##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 COMMISSION FILE NUMBER 000-50667
 INTERMOUNTAIN COMMUNITY BANCORP
 (Exact name of registrant as specified in its charter)
 Idaho
    
    82-0499463(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 414 Church Street, Sandpoint, ID 83864  (Address of principal executive offices) (Zip code)
 Registrants telephone number, including area code:
(208) 263-0505
 Securities registered pursuant to Section 12(b) of the Act:
 None
    
    None(Title of each class)
    
    (Name of each exchange on which registered)
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock (no par value)  (Title of class)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



Intermountain Community Bancorp
 FORM 10-Q
For the Quarter Ended March 31, 2011
 TABLE OF CONTENTS
 PART I  Financial InformationItem 1  Financial Statements (Unaudited)Consolidated Balance Sheets for March 31, 2011 and December 31, 2010
    
    
    3Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010
    
    
    4Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010
    
    
    5Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2011 and 2010
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    51Item 4  Controls and Procedures
    
    
    51PART II  Other InformationItem 1  Legal Proceedings
    
    
    52Item 1A  Risk Factors
    
    
    52Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    59Item 3  Defaults Upon Senior Securities
    
    
    59Item 4  [Removed and Reserved]
    
    
    59Item 5  Other Information
    
    
    60Item 6  Exhibits
    
    
    61Signatures
    
    
    62EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I  Financial Information
 
 Item 1  Financial Statements  Intermountain Community Bancorp
 
 Consolidated Balance Sheets
(Unaudited)
 March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)ASSETSCash and cash equivalents:Interest-bearing
    
    $
    143,957
    
    
    $
    132,693Non-interest bearing and vault
    
    
    12,891
    
    
    
    11,973Restricted cash
    
    
    3,224
    
    
    
    3,290Available-for-sale securities, at fair value
    
    
    173,484
    
    
    
    183,081Held-to-maturity securities, at amortized cost
    
    
    22,188
    
    
    
    22,217Federal Home Loan Bank (FHLB) of Seattle stock, at cost
    
    
    2,310
    
    
    
    2,310Loans held for sale
    
    
    1,823
    
    
    
    3,425Loans receivable, net
    
    
    540,614
    
    
    
    563,228Accrued interest receivable
    
    
    4,021
    
    
    
    4,360Office properties and equipment, net
    
    
    39,560
    
    
    
    40,246Bank-owned life insurance
    
    
    8,854
    
    
    
    8,765Other intangibles
    
    
    280
    
    
    
    310Other real estate owned (OREO)
    
    
    3,686
    
    
    
    4,429Prepaid expenses and other assets
    
    
    23,981
    
    
    
    24,782Total assets
    
    $
    980,873
    
    
    $
    1,005,109LIABILITIESDeposits
    
    $
    767,641
    
    
    $
    778,833Securities sold subject to repurchase agreements
    
    
    92,240
    
    
    
    105,116Advances from Federal Home Loan Bank
    
    
    34,000
    
    
    
    34,000Cashier checks issued and payable
    
    
    550
    
    
    
    580Accrued interest payable
    
    
    1,340
    
    
    
    1,406Other borrowings
    
    
    16,527
    
    
    
    16,527Accrued expenses and other liabilities
    
    
    9,457
    
    
    
    9,294Total liabilities
    
    
    921,755
    
    
    
    945,756Commitments and contingent liabilitiesSTOCKHOLDERS EQUITYCommon stock 300,000,000 shares authorized; 8,428,519
and 8,431,385 shares issued and 8,409,730 and 8,390,877
shares outstanding as of March 31, 2011 and December 31,
2010
    
    
    78,773
    
    
    
    78,803Preferred stock 1,000,000 shares authorized; 27,000
shares issued and outstanding as of March 31, 2011 and
December 31, 2010
    
    
    25,881
    
    
    
    25,794Accumulated other comprehensive loss, net of tax
    
    
    (1,079
    )
    
    
    (1,229
    )Accumulated deficit
    
    
    (44,457
    )
    
    
    (44,015
    )Total stockholders equity
    
    
    59,118
    
    
    
    59,353Total liabilities and stockholders equity
    
    $
    980,873
    
    
    $
    1,005,109
  3




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##### Table of Contents



Intermountain Community Bancorp
 
 Consolidated Statements of Operations
 (Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010(Dollars in thousands,except per share data)Interest income:Loans
    
    $
    8,335
    
    
    $
    9,649Investments
    
    
    2,153
    
    
    
    1,967Total interest income
    
    
    10,488
    
    
    
    11,616Interest expense:Deposits
    
    
    1,248
    
    
    
    2,390Other borrowings
    
    
    529
    
    
    
    807Total interest expense
    
    
    1,777
    
    
    
    3,197Net interest income
    
    
    8,711
    
    
    
    8,419Provision for losses on loans
    
    
    (1,633
    )
    
    
    (6,808
    )Net interest income after provision for losses on loans
    
    
    7,078
    
    
    
    1,611Other income:Fees and service charges
    
    
    1,670
    
    
    
    1,681Loan related fee income
    
    
    575
    
    
    
    599Net gain on sale of securities
    
    
    
    
    
    
    53Other-than-temporary impairment (OTTI) losses on investments (1)
    
    
    
    
    
    
    (19
    )Bank-owned life insurance
    
    
    89
    
    
    
    91Other
    
    
    329
    
    
    
    118Total other income
    
    
    2,663
    
    
    
    2,523Operating expenses
    
    
    9,740
    
    
    
    11,560Income (loss) before income taxes
    
    
    1
    
    
    
    (7,426
    )Income tax benefit
    
    
    
    
    
    
    3,117Net income (loss)
    
    
    1
    
    
    
    (4,309
    )Preferred stock dividend
    
    
    443
    
    
    
    419Net loss applicable to common stockholders
    
    $
    (442
    )
    
    $
    (4,728
    )Loss per share  basic
    
    $
    (0.05
    )
    
    $
    (0.56
    )Loss per share  diluted
    
    $
    (0.05
    )
    
    $
    (0.56
    )Weighted average common shares outstanding  basic
    
    
    8,396,495
    
    
    
    8,372,315Weighted average common shares outstanding  diluted
    
    
    8,396,495
    
    
    
    8,372,315
 
 (1)
    
    Consisting of $0, and $0 of total other-than-temporary impairment net losses, net of $0 and
$19,000 recognized in other comprehensive income, for the three months ended March 31, 2011,
and March 31, 2010, respectively.  4




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##### Table of Contents



Intermountain Community Bancorp
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Three months endedMarch 31,2011
    
    
    2010(Dollars in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    1
    
    
    $
    (4,309
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation
    
    
    768
    
    
    
    802Stock-based compensation expense
    
    
    72
    
    
    
    122Net amortization of premiums on securities
    
    
    604
    
    
    
    769Provisions for losses on loans
    
    
    1,633
    
    
    
    6,808Amortization of core deposit intangibles
    
    
    31
    
    
    
    32(Gain) on sale of loans, investments, property and equipment
    
    
    (147
    )
    
    
    (262
    )OTTI credit loss on available-for-sale investments
    
    
    
    
    
    
    19OREO valuation adjustments
    
    
    361
    
    
    
    777Accretion of deferred gain on sale of branch property
    
    
    (3
    )
    
    
    (4
    )Net accretion of loan and deposit discounts and premiums
    
    
    (3
    )
    
    
    (10
    )Increase in cash surrender value of bank-owned life insurance
    
    
    (89
    )
    
    
    (91
    )Change in:Accrued interest receivable
    
    
    339
    
    
    
    265Prepaid expenses and other assets
    
    
    606
    
    
    
    (4,413
    )Accrued interest payable
    
    
    (66
    )
    
    
    185Accrued expenses and other liabilities
    
    
    (197
    )
    
    
    970Proceeds from sale of loans
    
    
    10,466
    
    
    
    17,267Originations of loans held for sale
    
    
    (8,717
    )
    
    
    (15,474
    )Net cash provided by operating activities
    
    
    5,659
    
    
    
    3,453Cash flows from investing activities:Purchases of available-for-sale securities
    
    
    (4,038
    )
    
    
    (26,128
    )Proceeds from calls or maturities of available-for-sale securities
    
    
    132
    
    
    
    6,309Principal payments on mortgage-backed securities
    
    
    13,132
    
    
    
    14,071Proceeds from calls or maturities of held-to-maturity securities
    
    
    22
    
    
    
    20Origination of loans, net principal payments
    
    
    20,094
    
    
    
    22,827Purchase of office properties and equipment
    
    
    (83
    )
    
    
    (143
    )Proceeds from sale of office properties and equipment
    
    
    
    
    
    
    6Proceeds from sale of other real estate owned
    
    
    1,270
    
    
    
    1,684Net change in restricted cash
    
    
    67
    
    
    
    (428
    )Net cash provided by investing activities
    
    
    30,596
    
    
    
    18,218Cash flows from financing activities:Net change in demand, money market and savings deposits
    
    $
    5,969
    
    
    $
    3,908Net change in certificates of deposit
    
    
    (17,161
    )
    
    
    2,777Net change in repurchase agreements
    
    
    (12,877
    )
    
    
    (8,577
    )Retirement of treasury stock
    
    
    (4
    )
    
    
    (3
    )Net cash used in financing activities
    
    
    (24,073
    )
    
    
    (1,895
    )Net change in cash and cash equivalents
    
    
    12,182
    
    
    
    19,776Cash and cash equivalents, beginning of period
    
    
    144,666
    
    
    
    103,189Cash and cash equivalents, end of period
    
    $
    156,848
    
    
    $
    122,965Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    1,843
    
    
    $
    3,012Noncash investing and financing activities:Loans converted to other real estate owned
    
    
    888
    
    
    
    2,461Accrual of preferred stock dividend
    
    
    356
    
    
    
    340
  5




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##### Table of Contents



Intermountain Community Bancorp
 
 Consolidated Statements of Comprehensive Income (Loss)
 (Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010(Dollars in thousands)Net income (loss)
    
    $
    1
    
    
    $
    (4,309
    )Other comprehensive income:Change in unrealized gains on investments, and mortgage
backed securities (MBS) available for sale, excluding
non-credit loss on impairment of securities
    
    
    226
    
    
    
    615Non-credit loss on impairment on available-for-sale debt
    
    
    
    
    
    
    19Less deferred income tax provision
    
    
    (89
    )
    
    
    (251
    )Change in fair value of qualifying cash flow hedge
    
    
    13
    
    
    
    245Net other comprehensive income
    
    
    150
    
    
    
    628Comprehensive income (loss)
    
    $
    151
    
    
    $
    (3,681
    )
  6




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##### Table of Contents



Intermountain Community Bancorp
 
 Notes to Consolidated Financial Statements (Unaudited)
 1. Basis of Presentation
   2. Investments:
  Available-for-SaleNon-CreditOTTIRecognized
    
    
    Gross
    
    
    GrossAmortized
    
    
    in OCI
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair Value/Cost
    
    
    (Losses)
    
    
    Gains
    
    
    Losses
    
    
    Carrying ValueMarch 31, 2011U.S. treasury securities and
obligations of U.S. government
agencies
    
    $
    4,017
    
    
    $
    
    
    
    $
    
    
    
    $
    (201
    )
    
    $
    3,816State and municipal securities
    
    
    7,259
    
    
    
    
    
    
    
    44
    
    
    
    (83
    )
    
    
    7,220Mortgage-backed securities & CMOs
    
    
    163,302
    
    
    
    (1,926
    )
    
    
    3,278
    
    
    
    (2,206
    )
    
    
    162,448$
    174,578
    
    
    $
    (1,926
    )
    
    $
    3,322
    
    
    $
    (2,490
    )
    
    $
    173,484December 31, 2010U.S. treasury securities and
obligations of U.S. government
agencies
    
    $
    4,020
    
    
    $
    
    
    
    $
    
    
    
    $
    (95
    )
    
    $
    3,925State and municipal securities
    
    
    5,251
    
    
    
    
    
    
    
    28
    
    
    
    (49
    )
    
    
    5,230Mortgage-backed securities & CMOs
    
    
    175,129
    
    
    
    (1,926
    )
    
    
    3,648
    
    
    
