##### 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 June 30, 2008
 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
  Idaho
    
    82-0499463(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 414 Church Street, Sandpoint, Idaho 83864
  (208) 263-0505
  þ o
  Large accelerated filer
o

    

  Accelerated filer
o

    

    Non-accelerated filer
o

(Do not check if a smaller reporting company)

  

    Smaller reporting company
þ
 o þ
  Class
    
    Outstanding as of August 4, 2008Common Stock (no par value)
    
    8,305,769




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##### 



Intermountain Community Bancorp
FORM 10-Q
For the Quarter Ended June 30, 2008
  
 TABLE OF CONTENTS
 PART I  Financial InformationItem 1  Financial Statements (Unaudited)Consolidated Balance Sheets for June 30, 2008 and December 31, 2007Consolidated Statements of Income for the three and six months ended June 30, 2008 and 2007Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007Consolidated Statements of Comprehensive Income for the three and six months ended June
30, 2008 and 2007Notes to Consolidated Financial StatementsItem 2  Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3  Quantitative and Qualitative Disclosures About Market RiskItem 4  Controls and ProceduresPART II  Other InformationItem 1  Legal ProceedingsItem 1A   Risk FactorsItem 2  Unregistered Sales of Equity Securities and Use of ProceedsItem 3  Defaults Upon Senior SecuritiesItem 4  Submission of Matters to a Vote of Security HoldersItem 5  Other InformationItem 6  ExhibitsSignaturesEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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##### Table of Contents



PART I  Financial Information
 
 Item 1  Financial Statements
 Intermountain Community Bancorp
 
 Consolidated Balance Sheets
(Unaudited)
 June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)ASSETS:Cash and cash equivalents:Interest bearing
    
    $
    2,103
    
    
    $
    149Non-interest bearing and vault
    
    
    24,730
    
    
    
    26,851Restricted cash
    
    
    866
    
    
    
    4,527Federal funds sold
    
    
    6,730
    
    
    
    6,565Available-for-sale securities, at fair value
    
    
    131,319
    
    
    
    158,791Held-to-maturity securities, at amortized cost
    
    
    11,274
    
    
    
    11,324Federal Home Loan Bank of Seattle (FHLB) stock, at cost
    
    
    2,485
    
    
    
    1,779Loans held for sale
    
    
    1,652
    
    
    
    4,201Loans receivable, net
    
    
    781,786
    
    
    
    756,549Accrued interest receivable
    
    
    6,318
    
    
    
    8,207Office properties and equipment, net
    
    
    45,250
    
    
    
    42,090Bank-owned life insurance
    
    
    7,869
    
    
    
    7,713Goodwill
    
    
    11,662
    
    
    
    11,662Other intangible assets
    
    
    649
    
    
    
    723Prepaid expenses and other assets, net
    
    
    10,874
    
    
    
    7,528Total assets
    
    $
    1,045,567
    
    
    $
    1,048,659LIABILITIES:Deposits
    
    $
    741,635
    
    
    $
    757,838Securities sold subject to repurchase agreements
    
    
    110,320
    
    
    
    124,127Advances from Federal Home Loan Bank of Seattle
    
    
    54,000
    
    
    
    29,000Cashiers checks issued and payable
    
    
    1,127
    
    
    
    1,509Accrued interest payable
    
    
    2,128
    
    
    
    3,027Other borrowings
    
    
    40,632
    
    
    
    36,998Accrued expenses and other liabilities
    
    
    5,178
    
    
    
    6,041Total liabilities
    
    
    955,020
    
    
    
    958,540Commitments and contingent liabilitiesCommon stock, no par value; 29,040,000 shares
authorized; 8,388,465 and 8,313,005 shares issued and
8,303,769 and 8,248,710 shares outstanding
    
    
    76,241
    
    
    
    76,746Accumulated other comprehensive income (loss)
    
    
    (1,428
    )
    
    
    1,327Retained earnings
    
    
    15,734
    
    
    
    12,046Total stockholders equity
    
    
    90,547
    
    
    
    90,119Total liabilities and stockholders equity
    
    $
    1,045,567
    
    
    $
    1,048,659
  3




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##### Table of Contents



Intermountain Community Bancorp
 
 Consolidated Statements of Income
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands, except per
    
    
    (Dollars in thousands, except pershare data)
    
    
    share data)Interest income:Loans
    
    $
    13,942
    
    
    $
    16,310
    
    
    $
    28,960
    
    
    $
    31,371Investments
    
    
    1,899
    
    
    
    1,642
    
    
    
    4,082
    
    
    
    3,638Total interest income
    
    
    15,841
    
    
    
    17,952
    
    
    
    33,042
    
    
    
