Good day, everyone and welcome to today's program, Glacier Bancorp quarterly earnings call. At this time all participants are in a listen-only mode. Later you may have the opportunity to ask questions during the question-and-answer session. Please not this call may be recorded. I will be standing by if you should need assistance. And it is now my pleasure to turn the call over to Mr. Mick Blodnick. Please go ahead sir.

Thank you. Welcome and thank you for joining us. With me this morning is Ron Copher, our Chief Financial Officer, Don Chery, our Chief Administrative Officer, Barry Johnston, our Chief Credit Administrator and Angela Dose, our Principal Accounting Officer. Last night we reported earnings for the fourth quarter of 2009. Earnings for the quarter were $9.474 million compared to $17.14 million in last year’s quarter. That calculates to a decrease of $7.5 million or 44%. Our diluted earnings per share for the quarter were $0.15 compared to $0.29 in the prior year’s quarter, a decrease of 48%. The quarters numbers had more noise than usual as we booked an after tax bargain purchase gain of $3.5 million. And in addition we had a pre-tax gain on the sale of investments during the quarter of $3.3 million. The investment gains came from the sale of some [Z tranches] that we purchased back in the summer of 2009; we held them on our books at very low basis. Not expecting there to be much value in those [Z tranches] for the next couple of years. However in October those [Z tranches] became far more valuable than what we ever had expected so we sold those and that was a big part of the gain on sale of investments that we recorded during the quarter. However we did also have some positive gain in the sale of some of our municipal bonds as we chose to sell some municipals that were getting close to their call date and we did not want to loose the premium on those. So we chose to sell a few of them but at the same time we also sold some municipals that we have losses in. So, overall we were little bit more active than we usually…

(Operator Instructions). And we will take our first question from the line of Matthew Clark.

Can you may be start with your loan growth comment related to your expectation to see little to no longer, I mean is it fair to assume that we are going to see construction loan [battles] continue to shrink, that’s going to cause the overall portfolio that shrink this year?

Yes. If you look at our loan portfolio from December to December, the loan portfolio ended 2009 exactly where it started at $4.130 billion. However you got to take into consideration that we had $153 million in the form of loans coming up from First National in total. So, from an organic perspective we were down about that $153 million, it took the acquisition of the bank to bring us back to even and as we continue to push out and have pay downs or do everything we can in the land development section. As we said last quarter, we continue to make residential construction loans but nowhere near the pace that we were in prior years and you can see that even that balance has decreased dramatically over the last year and we are not seeing a lot of signs if that’s going to necessary pickup steam in the near term at least. So, our expectations that we will some growth and I’m sure we will especially in some markets we will take advantage of our strength and the ability to lend money but at best I think its going to be an offset to some of the runoff. So, our expectations are not much if any loan growth and we actually could see loans shrink somewhat during the course of 2010.

Okay, and then in the construction book problem seemed to be in the land development area and raw land and pre-sold spec construction. Can you give us a sense in terms of the what the new disclosure the $228 million of land development $192 million of consumer land lot and the $114 million of unimproved land we got the non-accruals there, can you just give us I guess better visibility as to maybe what’s in criticized classified and just trying to cast a wider net.

What now, as far as what seems criticized classified?

Yes, within those categories, maybe on a percentage basis of each of those portfolios.

Matthew this is Barry. The planned acquisition and development portfolio, frankly, all of its stressed when you haven’t sold a lot for 2.5 years at least from its stress from the lack of sales, some of those developers and builders that if you want to improve the spec construction are suffering given the lack of sales. So we consider that whole portfolio to be, we have concerns with it. The thing that we are fortunate is that on the acquisition and development side of what we have some of those guys that have deep pockets they are going into basically latency mode they continue to carry the projects from outside resources. And fortunately we just had a huge amounts of new additions this quarter, we did have the $18 million increase and primarily that came from not only line acquisition development but we are starting to see some spill over and into the commercial real estate in a single family residential. So, we don’t like the totals, our new concern is if you will, it’s the other portfolios that we're seeing some increases in NPA, so.

Let me add one thing though Matthew, one of our concerns all along to the land development component was the marks that we were going to take from that. We did this last quarter, as I said most of our increase in NPAs actually came from commercial real estate in one to four family and a little bit in CNI, and that’s troublesome, nobody likes to see those increases. But so far we haven’t seen the marks on those kinds of loans that we saw in land development and in some of the raw land that we have seen in those particular loan categories. Not to say that there is still not so potential charge offs now but we were talking yesterday Barry and myself and if a lot of those if most of our NPAs were in one to four family residential rather than that makeup of where they are we probably feel a lot better about what the net charge-off and what those marks are coming on with that portfolio. So it was somewhat encouraging that the increase didn’t come from those loan types and those loan categories that have really been stressed and that we feel you are going to subject to greater losses.