    (2,925
    )
    
    
    173,926$
    184,400
    
    
    $
    (1,926
    )
    
    $
    3,676
    
    
    $
    (3,069
    )
    
    $
    183,081Held-to-MaturityNon-CreditCarrying
    
    OTTIValue/
    
    Recognized
    
    Gross
    
    GrossAmortized
    
    in OCI
    
    Unrealized
    
    UnrealizedCost
    
    (Losses)
    
    Gains
    
    Losses
    
    Fair ValueMarch 31, 2011State and municipal securities
    
    $
    22,188
    
    
    $
    
    
    
    $
    367
    
    
    $
    (299
    )
    
    $
    22,256December 31, 2010State and municipal securities
    
    $
    22,217
    
    
    $
    
    
    
    $
    280
    
    
    $
    (385
    )
    
    $
    22,112
 7




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##### Table of Contents



Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedMarch 31, 2011
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. treasury securities and
obligations of U.S. government
agencies
    
    $
    3,789
    
    
    $
    201
    
    
    $
    
    
    
    $
    
    
    
    $
    3,789
    
    
    $
    201State and municipal securities
    
    
    11,260
    
    
    
    382
    
    
    
    
    
    
    
    
    
    
    
    11,260
    
    
    
    382Mortgage-backed securities & CMOs
    
    
    29,392
    
    
    
    389
    
    
    
    18,977
    
    
    
    1,817
    
    
    
    48,369
    
    
    
    2,206Total
    
    $
    44,441
    
    
    $
    972
    
    
    $
    18,977
    
    
    $
    1,817
    
    
    $
    63,418
    
    
    $
    2,789
 Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDecember 31, 2010
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. treasury securities and
obligations of U.S. government
agencies
    
    $
    3,897
    
    
    $
    95
    
    
    $
    
    
    
    $
    
    
    
    $
    3,897
    
    
    $
    95State and municipal securities
    
    
    11,713
    
    
    
    434
    
    
    
    
    
    
    
    
    
    
    
    11,713
    
    
    
    434Mortgage-backed securities & CMOs
    
    
    36,338
    
    
    
    581
    
    
    
    14,447
    
    
    
    2,344
    
    
    
    50,785
    
    
    
    2,925Total
    
    $
    51,948
    
    
    $
    1,110
    
    
    $
    14,447
    
    
    $
    2,344
    
    
    $
    66,395
    
    
    $
    3,454
  Available-for-Sale
    
    
    Held-to-MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueOne year or less
    
    $
    
    
    
    $
    
    
    
    $
    296
    
    
    $
    299After one year through five years
    
    
    26
    
    
    
    28
    
    
    
    701
    
    
    
    743After five years through ten years
    
    
    6,000
    
    
    
    5,726
    
    
    
    9,658
    
    
    
    9,701After ten years
    
    
    5,250
    
    
    
    5,282
    
    
    
    11,533
    
    
    
    11,513Subtotal
    
    
    11,276
    
    
    
    11,036
    
    
    
    22,188
    
    
    
    22,256Mortgage-backed securities
    
    
    163,302
    
    
    
    162,448
    
    
    
    
    
    
    
    Total Securities
    
    $
    174,578
    
    
    $
    173,484
    
    
    $
    22,188
    
    
    $
    22,256
     8




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##### Table of Contents



2011
    
    
    2010Held To
    
    
    Available
    
    
    Held To
    
    
    AvailableMaturity
    
    
    For Sale
    
    
    Maturity
    
    
    For SaleTotal other-than-temporary impairment losses
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Portion of other-than-temporary impairment
losses transferred from (recognized in) other
comprehensive income(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Net impairment losses recognized in earnings(2)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    19
 
 (1)
    
    Represents other-than-temporary impairment losses related to all other factors.(2)
    
    Represents other-than-temporary impairment losses related to credit losses.   9




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##### Table of Contents



3. Loans and Allowance for Loan Losses
  March 31, 2011Individually
    
    
    CollectivelyLoans
    
    
    
    
    
    
    Evaluated for
    
    
    Evaluated forReceivable
    
    
    %
    
    
    Impairment
    
    
    ImpairmentCommercial
    
    $
    118,396
    
    
    
    21.4
    %
    
    $
    11,216
    
    
    $
    107,180Commercial real estate
    
    
    169,888
    
    
    
    30.7
    
    
    
    11,519
    
    
    
    158,369Commercial construction
    
    
    18,579
    
    
    
    3.4
    
    
    
    454
    
    
    
    18,125Land and land development loans
    
    
    58,086
    
    
    
    10.5
    
    
    
    12,585
    
    
    
    45,501Agriculture
    
    
    77,098
    
    
    
    13.9
    
    
    
    972
    
    
    
    76,126Multifamily
    
    
    26,253
    
    
    
    4.8
    
    
    
    
    
    
    
    26,253Residential real estate
    
    
    61,854
    
    
    
    11.2
    
    
    
    3,036
    
    
    
    58,818Residential construction
    
    
    3,537
    
    
    
    0.6
    
    
    
    278
    
    
    
    3,259Consumer
    
    
    13,014
    
    
    
    2.4
    
    
    
    602
    
    
    
    12,412Municipal
    
    
    6,383
    
    
    
    1.1
    
    
    
    
    
    
    
    6,383Total loans receivable
    
    
    553,088
    
    
    
    100.0
    %
    
    $
    40,662
    
    
    $
    512,426Allowance for loan losses
    
    
    (12,482
    )Deferred loan fees, net of direct origination costs
    
    
    8Loans receivable, net
    
    $
    540,614Weighted average interest rate
    
    
    5.97
    %
 December 31, 2010Individually
    
    
    CollectivelyLoans
    
    
    
    
    
    
    Evaluated for
    
    
    Evaluated forReceivable
    
    
    %
    
    
    Impairment
    
    
    ImpairmentCommercial
    
    $
    122,656
    
    
    
    21.3
    %
    
    $
    10,698
    
    
    $
    111,958Commercial real estate
    
    
    175,559
    
    
    
    30.5
    
    
    
    13,077
    
    
    
    162,482Commercial construction
    
    
    17,951
    
    
    
    3.1
    
    
    
    691
    
    
    
    17,260Land and land development loans
    
    
    60,962
    
    
    
    10.6
    
    
    
    5,995
    
    
    
    54,967Agriculture
    
    
    87,364
    
    
    
    15.2
    
    
    
    1,460
    
    
    
    85,904Multifamily
    
    
    26,417
    
    
    
    4.6
    
    
    
    
    
    
    
    26,417Residential real estate
    
    
    60,872
    
    
    
    10.6
    
    
    
    3,276
    
    
    
    57,596Residential construction
    
    
    3,219
    
    
    
    0.6
    
    
    
    277
    
    
    
    2,942Consumer
    
    
    14,095
    
    
    
    2.4
    
    
    
    1,094
    
    
    
    13,001Municipal
    
    
    6,528
    
    
    
    1.1
    
    
    
    
    
    
    
    6,528Total loans receivable
    
    
    575,623
    
    
    
    100.0
    %
    
    $
    36,568
    
    
    $
    539,055Allowance for loan losses
    
    
    (12,455
    )Deferred loan fees, net of direct origination costs
    
    
    60Loans receivable, net
    
    $
    563,228Weighted average interest rate
    
    
    6.04
    %
  March 31, 2011Individually
    
    
    CollectivelyTotal
    
    
    Evaluated
    
    
    EvaluatedAllowance
    
    
    Allowance
    
    
    AllowanceCommercial
    
    $
    2,411
    
    
    $
    922
    
    
    $
    1,489Commercial real estate
    
    
    4,092
    
    
    
    1,809
    
    
    
    2,283Commercial construction
    
    
    568
    
    
    
    145
    
    
    
    423Land and land development loans
    
    
    2,478
    
    
    
    957
    
    
    
    1,521Agriculture
    
    
    845
    
    
    
    107
    
    
    
    738Multifamily
    
    
    73
    
    
    
    
    
    
    
    73Residential real estate
    
    
    1,259
    
    
    
    528
    
    
    
    731Residential construction
    
    
    118
    
    
    
    36
    
    
    
    82Consumer
    
    
    577
    
    
    
    417
    
    
    
    160Municipal
    
    
    61
    
    
    
    
    
    
    
    61Total
    
    $
    12,482
    
    
    $
    4,921
    
    
    $
    7,561
 10




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##### Table of Contents



December 31, 2010Individually
    
    
    CollectivelyTotal
    
    
    Evaluated
    
    
    EvaluatedAllowance
    
    
    Allowance
    
    
    AllowanceCommercial
    
    $
    2,925
    
    
    $
    744
    
    
    $
    2,181Commercial real estate
    
    
    3,655
    
    
    
    1,475
    
    
    
    2,180Commercial construction
    
    
    540
    
    
    
    145
    
    
    
    395Land and land development loans
    
    
    2,408
    
    
    
    770
    
    
    
    1,638Agriculture
    
    
    779
    
    
    
    92
    
    
    
    687Multifamily
    
    
    83
    
    
    
    
    
    
    
    83Residential real estate
    
    
    1,252
    
    
    
    545
    
    
    
    707Residential construction
    
    
    65
    
    
    
    
    
    
    
    65Consumer
    
    
    613
    
    
    
    449
    
    
    
    164Municipal
    
    
    135
    
    
    
    
    
    
    
    135Total
    
    $
    12,455
    
    
    $
    4,220
    
    
    $
    8,235
  90 Days or More30-89 Days
    
    
    Past DueCurrent
    
    
    Past Due
    
    
    and Accruing
    
    
    Nonaccrual
    
    
    TotalCommercial
    
    $
    113,697
    
    
    $
    276
    
    
    $
    
    
    
    $
    4,423
    
    
    $
    118,396Commercial real estate
    
    
    165,174
    
    
    
    549
    
    
    
    
    
    
    
    4,165
    
    
    
    169,888Commercial construction
    
    
    18,531
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    18,579Land and land development loans
    
    
    49,731
    
    
    
    178
    
    
    
    
    
    
    
    8,177
    
    
    
    58,086Agriculture
    
    
    76,347
    
    
    
    137
    
    
    
    
    
    
    
    614
    
    
    
    77,098Multifamily
    
    
    26,253
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,253Residential real estate
    
    
    60,148
    
    
    
    905
    
    
    
    
    
    
    
    801
    
    
    
    61,854Residential construction
    
    
    3,428
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    3,537Consumer
    
    
    12,592
    
    
    
    42
    
    
    
    1
    
    
    
    379
    
    
    
    13,014Municipal
    
    
    6,383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,383Total
    
    $
    532,284
    
    
    $
    2,087
    
    
    $
    1
    
    
    $
    18,716
    
    
    $
    553,088
  90 Days or More30-89 Days
    
    
    Past DueCurrent
    
    
    Past Due
    
    
    and Accruing
    
    
    Nonaccrual
    
    
    TotalCommercial
    
    $
    118,036
    
    
    $
    761
    
    
    $
    
    
    
    $
    3,859
    
    
    $
    122,656Commercial real estate
    
    
    171,633
    
    
    
    360
    
    
    
    
    
    
    
    3,566
    
    
    
    175,559Commercial construction
    
    
    17,880
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    17,951Land and land development loans
    
    
    58,537
    
    
    
    515
    
    
    
    
    
    
    
    1,910
    
    
    
    60,962Agriculture
    
    
    86,782
    
    
    
    
    
    
    
    
    
    
    
    582
    
    
    
    87,364Multifamily
    
    
    26,417
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,417Residential real estate
    
    
    58,481
    
    
    
    1,361
    
    
    
    66
    
    
    
    964
    
    
    
    60,872Residential construction
    
    
    3,109
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    3,219Consumer
    
    
    13,664
    
    
    
    42
    
    
    
    
    
    
    
    389
    
    
    
    14,095Municipal
    
    
    6,528
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,528Total
    
    $
    561,067
    
    
    $
    3,039
    
    
    $
    66
    
    
    $
    11,451
    
    
    $
    575,623
   11




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##### Table of Contents



Allowance for Loan LossesMarch 31, 2011Balance,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance,Beginning of
    
    
    Charge-Offs
    
    
    Recoveries
    
    
    
    
    