    35,009Interest expense:Deposits
    
    
    3,275
    
    
    
    4,630
    
    
    
    7,304
    
    
    
    9,064Other borrowings
    
    
    1,390
    
    
    
    1,852
    
    
    
    3,237
    
    
    
    3,626Total interest expense
    
    
    4,665
    
    
    
    6,482
    
    
    
    10,541
    
    
    
    12,690Net interest income
    
    
    11,176
    
    
    
    11,470
    
    
    
    22,501
    
    
    
    22,319Provision for losses on loans
    
    
    (2,140
    )
    
    
    (1,172
    )
    
    
    (2,398
    )
    
    
    (2,006
    )Net interest income after provision for
losses on loans
    
    
    9,036
    
    
    
    10,298
    
    
    
    20,103
    
    
    
    20,313Other income:Fees and service charges
    
    
    2,342
    
    
    
    2,146
    
    
    
    4,346
    
    
    
    3,932Mortgage Banking Operations
    
    
    385
    
    
    
    610
    
    
    
    791
    
    
    
    1,340Bank-owned life insurance
    
    
    81
    
    
    
    81
    
    
    
    156
    
    
    
    158Gain on sale of securities
    
    
    2,182
    
    
    
    
    
    
    
    2,182
    
    
    
    Other
    
    
    241
    
    
    
    360
    
    
    
    535
    
    
    
    808Total other income
    
    
    5,231
    
    
    
    3,197
    
    
    
    8,010
    
    
    
    6,238Operating expenses
    
    
    10,635
    
    
    
    9,957
    
    
    
    21,894
    
    
    
    19,635Income before income taxes
    
    
    3,632
    
    
    
    3,538
    
    
    
    6,219
    
    
    
    6,916Income tax provision
    
    
    (1,363
    )
    
    
    (1,354
    )
    
    
    (2,296
    )
    
    
    (2,639
    )Net income
    
    $
    2,269
    
    
    $
    2,184
    
    
    $
    3,923
    
    
    $
    4,277Earnings per share  basic
    
    $
    0.27
    
    
    $
    0.27
    
    
    $
    0.47
    
    
    $
    0.52Earnings per share  diluted
    
    $
    0.27
    
    
    $
    0.25
    
    
    $
    0.46
    
    
    $
    0.50Weighted average shares outstanding  basic
    
    
    8,286,087
    
    
    
    8,194,522
    
    
    
    8,278,596
    
    
    
    8,178,025Weighted average shares outstanding  diluted
    
    
    8,534,186
    
    
    
    8,605,032
    
    
    
    8,549,144
    
    
    
    8,610,927
  4




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Intermountain Community Bancorp
 
 Consolidated Statements of Cash Flows
(Unaudited)
 Six Months EndedJune 30,2008
    
    
    2007(Dollars in thousands)Cash flows from operating activities:Net income
    
    $
    3,923
    
    
    $
    4,277Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    1,653
    
    
    
    1,189Stock-based compensation expense
    
    
    (344
    )
    
    
    195Net amortization of premiums on securities
    
    
    (113
    )
    
    
    (243
    )Excess tax benefit related to stock-based compensation
    
    
    
    
    
    
    (346
    )Provisions for losses on loans
    
    
    2,398
    
    
    
    2,006Amortization of core deposit intangibles
    
    
    74
    
    
    
    80Gain on sale of loans, investments, property and equipment
    
    
    (2,496
    )
    
    
    (220
    )Gain on sale of other real estate owned
    
    
    (20
    )
    
    
    Accretion of deferred gain on sale of branch property
    
    
    (9
    )
    
    
    (8
    )Net accretion of loan and deposit discounts and premiums
    
    
    (9
    )
    
    
    (33
    )Deferred income tax benefit
    
    
    
    
    
    
    321Increase in cash surrender value of bank-owned life insurance
    
    
    (156
    )
    
    
    (158
    )Change in:Loans held for sale
    
    
    2,548
    
    
    
    4,124Accrued interest receivable
    
    
    1,890
    
    
    
    (484
    )Prepaid expenses and other assets
    
    
    (2,608
    )
    
    
    (3,294
    )Accrued interest payable
    
    
    (899
    )
    
    
    1,047Accrued expenses and other liabilities
    
    
    (1,627
    )
    
    
    (863
    )Net cash provided by operating activities
    
    
    4,205
    
    
    
    7,590Cash flows from investing activities:Purchases of available-for-sale securities
    
    
    (32,872
    )
    
    
    (56,849
    )Purchases of FHLB Stock
    
    
    (706
    )
    
    
    Proceeds from calls or maturities of available-for-sale securities
    
    
    51,022
    
    
    
