And welcome to today's teleconference. At this time, all of our participants are in a listen-only mode. Later, there will be an opportunity to ask questions during our question-and-answer session. Please note that this call may be recorded. I will now turn the program over to President and CEO of Glacier Bancorp, Mick Blodnick. Please go ahead, sir.

Welcome, and thank you for joining us this morning. With me this morning is Don Chery, our Chief Administrative Officer and Executive Vice President; Ron Copher, our Senior Vice President and Chief Financial Officer; and Barry Johnston, our Senior Vice President and Chief Credit Administrator. As some of you know by now, last night, we reported earnings for the fourth quarter. They were record earnings not only for the fourth quarter, but also for the full year of 2007. Our diluted earnings per share for the quarter were $0.34. That was an increase of 6% over the prior year's quarter, and for the full year 2007 we earned $1.28 overall and also a 6% increase over 2006. Some of our profitability ratios were fairly consistent from prior years. We produced a ROA for the quarter of 1.51% and an ROE of 13.74%, and for the full year our ROA came in at 1.49% and Our ROE of 13.82%. As many of know if you do the comparisons from last year to this year, our ROE has slipped some from 2005 and 2006, part of that is a function of the capital that we have been building within the company. During these definitely challenging and unsettled times Board of Directors of GBCI and the senior staff have felt that, probably having a little higher capital cushion in these uncertain times is maybe not a bad thing. So a capital has been build in over the last year/year and a half. It continues to be a difficult operating environment out there for banks; however, so far we have been able to navigate through these challenging times in pretty good shape. Asset quality remained basically unchanged during the quarter and year. We did see a slight increase in NPAs. On a link quarter…

(Operator Instructions). And it looks like we'll take our first question from Matthew Clark of KBW Please go ahead. Matthew Clark – KBW: Good morning

Hi! Matthew Matthew Clark – KBW: How are you doing. Can you first touch on or just discuss how your commercial loan yields were able to hold up or just keep to that 4 basis points decline, and maybe just touch on the overall outlook for loan yields that the Fed has cut quickly here 125 basis points, just wondering, I guess if there is a lot of loans embedded in than that commercial line, that might be hitting floors or if there is a higher component of commercial construction in there?

I'm not sure that a lot of our loans have hit floors yet. I mean obviously many of our banks have floors embedded in their rate structures, in their pricing structures. I think that to answer you very first question, every one of the banks get together on a weekly basis, and not that pricing is the number one topic each and every week, but I know it's discussed by Barry and the group of Senior Credit Officers. And I think there is a level of competition to try to maintain pricing at adequate levels. And for most of 2007, I mean it wasn’t until the fourth quarter when we saw a real drop off in interest rates. We were able to do that. Yeah, I think part of that could be a construction component that makes up a part of those higher yields, but we've had that construction component out there for a lot of quarters prior to this, and we've just been able to maintain. And I think one of the reasons that the margins probably did hold up better, is maybe not even so much on, while the yield on earning did hold up, you are right, it didn't go down much. The margin probably held up well because we tried to do the best job possible on our funding side. I think the banks really do a good job in that respect, and with some of our wholesale funding, we've tried to maintain levels of pricing and looking around on the wholesale front to make sure that we are funding these banks at the lowest levels possible. I would expect now that we have seen the rate reductions over the last 10, 12 days; that it is probably going to move more and more of our…

Yeah we do have -- Matthew we do have those numbers, I don’t have those in front of me. Is that something that you'd wanted. Just call in later and we could give you those numbers. Matthew Clark – KBW: True, it’s great

I know we've got them because we've been looking at them, and I am getting prepared to go out next week so I don’t have those in front of me here as well. Matthew Clark – KBW: Okay. Can you may be just comment on just your overall – what you're seeing in terms of risk grading as related to, if you just want to pass out the resi construction book for example?