Okay and then the incremental increase and delinquencies even on just prior to that portion that became current can you give us a better sense for the nature of those types of situations that deteriorated in the delinquency bucket and then as a follow on same thing in CRE the types of properties that are seeing some stress.

We were disappointed to see about $45 million increase in what we call was early stage delinquencies. Its about a third of it was in speck and land of element we continue to see some delinquencies there especially there were 2 large projects in our Idaho market that came on in that land development. One of them as to which as Mick mentioned in his announcement that has sense been cured about $25 million of that but another part of that was in the commercial real estate side and a large part of that was in single family residential. So that's where those increases were centered and then the second part of your question had to with

The property types within few area that we are seeing weakness.

Yeah and it comes right down in kind of falls the first set its three sections in there that we are seeing. One is anything that was related to the single family residential construction industry. We are seeing some past dues there we are seeing some stress, we are seeing some recreational property type of entities and we feel that's probably has something to do with discretionary income and that end of it. And then the last part is just some commercial real estate properties just across the board. We only have one large credit that would consider large about $4 million credit to rest of which is juts smaller balances that are just having some difficulty due to the challenges which we are facing so.

Okay and then sorry, last one just can you give us the TDR number, TRs on accrual?

Yes we do its $14.9 million.

(Operator Instructions). We will go now to the line of Brett Rabatin. Please go ahead.

Wanted to ask first on the other real-estate, ORE obviously you had some inflows and outflows to that bucket this quarter but it didn't really change a whole lot. Can you talk about what you have in there now in terms of have those properties undergoing appraisals where you are selling are you on a six month type cycle on the ORE or can you give us some more color on generally what's going on that bucket.

Well obviously everything that's placed in there has got a current appraisal on it if it going new into OREO and we have got some properties that have been in there for a while now but even some of those properties have had additional appraisals done if the particular bank was coming into an exam or felt they needed to, if there are some interest in the property. The one thing we are seeing and we have mentioned this to a number of investors over the last quarter and that is prior to the fourth quarter of the year especially the prior two quarters, three quarters, four quarters for that matter we were just basically seeing nothing. I mean there was just no way interest. I think it's a fact nationwide that when credits go into OREO maybe the interest level gets a little greater because potential investors, private equity firms whoever feel they can now deal directly with the bank. But we did and I think Barry would concur with this. We definitely saw a higher level of tier tickers if nothing else. I am not saying that there was strong interest but there was a lot more people snooping around and asking and looking into some of the OREO properties that we have had. Now again it didn't as you could see from the numbers it didn't spillover into a significant reduction but we do feel that for the most part the OREO lease coming in has been valued properly based on appraisals. We also though we are not naïve and we did see during the course of 2009 as I said. We saw higher OREO expense we saw even though we did what we thought as a very good job upfront still when it came down to moving properties we did see some further write-downs and charge-offs on a OREO but it was more based on a lot of volume, it was a lot of wonderful family residential construction loans and not so much major projects that we added in OREO. So I mean the good news there Brett I think looks like maybe the activity or the interest level out there is picking up a little bit of strength. We were right in the middle of winner, if you look outside and there is snow on the ground so maybe it's going to take until March or April of the year to start getting more excitement along that line but its been somewhat encouraging to us to see a little bit heightened level of activity, Barry you got anything to add in here.

No, definitely we have seen the trend and we have had some success as soon as the bank takes ownership, that’s when the phone starts ringing. And up until that point would acquire and we have had some small success in liquidating some of these properties that we thought we were just going to have to hold to on to for a while so, its [panacea] out there by any means and I don’t want to give anybody that impression. But at least it’s a mix that there are a few people in making them acquire reserves to the status of our properties and another thing we did is we listed all our properties that on our website and that has generated quite bit of activity and we have had some success there too from that communication venue.

Yes, I saw that on the website the other day and there was a couple of properties there that looked pretty interesting

Get your checkbook out.

Anyway and then I wanted to just talk about the current NPAs a little bit, it sounds like, I guess one is can you give us a number for what you have charged down the current non-performers I don’t know if you have been able to disclose that in the past or I was just curious if you might have that number Barry?

I do not. But lets see I think I could put it together take some doing because we have quite a list of loans but if you need that well I can put it together e-mail it to you.