    56,281Principal payments on mortgage-backed securities
    
    
    7,082
    
    
    
    3,811Purchases of held-to-maturity securities
    
    
    (127
    )
    
    
    (300
    )Proceeds from calls or maturities of held-to-maturity securities
    
    
    151
    
    
    
    42Origination of loans, net of principal payments
    
    
    (40,007
    )
    
    
    (81,606
    )Proceeds from sale of loans
    
    
    13,994
    
    
    
    3,215Purchase of office properties and equipment
    
    
    (4,999
    )
    
    
    (12,421
    )Proceeds from sale of office properties and equipment
    
    
    8
    
    
    
    2,242Net change in federal funds sold
    
    
    (165
    )
    
    
    22,475Proceeds from sale of other real estate owned
    
    
    62
    
    
    
    Improvements and other changes in other real estate owned
    
    
    
    
    
    
    271Net change in restricted cash
    
    
    3,661
    
    
    
    293Net cash used in investing activities
    
    
    (2,896
    )
    
    
    (62,546
    )
 5




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##### Table of Contents



Intermountain Community Bancorp
 Consolidated Statements of Cash Flows (continued)
(Unaudited)
 Six Months EndedJune 30,2008
    
    
    2007(Dollars in thousands)Cash flows from financing activities:Net change in demand, money market and savings deposits
    
    $
    (19,988
    )
    
    $
    48,416Net change in certificates of deposit
    
    
    3,782
    
    
    
    (7,699
    )Net change in repurchase agreements
    
    
    (13,807
    )
    
    
    4,318Principal reduction of note payable
    
    
    (22
    )
    
    
    (18
    )Excess tax benefit related to stock-based compensation
    
    
    
    
    
    
    346Proceeds from exercise of stock options
    
    
    95
    
    
    
    224Retirement of Treasury Stock
    
    
    (193
    )
    
    
    Proceeds from other borrowings
    
    
    28,657
    
    
    
    6,819Net cash (used in) provided by financing activities
    
    
    (1,476
    )
    
    
    52,406Net change in cash and cash equivalents
    
    
    (167
    )
    
    
    (2,550
    )Cash and cash equivalents, beginning of period
    
    
    27,000
    
    
    
    24,377Cash and cash equivalents, end of period
    
    $
    26,833
    
    
    $
    21,827Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    11,002
    
    
    $
    13,459Income taxes
    
    
    2,495
    
    
    
    3,090Noncash investing and financing activities:Restricted stock issued
    
    
    547
    
    
    
    698Deferred gain on sale/leaseback
    
    
    
    
    
    
    31210% stock dividend
    
    
    
    
    
    
    15,186Accrual of liability for split dollar life insurance
    
    
    389
    
    
    
    Loans converted to Other Real Estate Owned
    
    
    1,304
    
    
    
    
  6




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Intermountain Community Bancorp
 
 Consolidated Statements of Comprehensive Income
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Net income
    
    $
    2,269
    
    
    $
    2,184
    
    
    $
    3,923
    
    
    $
    4,277Other comprehensive income (loss):Change in unrealized gains (losses) on
investments, net of reclassification
adjustments
    
    
    (5,792
    )
    
    
    (941
    )
    
    
    (4,561
    )
    
    
    (412
    )Less deferred income tax (expense) benefit
    
    
    2,294
    
    
    
    372
    
    
    
    1,806
    
    
    
    163Net other comprehensive (loss)
    
    
    (3,498
    )
    
    
    (569
    )
    
    
    (2,755
    )
    
    
    (249
    )Comprehensive income (loss)
    
    $
    (1,229
    )
    
    $
    1,615
    
    
    $
    1,168
    
    
    $
    4,028
  7




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##### Table of Contents





Intermountain Community Bancorp





Notes to Consolidated Financial Statements


1.
    
    Basis of Presentation:The foregoing unaudited interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, these
financial statements do not include all of the disclosures required by accounting principles
generally accepted in the United States of America for complete financial statements. These
unaudited interim consolidated financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December 31, 2007. In the
opinion of management, the unaudited interim consolidated financial statements furnished
herein include adjustments, all of which are of a normal recurring nature, necessary for a
fair statement of the results for the interim periods presented.The preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities known to exist as of the date the financial statements are published, and the
reported amounts of revenues and expenses during the reporting period. Uncertainties with
respect to such estimates and assumptions are inherent in the preparation of Intermountain
Community Bancorps (Intermountains or  the Companys ) consolidated financial
statements; accordingly, it is possible that the actual results could differ from these
estimates and assumptions, which could have a material effect on the reported amounts of
Intermountains consolidated financial position and results of operations.2.
    
