisitions;

•

the goodwill we have recorded in connection with acquisitions could become impaired, which may have an adverse impact on our earnings and capital;

•

reduced demand for banking products and services;

•

the risks presented by public stock market volatility, which could adversely affect the market price of our common stock and our ability to raise additional capital in the future;

•

competition from other financial services companies in our markets;

•

loss of services from the senior management team; and

•

the Company’s success in managing risks involved in the foregoing.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Risk Factors in Item 1A. Please take into account that forward-looking statements speak only as of the date of this Annual Report on Form 10-K (or documents incorporated by reference, if applicable). The Company does not undertake any obligation to publicly correct or update any forward-looking statement if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statement.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2011 COMPARED TO DECEMBER 31, 2010

Highlights and Overview

Net income for 2011 was $17.5 million, a decrease of $24.9 million from the prior year, and diluted earnings per share for 2011 was $0.24, a decrease of $0.37 per share from the prior year. The decrease in net income during 2011 compared to 2010 resulted from a goodwill impairment charge of $32.6 million ($40.2 million pre-tax) during 2011. For additional information regarding the goodwill impairment charge, see the section captioned “Critical Accounting Polices” included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Excluding the goodwill impairment charge, operating income for 2011 was $50.1 million, an increase of $7.8 million, or 18 percent, over the prior year. Diluted operating earnings per share was $0.70, an increase of 15 percent from the $0.61 earned in 2010.

The foremost reason for the increase in operating income was a reduction in the provision for loan losses of $20.2 million. During the year, there was increased pressure on the net interest margin as a percentage of earning assets, on a tax-equivalent basis, which was attributable to a lower yield and volume of loans coupled with an increase in lower yielding investment securities. The net interest margin decreased 32 basis points from 4.21 percent in 2010 to 3.89 percent in 2011. However, the Company worked diligently to maintain net interest income through the purchase of investment securities and the decrease in interest rates on deposits. Net interest income increased $847 thousand, or less than 1 percent, from the prior year.

The Company’s loan portfolio decreased from the prior year as a result of continued slowing loan demand, net charged-off loans, and repossession of foreclosed assets. The loan portfolio decreased by $283 million, or 8 percent, from the prior year end. During the year, there was improvement in the credit quality of the loan portfolio from the historically high levels in 2010. Non-performing assets were $213 million at year end, a decrease of $57.1 million, or 21 percent, from the prior year end and primarily the result of a decrease in the non-performing loans which decreased 31 percent from the prior year end.

Consistent with the prior year, the Company purchased investment securities throughout the year to offset the decrease in the loan portfolio. Investment securities, interest bearing deposits and federal funds sold, increased $721 million, or 30 percent, from the prior year end.

Non-interest bearing deposits increased $155 million, or 18 percent, during the year and interest bearing deposits increased by $144 million, or 4 percent, during the year. As a result of the increase in deposits, the Company required less borrowings to fund the investment growth and only increased FHLB advances by $104 million during the year. Tangible stockholders’ equity increased $54.7 million, or $0.76 per share, during the year and the Company and each of the bank subsidiaries have remained above the well capitalized levels required by regulators.

Looking forward, the Company’s future performance will depend on many factors including economic conditions in the markets the Company serves, interest rate changes, increasing competition for deposits and loans, loan quality, 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 Analysis

Assets

The following table summarizes the asset balances as of the dates indicated, and the amount and percentage changes from December 31, 2010:


	December 31,			December 31,
(Dollars in thousands)	2011			2010			$ Change			% Change

Cash on hand and in banks	$	104,674			71,465			33,209			46	%
Investment securities and interest bearing cash deposits		3,150,101			2,429,473			720,628			30	%
Loans receivable
Residential real estate		516,807			632,877			(116,070	)		-18	%
Commercial		2,295,927			2,451,091			(155,164	)		-6	%
Consumer and other		653,401			665,321			(11,920	)		-2	%

Loans receivable		3,466,135			3,749,289			(283,154	)		-8	%
Allowance for loan and lease losses		(137,516	)		(137,107	)		(409	)		0	%

Loans receivable, net		3,328,619			3,612,182			(283,563	)		-8	%


Other assets		604,512			646,167			(41,655	)		-6	%

Total assets	$	7,187,906			6,759,287			428,619			6	%

Investment securities and interest bearing deposits, increased $721 million, or 30 percent, from December 31, 2010. During the year, the Company purchased investment securities to primarily offset the lack of loan growth and to maintain interest income. The investment securities purchased during the current year were predominately U.S. Agency Collateralized Mortgage Obligations (“CMO”) with short weighted-average-lives and tax-exempt state and local government obligations. Investment securities represent 44 percent of total assets at December 31, 2011 versus 36 percent at December 31, 2010.