    
    End ofYear
    
    
    YTD
    
    
    YTD
    
    
    Provision
    
    
    Period(Dollars in thousands)Commercial
    
    $
    2,925
    
    
    $
    
    
    
    $
    
    
    
    $
    (514
    )
    
    $
    2,411Commercial real estate
    
    
    3,655
    
    
    
    (477
    )
    
    
    1
    
    
    
    913
    
    
    
    4,092Commercial construction
    
    
    540
    
    
    
    (382
    )
    
    
    58
    
    
    
    352
    
    
    
    568Land and land development loans
    
    
    2,408
    
    
    
    (476
    )
    
    
    154
    
    
    
    392
    
    
    
    2,478Agriculture
    
    
    779
    
    
    
    (294
    )
    
    
    40
    
    
    
    320
    
    
    
    845Multifamily
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    73Residential real estate
    
    
    1,252
    
    
    
    (213
    )
    
    
    40
    
    
    
    180
    
    
    
    1,259Residential construction
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    118Consumer
    
    
    613
    
    
    
    (99
    )
    
    
    42
    
    
    
    21
    
    
    
    577Municipal
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    61Allowance for loan losses
    
    $
    12,455
    
    
    $
    (1,941
    )
    
    $
    335
    
    
    $
    1,633
    
    
    $
    12,482
 Allowance for Loan LossesMarch 31, 2010Balance,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance,Beginning of
    
    
    Charge-Offs
    
    
    Recoveries
    
    
    
    
    
    
    End ofYear
    
    
    YTD
    
    
    YTD
    
    
    Provision
    
    
    Period(Dollars in thousands)Commercial
    
    $
    4,785
    
    
    $
    (1,158
    )
    
    $
    226
    
    
    $
    1,440
    
    
    $
    5,293Commercial real estate
    
    
    3,827
    
    
    
    (1,071
    )
    
    
    1
    
    
    
    958
    
    
    
    3,715Commercial construction
    
    
    1,671
    
    
    
    (61
    )
    
    
    
    
    
    
    778
    
    
    
    2,388Land and land development loans
    
    
    2,707
    
    
    
    (2,166
    )
    
    
    2
    
    
    
    3,122
    
    
    
    3,665Agriculture
    
    
    1,390
    
    
    
    (183
    )
    
    
    
    
    
    
    (439
    )
    
    
    768Multifamily
    
    
    26
    
    
    
    (8
    )
    
    
    
    
    
    
    40
    
    
    
    58Residential real estate
    
    
    1,412
    
    
    
    (566
    )
    
    
    7
    
    
    
    848
    
    
    
    1,701Residential construction
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    180Consumer
    
    
    539
    
    
    
    (189
    )
    
    
    47
    
    
    
    8
    
    
    
    405Municipal
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    124Allowances for loan losses
    
    $
    16,608
    
    
    $
    (5,402
    )
    
    $
    283
    
    
    $
    6,808
    
    
    $
    18,297
 Allowance
for Unfunded Commitments
 March 31,2011
    
    
    2010(Dollars in thousands)Balance Beginning January 1
    
    $
    17
    
    
    $
    11Adjustment
    
    
    1
    
    
    
    5Transfers
    
    
    
    
    
    
    Allowance  Unfunded Commitments at end of period
    
    $
    18
    
    
    $
    16
 12




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##### Table of Contents



March 31, 2011
    
    
    Quarter Ended March 31, 2011AverageRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    Interest IncomeInvestment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    Recognized(Dollars in thousands)With an allowance recorded:Commercial
    
    $
    1,954
    
    
    $
    1,996
    
    
    $
    922
    
    
    $
    2,137
    
    
    $
    42Commercial real estate
    
    
    6,424
    
    
    
    7,359
    
    
    
    1,809
    
    
    
    5,403
    
    
    
    261Commercial construction
    
    
    406
    
    
    
    406
    
    
    
    145
    
    
    
    406
    
    
    
    6Land and land development loans
    
    
    5,017
    
    
    
    5,017
    
    
    
    957
    
    
    
    3,401
    
    
    
    34Agriculture
    
    
    120
    
    
    
    156
    
    
    
    107
    
    
    
    274
    
    
    
    11Multifamily
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential real estate
    
    
    1,428
    
    
    
    1,437
    
    
    
    528
    
    
    
    1,318
    
    
    
    41Residential construction
    
    
    110
    
    
    
    196
    
    
    
    36
    
    
    
    55
    
    
    
    23Consumer
    
    
    476
    
    
    
    483
    
    
    
    417
    
    
    
    507
    
    
    
    12Municipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    15,935
    
    
    $
    17,050
    
    
    $
    4,921
    
    
    $
    13,501
    
    
    $
    430Without an allowance recorded:Commercial
    
    $
    9,262
    
    
    $
    13,335
    
    
    $
    
    
    
    $
    8,820
    
    
    $
    542Commercial real estate
    
    
    5,095
    
    
    
    9,182
    
    
    
    
    
    
    
    6,894
    
    
    
    369Commercial construction
    
    
    48
    
    
    
    182
    
    
    
    
    
    
    
    167
    
    
    
    11Land and land development loans
    
    
    7,568
    
    
    
    16,370
    
    
    
    
    
    
    
    5,888
    
    
    
    316Agriculture
    
    
    852
    
    
    
    1,958
    
    
    
    
    
    
    
    942
    
    
    
    77Multifamily
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential real estate
    
    
    1,608
    
    
    
    2,041
    
    
    
    
    
    
    
    1,839
    
    
    
    69Residential construction
    
    
    168
    
    
    
    168
    
    
    
    
    
    
    
    223
    
    
    
    3Consumer
    
    
    126
    
    
    
    160
    
    
    
    
    
    
    
    341
    
    
    
    5Municipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    24,727
    
    
    $
    43,396
    
    
    $
    
    
    
    $
    25,114
    
    
    $
    1,392Total:Commercial
    
    $
    11,216
    
    
    $
    15,331
    
    
    $
    922
    
    
    $
    10,957
    
    
    $
    584Commercial real estate
    
    
    11,519
    
    
    
    16,541
    
    
    
    1,809
    
    
    
    12,297
    
    
    
    630Commercial construction
    
    
    454
    
    
    
    588
    
    
    
    145
    
    
    
    573
    
    
    
    17Land and land development loans
    
    
    12,585
    
    
    
    21,387
    
    
    
    957
    
    
    
    9,289
    
    
    
    350Agriculture
    
    
    972
    
    
    
    2,114
    
    
    
    107
    
    
    
    1,216
    
    
    
    88Multifamily
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential real estate
    
    
    3,036
    
    
    
    3,478
    
    
    
    528
    
    
    
    3,157
    
    
    
    110Residential construction
    
    
    278
    
    
    
    364
    
    
    
    36
    
    
    
    278
    
    
    
    26Consumer
    
    
    602
    
    
    
    643
    
    
    
    417
    
    
    
    848
    
    
    
    17Municipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    40,662
    
    
    $
    60,446
    
    
    $
    4,921
    
    
    $
    38,615
    
    
    $
    1,822
 13




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##### Table of Contents



December 31, 2010
    
    
    Year Ended December 31, 2010AverageRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    Interest IncomeInvestment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    Recognized(Dollars in thousands)With an allowance recorded:Commercial
    
    $
    2,319
    
    
    $
    2,320
    
    
    $
    744
    
    
    $
    3,785
    
    
    $
    173Commercial real estate
    
    
    4,383
    
    
    
    5,088
    
    
    
    1,475
    
    
    
    4,804
    
    
    
    381Commercial construction
    
    
    406
    
    
    
    407
    
    
    
    145
    
    
    
    425
    
    
    
    17Land and land development loans
    
    
    1,786
    
    
    
    1,786
    
    
    
    770
    
    
    
    2,411
    
    
    
    120Agriculture
    
    
    428
    
    
    
    463
    
    
    
    92
    
    
    
    1,470
    
    
    
    46Multifamily
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Residential real estate
    
    
    1,207
    
    
    
    1,357
    
    
    
    545
    
    
    
    1,303
    
    
    
    98Residential construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    302
    
    
    
    Consumer
    
    
    538
    
    
    
    594
    
    
    
    449
    
    
    
    394
    
    
    
    45Municipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    11,067
    
    
    $
    12,023
    
    
    $
    4,220
    
    
    $
    14,894
    
    
    $
    888Without an allowance recorded:Commercial
    
    $
    8,379
    
    
    $
    12,362
    
    
    $
    
    
    
    $
    5,865
    
    
    $
    1,021Commercial real estate
    
    
    8,694
    
    
    
    11,510
    
    
    
    
    
    
    
    6,589
    
    
    
    901Commercial construction
    
    
    285
    
    
    
    418
    
    
    
    
    
    
    
    3,852
    
    
    
    36Land and land development loans
    
    
    4,209
    
    
    
    7,573
    
    
    
    
    
    
    
    9,617
    
    
    
    575Agriculture
    
    
    1,032
    
    
    
    1,885
    
    
    
    
    
    
    
    2,560
    
    
    
    192Multifamily
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    347
    
    
    
    Residential real estate
    
    
    2,069
    
    
    
    2,335
    
    
    
    
    
    
    
    2,689
    
    
    
    204Residential construction
    
    
    277
    
    
    
    363
    
    
    
    
    
    
    
    420
    
    
    
    54Consumer
    
    
    556
    
    
    
    726
    
    
    
    
    
    
    
    311
    
    
    
    75Municipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    25,501
    
    
    $
    37,172
    
    
    $
    
    
    
    $
    32,250
    
    
    $
    3,058Total:Commercial
    
    $
    10,698
    
    
    $
    14,682
    
    
    $
    744
    
    
    $
    9,650
    
    
    $
    1,194Commercial real estate
    
    
    13,077
    
    
    
    16,598
    
    
    
    1,475
    
    
    
    11,393
    
    
    
    1,282Commercial construction
    
    
    691
    
    
    
    825
    
    
    
    145
    
    
    
    4,277
    
    
    
    53Land and land development loans
    
    
    5,995
    
    
    
    9,359
    
    
    
    770
    
    
    
    12,028
    
    
    
    695Agriculture
    
    
    1,460
    
    
    
    2,348
    
    
    
    92
    
    
    
    4,030
    
    
    
    238Multifamily
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    347
    
    
    
    8Residential real estate
    
    
    3,276
    
    
    
    3,692
    
    
    
    545
    
    
    
    3,992
    
    
    
    302Residential construction
    
    
    277
    
    
    
    363
    
    
    
    
    
    
    
    722
    
    
    
    54Consumer
    
    
    1,094
    
    
    
    1,320
    
    
    
    449
    
    
    
    705
    
    
    
    120Municipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    36,568
    
    
    $
    49,195
    
    
    $
    4,220
    
    
    $
    47,144
    
    
    $
    3,946
 Credit quality indicators
  Satisfactory
 14




---



##### Table of Contents



Watch
 Special mention
 Substandard
 Doubtful
 Loss
  Loan Portfolio Credit Grades by TypeMarch 31, 2011Internal
    
    
    SpecialSatisfactory
    
    
    Watch
    
    
    Mention
    
    
    Substandard
    
    
    DoubtfulGrade 1-3
    
    
    Grade 4
    
    
    Grade 5
    
    
    Grade 6
    
    
    Grade 7
    
    
    Total(Dollars in thousands)Commercial
    
    $
    70,245
    
    
    $
    29,113
    
    
    $
    4,067
    
    
    $
    14,971
    
    
    $
    
    
    
    $
    118,396Commercial real estate
    
    
    106,352
    
    
    
    45,014
    
    
    
    2,508
    
    
    
    16,014
    
    
    
    
    
    
    
    169,888Commercial construction
    
    
    4,554
    
    
    
    5,207
    
    
    
    987
    
    
    
    7,831
    
    
    
    
    
    
    
    18,579Land and land development loans
    
    
    11,575
    
    
    
    27,324
    
    
    
    5,088
    
    
    
    14,099
    
    
    
    
    
    
    
    58,086Agriculture
    
    
    52,732
    
    
    
    19,205
    
    
    
    3,143
    
    
    
    2,018
    
    
    
    
    
    
    