    Advances from the Federal Home Loan Bank of Seattle:During June of 2003 the Bank obtained an advance from the Federal Home Loan Bank of Seattle
(FHLB Seattle) in the amount of $5,000,000. The note matured in May 2008. During September
2007, the Bank obtained two advances from the FHLB Seattle in the amounts of $10.0 million
and $14.0 million with interest only payable at 4.96% and 4.90% and maturities in September
2010 and September 2009, respectively. During April 2008, the Bank obtained two advances
from the FHLB Seattle in the amounts of $5.0 million and $5.0 million with interest only
payable at 2.89% and 2.95% and maturities in April 2009. During May 2008, the Bank obtained
two advances from the FHLB Seattle in the amounts of $12.0 million and $8.0 million with
interest only payable at 2.88% and 2.51% and maturities in August 2009 and December 2008,
respectively.Advances from FHLB Seattle are collateralized by certain qualifying loans. At June 30, 2008,
Intermountain had the ability to borrow $113.0 million from FHLB Seattle, of which
approximately $54.0 million was utilized at June 30, 2008. The Banks credit line with FHLB
Seattle is limited to a percentage of its total regulatory assets subject to
collateralization requirements. Intermountain would be able to borrow amounts in excess of
this total from the FHLB Seattle with the placement of additional available collateral.3.
    
    Other Borrowings:The components of other borrowings are as follows (in thousands):


June 30,
    
    
    December 31,2008
    
    
    2007Term note payable (1)
    
    $
    8,279
    
    
    $
    8,279Term note payable (2)
    
    
    8,248
    
    
    
    8,248Term note payable (3)
    
    
    960
    
    
    
    982Term note payable (4)
    
    
    23,145
    
    
    
    19,489Total other borrowings
    
    $
    40,632
    
    
    $
    36,998


(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 bore a fixed interest rate for a period of five years from issue date
and now 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 6.06% at June 30, 2008. The debt is callable by the Company quarterly and
matures in March 2033. See Note A.(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 5.51% at June 30, 2008. The debt is callable by the Company after
five years and matures in April 2034. See Note A. 8




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##### Table of Contents



(3)
    
    In January 2006, the Company purchased land to build its new headquarters, the
Sandpoint Center in Sandpoint, Idaho. It entered into a Note Payable with the sellers
of the property in the amount of $1.13 million, with a fixed rate of 6.65%. The note
matures in February 2026.(4)
    
    In December 2007, the Company renewed a borrowing agreement with Pacific Coast
Bankers Bank in the amount of $25.0 million. The borrowing agreement is a revolving
line of credit with a variable rate of interest tied to LIBOR with a maturity date of
January 18, 2009. It is anticipated that this line will either be paid down with the
sale of the building or refinanced with a longer term instrument. The collateral for
the credit line is all of Panhandle State Banks stock and the Sandpoint Center. Under
the restrictive covenants of the borrowing agreement, Intermountain cannot incur
additional debt outside of its normal course of business over $5.0 million without
Pacific Coast Bankers Banks consent, and Intermountain is obligated to provide
information regarding its financial position and loan portfolio on a regular basis.
At June 30, 2008, the balance outstanding was $23,145,000 at a rate of 4.69%. A)
    
    Intermountains obligations under the above debentures issued by its
subsidiaries constitute a full and unconditional guarantee by Intermountain of the
Statutory Trusts obligations under the Trust Preferred Securities. In accordance
with Financial Interpretation No. 46 (Revised), Consolidation of Variable Interest
Entities (FIN No. 46R), the trusts are not consolidated and the debentures and
related amounts are treated as debt of Intermountain.
 4.
    
    Earnings Per Share:The following table presents the basic and diluted earnings per share computations:
 Three Months Ended June 30,(Dollars in thousands, except per share amounts)2008
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    
    Avg.
    
    
    Per Share
    
    
    Net
    
    
    Avg.
    
    
    Per ShareIncome
    
    
    Shares(1)
    
    
    Amount
    
    
    Income
    
    
    Shares(1)
    
    
    AmountBasic computations
    
    $
    2,269
    
    
    
    8,286,087
    
    
    $
    0.27
    
    
    $
    2,184
    
    
    
    8,194,522
    
    
    $
    0.27Effect of dilutive
securities:Common stock
options and
stock grants
    
    
    
    
    
    
    248,099
    
    
    
    (0.00
    )
    
    
    
    
    
    
    410,510
    
    
    
    (0.02
    )Diluted computations
    
    $
    2,269
    
    
    
    8,534,186
    
    
    $
    0.27
    
    
    $
    2,184
    
    
    
    8,605,032
    
    
    $
    0.25
 Six Months Ended June 30,(Dollars in thousands, except per share amounts)2008
    