Yeah I would say that the residential construction that were in two or three markets where residential construction was a big line of business, I think when you are talking about appearing to flat it, when you talk in about the treasure valley down in the Boise area, when you are talking about Bozeman. Those were areas that were good construction lending markets for us. There is no doubt that that construction lending has slowed down. We would expect going forward that there maybe some things that we are just going to have to work through, but through the end of the year so far, you can tell by the numbers, things have been reasonably solid. It’s not the market that it was a year or two ago and we don’t expect that 2008 is going to be that kind of a market either. It’s going to be similar to probably the last six months of '07. There's still inventories out there in these markets that are going to have to be absorbed. We kind of like some of the trends we are seeing in Boise right now based on last couple of weeks, it's looking as though some of that inventory is being worked up. Some of these other areas of course never saw that high level of inventory. I guess on construction side, it looks a little bit better, as far as absorbing some of the construction and spec loans in these areas, than the lot in development loans. So I think it's still a number of these areas have a huge backlog or significant backlog of lot loans, and there again with lot loans, it's going to really depend up on who the borrower is, what kind of staying power the borrower has, and again, a lot…

No, I think we have been very fortunate having the markets that we've been operated in. And there's one of the things that we've also maintained over last several years, during what was considered to be boom years in the real estate market. We were able to maintain our underwriting standards without getting too aggressive. Now there is always an exception here though, but here and there. But generally across the board we maintained our loan-to-value ratios and our debt service coverage ratios, and also on most of the construction side we maintained the criteria that the builders or developers have some kind of interest reserve to carry these loans through a slow period, which of course as you are all aware we are seeing. So up to this point generally with the exception of one or two credits have been able to do that. Have been able to carry interest and continue through what appears to be a fairly slow selling period. Matthew Clark – KBW: Okay, great. And then finally do you just happen to have your 30 to 89 days past due at the end of the quarter, that I think were about $18.7 million last quarter.

Yes, we do. 30 to 89? Matthew Clark – KBW: Yeah.

Well let's put it this way. 30 to 61 is 0.64, 60 to 90 is0.11, and 90 plus and 91 plus is 0.26 Matthew Clark – KBW: Is that of assets or of loans?

That’s of loans. Matthew Clark – KBW: Okay thank you

Yeah and when I look at total past due loans Matthew we're showing 1.01 at the end of the year for total past due loans Matthew Clark – KBW: And that’s versus what you do –

The days greater. That includes the 90 days and greater also. Matthew Clark – KBW: Okay, thank you

And that compares the

[0.80] the quarter before.

Right.

But in a quarter it’s lower than it was in October and November. So

Okay. And we'll take our next question from Brett Rabatin of FTN. Please go ahead.

Hi. Good morning Mick.

Hi Brett

I will say congratulations, I haven’t gotten to say too much this quarter. Though I've seen it too much, but I will give two of those obviously strong earnings in the environment. I didn’t want to go back to net charge-offs and your allusion to the part of them being from past acquisition. Is that Sanders County and Beaverton County area Montana or is that –

It was at Sanders County

Sanders County. Okay, all right. And then from the link quarter perspective, it seems like personnel expenses were a little lighter than at least had expected and so I was curious if there were any reversals that would have impacted the fourth quarter or just any color on a $19 million run rate or assuming it will be a little higher than that going forward, but just any color on the fourth quarter number?

You bet. On the fourth quarter, there was, and thanks for what you had to say. I mean it was in our minds it wasn’t the year that we set out to have, but we never expected that 2007 was going to be the year that it was for banks. A lot of our incentive plans are tied to our return on equity and how well we return and what the level that return is to the equity that our shareholders have provided and invested with us. And with that coming in lower this year, obviously, it did have an impact on some of our bonus and incentive plan, so those were lower than they have been in prior years. So that was definitely part of it. Again, I also think that we've tried to be as productive as possible, and I think from a hiring perspective, I think the banks have done a really good job of making sure that they are as productive and efficient as they possibly can out there. But one of the key things that we can absolutely point our finger to is the fact that some of the incentive programs that we have in place were not at the level they had been in years past. Brett Rabatin – FTN: Okay. And then I wanted to go to loan growth. Obviously, loan growth was pretty strong in '07. I did notice that their current real estate portfolio was 725 versus average of 799 for the quarter. Can you give us just kind of your thoughts on the current environment seems like single-digit type growth. Is there any reason to expect you guys to continue double-digit growth, or some thoughts maybe on the loan pipeline?