    77,098Multifamily
    
    
    16,318
    
    
    
    9,935
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,253Residential real estate
    
    
    46,902
    
    
    
    9,813
    
    
    
    
    
    
    
    5,139
    
    
    
    
    
    
    
    61,854Residential construction
    
    
    2,815
    
    
    
    445
    
    
    
    
    
    
    
    277
    
    
    
    
    
    
    
    3,537Consumer
    
    
    11,189
    
    
    
    829
    
    
    
    106
    
    
    
    890
    
    
    
    
    
    
    
    13,014Municipal
    
    
    6,383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,383Loans receivable, net
    
    $
    329,065
    
    
    $
    146,885
    
    
    $
    15,899
    
    
    $
    61,239
    
    
    $
    
    
    
    $
    553,088
 Loan Portfolio Credit Grades by TypeDecember 31, 2010Internal
    
    
    SpecialSatisfactory
    
    
    Watch
    
    
    Mention
    
    
    Substandard
    
    
    DoubtfulGrade 1-3
    
    
    Grade 4
    
    
    Grade 5
    
    
    Grade 6
    
    
    Grade 7
    
    
    Total(Dollars in thousands)Commercial
    
    $
    78,693
    
    
    $
    26,383
    
    
    $
    3,517
    
    
    $
    14,062
    
    
    $
    1
    
    
    $
    122,656Commercial real estate
    
    
    113,759
    
    
    
    43,296
    
    
    
    2,696
    
    
    
    15,808
    
    
    
    
    
    
    
    175,559Commercial construction
    
    
    3,921
    
    
    
    4,976
    
    
    
    986
    
    
    
    8,068
    
    
    
    
    
    
    
    17,951Land and land development loans
    
    
    13,825
    
    
    
    33,688
    
    
    
    5,409
    
    
    
    8,040
    
    
    
    
    
    
    
    60,962Agriculture
    
    
    60,508
    
    
    
    23,199
    
    
    
    1,277
    
    
    
    2,380
    
    
    
    
    
    
    
    87,364Multifamily
    
    
    16,455
    
    
    
    9,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,417Residential real estate
    
    
    46,111
    
    
    
    10,230
    
    
    
    54
    
    
    
    4,477
    
    
    
    
    
    
    
    60,872Residential construction
    
    
    2,497
    
    
    
    445
    
    
    
    
    
    
    
    277
    
    
    
    
    
    
    
    3,219Consumer
    
    
    12,302
    
    
    
    715
    
    
    
    106
    
    
    
    972
    
    
    
    
    
    
    
    14,095Municipal
    
    
    6,528
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,528Loans receivable, net
    
    $
    354,599
    
    
    $
    152,894
    
    
    $
    14,045
    
    
    $
    54,084
    
    
    $
    1
    
    
    $
    575,623
 15




---



##### Table of Contents



March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Loans past due in excess of 90 days and still accruing
    
    $
    1
    
    
    $
    66Non-accrual loans
    
    
    18,716
    
    
    
    11,451Total non-performing loans
    
    
    18,717
    
    
    
    11,517Other real estate owned (OREO)
    
    
    3,686
    
    
    
    4,429Total non-performing assets (NPAs)
    
    $
    22,403
    
    
    $
    15,946Classified loans(1)
    
    $
    61,239
    
    
    $
    54,085Troubled debt restructured loans
    
    $
    6,360
    
    
    $
    4,838
 
 1)
    
    Classified loan totals are inclusive of non-performing loans and may
also include troubled debt restructured loans, depending on the
grading of these restructured loans.   4. Other Real Estate Owned
  Three Months EndedMarch 31, 2011
    
    
    March 31, 2010(Dollars in thousands)Balance, beginning of period
    
    $
    4,429
    
    
    $
    11,538Additions to OREO
    
    
    888
    
    
    
    2,461Proceeds from sale of OREO
    
    
    (1,270
    )
    
    
    (1,684
    )Valuation Adjustments in the period (1)
    
    
    (361
    )
    
    
    (777
    )Balance, end of period, March 31
    
    $
    3,686
    
    
    $
    11,538
 
 (1)
    
    Amount includes chargedowns and gains/losses on sale of OREO  March 31, 2011
    
    
    December 31, 2010Single family residence
    
    $
    1,380
    
    
    
    37.5
    %
    
    $
    2,183
    
    
    
    49.3
    %Developed residential lots
    
    
    1,034
    
    
    
    28.0
    
    
    
    1,009
    
    
    
    22.8Commercial buildings
    
    
    770
    
    
    
    20.9
    
    
    
    788
    
    
    
    17.8Raw Land
    
    
    502
    
    
    
    13.6
    
    
    
    449
    
    
    
    10.1Total OREO
    
    $
    3,686
    
    
    
    100.0
    %
    
    $
    4,429
    
    
    
    100.0
    %
  16




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##### Table of Contents



5. Advances from the Federal Home Loan Bank of Seattle
  March 31, 2011
    
    
    December 31, 2010Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageAmount
    
    
    Interest Rate
    
    
    Amount
    
    
    Interest RateDue within 1 year
    
    $
    5,000
    
    
    
    1.49
    %
    
    $
    5,000
    
    
    
    1.49
    %Due in 1 to 2 years
    
    
    25,000
    
    
    
    2.06
    
    
    
    
    
    
    
    Due in 2 to 3 years
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    2.06Due in 3 to 4 years
    
    
    4,000
    
    
    
    3.11
    
    
    
    4,000
    
    
    
    3.11Due in 4 to 5 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    34,000
    
    
    
    2.10
    %
    
    $
    34,000
    
    
    
    2.10
    %
  6. Other Borrowings
  March 31,
    
    
    December 31,2011
    
    
    2010Term note payable (1)
    
    $
    8,279
    
    
    $
    8,279Term note payable (2)
    
    
    8,248
    
    
    
    8,248Total other borrowings
    
    $
    16,527
    
    
    $
    16,527
 
 (1)
    
    In January 2003, the Company issued $8.0 million of Trust Preferred securities through its
subsidiary, Intermountain Statutory Trust I. The debt associated with these securities bears
interest on a variable basis tied to the 90-day LIBOR (London Inter-Bank Offering Rate) index
plus 3.25%, with interest only paid quarterly. The rate on this borrowing was 3.56% at March
31, 2011. The debt is callable by the Company quarterly and matures in March 2033. During the
third quarter of 2008, the Company entered into an interest rate swap contract with Pacific
Coast Bankers Bank. The purpose of the $8.2 million notional value swap is to convert the
variable rate payments made on our Trust Preferred I obligation to a series of fixed rate
payments at 7.38% for five years, as a hedging strategy to help manage the Companys
interest-rate risk. See Note 2A and 2B below:(2)
    
    In March 2004, the Company issued $8.0 million of Trust Preferred securities through its
subsidiary, Intermountain Statutory Trust II. The debt associated with these securities bears
interest on a variable basis tied to the 90-day LIBOR index plus 2.8%, with interest only paid
quarterly. The rate on this borrowing was 3.10% at March 31, 2011. The debt is callable by the
Company quarterly and matures in April 2034. See Note A and B. A)
    
    Intermountains obligations under the debentures issued to the trusts referred
to above constitute a full and unconditional guarantee by Intermountain of the
Statutory Trusts obligations under the Trust Preferred Securities. In accordance with
ASC 810, Consolidation, (formerly FIN 46R, Consolidation of Variable Interest
Entities), the trusts are not consolidated and the debentures and related amounts are
treated as debt of Intermountain.B)
    
    To conserve the liquid assets of the parent Company, the Companys Board of
Directors has decided to defer regularly scheduled interest payments on its outstanding
Junior Subordinated Debentures related to its Trust Preferred Securities
 17




---



##### Table of Contents



(TRUPS Debentures) beginning in December 2009. The Company is permitted to defer
payments of interest on the TRUPS Debentures for up to 20 consecutive quarterly periods
without default. During the deferral period, the Company may not pay any dividends or
distributions on, or redeem, purchase or acquire, or make a liquidation payment with
respect to the Companys capital stock, or make any payment of principal or interest on,
or repay, repurchase or redeem any debt securities of the Company that rank equally or
junior to the TRUPS Debentures.
 7. Earnings Per Share
  Three months Ended March 312011
    
    
    2010Numerator:Net income (loss)  basic and diluted
    
    $
    1
    
    
    $
    (4,309
    )Preferred stock dividend
    
    
    443
    
    
    
    419Net loss applicable to commons stockholders
    
    $
    (442
    )
    
    $
    (4,728
    )Denominator:Weighted average shares outstanding  basic
    
    
    8,396,495
    
    
    
    8,372,315Dilutive effect of common stock options, warrants, restricted stock awards
    
    
    
    
    
    
    Weighted average shares outstanding  diluted
    
    
    8,396,495
    
    
    
    8,372,315Loss per share  basic and diluted:Loss per share  basic
    
    $
    (0.05
    )
    
    $
    (0.56
    )Effect of dilutive common stock options
    
    
    
    
    
    
    Loss per share  diluted
    
    $
    (0.05
    )
    
    $
    (0.56
    )Anti-dilutive securities not included in diluted earnings per share:Common stock options
    
    
    196,057
    
    
    
    254,683Common stock warrant
    
    
    653,226
    
    
    
    653,226Restricted shares
    
    
    29,649
    
    
    
    59,927Total anti-dilutive shares
    
    
    878,932
    
    
    
    967,836
  8. Operating Expenses
  Three months endedMarch 31,2011
    
    
    2010Salaries and employee benefits
    
    $
    4,947
    
    
    $
    5,832Occupancy expense
    
    
    1,787
    
    
    
    1,828Advertising
    
    
    130
    
    
    
    222Fees and service charges
    
    
    651
    
    
    
    651Printing, postage and supplies
    
    
    337
    
    
    
    389Legal and accounting
    
    
    235
    
    
    
    324FDIC Assessment
    
    
    445
    
    
    
    469OREO operations
    
    
    476
    
    
    
    1,030Other expense
    
    
    732
    
    
    
    815Total operating expenses
    
    $
    9,740
    
    
    $
    11,560
  18




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##### Table of Contents



9. Income Taxes
  Subsequent
Events
 10. Derivative Financial Instruments:
   19




---



##### Table of Contents



Interest Rate Swaps  Designated as Cash Flow Hedges
  March 31, 2011Receive Rate
    
    Pay Rate
    
    Type of HedgingMaturity Date
    
    Notional Amount
    
    Fair Value (Loss)
    
    (LIBOR)
    
    (Fixed)
    
    RelationshipPay Fixed, Receive Variable:October 2013
    
    $
    8,248
    
    
    $
    (781
    )
    
    
    0.30
    %
    
    
    4.58
    %
    
    Cash Flow
 December 31, 2010Receive Rate
    
    Pay Rate
    
    Type of HedgingMaturity Date
    
    Notional Amount
    
    Fair Value (Loss)
    
    (LIBOR)
    
    (Fixed)
    
    RelationshipPay Fixed, Receive Variable:October 2013
    
    $
    8,248
    
    
    $
    (892
    )
    
    
    0.29
    %
    
    
    4.58
    %
    
    Cash Flow
  Three months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010Unrealized loss at beginning of period
    
    $
    (892
    )
    
    $
    (678
    )Amount of gross loss recognized in earnings (loss)
    
    
    90
    
    
    
    Amount of gross loss recognized in other comprehensive income (loss)
    
    
    21
    
    
    
    (128
    )Unrealized loss at end of period
    
    $
    (781
    )
    
    $
    (806
    )
 Interest Rate Swaps  Not Designated as Hedging Instruments Under ASC 815
 20




---



##### Table of Contents



March 31, 2011
    
    
    December 31, 2010Notional
    
    
    
    
    
    
    NotionalAmount
    
    
    Fair Value Loss
    
    
    Amount
    
    
    Fair Value LossInterest rate
swaps with third
party financial
institutions
    
    $
    2,559
    
    
    $
    (36
    )
    
    $
    2,559
    
    
    $
    (38
    )
  11. Fair Value of Financial Instruments:
  Level 1 inputs
 Level 2 inputs
 Level 3 inputs
  Fair Value MeasurementsAt March 31, 2011, UsingQuoted PricesIn Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    March 31, 2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-Sale Securities:U.S. treasury securities and obligations of
U.S. government agencies
    