    
    2007Net
    
    
    Weighted
    
    
    Per Share
    
    
    Net
    
    
    Weighted
    
    
    Per ShareIncome
    
    
    Avg. Shares
    
    
    Amount
    
    
    Income
    
    
    Avg. Shares
    
    
    AmountBasic computations
    
    $
    3,923
    
    
    
    8,278,596
    
    
    $
    0.47
    
    
    $
    4,277
    
    
    
    8,178,025
    
    
    $
    0.52Effect of dilutive
securities:Common stock
options and
stock grants
    
    
    
    
    
    
    270,548
    
    
    
    (0.01
    )
    
    
    
    
    
    
    432,902
    
    
    
    (0.02
    )Diluted computations
    
    $
    3,923
    
    
    
    8,549,144
    
    
    $
    0.46
    
    
    $
    4,277
    
    
    
    8,610,927
    
    
    $
    0.50
 9




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##### Table of Contents



5.
    
    Operating Expenses:The following table details Intermountains components of total operating expenses:
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Salaries and employee benefits
    
    $
    5,530
    
    
    $
    6,322
    
    
    $
    12,476
    
    
    $
    12,442Occupancy expense
    
    
    1,938
    
    
    
    1,445
    
    
    
    3,591
    
    
    
    2,837Advertising
    
    
    426
    
    
    
    353
    
    
    
    691
    
    
    
    571Fees and service charges
    
    
    535
    
    
    
    392
    
    
    
    969
    
    
    
    672Printing, postage and supplies
    
    
    360
    
    
    
    402
    
    
    
    708
    
    
    
    747Legal and accounting
    
    
    488
    
    
    
    334
    
    
    
    936
    
    
    
    606Other expense
    
    
    1,358
    
    
    
    709
    
    
    
    2,523
    
    
    
    1,760Total operating expenses
    
    $
    10,635
    
    
    $
    9,957
    
    
    $
    21,894
    
    
    $
    19,635
 6.
    
    Stock-Based Compensation Plans:The Company utilizes its stock to compensate employees and Directors under the 1999 Director
Stock Option Plan, the 1999 Employee Plan and the 1988 Employee Plan (together the Stock
Option Plans). Options to purchase Intermountain common stock have been granted to
employees and directors under the Stock Option Plans at prices equal to the fair market
value of the underlying stock on the dates the options were granted. The options vest 20%
per year, over a five-year period, and expire in 10 years. At June 30, 2008, there were
212,289 shares available for grant. The Company did not grant options to purchase
Intermountain common stock during either the six months ended June 30, 2008 or 2007.For the six months ended June 30, 2008 and 2007, stock option expense totaled $68,000 and
$65,000, respectively. The Company has approximately $68,000 remaining to expense related
to the non-vested stock options outstanding at June 30, 2008. This expense will be recorded
over a weighted average period of 6.0 months. The expense for the stock options was
calculated using the Black-Scholes valuation model per Statement 123 (R). Assumptions used
in the Black-Scholes option-pricing model for options issued in years prior to 2005 are as
follows:
 Dividend yield
    
    0.0%Expected volatility
    

17.0% - 46.6%Risk free interest rates
    

4.0% - 7.1%Expected option lives
    
    5
- 10 years
 In 2003, shareholders approved a change to the 1999 Employee Option Plan to provide for the
granting of restricted stock awards. The Company has granted restricted stock to directors
and employees beginning in 2005. The restricted stock vests 20% per year, over a five-year
period. The Company granted 37,949 and 32,174 restricted shares with a grant date fair
value of $547,000 and $698,000 during the six months ended June 30, 2008 and 2007,
respectively. For the six months ended June 30, 2008 and 2007, restricted stock expense
totaled $163,000 and $107,000, respectively. Total expense related to stock-based
compensation is comprised of restricted stock expense, stock option expense and expense
related to the 2006-2008 Long-Term Incentive Plan (LTIP). The LTIP expense is based on
anticipated company performance over a 3-year period and has a 5-year vesting period.
During the six months ended June 30, 2008, the Company reversed $640,000 in accrued
incentives related to the LTIP as it appeared that asset growth and ROE targets required by
the plan would not be met by the end of this year. Total expense related to stock-based
compensation recorded in the six months ended June 30, 2008 and 2007 was ($344,000) and
$283,000, respectively.
 10




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##### Table of Contents



A summary of the changes in stock options outstanding for the
six months ended June 30,
2008 is presented below:
 Six months ended June 30, 2008(dollars in thousands, except per share amounts)Weighted
    