At December 31, 2011, the loan portfolio was $3.466 billion, a decrease of $283 million, or 8 percent, from total loans of $3.749 billion at December 31, 2010. Excluding net charge-offs of $64.1 million and loans transferred to OREO of $79.3 million, loans decreased $140 million, or 4 percent, from December 31, 2010. During the year, the largest decrease in dollars was in commercial loans which decreased $155 million, or 6 percent, from December 31, 2010. The largest percentage decrease was in real estate loans which decreased $116 million, or 18 percent, from December 31, 2010. The Company continues to reduce its exposure to land, lot and other construction loans which totaled $381 million as of December 31, 2011 and have decreased $168 million, or 31 percent, since the prior year end. The continued downturn in the economy and resulting lack of loan demand were the primary reasons for the decrease in the loan portfolio.

As a result of the third quarter 2011 goodwill impairment charge (net of tax) of $32.6 million, other assets decreased $41.7 million from December 31, 2010.

Liabilities

The following table summarizes the liability balances as of the dates indicated, and the amount and percentage changes from December 31, 2010:


	December 31,		December 31,
(Dollars in thousands)	2011		2010		$ Change			% Change

Non-interest bearing deposits	$	1,010,899		855,829		155,070			18	%
Interest bearing deposits		3,810,314		3,666,073		144,241			4	%
Repurchase agreements		258,643		249,403		9,240			4	%
FHLB advances		1,069,046		965,141		103,905			11	%
Other borrowed funds		9,995		20,005		(10,010	)		-50	%
Subordinated debentures		125,275		125,132		143			0	%
Other liabilities		53,507		39,500		14,007			35	%

Total liabilities	$	6,337,679		5,921,083		416,596			7	%

At December 31, 2011, non-interest bearing deposits of $1.011 billion increased $155 million, or 18 percent, since December 31, 2010. The increase in non-interest bearing deposits during the year was driven by the continued growth in the number of personal and business customers, as well as existing customers retaining cash deposits for liquidity purposes due to the uncertainty in the current economic environment. Interest bearing deposits of $3.810 billion at December 31, 2011 included $170 million of reciprocal deposits (e.g., Certificate of Deposit Account Registry System deposits). Interest bearing deposits increased $144 million, or 4 percent, from the prior year end and included an increase of $31.1 million in wholesale deposits, including reciprocal deposits. These deposit increases have been beneficial to the Company in funding the investment securities portfolio growth at low costs over the prior twelve months.

To fund growth in the investment securities portfolio, the Company’s level of borrowings has increased as needed to supplement deposit growth. FHLB advances increased $104 million since December 31, 2010.

Stockholders’ Equity

The following table summarizes the stockholders’ equity balances as of the dates indicated, and the amount and percentage changes from December 31, 2010:


	December 31,			December 31,
Dollars in thousands, except per share data)	2011			2010			$ Change			% Change

Common equity	$	816,740			837,676			(20,936	)		-2	%
Accumulated other comprehensive income		33,487			528			32,959			6242	%

Total stockholders’ equity		850,227			838,204			12,023			1	%
Goodwill and core deposit intangible, net		(114,384	)		(157,016	)		42,632			-27	%

Tangible stockholders’ equity	$	735,843			681,188			54,655			8	%


Stockholders’ equity to total assets		11.83	%		12.40	%		-0.57	%		-5	%
Tangible stockholders’ equity to total tangible assets		10.40	%		10.32	%		0.08	%		1	%
Book value per common share	$	11.82			11.66			0.16			1	%
Tangible book value per common share	$	10.23			9.47			0.76			8	%
Market price per share at end of period	$	12.03			15.11			(3.08	)		-20	%

Total stockholders’ equity and book value per share increased $12.0 million and $0.16 per share from the prior year end. The increase came primarily from accumulated other comprehensive income representing net unrealized gains or losses (net of tax) on the investment securities portfolio which was largely offset by the third quarter 2011 goodwill impairment charge (net of tax) of $32.6 million. Tangible stockholders’ equity increased $54.7 million, or $0.76 per share since December 31, 2010 resulting in tangible stockholders’ equity to tangible assets of 10.40 percent and tangible book value per share of $10.23 as of December 31, 2011.