No. I don't think so. To be quite honest, perfectly frank, the fourth quarter surprised us, we didn't expect that it was going to be as good as it was. In fact, the entire year 2007 Bret was better. We were projecting 10% loan growth for 2007, we came in at a 11, and really when we even projected 10% we thought that, that was really going to be an ominous task to get that done and came in a little bit higher. Lot about was the fact that the fourth quarter which historically has been slower along with the first quarter, the fourth quarter was just a lot stronger for us. Some of the banks really had some good loan growth in the October, November, December time frame. I think that's already starting to show signs of slowing down, and then the other thing is, we are having real winter this year too. The snow levels here are probably the most we have seen in 6 or 7 years. So that's probably having some impact. Although I am not so sure in the current market that residential construction and that is being hurt that much because of the seasonality, I think it's more just the overall dynamics of that industry right now. So yeah, it was. We were surprised, but I would not expect that kind of growth moving forward. And we are sure not projecting that kind of growth for 2008 in our loan portfolio.

Okay. And I also would like if you make some calls about the construction portfolio and just the dynamics of how much is commercial versus residential later in the day that will be great. The one, I know you pulled back from Boyce long time ago in terms of commitments, but I also get a lot of calls on how much exposure you have to that market in particular. So if you're making calls on those numbers please give me a call too?

We'll give definitely give that to all of you.

Okay, great. Thanks

You bet Brett

And we'll take our next question from Mr. Jim Bradshaw of D.A. Davidson. Please go ahead sir

Good morning, thank you

Hi Jim

Hi Mick. Could you talk a little bit about what your management response is going to be to the rate cuts or the things that you are going to actively work on, on both sides of funding and loan yield side? And I also wondered if what you've done so far I guess on deposit rates. I looked at the yield analysis in the quarter, and it looks you got a little bit of room cut now in saving accounts, but certainly not a 125 basis points. So just wondered sort of how you're going to manage through this near term issue?

Well that’s a very good question. We just had a meeting yesterday with all the Bank Presidents and that was one of the key focus, now that we know what took place at the last FOMC meeting and what we're facing now with a 125 basis points reduction in 9 or10 days. I think all the bank Presidents and their staffs are truly doing some very impressive things to manage that funding that deposit based downward. I think in some markets they are watching very carefully what the competition is doing. I think we're going to take a good hard look at – if it's not relationship type deposits, we may treat non-relationships differently than we do relationships. One of the things that somewhat hurts us when rates are moving up, but does at least for a short-term help us when rates move downwards, and we have always been an active user of wholesale funding. And of course, on the wholesale funding side when rates get moved, and they pretty much get moved immediately, they don't tend to have the drag or the delay that retail deposit sometimes have. So maybe in the short-term, we will see some benefit from being able to lower that funding base. The key for us and the question mark for us is managing the retail base. We can't afford to lose customers that we worked very, very hard to generate. At the same time, I think the banks understand now especially after last series of meetings that we just can't continue even if some of the competition is, we just can't continue to pay some these rates. It just does not make any sense. Especially, if we've got other alternatives that are lower funding sources on the wholesale side. So if it means that some of that mix of funding shifts moreover for the time being to a wholesale, that might have to be the case. Again, number of things to discuss, I don't want to go through all of them on the phone, but they all understand very, very succinctly that this is key. Something on the asset side, and on the loan side, you don't have quite the flexibility there. We have got to really spend our time and energy on the funding side, and that's what we've primarily discussed yesterday.

Has all that noise in the bond market changed duration or cash flow that you are seeing spin off from your investment securities portfolio?

No, the investment portfolio has gotten so small these days it's just night and day different, Jim from what it was back in '04 and early '05. Cash flow still continues to spin-off the [CMOs]. We don't see a great deal of extension. This was all -- what's left in that portfolio of investments is basically over half of it is muni's that have been out there. They haven’t bought a muni either for years. So it is all well seasoned muni product and then the other half or the other 45% is pretty much all CMOs that again are well, well seasoned. And we admit those were -- we felt very, very good as you probably remember from years ago when we talked a lot more about the investment portfolio, about the structure that we were putting in place. Those structures as we've looked back now four or five years, those structures that we purchased, they did just about everything that we expected them to do. They really performed very, very well. We have seen, of course, in this kind of environment you are naturally going to see some extension. But it hasn’t been anything significant and we still even now with that investment portfolio dropping dramatically over the last four years, we are still seeing any given month, $10 million, $11 million, $12 million in cash flow coming after that. One of the issues though we have is a lot of -- some of that is collateralizing other funding sources. So one of benefits we had in past years was, we were able to allow that investment portfolio to just decrease, take the cash flow every month and redeploy that cash flow in to higher earning assets or to a point right now at about 15% of assets where that investment portfolio because we don’t want to do anything with the munis and munis themselves represent 8% or 9%. And with the remaining CMO portfolio lot of that is usual, so are munis though. I mean they are used for collateral, and we're getting to points where we've got to maintain appropriate collateral levels for some of our funding. So we may have to start this year now to step up and actually purchase some more securities. Again that will be very tightly structured on the short end of the majority range, but we may have to buy some more of securities of one type or another to collateralize some of our funding sources with states and municipalities.