    
    WeightedNumber
    
    
    Average
    
    
    Averageof
    
    
    Exercise
    
    
    RemainingShares
    
    
    Price
    
    
    life(Years)Beginning Options Outstanding, Jan 1, 2008
    
    
    487,329
    
    
    $
    5.48Options Granted
    
    
    
    
    
    
    Exercises
    
    
    (21,452
    )
    
    
    4.43Forfeitures
    
    
    (510
    )
    
    
    13.12Ending options outstanding, June 30, 2008
    
    
    465,367
    
    
    
    5.52
    
    
    
    2.6Exercisable at June 30, 2008
    
    
    445,669
    
    
    $
    5.29
    
    
    
    2.5
 The total intrinsic value of options exercised during the six months ended June 30, 2008 and
2007 was $96,000 and $854,000, respectively.A summary of the Companys nonvested restricted shares for the six months ended June 30,
2008 is presented below:
 Weighted-AverageGrant-DateNonvested Shares
    
    Shares
    
    
    Fair ValueNonvested at January 1, 2008
    
    
    64,295
    
    
    $
    19.53Granted
    
    
    37,949
    
    
    
    14.42Vested
    
    
    (15,256
    )
    
    
    18.10Forfeited
    
    
    (2,292
    )
    
    
    18.21Nonvested at June 30, 2008
    
    
    84,696
    
    
    $
    17.53
 As of June 30, 2008, there was $1.4 million of unrecognized compensation cost related to
nonvested share-based compensation arrangements granted under this plan. This cost is
expected to be recognized over a weighted-average period of 3.6 years.7.
    
    Fair Value MeasurementsEffective January 1, 2008, the Company adopted SFAS No. 157 (SFAS 157), Fair Value
Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles and expands disclosures about fair value
measurements. SFAS 157 applies whenever other standards require (or permit) assets or
liabilities to be measured at fair value but does not expand the use of fair value in any
new circumstances. In this standard, the FASB clarifies the principle that fair value should
be based on the assumptions market participants would use when pricing the asset or
liability. In support of this principle, SFAS 157 establishes a fair value hierarchy that
prioritizes the information used to develop those assumptions. The fair value hierarchy is
as follows:Level 1 inputs- Unadjusted quoted process in active markets for identical assets or
liabilities that the entity has the ability to access at the measurement date.Level 2 inputs- Inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly. These might include quoted prices for
similar assets and liabilities in active markets, and inputs other than quoted prices that
are observable for the asset or liability, such as interest rates and yield curves that are
observable at commonly quoted intervals.Level 3 inputs- Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entitys own assumptions about the assumptions that market
participants would use in pricing the assets or liabilities.The available-for-sale securities category is the only balance sheet category the Company is
required by generally accepted accounting principles to account for at fair value. The
following table presents information about the
Companys assets measured at fair value on a recurring basis as of June 30, 2008, and
indicates the fair value hierarchy of the valuation techniques utilized by the Company to
determine such fair value (dollars in thousands).
 11




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##### Table of Contents



Fair Value MeasurementsAt June 30, 2008, UsingQuoted PricesIn Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    June 30, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-Sale Securities
    
    $
    131,319
    
    
    $
    
    
    
    $
    131,319
    
    
    $Total Assets Measured at
Fair Value
    
    $
    131,319
    
    
    $
    
    
    
    $
    131,319
    
    
    $
 Available for Sale Securities. Securities classified as available for sale are reported at
fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value
measurements from an independent pricing service. The fair value measurements consider
observable data that may include dealer quotes, market spreads, cash flows, the U.S.
Treasury yield curve, live trading levels, trade execution data, market consensus prepayment
speeds, credit information and the bonds terms and conditions, among other things.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities  Including an Amendment of FASB Statement No. 115.This
Statement permits entities to choose to measure many financial instruments and certain other
items at fair value. Unrealized gains and losses on items for which the fair value option
has been elected will be reported in earnings. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to
apply complex hedge accounting provisions. This Statement is expected to expand the use of
fair value measurement, which is consistent with the FASBs long-term measurement objectives
for accounting for financial instruments. The company did not elect the fair value option
for financial assets as of January 1, 2008, the effective date of this standard.8.
    