    $
    3,816
    
    
    $
    
    
    
    $
    3,816
    
    
    $
    State and municipal securities
    
    
    7,220
    
    
    
    
    
    
    
    7,220Residential mortgage backed securities (MBS)
    
    
    162,448
    
    
    
    
    
    
    
    133,358
    
    
    
    29,090Other Assets  Derivative
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )Total Assets Measured at Fair Value
    
    $
    173,448
    
    
    $
    
    
    
    $
    144,394
    
    
    $
    29,054Other Liabilities  Derivatives
    
    $
    781
    
    
    $
    
    
    
    $
    
    
    
    $
    781
 21




---



##### Table of Contents



Fair Value MeasurementsAt December 31, 2010 UsingQuoted PricesIn Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    December 31, 2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-Sale Securities:U.S. treasury securities and obligations of
U.S. government agencies
    
    $
    3,925
    
    
    $
    
    
    
    $
    3,925
    
    
    $
    State and municipal securities
    
    
    5,230
    
    
    
    
    
    
    
    5,230Residential mortgage backed securities (MBS)
    
    
    173,926
    
    
    
    
    
    
    
    144,412
    
    
    
    29,514Other Assets  Derivative
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    (38
    )Total Assets Measured at Fair Value
    
    $
    183,043
    
    
    $
    
    
    
    $
    153,567
    
    
    $
    29,476Other Liabilities  Derivatives
    
    $
    892
    
    
    $
    
    
    
    $
    
    
    
    $
    892
  Fair Value Measurements Using SignificantUnobservable Inputs ( Level 3)Description
    
    Residential MBS
    
    
    Derivatives
    
    
    TotalJanuary 1, 2011 Balance
    
    $
    29,514
    
    
    $
    (38
    )
    
    $
    29,476Total gains
or losses (realized/unrealized) Included in earnings
    
    
    
    
    
    
    2
    
    
    
    2Included in other comprehensive income
    
    
    504
    
    
    
    
    
    
    
    504Principal Payments
    
    
    (928
    )
    
    
    
    
    
    
    (928
    )Sales of Securities
    
    
    
    
    
    
    
    
    
    
    Transfers in and /or out of Level 3
    
    
    
    
    
    
    
    
    
    
    March 31, 2011 Balance
    
    $
    29,090
    
    
    $
    (36
    )
    
    $
    29,054
 Fair Value MeasurementsUsing Significant UnobservableInputs ( Level 3)Description
    
    DerivativesJanuary 1, 2011 Balance
    
    $
    892Total gains or losses (realized/unrealized) included in earnings
    
    
    (90
    )Included in other comprehensive income
    
    
    (21
    )March 31, 2011 Balance
    
    $
    781
  Fair Value MeasurementsAt March 31, 2011, UsingQuoted PricesIn Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    March 31, 2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Loans(1)
    
    $
    35,741
    
    
    $
    
    
    
    $
    
    
    
    $
    35,741OREO
    
    
    3,686
    
    
    
    
    
    
    
    
    
    
    
    3,686Net Deferred Tax Asset, net of valuation
    
    
    15,253
    
    
    
    
    
    
    
    
    
    
    
    15,253Total Assets Measured at Fair Value
    
    $
    54,680
    
    
    $
    
    
    
    $
    
    
    
    $
    54,680
 
 (1)
    
    Represents impaired loans, net of allowance for loan loss, which are included in loans. 22




---



##### Table of Contents



Securities
  Available for Sale Securities.
   23




---



##### Table of Contents




    
    The length of time and the extent to which the market value of the securities has
been lower than their cost;
    
    The financial condition and near-term prospects of the issuer or obligation,
including any specific events, which may influence the operations of the issuer or
obligation such as credit defaults and losses in mortgages underlying the security,
changes in technology that impair the earnings potential of the investment or the
discontinuation of a segment of the business that may affect the future earnings
potential; and
    
    The intent and ability of the Company to retain its investment in the issuer for a
period of time sufficient to allow for any anticipated recovery in market value.
  2011
    
    
    2010Held To
    
    
    Available
    
    
    Held To
    
    
    AvailableMaturity
    
    
    For Sale
    
    
    Maturity
    
    
    For SaleTotal other-than-temporary impairment losses
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Portion of other-than-temporary impairment losses
transferred from (recognized in) other comprehensive
income(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Net impairment losses recognized in earnings(2)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    19
 
 (1)
    
    Represents other-than-temporary impairment losses related to all other factors.(2)
    
    Represents other-than-temporary impairment losses related to credit losses.  Loans.
 24




---



##### Table of Contents



Other Real Estate Owned. Level 3.
 Interest Rate Swaps.
    March 31, 2011
    
    December 31, 2010Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial assets:Cash, cash equivalents, restricted cash and federal funds sold
    
    $
    160,072
    
    
    $
    160,072
    
    
    $
    147,956
    
    
    $
    147,956Interest bearing certificates of deposit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale securities
    
    
    173,456
    
    
    
    173,456
    
    
    
    183,081
    
    
    
    183,081Held-to-maturity securities
    
    
    22,188
    
    
    
    22,256
    
    
    
    22,217
    
    
    
    22,112Loans held for sale
    
    
    1,823
    
    
    
    1,823
    
    
    
    3,425
    
    
    
    3,425Loans receivable, net
    
    
    540,614
    
    
    
    553,459
    
    
    
    563,228
    
    
    
    578,080Accrued interest receivable
    
    
    4,021
    
    
    
    4,021
    
    
    
    4,360
    
    
    
    4,360BOLI
    
    
    8,854
    
    
    
    8,854
    
    
    
    8,765
    
    
    
    8,765Financial liabilities:Deposit liabilities
    
    
    767,641
    
    
    
    728,015
    
    
    
    778,833
    
    
    
    741,426Borrowings
    
    
    142,767
    
    
    
    143,305
    
    
    
    155,643
    
    
    
    156,200Accrued interest payable
    
    
    1,340
    
    
    
    1,340
    
    
    
    1,406
    
    
    
    1,406
 25




---



##### Table of Contents



Cash, Cash Equivalents, Federal Funds and Certificates of Deposit
  Investments and BOLI
  Loans Receivable and Loans Held For Sale
  Deposits
  Borrowings
  Accrued Interest
  12. Subsequent Events:
  26




---



##### Table of Contents



13. New Accounting Pronouncements
   
 Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
 This report contains forward-looking statements. For a discussion about such statements,
including the risks and uncertainties inherent therein, see Forward-Looking Statements.
Managements Discussion and Analysis of Financial Condition and Results of Operations should be
read in conjunction with the Consolidated Financial Statements and Notes presented elsewhere in
this report and in Intermountains Form 10-K for the year ended December 31, 2010.
 General (Overview & History)
     27




---



##### Table of Contents



Business Strategy & Opportunities
   
    
    Maintaining a conservative balance sheet and effectively managing Company risk amidst
a still uncertain economic and regulatory environment.
    
    Increasing and diversifying its loan origination activity by pursuing attractive
small and mid-market commercial credits in its markets, originating commercial real
estate loans to strong borrowers at lower real estate prices, originating and seasoning
mortgage loans to strong borrowers at conservative loan-to-values in rural and smaller
suburban areas not well-served by current secondary market appraisal standards,
expanding and diversifying its agricultural portfolio, and expanding its already strong
government-guaranteed loan marketing efforts.
    
    Increasing local, transactional deposit balances while continuing to minimize
interest expense by increasing referral activity and targeting specific business and
non-profit groups.
    
    Increasing the efficiency of its operations by restructuring processes,
re-negotiating contracts and rationalizing various business functions.
    
    Offsetting anticipated regulatory pressures on current non-interest income streams by
expanding its trust, investment and insurance sales, restructuring current product
pricing plans, and pursuing opportunities to diversify into new fee-based programs
serving its clientele.
   28




---



##### Table of Contents



Critical Accounting Policies
  Income Recognition.
 Allowance For Loan Losses.
     29




---



##### Table of Contents



Investments.
   Other Real Estate Owned.
  Fair Value Measurements.
 30




---



##### Table of Contents



Derivative Financial Instruments and Hedging Activities.
 Income Taxes.
   Results of Operations
 Overview
   Net Interest Income
 31




---



##### Table of Contents



Provision for Losses on Loans & Credit Quality.
  32




---



##### Table of Contents



March 31,2011
    
    
    2010(Dollars in thousands)Balance Beginning January 1
    
    $
    12,455
    
    
    $
    16,608Charge-OffsCommercial loans
    
    
    
    
    
    
    (1,158
    )Commercial real estate loans
    
    
    (477
    )
    
    
    (1,071
    )Commercial construction loans
    
    
    (382
    )
    
    
    (61
    )Land and land development loans
    
    
    (476
    )
    
    
    (2,166
    )Agriculture loans
    
    
    (294
    )
    
    
    (183
    )Multifamily loans
    
    
    
    
    
    
    (8
    )Residential loans
    
    
    (213
    )
    
    
    (566
    )Residential construction loans
    
    
    
    
    
    
    Consumer loans
    
    
    (99
    )
    
    
    (189
    )Municipal loans
    
    
    
    
    
    
    Total Charge-offs
    
    
    (1,941
    )
    
    
    (5,402
    )RecoveriesCommercial loans
    
    
    
    
    
    
    226Commercial real estate loans
    
    
    1
    
    
    
    1Commercial construction loans
    
    
    58
    
    
    
    Land and land development loans
    
    
    154
    
    
    
    2Agriculture loans
    
    
    40
    
    
    
    Multifamily loans
    
    
    
    
    
    
    Residential loans
    
    
    40
    
    
    
    7Residential construction loans
    
    
    
    
    
    
    Consumer loans
    
    
    42
    
    
    
    47Municipal loans
    
    
    
    
    
    
    Total Recoveries
    
    
    335
    
    
    
    283Net charge-offs
    
    
    (1,607
    )
    
    
    (5,119
    )Transfers
    
    
    
    
    
    
    Provision for losses on loans
    
    
    1,633
    
    
    
    6,808Sale of loans
    
    
    
    
    
    
    Balance at March 31
    
    $
    12,482
    
    
    $
    18,297Allowance  Unfunded Commitments Balance Beginning January 1
    
    $
    17
    
    
    $
    11Adjustment
    
    
    1
    
    
    
    5Transfers
    
    
    
    
    
    
    Allowance  Unfunded Commitments at March 31
    
    $
    18
    
    
    $
    16
   33




---



##### Table of Contents



Credit Quality Trending
 March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    March 31,2011
    
    
    2010
    
    
    2010
    
    
    2010(Dollars in thousands)Loans past due in excess of 90 days and still accruing
    
    $
    1
    
    
    $
    66
    
    
    $
    532
    
    
    $
    50Non-accrual loans
    
    
    18,716
    
    
    
    11,451
    
    
    
    15,832
    
    
    
    22,791Total non-performing loans (NPLs)
    
    
    18,717
    
    
    
    11,517
    
    
    
    16,364
    
    
    
    22,841OREO
    
    
    3,686
    
    
    
    4,429
    
    
    
    6,424
    
    
    
    11,538Total non-performing assets (NPAs)
    
    $
    22,403
    
    
    $
    15,946
    
    
    $
    22,788
    
    
    $
    34,379Classified loans (1)
    
    $
    61,239
    
    
    $
    54,085
    
    
    $
    62,410
    
    
    $
    71,076Troubled debt restructured loans (2)
    
    $
    6,360
    
    
    $
    4,838
    
    
    $
    1,236
    
    
    $
    3,201Total allowance related to non-accrual loans
    
    $
    1,254
    
    
    $
    1,192
    
    
    $
    1,505
    
    
    $
    3,341Interest income recorded on non-accrual loans (3)
    
    $
    156
    
    
    $
    848
    
    
    $
    666
    
    
    $
    155Non-accrual loans as a percentage of net loans receivable
    
    
    3.46
    %
    
    
    2.03
    %
    
    
    2.67
    %
    
    
    3.66
    %Total non-performing loans as a % of net loans receivable
    
    
    3.46
    %
    
    
    2.04
    %
    
    
    2.76
    %
    
    
    3.66
    %Allowance for loan losses (ALLL) as a percentage of
non-performing loans
    