Results of Operations

Performance Summary

Net income was $17.5 million or $0.24 per share for the year ended December 31, 2011. Excluding the goodwill impairment charge, net operating income for 2011 was $50.1 million versus $42.3 million for the prior year. Diluted operating income per share for 2011 was $0.70 per share, an increase of 15 percent from the prior year earnings per share of $0.61. Net operating income is considered a non-GAAP financial measure and additional information regarding this measurement and reconciliation is provided in “Item 6. Selected Financial Data.”

Income Summary

The following table summarizes income for the periods indicated, including the amount and percentage changes from December 31, 2010:


	Years ended December 31,
(Dollars in thousands)	2011			2010			$ Change			% Change
Net interest income
Interest income	$	280,109		$	288,402		$	(8,293	)		-3	%
Interest expense		44,494			53,634			(9,140	)		-17	%

Total net interest income		235,615			234,768			847			0	%

Non-interest income
Service charges, loan fees, and other fees		48,113			47,946			167			0	%
Gain on sale of loans		21,132			27,233			(6,101	)		-22	%
Gain on sale of investments		346			4,822			(4,476	)		-93	%
Other income		8,608			7,545			1,063			14	%

Total non-interest income		78,199			87,546			(9,347	)		-11	%


	$	313,814		$	322,314		$	(8,500	)		-3	%


Net interest margin (tax-equivalent)		3.89	%		4.21	%

Net Interest Income

Net interest income for 2011 remained stable compared to 2010. During 2011, interest income decreased $8.3 million, or 3 percent, while interest expense decreased $9.1 million, or 17 percent from 2010. The decrease in interest income from the prior year resulted from the increase in premium amortization coupled with the reduction in loan balances, the combination of which put further pressure on earning asset yields. Interest income also continues to reflect the Company’s purchase of a significant amount of investment securities over the course of several quarters at lower yields than the loans they replaced. Interest income included $35.8 million in premium amortization (net of discount accretion) on CMOs which was an increase of $18.1 million from the prior year. This increase was the result of both the increased purchases of CMOs combined with the continued refinance activity. The decrease in interest expense in 2011 was primarily attributable to the rate decreases on interest bearing deposits. The funding cost for 2011 was 87 basis points compared to 116 basis points for 2010.

The net interest margin decreased 32 basis points from 4.21 percent for 2010 to 3.89 for 2011. The reduction was attributable to a lower yield and volume of loans coupled with an increase in lower yielding investment securities and higher CMO premium amortization. The premium amortization in 2011 accounted for a 56 basis point reduction in the net interest margin compared to a 30 basis point reduction in the net interest margin for the same period last year.

Non-interest Income

Non-interest income of $78.2 million for 2011 decreased $9.3 million, or 11 percent, over non-interest income of $87.5 million for 2010. Gain on sale of loans for 2011 decreased $6.1 million, or 22 percent, from 2010 due to a significant reduction in refinance activity. Excluding the prior year $2.0 million gain on the sale of merchant card servicing portfolio, other income for 2011 increased $3.1 million, or 56 percent, over 2010 of which $1.7 million was from debit card income and $1.3 million was from the combination of operating income from OREO and gain on sale of OREO.

Non-interest Expense

The following table summarizes non-interest expense for the periods indicated, including the amount and percentage changes from December 31, 2010:


	Years ended December 31,
(Dollars in thousands)	2011		2010		$ Change			% Change

Compensation, employee benefits and related expense	$	85,691	$	87,728	$	(2,037	)		-2	%
Occupancy and equipment expense		23,599		24,261		(662	)		-3	%
Advertising and promotions		6,469		6,831		(362	)		-5	%
Outsourced data processing expense		3,153		3,057		96			3	%
Other real estate owned expense		27,255		22,193		5,062			23	%
Federal Deposit Insurance Corporation premiums		8,169		9,121		(952	)		-10	%
Core deposit intangibles amortization		2,473		3,180		(707	)		-22	%
Other expense		35,156		31,577		3,579			11	%