    New Accounting Pronouncements:In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (SFAS 157).
SFAS 157 defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS 157 establishes a fair value hierarchy about
the assumptions used to measure fair value and clarifies assumptions about risk and the
effect of a restriction on the sale or use of an asset. SFAS 157 is effective for fiscal
years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position
(FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of
FAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal
years beginning after November 15, 2008, and interim periods within those fiscal years.
See Notes to Financial Statements, Note 7, Fair Value Measurements for further discussion of
the impact of SFAS No. 159.In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS 159). SFAS 159 provides companies with an option to
report selected financial assets and liabilities at fair value and establishes presentation
and disclosure requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities. The Company
did not elect the fair value option for any financial assets or financial liabilities as of
January 1, 2008, the effective date of the standard.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated
Financial Statements (SFAS 160). SFAS 160 re-characterizes minority interests in
consolidated subsidiaries as non-controlling interests and requires the classification of
minority interests as a component of equity. Under SFAS 160, a change in control will be
measured at fair value, with any gain or loss recognized in earnings. The effective date for
SFAS 160 is for annual periods beginning on or after December 15, 2008. Early adoption and
retroactive application of SFAS 160 to fiscal years preceding the effective date are not
permitted. The Company is evaluating the impact of adoption on its Consolidated Financial
Statements.
 12




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##### Table of Contents



In December 2007, the FASB issued Statement No. 141(R)  Business Combinations. This
statement replaces FASB Statement No. 141  Business Combinations. SFAS No. 141(R)
establishes principles and requirements for how an acquiring company (1) recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities
assumed and any noncontrolling interest in the acquiree, (2) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase, and
(3) determines what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. The new standard is
effective for the Company on January 1, 2009. The Company is currently evaluating the impact
of adopting SFAS No. 141(R) on the Consolidated Financial Statements.In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities (SFAS 161). SFAS 161 requires specific disclosures regarding the
location and amounts of derivative instruments in the Companys financial statements; how
derivative instruments and related hedged items are accounted for; and how derivative
instruments and related hedged items affect the Companys financial position, financial
performance, and cash flows. SFAS 161 is effective for financial statements issued and for
fiscal years and interim periods after November 15, 2008. Early application is permitted.
Because SFAS 161 impacts the Companys disclosure and not its accounting treatment for
derivative instruments and related hedged items, the Companys adoption of SFAS 161 will
impact the Consolidated Financial Statements.In May 2008, FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS No. 162). This statement identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with GAAP in the
Unites States (the GAAP hierarchy). SFAS No. 162 divides the body of GAAP into four
categories by level of authority. This statement is effective sixty days following the SECs
approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The
Company is currently evaluating the impact of SFAS No. 162 on its Consolidated Financial
Statements.In September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-4 (EITF
06-4), Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements. EITF 06-4 requires that a liability be
recorded during the service period when a split-dollar life insurance agreement continues
after participants employment or retirement. The required accrued liability will be based
on either the post-employment benefit cost for the continuing life insurance or based on the
future death benefit depending on the contractual terms of the underlying agreement. EITF
06-4 is effective for fiscal years beginning after December 15, 2007. Effective January 1,
2008, the Company recorded a liability in the amount of $389,000 and a reduction in equity
in the amount of $235,000 to record the liability as of January 1, 2008.On November 5, 2007, the SEC issued Staff Accounting Bulletin No. 109, Written Loan
Commitments Recorded at Fair Value through Earnings (SAB 109). Previously, SAB 105,
Application of Accounting Principles to Loan Commitments, stated that in measuring the fair
value of a derivative loan commitment, a company should not incorporate the expected net
future cash flows related to the associated servicing of the loan. SAB 109 supersedes SAB
105 and indicates that the expected net future cash flows related to the associated
servicing of the loan should be included in measuring fair value for all written loan
commitments that are accounted for at fair value through earnings. SAB 105 also indicated
that internally-developed intangible assets should not be recorded as part of the fair value
of a derivative loan commitment, and SAB 109 retains that view. SAB 109 is effective for
derivative loan commitments issued or modified in fiscal quarters beginning after
December 15, 2007. The Company believes the impact of this standard to be immaterial.
 13




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##### Table of Contents



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, 2007.
 General
        14




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##### Table of Contents



Current Economic Challenges and Future Economic Outlook
    
    
    Slightly stronger loan demand, as business borrowers sought more community bank
financing in a tightened credit environment.
    
    Higher deposit demand. Despite negative publicity regarding the banking sector
as a whole during the quarter, it appeared that depositors continued to trust
well-capitalized local banks with their deposits.
    
    A stabilizing net interest margin as reduced costs on the Companys liabilities
began to catch up with the significant drop in asset yields created by the rapid
drop in the Federal Funds rate.
    
    Higher non-performing loans and credit losses, as credit conditions, particularly
in the real estate sector, continued to weaken.
    