Okay, I appreciate it. And then all this skipper as a quality questions I have maybe we can talk offline on that, but I do want ask really quick, it sounds like if the balance sheet growth maybe balance sheet abatement would be a better word in 2010. So this gives you an opportunity to pay down some of the borrowings and maybe position yourself for more asset sensitivity as rates presumably go higher at some point?

Yes, and in fact Ron and myself are talking about that continually and my guess would be that you would see in the subsequent or in the next few quarters that we will probably be looking more and more into doing some further extension not relying as much on borrowings. And I mention that, we have had very good success on the deposit side this past year and our ratios, I didn't calculate a longer deposit ratio at the end of the year, I guess I should have. But it continues to obviously as we don’t continue to come way off and lead down and deposits are growing our reliance on borrowings and other wholesale funding continues to dissipate. And the next thing is that we are very cognizant of the potential of rates moving up and when they do move up of what that’s going to do and we can continue to model extensively our exposure and all I can tell you Brett is I think we will be doing the right thing but that probably will come with some liability extension as we move forward into 2010.

And we’ll take our next question from the line of Jeff Rulis. Please go ahead.

Just a follow-on on the delinquencies, given that I guess two-thirds of the delinquencies were related to residential properties and that's not necessarily late cycle type stuff. I was wondering if that sort of surprises you that your new delinquencies are in that sector. As Barry mentioned, it was a couple big projects perhaps in that spec land, but if you could comment on that.

Jeff, were you saying that because most of the delinquencies are in that one to four family.

Being that a third is spec land, a third single family residential, the increase in NPAs is more CRE type later cycle but I guess couch that your delinquency increase was more maybe some early cycle type stuff that again I guess characterize that as it was a couple of big projects and I guess going forward what would new delinquencies I guess if they were to occur, where would you expect those?

I think that we are starting. Everybody has been saying that our markets are late into this whole cycle and there maybe some validity to that and yet I still look around that the stage with the exception of Idaho, I still look at the states that we are doing business in and unemployment rates in that are still very good compared to the national averages and compared to more states out west and yet every one of those states that we are in continue to experience higher and higher on employment levels. I think it's a function of partly of that I mean there are more stress we have seen a couple and I am talking primarily about the one to four family and maybe some of the land development type loans. I think we are starting to see a few; we have had a few significant layoffs in Western Montana that we have announced over the last month or two. I am not sure if we got huge exposure to those particular employee bases but as you know it's that trickle down effect that affects everyone else. And yeah we are definitely seeing higher delinquency rates on the traditional one to four family turned down more to loans and I think that hope there is did we underwrite those properly because these are the ones, a lot of the one to four family about 80%-85%-90% above of our one to four family production kit sold in the secondary market. So I am hoping that and I think this the case that a lot of the ones that we kept, we kept because loan to values were low, because borrowers at that time had good jobs or had capacity, now that can change though and I think that's somewhere what we are experiencing. And we have a seen couple of higher end homes, jumble homes that have definitely gone into that delinquency status and these were some people that we are pretty well healed and either some events or something has go change their circumstances dramatically. So yeah I mean late stage, early stage I think we look at it as just problems that we're going to have to continue to deal with and we're going to have to continue potentially to reserve against.

Okay. And then kind of switching gears a bit on the charge-off pace and maybe it was misguided in the last call from my part but I got the indication that maybe that charge-off level would increase going forward but it was I guess flat quarter-to-quarter. Any reason there that, that was held flat or wasn’t a bigger number.

No in fact I think we were somewhat disappointed that it was where it was. I think we are hoping that we could have kept that jus a little bit lower. But I think you bring up an excellent point Jeff and that is that this coming year I'm not so sure of that provision is. I hope that provision isn’t going to have to be what it was in 2009. But as I said in my remarks we could very easily hit that same 1.5% net charge-offs. I hope we don’t but we're really going to start lower these overall NPAs and get these off the books. I think our plan is to be more aggressive on the charge-off and writing-down some of these. We built up as you can see we built up a large reserve and now I think its time for us to really start to show some progress on the NPA front. Barry you got anything to add?

We went through the cycle this past fall and we anticipated the charge-offs overall when we sat here a year or so, and we were hoping to hold them underneath 1% that's definitely didn't happen I think we might be able to hold rest of in that. I guess that where they were going to be at so we are anticipating that this year is going to look similar to what we were last year. I don't know, now that we've increased the reserve up to that 3.5% level that we will continue to reserve at the level we did in 2009 given that we are there. But it will still depend on, we have to maintain directional consistency if so our NPAs continue to increase, we will see some deterioration of collateral values in this economy states at the level of that. We will continue to provision accordingly so like my thoughts are as we have released cover charge-offs if not a little bit more so that's where we anticipate we are going to be at this year.