And Mick looks like you got a little bit of excess capital and it’s certainly returning nice capital at this point too. Just wondered is there enough slope in the yield curve or do have enough balance sheet capacity to maybe build that investment portfolio in more than what you need for funding sources or buybacks and boost the dividend. Maybe if you could just sort of talk philosophically about where your priorities are in the capital, on management side, and maybe there is an M&A opportunities that have emerged too?

I think that’s been a major topic for last two or three Board meetings, absolutely. And on that we’ve spent a great deal at time on capital management capital adequacy. I have done a lot of modeling on it. And I guess where we've come up, and this is just again recently at our last couple of meetings is, right now when we model our capital position, stay in the course and really not doing much of anything in 2008 is not the worst of alternatives, believe me. Yes, our capital would continue to grow, ROE would shirk down a little bit, but we would build a fairly significant war chest by the end of '08 and into '09. And so as all of you know, we are just not going to do anything stupid on the acquisition front. And right now, and maybe I should have talked about that a little bit earlier. One of the things that concerns me about the M&A environment right now is, you've got such a short time and such a short window to do loan due diligence, could you really ever get your arms around a targets asset quality? I think the last thing that we would ever do or want to do in this environment is buy somebody else's problem loan portfolio. We work so hard to keep ours at the level it is. We're not going to go and buy somebody else's troubles. So that's going to be a issue on the M&A front. But with that said, Jim, I mean if a great deal came and it was strategic deal, we think we've got the wherewithal to do that right now. And of course we would do it. But again, it's going to have to be somebody that we had…

Fantastic. Thanks and congratulations. That was nice to see somebody put up a good chorus since [Sensex] have changed this time.

Thank you Jim

(Operator Instructions). And at this point, we will take our next question from Ben Crabtree of Stifel Nicolaus. Please go ahead.

Thank you. I would like to echo that too, it’s nice to go out of the earnings season on a good note for a change. To follow-on a little bit from of the stuff that Jim was taking about in terms of the acquisitions and tying it in to asset quality. Could you talk about the bulk of the problem credits, the write-offs here being things you acquired. I guess one question would be, when you did the deal did you identify them as, were they high on a fairly high watch list?

Yeah. One of them was not hearing in, one of them - it’s kind of unique situation because it was a credit that was done in between due diligence and in between the acquisition being announced, where after an acquisition is announced, we always have the capability of reviewing credits.

Okay.

It just happened to be a weird timing thing. And even there, I think that really would lead to that credit deteriorating further was the individual, the main player got very, very sick.

Okay, all right.

And you can't sometimes, that's just going to happen, and you hope it doesn't. But what it did do Ben, is not just so much [debt], but it's just all the things I have been reading and all the things that we've internally been talking about is the due diligence process in an M&A transaction, as you all know is not the greatest. I mean it's not perfect by any stretch. And you are doing a deal that has to be kept in strict as confidence and secrecy, and yet you would like to maybe go and spend four weeks analyzing every credit you can get your hands on. Instead they give you three days hold up in a motel room often times, or you are trying to make some other excuse as to why you are there. And that's not the greatest circumstances, and I guess it's probably never going to be any better. I don't know we keep thinking about how can we do it differently, how can we allow ourselves more time, how can we drill down even further to make sure that we are doing things appropriately. I always think that we've cried to analyze the portfolio, take a conservative view of that portfolio, and then require that we have got the necessary reserves to cover what we think that portfolio contains. And sometimes that's easier than others, and yet at this particular juncture where we are up on the M&A front and with the Aztec quality that’s taken place or the deterioration in this industry, it just tells us that boy, we would really have to be very, very careful right now. And I am not sure again that the process would allow for the level of due diligence that we need to be comfortable with.