    
    66.7
    %
    
    
    108.1
    %
    
    
    87.6
    %
    
    
    80.1
    %Total NPAs as a % of total assets (4)
    
    
    2.28
    %
    
    
    1.59
    %
    
    
    2.30
    %
    
    
    3.20
    %Total NPAs as a % of tangible capital + ALLL (Texas Ratio) (4)
    
    
    31.41
    %
    
    
    22.30
    %
    
    
    30.67
    %
    
    
    37.84
    %Loan delinquency ratio (30 days and over)
    
    
    0.54
    %
    
    
    0.55
    %
    
    
    0.69
    %
    
    
    0.33
    %
 
 (1)
    
    Classified loan totals are inclusive of non-performing loans and may also include troubled
debt restructured loans, depending on the grading of these restructured loans.(2)
    
    Represents accruing restructured loans performing according to their modified terms.
Restructured loans that are not performing according to their modified terms are included in
non-accrual loans. No other funds are available for disbursement on restructured loans.(3)
    
    Interest income on non-accrual loans based on year-to-date interest totals(4)
    
    NPAs include both nonperforming loans and OREO.  34




---



##### Table of Contents



Nonperforming Asset Trending By Category
 March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    March 31,2011
    
    
    2010
    
    
    2010
    
    
    2010(Dollars in thousands)Commercial loans
    
    $
    4,423
    
    
    $
    3,859
    
    
    $
    4,394
    
    
    $
    5,282Commercial real estate loans
    
    
    4,935
    
    
    
    4,354
    
    
    
    4,882
    
    
    
    6,766Commercial construction loans
    
    
    46
    
    
    
    69
    
    
    
    1,662
    
    
    
    3,858Land and land development loans
    
    
    9,713
    
    
    
    3,368
    
    
    
    7,266
    
    
    
    12,989Agriculture loans
    
    
    614
    
    
    
    582
    
    
    
    934
    
    
    
    250Multifamily loans
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    Residential real estate loans
    
    
    2,181
    
    
    
    3,213
    
    
    
    3,524
    
    
    
    4,040Residential construction loans
    
    
    111
    
    
    
    112
    
    
    
    2
    
    
    
    1,173Consumer loans
    
    
    380
    
    
    
    389
    
    
    
    12
    
    
    
    21Total NPAs by Categories
    
    $
    22,403
    
    
    $
    15,946
    
    
    $
    22,788
    
    
    $
    34,379
 E. Oregon,
    
    
    
    
    
    
    
    
    
    
    % of LoanNorth Idaho 
    
    
    Magic
    
    
    
    
    
    
    SW Idaho
    
    
    
    
    
    
    
    
    
    
    Type to TotalNPAs by location
    
    Eastern
    
    
    Valley
    
    
    Greater
    
    
    Excluding
    
    
    
    
    
    
    
    
    
    
    Non-PerformingMarch 31, 2011
    
    Washington
    
    
    Idaho
    
    
    Boise Area
    
    
    Boise
    
    
    Other
    
    
    Total
    
    
    Assets(Dollars in thousands)Commercial loans
    
    $
    3,098
    
    
    $
    500
    
    
    $
    469
    
    
    $
    330
    
    
    $
    26
    
    
    $
    4,423
    
    
    
    19.7
    %Commercial real estate loans
    
    
    2,827
    
    
    
    4
    
    
    
    440
    
    
    
    267
    
    
    
    1,397
    
    
    
    4,935
    
    
    
    22.0
    %Commercial construction loans
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46
    
    
    
    0.2
    %Land and land development loans
    
    
    9,161
    
    
    
    42
    
    
    
    250
    
    
    
    94
    
    
    
    166
    
    
    
    9,713
    
    
    
    43.4
    %Agriculture loans
    
    
    
    
    
    
    38
    
    
    
    150
    
    
    
    22
    
    
    
    404
    
    
    
    614
    
    
    
    2.7
    %Multifamily loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %Residential real estate loans
    
    
    1,593
    
    
    
    99
    
    
    
    213
    
    
    
    125
    
    
    
    151
    
    
    
    2,181
    
    
    
    9.8
    %Residential construction loans
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    0.5
    %Consumer loans
    
    
    377
    
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    380
    
    
    
    1.7
    %Total
    
    $
    17,213
    
    
    $
    685
    
    
    $
    1,522
    
    
    $
    839
    
    
    $
    2,144
    
    
    $
    22,403
    
    
    
    100.0
    %Percent of total NPAs
    
    
    76.8
    %
    
    
    3.1
    %
    
    
    6.8
    %
    
    
    3.7
    %
    
    
    9.6
    %
    
    
    100.0
    %Percent of NPAs to total loans
in each region
    
    
    5.4
    %
    
    
    1.6
    %
    
    
    2.5
    %
    
    
    0.8
    %
    
    
    7.8
    %
    
    
    4.1
    %
 E. Oregon,
    
    
    
    
    
    
    
    
    
    
    % of LoanNorth Idaho  
    
    
    Magic
    
    
    
    
    
    
    SW Idaho
    
    
    
    
    
    
    
    
    
    
    Type to TotalNPAs by location
    
    Eastern
    
    
    Valley
    
    
    Greater
    
    
    Excluding
    
    
    
    
    
    
    
    
    
    
    Non-PerformingDecember 31, 2010
    
    Washington
    
    
    Idaho
    
    
    Boise Area
    
    
    Boise
    
    
    Other
    
    
    Total
    
    
    Assets(Dollars in thousands)Commercial loans
    
    $
    2,927
    
    
    $
    415
    
    
    $
    135
    
    
    $
    352
    
    
    $
    30
    
    
    $
    3,859
    
    
    
    24.2
    %Commercial real estate loans
    
    
    1,714
    
    
    
    46
    
    
    
    453
    
    
    
    413
    
    
    
    1,728
    
    
    
    4,354
    
    
    
    27.3
    %Commercial construction loans
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    0.4
    %Land and land development loans
    
    
    2,600
    
    
    
    49
    
    
    
    250
    
    
    
    269
    
    
    
    200
    
    
    
    3,368
    
    
    
    21.1
    %Agriculture loans
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    22
    
    
    
    403
    
    
    
    582
    
    
    
    3.7
    %Multifamily loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %Residential real estate loans
    
    
    2,013
    
    
    
    102
    
    
    
    652
    
    
    
    259
    
    
    
    187
    
    
    
    3,213
    
    
    
    20.2
    %Residential construction loans
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    0.7
    %Consumer loans
    
    
    386
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389
    
    
    
    2.4
    %Total
    
    $
    9,821
    
    
    $
    615
    
    
    $
    1,647
    
    
    $
    1,315
    
    
    $
    2,548
    
    
    $
    15,946
    
    
    
    100.0
    %Percent of total NPAs
    
    
    61.6
    %
    
    
    3.9
    %
    
    
    10.3
    %
    
    
    8.2
    %
    
    
    16.0
    %
    
    
    100.0
    %Percent of NPAs to total loans in each
region
    
    
    3.0
    %
    
    
    1.3
    %
    
    
    2.5
    %
    
    
    1.2
    %
    
    
    9.7
    %
    
    
    2.8
    %
 35




---



##### Table of Contents



March 31, 2011
    
    
    Dec 31, 2010Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of Total(Dollars in thousands)Commercial loans
    
    $
    14,971
    
    
    
    24.4
    
    
    $
    14,069
    
    
    
    26.0Commercial real estate loans
    
    
    16,014
    
    
    
    26.2
    
    
    
    15,807
    
    
    
    29.2Commercial construction loans
    
    
    7,831
    
    
    
    12.8
    
    
    
    7,832
    
    
    
    14.5Land and land development loans
    
    
    14,099
    
    
    
    23.0
    
    
    
    8,040
    
    
    
    14.9Agriculture loans
    
    
    2,018
    
    
    
    3.3
    
    
    
    2,380
    
    
    
    4.4Multifamily loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential real estate loans
    
    
    5,139
    
    
    
    8.4
    
    
    
    4,477
    
    
    
    8.3Residential construction loans
    
    
    277
    
    
    
    0.5
    
    
    
    277
    
    
    
    0.5Consumer loans
    
    
    890
    
    
    
    1.4
    
    
    
    1,203
    
    
    
    2.2Municipal loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total classified loans
    
    $
    61,239
    
    
    
    100.0
    
    
    $
    54,085
    
    
    
    100.0
     36




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##### Table of Contents



Other Income.
  March 31,
    
    
    
    
    
    
    Percent
    
    
    March 31,2011
    
    
    % of
    
    
    Change
    
    
    2010
    
    
    % ofOther Income
    
    Amount
    
    
    Total
    
    
    Prev. Yr
    
    
    Amount
    
    
    Total(Dollars in thousands)Fees and service charges
    
    $
    1,670
    
    
    
    63
    %
    
    
    (1
    )%
    
    $
    1,681
    
    
    
    66
    %Loan related fee income
    
    
    575
    
    
    
    22
    
    
    
    (4
    )
    
    
    599
    
    
    
    24BOLI income
    
    
    89
    
    
    
    3
    
    
    
    (2
    )
    
    
    91
    
    
    
    4Other-than-temporary credit impairment on investment securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    (1
    )Net gain (loss) on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    2Other income
    
    
    329
    
    
    
    12
    
    
    
    179
    
    
    
    118
    
    
    
    5Total
    
    $
    2,663
    
    
    
    100
    %
    
    
    6
    %
    
    $
    2,523
    
    
    
    100
    %
     37




---



##### Table of Contents



Operating Expenses.
  March 31,
    
    
    
    
    
    
    Percent
    
    
    March 31,2011
    
    
    % of
    
    
    Change
    
    
    2010
    
    
    % ofOther Expense
    
    Amount
    
    
    Total
    
    
    Prev. Yr
    
    
    Amount
    
    
    Total(Dollars in thousands)Salaries and employee benefits
    
    $
    4,947
    
    
    
    51
    %
    
    
    (15
    )%
    
    $
    5,832
    
    
    
    50
    %Occupancy expense
    
    
    1,787
    
    
    
    18
    
    
    
    (2
    )
    
    
    1,828
    
    
    
    16Advertising
    
    
    130
    
    
    
    1
    
    
    
    (41
    )
    
    
    222
    
    
    
    2Fees and service charges
    
    
    651
    
    
    
    7
    
    
    
    
    
    
    
    651
    
    
    
    6Printing, postage and supplies
    
    
    337
    
    
    
    3
    
    
    
    (13
    )
    
    
    389
    
    
    
    3Legal and accounting
    
    
    235
    
    
    
    2
    
    
    
    (27
    )
    
    
    324
    
    
    
    3FDIC assessment
    
    
    445
    
    
    
    5
    
    
    
    (5
    )
    
    
    469
    
    
    
    4OREO operations(1)
    
    
    476
    
    
    
    5
    
    
    
    (54
    )
    
    
    1,030
    
    
    
    9Other expense
    
    
    732
    
    
    
    8
    
    
    
    (10
    )
    
    
    815
    
    
    
    7Total
    
    $
    9,740
    
    
    
    100
    %
    
    
    (16
    )%
    
    $
    11,560
    
    
    
    100
    %
 
 (1)
    
    Amount includes chargedowns and gains/losses on sale of OREO      38




---



##### Table of Contents



Income Tax Provision
    Financial Position
 Assets
 39




---



##### Table of Contents



Investments.
  Cumulative
    
    
    CumulativeOTTI Credit
    
    
    OTTI ImpairmentPrincipal
    
    
    Fair
    
    
    Unrealized
    
    
    Loss Recorded in
    
    
    Loss Recorded inSecurity Issuer
    
    Balance
    
    
    Value
    
    
    (Loss) Gain
    
    
    Income
    
    
    OCISecurity 1
    
    $
    3,032
    
    
    $
    1,964
    
    
    $
    515
    
    
    $
    (947
    )
    
    $
    (805
    )Security 2
    
    
    7,146
    
    
    
    5,391
    
    
    
    (169
    )
    
    
    (407
    )
    