Total non-interest expense before goodwill impairment charge		191,965		187,948		4,017			2	%
Goodwill impairment charge		40,159		—		40,159			n/m

Total non-interest expense	$	232,124	$	187,948	$	44,176			24	%

Excluding the goodwill impairment charge, non-interest expense for 2011 increased by $4.0 million, or 2 percent, from 2010. Compensation and employee benefits for 2011 decreased $2.0 million, or 2 percent, and was the result of the reduction in full time equivalent employees. Occupancy and equipment expense decreased $662 thousand, or 3 percent, from the prior year. OREO expense of $27.3 million increased $5.1 million, or 23 percent, from the prior year. The OREO expense for 2011 included $5.8 million of operating expenses, $16.3 million of fair value write-downs, and $5.2 million of loss on sale of OREO. FDIC premium expense decreased $952 thousand, or 10 percent, from the prior year as a result of a change in the FDIC assessment calculation. Other expense increased $3.6 million, or 11 percent, from the prior year and was primarily driven by increases in debit card expenses and expenses associated with New Markets Tax Credits investments.

Efficiency Ratio

The Company calculates the efficiency ratio as non-interest expense before other real estate owned expenses, core deposit intangibles amortization, goodwill impairment charges, and non-recurring expense items as a percentage of fully taxable equivalent net interest income and non-interest income, excluding gains or losses on sale of investments, other real estate owned income, and non-recurring income items. The efficiency ratio was 50 percent for both 2011 and 2010. There was a notable decrease in gain on sale of loans for 2011 compared to 2010 as refinance activity slowed during 2011. The decrease in gain on sale of loans was offset by increases in investment security income.

Provision for Loan Losses


(Dollars in thousands)	Provision for Loan Losses		Net Charge-Offs		ALLL as a Percent of Loans			Accruing Loans 30-89 Days Past Due as a Percent of Loans			Non-Performing Assets to Total Subsidiary Assets
Q4 2011	$	8,675		9,252		3.97	%		1.42	%		2.92	%
Q3 2011		17,175		18,877		3.92	%		0.60	%		3.49	%
Q2 2011		19,150		20,184		3.88	%		1.14	%		3.68	%
Q1 2011		19,500		15,778		3.86	%		1.44	%		3.78	%
Q4 2010		27,375		24,525		3.66	%		1.21	%		3.91	%
Q3 2010		19,162		26,570		3.47	%		1.06	%		4.03	%
Q2 2010		17,246		19,181		3.58	%		0.92	%		4.01	%
Q1 2010		20,910		20,237		3.58	%		1.53	%		4.19	%

The Company provisioned slightly more than the amount of net charged-off loans during 2011. The provision for loan losses was $64.5 million for 2011, a decrease of $20.2 million, or 24 percent, from the prior year. Net charged-off loans during 2011 was $64.1 million, a decrease of $26.4 million from 2010. The largest category of net charge-offs was in land, lot and other construction loans which had net charge-offs of $31.3 million, or 49 percent of total net charged-off loans.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF THE RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2010 COMPARED TO DECEMBER 31, 2009

Income Summary

The following table summarizes income for the periods indicated, including the amount and percentage changes from December 31, 2009:


	Years ended December 31,
(Dollars in thousands)	2010			2009			$ Change			% Change
Net interest income
Interest income	$	288,402		$	302,494		$	(14,092	)		-5	%
Interest expense		53,634			57,167			(3,533	)		-6	%

Total net interest income		234,768			245,327			(10,559	)		-4	%

Non-interest income
Service charges, loan fees, and other fees		47,946			45,871			2,075			5	%
Gain on sale of loans		27,233			26,923			310			1	%
Gain on sale of investments		4,822			5,995			(1,173	)		-20	%
Other income		7,545			7,685			(140	)		-2	%

Total non-interest income		87,546			86,474			1,072			1	%


	$	322,314		$	331,801		$	(9,487	)		-3	%


Net interest margin (tax-equivalent)		4.21	%		4.82	%

Net Interest Income

Net interest income for 2010 decreased $10.6 million, or 4 percent, over 2009. Total interest income decreased $14 million, or 5 percent, while total interest expense decreased $3.5 million, or 6 percent. The net interest margin as a percentage of earning assets, on a tax-equivalent basis, decreased 61 basis points from 4.82 percent for 2009 to 4.21 percent for 2010, such decrease including a 6 basis points reduction from the reversal of interest on non-accrual loans. The decrease in lower yield and lower volume of loans coupled with an increase in lower yielding investment securities put pressure on both interest income and the net interest margin.