The one headwind Jeff we are not seeing is obviously we are not provisioning for much loan growth because we just don't see right now much in the way of that I mean it would be nice if there was some good quality demand out there but at least right now, we're in the middle of winter things can change when spring hits but right now we are not expecting much there so.

And we will go next to the line of Brad Milsaps. Please go ahead.

Mick, I think my notes are correct here, but if I recall I think some of your banks were going through kind of annual regulatory exams in the fourth quarter. Were you guys able to get full reports back by the time in conjunction with the earnings announcement? I assume everything went as planned there but just thought you might give us an update.

Yes, obviously you cant say anything about regulatory exams but I can tell you that they are pretty much all completed for 2009, we had a fair number of them in the second half of the year, we do have on some of our smaller banks that are on 18 month cycles, we have got a few of them already scheduled it on the docket for 2010 but we are completely through that cycle now.

Okay. And then just kind of a housekeeping question maybe for Ron. Just kind of curious on the tax rate going forward. Ron, is there a certain level of kind of pretax earning that you guys need to get to provide for taxes in any given quarter? And just maybe comment on the tax benefit that you had in the fourth quarter of last year.

Let me start with the tax benefit, the last time of our investment portfolio just about a third of it is invested in municipal bonds and so as our earnings come down the percentage that the muni bond income represents as a percentage of that grows up dramatically. And so you saw that it on our third quarter in particular and then continuing effect go to a lesser degree in the fourth quarter. It is presently related to the tax-exempt muni bonds. But in addition as you guys saw in the third quarter 10Q we are having more federal income tax credits in various forms that we are taking advantage of them. So that’s had a impact in the fourth quarter but certainly we will have an impact going forward in 2010 as we continue to take advantage of tax credit opportunities. So, I was just going to mention it going forward our effective tax rate will certainly come down. I’m going to just estimate at this point 30% would be a very good place to start. And so until your first part as to the precise level that is going to change and I don’t want to put a number out there because if we continue to invest on these tax-credit opportunities that number that you were talking about changes. So hopefully the 30% aggressive, what you guys would need to know.

Just one final question. Mick, you've talked a lot about it in the past but now that you guys have worked through '09, I'm just kind of curious what your thoughts are, updated thoughts are on FDIC-assisted deals or other types of M&A opportunities that are out there? Just curious if you've changed your tune at all or what you are thinking?

No, it really hasn’t changed too much, its pretty much what we said last quarter that there was an FDIC assisted deal that was in our market that could be folded in, it would be something that we would take a look at and made this a good thing. We don’t see a lot in some of the markets that we are currently in especially like a Montana, Wyoming, and Idaho. There has been a few in some of the other states so we at least have a small presence in but I guess at the end of the day we are just not that interested or didn’t feel that there was much franchise value in those particular bank. So, we are just moving on, we will look at those but I would say that our tone and approach hasn’t really changed dramatically since the last quarter Brad.

And we’ll go now to the line of Jennifer Demba. Please go ahead.

My questions have been asked, thanks.

(Operator Instructions). And we will take a follow-up question from the line of Matthew Clark. Please go ahead.

Just a quick follow-up on the comp line. You guys tend to see a pretty decent increase I'm sure for the typical seasonal accruals in the first quarter. I just wanted to know whether or not you guys had any plans to delay some of those accruals or not, whether or not we are going to see a typical increase this coming quarter on the comp line?

Up line, yes, you’ll see just your traditional merit raises, this year that merit raise is right at 2%. So you’ll see that increase to comp but outside of that it wouldn’t expect you are going to see anything significant outside of that Matthew.

Okay, great.

And it does appear at this time that we have no further question.

Okay and we’ll ramp up by just thanking everyone for being on the phone this morning. If you have any other further questions we are always around so you can give us a call and see if we get some more of those questions answered. Again thank you very much for your interest in GBCI and your support of GBCI. And again like I said earlier, we are going to do everything we can, it’s a new year and we are going to continue to grind and plough our way through this thing, I do believe better times are on the horizon and we are going to do everything we can to take advantage over then get our performance back to the level that as share holders all of you have become accustomed to from this company over many, many year. So, that’s our goal and that’s the plan and we are going to do everything to make that become reality. And with that, thank you all very much and have a great weekend.

And again this does conclude today’s teleconference. You may now disconnect. And please enjoy the rest of your day. Thank you.