    
    (1,122
    )Total
    
    $
    10,178
    
    
    $
    7,355
    
    
    $
    346
    
    
    $
    (1,354
    )
    
    $
    (1,927
    )
  Loans Receivable.
 Powered By Community
  40




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##### Table of Contents



March 31, 2011
    
    
    December 31, 2010Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Commercial loans
    
    $
    118,396
    
    
    
    21.4
    
    
    $
    122,656
    
    
    
    21.3Commercial real estate loans
    
    
    169,888
    
    
    
    30.7
    
    
    
    175,559
    
    
    
    30.5Commercial construction loans
    
    
    18,579
    
    
    
    3.4
    
    
    
    17,951
    
    
    
    3.1Land and land development loans
    
    
    58,086
    
    
    
    10.5
    
    
    
    60,962
    
    
    
    10.6Agriculture loans
    
    
    77,098
    
    
    
    13.9
    
    
    
    87,364
    
    
    
    15.2Multifamily loans
    
    
    26,253
    
    
    
    4.8
    
    
    
    26,417
    
    
    
    4.6Residential real estate loans
    
    
    61,854
    
    
    
    11.2
    
    
    
    60,872
    
    
    
    10.6Residential construction loans
    
    
    3,537
    
    
    
    0.6
    
    
    
    3,219
    
    
    
    0.6Consumer loans
    
    
    13,014
    
    
    
    2.4
    
    
    
    14,095
    
    
    
    2.4Municipal loans
    
    
    6,383
    
    
    
    1.1
    
    
    
    6,528
    
    
    
    1.1Total loans
    
    
    553,088
    
    
    
    100.0
    
    
    
    575,623
    
    
    
    100.0Allowance for loan losses
    
    
    (12,482
    )
    
    
    
    
    
    
    (12,455
    )Deferred loan fees, net of direct origination costs
    
    
    8
    
    
    
    
    
    
    
    60Loans receivable, net
    
    $
    540,614
    
    
    
    
    
    
    $
    563,228Weighted average interest rate
    
    
    5.97
    %
    
    
    
    
    
    
    6.04
    %
       41




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##### Table of Contents



Geographic Distribution
  E. Oregon,
    
    
    
    
    
    
    
    
    
    
    % of LoanNorth Idaho 
    
    
    Magic
    
    
    Greater
    
    
    SW Idaho,
    
    
    
    
    
    
    
    
    
    
    type toEastern
    
    
    Valley
    
    
    Boise
    
    
    excluding
    
    
    
    
    
    
    
    
    
    
    totalLoan Portfolio by Location
    
    Washington
    
    
    Idaho
    
    
    Area
    
    
    Boise
    
    
    Other
    
    
    Total
    
    
    loans(Dollars in thousands)Commercial loans
    
    $
    78,505
    
    
    $
    8,941
    
    
    $
    10,977
    
    
    $
    18,076
    
    
    $
    1,897
    
    
    $
    118,396
    
    
    
    21.4
    %Commercial real estate loans
    
    
    113,352
    
    
    
    11,644
    
    
    
    17,751
    
    
    
    16,086
    
    
    
    11,055
    
    
    
    169,888
    
    
    
    30.7
    %Commercial construction loans
    
    
    7,130
    
    
    
    3,306
    
    
    
    8,143
    
    
    
    
    
    
    
    
    
    
    
    18,579
    
    
    
    3.4
    %Land and land development loans
    
    
    44,605
    
    
    
    4,414
    
    
    
    5,749
    
    
    
    1,777
    
    
    
    1,541
    
    
    
    58,086
    
    
    
    10.5
    %Agriculture loans
    
    
    1,572
    
    
    
    5,074
    
    
    
    13,799
    
    
    
    54,854
    
    
    
    1,799
    
    
    
    77,098
    
    
    
    13.9
    %Multifamily loans
    
    
    18,109
    
    
    
    
    
    
    
    718
    
    
    
    
    
    
    
    7,426
    
    
    
    26,253
    
    
    
    4.8
    %Residential real estate loans
    
    
    41,616
    
    
    
    5,198
    
    
    
    3,153
    
    
    
    8,463
    
    
    
    3,424
    
    
    
    61,854
    
    
    
    11.2
    %Residential construction loans
    
    
    2,565
    
    
    
    325
    
    
    
    98
    
    
    
    549
    
    
    
    
    
    
    
    3,537
    
    
    
    0.6
    %Consumer loans
    
    
    7,290
    
    
    
    1,380
    
    
    
    1,172
    
    
    
    2,712
    
    
    
    460
    
    
    
    13,014
    
    
    
    2.4
    %Municipal loans
    
    
    4,848
    
    
    
    1,535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,383
    
    
    
    1.1
    %Total
    
    $
    319,592
    
    
    $
    41,817
    
    
    $
    61,560
    
    
    $
    102,517
    
    
    $
    27,602
    
    
    $
    553,088
    
    
    
    100.0
    %Percent of total loans in
geographic area
    
    
    57.8
    %
    
    
    7.6
    %
    
    
    11.1
    %
    
    
    18.5
    %
    
    
    5.0
    %
    
    
    100.0
    %Percent of total loans where
real estate is the primary
collateral
    
    
    71.3
    %
    
    
    63.9
    %
    
    
    61.3
    %
    
    
    40.3
    %
    
    
    85.8
    %
    
    
    64.6
    %
  E. Oregon,
    
    
    
    
    
    
    
    
    
    
    % of LoanNorth Idaho  
    
    
    Magic
    
    
    Greater
    
    
    SW Idaho,
    
    
    
    
    
    
    
    
    
    
    type toEastern
    
    
    Valley
    
    
    Boise
    
    
    excluding
    
    
    
    
    
    
    
    
    
    
    totalLoan Portfolio by Location
    
    Washington
    
    
    Idaho
    
    
    Area
    
    
    Boise
    
    
    Other
    
    
    Total
    
    
    loans(Dollars in thousands)Commercial loans
    
    $
    81,916
    
    
    $
    9,572
    
    
    $
    10,747
    
    
    $
    18,865
    
    
    $
    1,556
    
    
    $
    122,656
    
    
    
    21.3
    %Commercial real estate loans
    
    
    115,721
    
    
    
    14,536
    
    
    
    18,295
    
    
    
    17,465
    
    
    
    9,542
    
    
    
    175,559
    
    
    
    30.5
    %Commercial construction loans
    
    
    6,738
    
    
    
    3,070
    
    
    
    8,143
    
    
    
    
    
    
    
    
    
    
    
    17,951
    
    
    
    3.1
    %Land and land development loans
    
    
    47,197
    
    
    
    4,421
    
    
    
    5,944
    
    
    
    1,904
    
    
    
    1,496
    
    
    
    60,962
    
    
    
    10.6
    %Agriculture loans
    
    
    1,609
    
    
    
    7,302
    
    
    
    16,754
    
    
    
    59,575
    
    
    
    2,124
    
    
    
    87,364
    
    
    
    15.2
    %Multifamily loans
    
    
    18,205
    
    
    
    
    
    
    
    725
    
    
    
    
    
    
    
    7,487
    
    
    
    26,417
    
    
    
    4.6
    %Residential real estate loans
    
    
    39,482
    
    
    
    5,795
    
    
    
    3,582
    
    
    
    8,248
    
    
    
    3,765
    
    
    
    60,872
    
    
    
    10.6
    %Residential construction loans
    
    
    2,594
    
    
    
    287
    
    
    
    7
    
    
    
    331
    
    
    
    
    
    
    
    3,219
    
    
    
    0.6
    %Consumer loans
    
    
    7,802
    
    
    
    1,580
    
    
    
    1,318
    
    
    
    2,960
    
    
    
    435
    
    
    
    14,095
    
    
    
    2.4
    %Municipal loans
    
    
    4,955
    
    
    
    1,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,528
    
    
    
    1.1
    %Total
    
    $
    326,219
    
    
    $
    48,136
    
    
    $
    65,515
    
    
    $
    109,348
    
    
    $
    26,405
    
    
    $
    575,623
    
    
    
    100.0
    %Percent of total loans in
geographic area
    
    
    56.4
    %
    
    
    8.4
    %
    
    
    11.5
    %
    
    
    19.1
    %
    
    
    4.6
    %
    
    
    100.0
    %Percent of total loans where
real estate is the primary
collateral
    
    
    70.6
    %
    
    
    64.5
    %
    
    
    59.5
    %
    
    
    40.2
    %
    
    
    85.4
    %
    
    
    63.7
    %
   42




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##### Table of Contents



Three Months Ended March 31,2011
    
    
    2010
    
    
    % Change(Dollars in thousands)Commercial loans
    
    $
    24,973
    
    
    $
    30,160
    
    
    
    (17.2
    )Commercial real estate loans
    
    
    1,766
    
    
    
    9,341
    
    
    
    (81.1
    )Commercial construction loans
    
    
    
    
    
    
    6,740
    
    
    
    (100.0
    )Land and land development loans
    
    
    644
    
    
    
    1,070
    
    
    
    (39.8
    )Agriculture loans
    
    
    18,408
    
    
    
    26,502
    
    
    
    (30.5
    )Multifamily loans
    
    
    
    
    
    
    
    
    
    
    (0.0
    )Residential real estate loans
    
    
    18,567
    
    
    
    17,263
    
    
    
    7.6Residential construction loans
    
    
    700
    
    
    
    603
    
    
    
    16.1Consumer
    
    
    947
    
    
    
    1,095
    
    
    
    (13.5
    )Municipal
    
    
    16,770
    
    
    
    
    
    
    
    100.0Total loans originated
    
    $
    82,775
    
    
    $
    92,774
    
    
    
    (10.8
    )
  Office Properties and Equipment.
 Other Real Estate Owned.
 Other Real Estate Owned Activity
 2011
    
    
    2010(Dollars in thousands)Balance, beginning of period, January 1
    
    $
    4,429
    
    
    $
    11,538Additions to OREO
    
    
    888
    
    
    
    2,461Proceeds from sale of OREO
    
    
    (1,270
    )
    
    
    (1,684
    )Valuation Adjustments in the period(1)
    
    
    (361
    )
    
    
    (777
    )Balance, end of period, March 31
    
    $
    3,686
    
    
    $
    11,538
 
 (1)
    
    Amount includes chargedowns and gains/losses on sale of OREO Intangible Assets .
 43




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##### Table of Contents



BOLI and All Other Assets
 Deposits
  March 31, 2011
    
    
    December 31, 2010Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Non-interest bearing demand accounts
    
    $
    168,151
    
    
    
    21.9
    
    
    $
    168,519
    
    
    
    21.6NOW and money market 0.0% to 4.65%
    
    
    333,757
    
    
    
    43.5
    
    
    
    327,891
    
    
    
    42.1Savings and IRA 0.0% to 5.75%
    
    
    75,858
    
    
    
    9.9
    
    
    
    75,387
    
    
    
    9.7Certificate of deposit accounts (CDs)
    
    
    72,067
    
    
    
    9.4
    
    
    
    79,533
    
    
    
    10.2Jumbo CDs
    
    
    67,336
    
    
    
    8.7
    
    
    
    77,685
    
    
    
    10.0Brokered CDs
    
    
    36,899
    
    
    
    4.8
    
    
    
    40,899
    
    
    
    5.3CDARS CDs to local customers
    
    
    13,573
    
    
    
    1.8
    
    
    
    8,919
    
    
    
    1.1Total deposits
    
    $
    767,641
    
    
    
    100.0
    
    
    $
    778,833
    
    
    
    100.0Weighted average interest rate on certificates of deposit
    
    
    
    
    
    
    1.62
    %
    
    
    
    
    
    
    1.66
    %Core Deposits as a percentage of total deposits (1)
    
    
    
    
    
    
    84.1
    %
    
    
    
    
    
    
    83.2
    %Deposits generated from the Companys market area as a %
of total deposits
    
    
    
    
    
    
    95.2
    %
    
    
    
    
    
    
    94.8
    %
 
 (1)
    
    Core deposits consist of non-interest bearing checking, money market checking, savings
accounts, and certificate of deposit accounts of less than $100,000 (excluding public
deposits).   March 31,
    