Non-interest Income

Non-interest income increased $1.0 million in 2010 over the same period in 2009. Fee income for 2010 increased $2.1 million, or 5 percent, compared to 2009 primarily from an increase in debit card income. Gain on sale of loans remained at historical highs of $27.2 million for 2010, which was an increase of $310 thousand, or 1 percent, over 2009. Included in 2010 other income was $2.0 million in one-time gains on merchant card servicing portfolios and included in 2009 other income was $3.5 million in a one-time bargain purchase gain from the acquisition of First Bank-WY. Excluding one-time gains, other income increased $1.3 million over the same period in 2009.

Non-interest Expense

The following table summarizes non-interest expense for the periods indicated, including the amount and percentage changes from December 31, 2009:


	Years ended December 31,
(Dollars in thousands)	2010		2009		$ Change		% Change

Compensation, employee benefits and related expense	$	87,728	$	84,965	$	2,763		3	%
Occupancy and equipment expense		24,261		23,471		790		3	%
Advertising and promotions		6,831		6,477		354		5	%
Outsourced data processing expense		3,057		3,031		26		1	%
Other real estate owned expense		22,193		9,092		13,101		144	%
Federal Deposit Insurance Corporation premiums		9,121		8,639		482		6	%
Core deposit intangibles amortization		3,180		3,116		64		2	%
Other expense		31,577		30,027		1,550		5	%

Total non-interest expense	$	187,948	$	168,818	$	19,130		11	%

Non-interest expense for 2010 increased by $19.1 million, or 11 percent, from 2009. Compensation and employee benefits increased $2.8 million, or 3 percent, from 2009 which relates to the increase in full-time equivalent employees including the addition of First Bank-WY employees in October 2009. Occupancy and equipment expense increased $790 thousand, or 3 percent, from 2009. Advertising and promotion expense increased by $354 thousand, or 5 percent, from 2009. The primary category that saw much higher expense was OREO which increased $13.1 million, or 144 percent, from 2009. OREO expenses of $22.2 million for 2010 included $5.1 million of operating expenses, $10.4 million of fair value write-downs, and $6.7 million of loss on sale of OREO. FDIC premiums increased $482 thousand, or 6 percent, from 2009 which included a second quarter 2010 special assessment of $2.5 million.

Provision for Loan Losses

The provision for loan losses was $84.7 million for 2010, a decrease of $39.9 million, or 32 percent, from the same period in 2009. Net charged-off loans during the year ended December 31, 2010 was $90.5 million, an increase of $32.1 million from the same period in 2009.

ADDITIONAL MANAGEMENT’S DISCUSSION AND ANALYSIS

Lending Activity and Practices

The Banks focus their lending activity primarily on the following types of loans: 1) first-mortgage, conventional loans secured by residential properties, particularly single-family, 2) commercial lending that concentrates on targeted businesses, and 3) installment lending for consumer purposes (e.g., auto, home equity, etc.). Note 4 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” provides more information about the loan portfolio.

The following table summarizes the Company’s loan portfolio as of the dates indicated:


	December 31, 2011					December 31, 2010					December 31, 2009					December 31, 2008					December 31, 2007
(Dollars in thousands)	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent

Residential real estate loans	$	516,807		15.53	%	$	632,877		17.52	%	$	743,147		18.95	%	$	783,399		19.59	%	$	685,731		19.50	%

Commercial loans
Real estate		1,672,059		50.23	%		1,796,503		49.73	%		1,894,690		48.33	%		1,930,849		48.29	%		1,611,178		45.81	%
Other commercial		623,868		18.74	%		654,588		18.12	%		724,579		18.48	%		644,980		16.13	%		636,125		18.09	%

Total		2,295,927		68.97	%		2,451,091		67.85	%		2,619,269		66.81	%		2,575,829		64.42	%		2,247,303		63.90	%

Consumer and other loans
Home equity		440,569		13.24	%		483,137		13.38	%		501,866		12.80	%		507,839		12.70	%		432,002		12.28	%
Other consumer		212,832		6.39	%		182,184		5.04	%		199,633		5.09	%		208,150

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company