It's my perception and I didn’t go back and check this of course. But if I would go back over the last six, eight quarters, a pretty high percentage of your charge-offs were not loans that you originated, but loans that you bought. And tell me if I am wrong on that, but it leads to the question of what else do you have in the way of watch list on the banks that you have acquired within the last year. Because if one goes back to your originated portfolio, the losses just going to continue to be exceptionally low.

Right. And again there is one thing that comes to mind, Ben is, every day that goes by we are another day away from those acquisitions. Some of those acquisitions now are two or three years behind us. Did we identify every last problem? Clearly not. Did we identify a whole bunch of them and put in strategies or put in some things to counteract future issues? Yeah, I think we did. We tried our hardest to circle these issues, circle these bad credits and then figure out what was the potential charge-off down the road. Or was there something that had significant collateral attached. Might have some issues with this being a non-performing loan from sometime, but are we going to actually loose any money? If I look back at the history of this company, our NPAs have been a lot higher than they currently are. You don’t have to go back too many years and we were running 40,50 basis points of NPAs, and yet I look back at those years and still our net charge-offs have always been relatively low, more often than not less than 15 basis points. And I think that all the bank Presidents and the senior credit officers I know vary. They put a lot of pride in the fact that even if a loan does get good NPA status that ultimately we get our money back. And that’s what we have really prided ourselves on. With some of these acquisitions, I think we did that, I think we tried to say hey this thing may cause us some administrative nightmares, this maybe troublesome but we don’t see a real loss at the end of the day or we do see a loss, and if we do see one, we try to recognize that right off the bat and deal with it. But again, I guess what I am trying to convey today is, I think the process just isn’t conducive to really getting your arms around loan portfolios like you would maybe need to, and that may in and of itself cause us to step back on even a potential opportunity that would present itself, that we would have to take a – we'll take a good look at it. But we would be looking at it, and in our diligence process probably being much, much tougher than maybe we had done in the past.

Okay. A couple of -- I guess this would just be a kind of a simple number question. I wonder if I get a breakdown of the non-performing asset numbers between non-accrual loans and 90 days late, and I guess you show real estate on, but it will make sure I've go the number right there. How do you get to the 13.3?

Ron, you got that?

Yeah. We are going to be putting that in our press release going forward and in the annual report as well the detail. So the non-accruals at the end of December, $8.5 million past due loans, $2.7, and then the REO category is, call it $2 million flat.

Right, okay. And then I guess one of the things. On the call last time, Mick, I think we were just starting to get into the slogging end of the mud here, and you had talked about the competition. We talked a little bit about competition on not deposits, but also on volume, and in particular I think in the real estate space and the non-conforming with Countrywide pulling back out of your market. So I was just looking for kind of a competitive update both on the deposit side and on the loan pricing, loan volume side from the banks and the non-banks in your territory.

Ben, I think on the deposit side, the competitive nature of that funding, generating that funding has slowed down. I just don't see the level of irrational pricing that was taking place earlier this year and definitely throughout 2006 on the funding side. Now that's not to say that you don't still have some one-off players out there that you shake your head and wonder what they are doing. But I think the sense I get from our Bank Presidents is, it's not pervasive like it was a lot back. And that’s a good thing. Now, the question we've got to ask ourselves is, how aggressive can we be? Again, we do not want to lose a very good strong customer base that we have built up, and yet we believe there are some strategies and strategic things we can do to minimize that impact and yet still work to lower our funding base out. I do believe that funding going forward would be a little bit easier to move. Maybe it's because of just the significant changes that have taken place in such a short time. Maybe it's just that loan growth is not as strong as it was over the last couple of years, so the need for funding is not quite there. Maybe it's because the wholesale side has become relatively cheap and it makes it pretty compelling to look at some of the wholesale funding versus paying up for retail funding. It’s a combination of all of those things. Your second question regarding real estate pricing and competition. I am not sure whether if there is any legislation that's going to go or any regulation that's really going to take place. You keep reading everyday that there is and then there's been people who say no,…

Good, thanks

You bet Ben.

Any other questions?

No Mr. Blodnick. It appears we have no more questions at this time.

Okay. Well, we will definitely give that information out to all of you at this morning or this afternoon. Again thank you all for taking part with us today, and I guess right now, we all are just hoping that 2008 that things start to settle down a little bit, and we can continue to perform like we hope to be able to do so. Thank you all very much for your time and support. We will talk to all of you later.