    
    % of total
    
    
    December 31,
    
    
    % of total
    
    
    March 31,
    
    
    % of totalDeposits by Location
    
    2011
    
    
    deposits
    
    
    2010
    
    
    deposits
    
    
    2010
    
    
    depositsNorth Idaho  Eastern Washington
    
    $
    364,055
    
    
    
    47.5
    
    
    $
    374,173
    
    
    
    48.0
    
    
    $
    400,320
    
    
    
    48.5Magic Valley Idaho
    
    
    68,669
    
    
    
    8.9
    
    
    
    68,870
    
    
    
    8.8
    
    
    
    69,523
    
    
    
    8.4Greater Boise Area
    
    
    72,993
    
    
    
    9.5
    
    
    
    79,697
    
    
    
    10.2
    
    
    
    78,830
    
    
    
    9.5Southwest Idaho  Oregon, excluding Boise
    
    
    164,307
    
    
    
    21.4
    
    
    
    165,505
    
    
    
    21.3
    
    
    
    167,534
    
    
    
    20.3Administration, Secured Savings
    
    
    97,617
    
    
    
    12.7
    
    
    
    90,588
    
    
    
    11.7
    
    
    
    109,799
    
    
    
    13.3Total
    
    $
    767,641
    
    
    
    100.0
    
    
    $
    778,833
    
    
    
    100.0
    
    
    $
    826,006
    
    
    
    100.0
  44




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##### Table of Contents



Borrowings
 Interest Rate Risk
      45




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##### Table of Contents



Liquidity and Sources of Funds
       46




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##### Table of Contents



Capital Resources
    Notes to Consolidated Financial Statements
  47




---



##### Table of Contents



Well-CapitalizedActual
    
    Capital Requirements
    
    RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal capital (to
risk-weighted assets):The Company
    
    $
    75,435
    
    
    
    11.65
    %
    
    $
    51,809
    
    
    
    8
    %
    
    $
    64,761
    
    
    
    10
    %Panhandle State Bank
    
    
    80,204
    
    
    
    12.38
    %
    
    
    51,810
    
    
    
    8
    %
    
    
    64,763
    
    
    
    10
    %Tier I capital (to risk-weighted
assets):The Company
    
    
    67,285
    
    
    
    10.39
    %
    
    
    25,904
    
    
    
    4
    %
    
    
    38,857
    
    
    
    6
    %Panhandle State Bank
    
    
    72,054
    
    
    
    11.13
    %
    
    
    25,905
    
    
    
    4
    %
    
    
    38,858
    
    
    
    6
    %Tier I capital (to average assets):The Company
    
    
    67,285
    
    
    
    6.79
    %
    
    
    39,662
    
    
    
    4
    %
    
    
    49,578
    
    
    
    5
    %Panhandle State Bank
    
    
    72,054
    
    
    
    7.27
    %
    
    
    39,635
    
    
    
    4
    %
    
    
    49,544
    
    
    
    5
    %
   Off Balance Sheet Arrangements and Contractual Obligations
  48




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##### Table of Contents



Tabular Disclosure of Contractual Obligations
  Payments Due by PeriodLess than
    
    
    1 to
    
    
    Over 3 to
    
    
    More thanTotal
    
    
    1 Year
    
    
    3 Years
    
    
    5 Years
    
    
    5 Years(in thousands)Long-term debt(1)
    
    $
    59,049
    
    
    $
    1,190
    
    
    $
    26,607
    
    
    $
    5,158
    
    
    $
    26,094Short-term debt
    
    
    97,275
    
    
    
    97,275
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations(2)
    
    
    13,514
    
    
    
    1,077
    
    
    
    1,677
    
    
    
    1,578
    
    
    
    9,182Direct financing obligations(3)
    
    
    33,725
    
    
    
    1,635
    
    
    
    3,270
    
    
    
    3,434
    
    
    
    25,386Total
    
    $
    203,563
    
    
    $
    101,177
    
    
    $
    31,554
    
    
    $
    10,170
    
    
    $
    60,662
 
 (1)
    
    Includes interest payments related to long-term debt agreements.(2)
    
    Excludes recurring accounts payable, accrued expenses and other liabilities, repurchase
agreements and customer deposits, all of which are recorded on the registrants balance sheet.
See Notes 6 and 7 of Notes to Consolidated Financial Statements.(3)
    
    Sandpoint Center Building lease payments related to direct financing transaction executed in
August 2009. New Accounting Pronouncements
   Forward-Looking Statements
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 This report contains 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 our plans ,objectives, expectations and intentions that are not historical facts,
and other statements identified by words such as expects, anticipates, intends, plans,
believes, will likely, 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 our control. In addition, these forward-looking statements
are subject to assumptions with respect to future business strategies and decisions that are
subject to change. In addition to the factors set forth in
 49




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##### Table of Contents



the sections titled Risk Factors, Business and Managements Discussion and Analysis of
Financial Condition and Results of Operations, as applicable, in this report and our Annual Report
on Form 10-K for the year ended December 31, 2010, the following factors, among others, could cause
actual results to differ materially from the anticipated results:
 
    
    further deterioration in economic conditions that could result in increased loan and
lease losses;
    
    risks associated with concentrations in real estate-related loans;
    
    declines in real estate values supporting loan collateral;
    
    our ability to comply with the requirements of regulatory orders issued to us and/or our
banking subsidiary;
    
    our ability to raise capital or incur debt on reasonable terms;
    
    regulatory limits on our subsidiary banks ability to pay dividends to the Company;
    
    applicable laws and regulations and legislative or regulatory changes, including the
ultimate financial and operational burden of financial regulatory reform legislation and
related regulations and the restrictions imposed on participants in the Troubled Asset
Relief Program (TARP) Capital Purchase Program, including the impact of executive
compensation restrictions, which may affect our ability to retain and recruit executives in
competition with other firms who do not operate under those restrictions;
    
    inflation and interest rate levels, and market and monetary fluctuations;
    
    the risks associated with lending and potential adverse changes in credit quality;
    
    changes in market interest rates and spreads, which could adversely affect our net
interest income and profitability;
    
    increased delinquency rates;
    
    trade, monetary and fiscal policies and laws, including interest rate and income tax
policies of the federal government;
    
    the timely development and acceptance of new products and services of Intermountain;
    
    the willingness of customers to substitute competitors products and services for
Intermountains products and services;
    
    technological and management changes;
    
    our ability to recruit and retain key management and staff;
    
    changes in estimates and assumptions used in financial accounting;
    
    the Companys critical accounting policies and the implementation of such policies;
    
    growth and acquisition strategies;
    
    lower-than-expected revenue or cost savings or other issues in connection with mergers
and acquisitions;
    
    changes in consumer spending, saving and borrowing habits;
    
    the strength of the United States economy in general and the strength of the local
economies in which Intermountain conducts its operations;
    
    our ability to attract new deposits and loans and leases;
 50




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##### Table of Contents




    
    competitive market pricing factors;
    
    stability of funding sources and continued availability of borrowings;
    
    Intermountains success in gaining regulatory approvals, when required;
    
    results of regulatory examinations that could restrict growth;
    
    future legislative or administrative changes to the TARP Capital Purchase Program; and
    
    Intermountains success at managing the risks involved in the foregoing.
  
 Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control over Financial Reporting
 51




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##### Table of Contents



PART II  Other Information
 
 Item 1
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  The continued challenging economic environment could have a material adverse effect on our future
results of operations or market price of our stock.
  
    
    economic conditions may worsen, increasing the likelihood of credit defaults by
borrowers;
    
    loan collateral values, especially as they relate to commercial and residential real
estate, may decline further, thereby increasing the severity of loss in the event of loan
defaults;
    
    nonperforming assets and write-downs of assets underlying troubled credits could
adversely affect our earnings;
    
    demand for banking products and services may decline, including services for low cost and
non-interest-bearing deposits; and
    
    changes and volatility in interest rates may negatively impact the yields on earning
assets and the cost of interest-bearing liabilities.
 Our allowance for loan losses may not be adequate to cover actual loan losses, which could
adversely affect our earnings.
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We have entered into an informal agreement with our regulators to take steps to further strengthen
the Bank.
  We may pursue additional capital in the future, which could dilute the holders of our outstanding
common stock and may adversely affect the market price of our common stock.
  We have recently incurred significant losses and losses may continue in the future.
  Concentration in real estate loans and the deterioration in the real estate markets we serve could
require material increases in our allowance for loan losses and adversely affect our financial
condition and results of operations.
  Non-performing assets take significant time to resolve and adversely affect our results of
operations and financial condition.
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Our ability to receive dividends from our banking subsidiary accounts for most of our revenue and
could affect our liquidity and ability to pay dividends.
    A continued tightening of credit markets and liquidity risk could adversely affect our business,
financial condition and results of operations.
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The FDIC has increased insurance premiums and imposed special assessments to rebuild and maintain
the federal deposit insurance fund, and any additional future premium increases or special
assessments could have a material adverse effect on our business, financial condition and results
of operations.
    We may be required, in the future, to recognize impairment with respect to investment securities,
including the FHLB stock we hold.
   Recent levels of market volatility were unprecedented and we cannot predict whether they will
return.
  We operate in a highly regulated environment and we cannot predict the effects of recent and
pending federal legislation.
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Fluctuating interest rates could adversely affect our profitability.
  Fluctuations in interest rates on loans could adversely affect our business.
  We face strong competition from financial services companies and other companies that offer
banking services.
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We may not be able to successfully implement our internal growth strategy.
  Certain built-in losses could be limited if we experience an ownership change, as defined in the
Internal Revenue Code.
   Unexpected losses, our inability to successfully implement our tax planning strategies in future
reporting periods, or IRS Section 382 limitations resulting from the successful completion of the
capital raise may either restrict our ability to recapture the existing valuation allowance
against our deferred income tax assets or require us to establish a higher valuation allowance in
the future.
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Changes in accounting standards could materially impact our financial statements.
  The Preferred Stock diminishes the net income available to our common stockholders and earnings
per common share.
   Holders of the Preferred Stock have certain voting rights that may adversely affect our common
stockholders, and the holders of the Preferred Stock may have interests different from our common
stockholders.
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
    
    any authorization or issuance of shares ranking senior to the Preferred Stock;
    
    any amendments to the rights of the Preferred Stock so as to adversely affect the rights,
preferences, privileges or voting power of the Preferred Stock; or
    
    consummation of any merger, share exchange or similar transaction unless the shares of
Preferred Stock remain outstanding, or if we are not the surviving entity in such
transaction, are converted into or exchanged for preference securities of the surviving
entity and the shares of Preferred Stock remaining outstanding or such preference securities
have the rights, preferences, privileges and voting power of the Preferred Stock.
  Because of our participation in TARP, we are subject to restrictions on compensation paid to our
executives.
  
    
    ensuring that incentive compensation for senior executives does not encourage unnecessary
and excessive risks that threaten the value of Intermountain;
    
    a prohibition on cash incentive bonuses to our five most highly-compensated employees,
subject to limited exceptions;
    
    a prohibition on equity compensation awards to our five most highly-compensated employees
other than long-term restricted stock that cannot be sold, other than to pay related taxes,
except to the extent the Treasury no longer holds the Series A Preferred Stock;
    
    a prohibition on any severance or change-in-control payments to our senior executive
officers and next five most highly-compensated employees;
    
    a required recovery or clawback of any bonus or incentive compensation paid to a senior
executive officer or any of the next twenty most highly compensated employees based on
financial or other performance criteria that are later proven to be materially inaccurate;
and
    
    an agreement not to deduct for tax purposes annual compensation in excess of $500,000 for
each senior executive officer.
  
 Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3
    
    Defaults Upon Senior Securities
  
 Item 4
    
    [Removed and Reserved]
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Item 5
    
    Other Information
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Item 6
    
    Exhibits
 Exhibit No.
    
    Exhibit31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.32
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
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Signatures
  INTERMOUNTAIN COMMUNITY BANCORP
(Registrant)May 12, 2011
Date
    
    By:
    
    /s/ Curt Hecker

Curt HeckerPresident and Chief Executive OfficerMay 12, 2011
Date
    
    By:
    
    /s/ Doug Wright

Doug WrightExecutive Vice President and Chief Financial 

Officer
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