    Pressure on fee income, particularly fees derived from mortgage banking activity.
   Critical Accounting Policies
  Income Recognition .
 15




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##### Table of Contents



Allowance For Loan Losses.
     Investments .
   16




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##### Table of Contents



Goodwill and Other Intangible Assets .
  Real Estate Owned.
  Intermountain Community Bancorp
Comparison of the Three and Six Month Periods Ended June 30, 2008 and 2007
 Results of Operations
 Overview
  
 17




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##### Table of Contents



Net Interest Income
    Provision for Losses on Loans.
   18




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##### Table of Contents



Six Months Ended June 30,2008
    
    
    2007(Dollars in thousands)Balance at January 1
    
    $
    11,761
    
    
    $
    9,837Provision for losses on loans
    
    
    2,398
    
    
    
    2,006Amounts written off, net of recoveries
    
    
    (1,266
    )
    
    
    (1,039
    )Transfers
    
    
    0
    
    
    
    (2
    )Allowance  loans, June 30
    
    
    12,893
    
    
    
    10,802Allowance  unfunded commitments, January 1
    
    
    18
    
    
    
    482Adjustment
    
    
    (10
    )
    
    
    (384
    )Transfers
    
    
    
    
    
    
    2Allowance  unfunded commitments, June 30
    
    
    8
    
    
    
    100Total credit allowance including unfunded commitments
    
    $
    12,901
    
    
    $
    10,902
    Other Income.
  Operating Expenses
 19




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##### Table of Contents



Income Tax Provision
 Financial Position
 Assets
 Investments.
 20




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##### Table of Contents



Loans Receivable
  June 30, 2008
    
    
    December 31, 2007Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Commercial
    
    $
    243,216
    
    
    
    30.59
    
    
    $
    240,421
    
    
    
    31.27Commercial real estate
    
    
    411,835
    
    
    
    51.80
    
    
    
    383,018
    
    
    
    49.80Residential real estate
    
    
    110,394
    
    
    
    13.89
    
    
    
    114,010
    
    
    
    14.83Consumer
    
    
    24,427
    
    
    
    3.07
    
    
    
    26,285
    
    
    
    3.42Municipal
    
    
    5,163
    
    
    
    0.65
    
    
    
    5,222
    
    
    
    0.68Total loans receivable
    
    
    795,035
    
    
    
    100.00
    
    
    
    768,956
    
    
    
    100.00Net deferred origination fees
    
    
    (356
    )
    
    
    
    
    
    
    (646
    )Allowance for losses on loans
    
    
    (12,893
    )
    
    
    
    
    
    
    (11,761
    )Loans receivable, net
    
    $
    781,786
    
    
    
    
    
    
    $
    756,549Weighted average yield at end of period
    
    
    7.03
    %
    
    
    
    
    
    
    8.16
    %
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(Dollars in thousands)Commercial
    
    $
    66,746
    
    
    $
    89,476
    
    
    
    (25.4
    )
    
    $
    124,645
    
    
    $
    162,069
    
    
    
    (23.1
    )Commercial real estate
    
    
    73,680
    
    
    
    82,006
    
    
    
    (10.2
    )
    
    
    133,439
    
    
    
    146,369
    
    
    
    (8.8
    )Residential real estate
    
    
    21,294
    
    
    
    24,666
    
    
    
    (23.8
    )
    
    
    39,666
    
    
    
    45,976
    
    
    
    (13.7
    )Consumer
    
    
    3,144
    
    
    
    4,444
    
    
    
    (29.3
    )
    
    
    6,248
    
    
    
    9,896
    
    
    
    (36.9
    )Municipal
    
    
    160
    
    
    
    2,703
    
    
    
    (94.1
    )
    
    
    475
    
    
    
    2,903
    
    
    
    (83.6
    )Total loans originated
    
    $
    165,024
    
    
    $
    203,295
    
    
    
    (18.8
    )
    
    $
    304,473
    
    
    $
    367,213
    
    
    
    (17.1
    )
  Office Properties and Equipment.
 21




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##### Table of Contents



BOLI and All Other Assets
 Deposits
  June 30, 2008
    
    
    December 31, 2007Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Demand
    
    $
    148,584
    
    
    
    20.0
    
    
    $
    159,069
    
    
    
    21.0NOW and money market 0.0% to 5.5%
    
    
    303,481
    
    
    
    40.9
    
    
    
    308,857
    
    
    
    40.8Savings and IRA 0.0% to 4.2%
    
    
    83,022
    
    
    
    11.2
    
    
    
    87,149
    
    
    
    11.5Certificate of deposit accounts
    
    
    206,548
    
    
    
    27.9
    
    
    
    202,763
    
    
    
    26.7Total deposits
    
    $
    741,635
    
    
    
    100.0
    
    
    $
    757,838
    
    
    
    100.0Weighted average interest rate
on certificates of deposit
    
    
    
    
    
    
    3.51
    %
    
    
    
    
    
    
    4.57
    %
 Borrowings
 Interest Rate Risk
   22




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##### Table of Contents



Net Interest Income
 Liquidity and Sources of Funds
   23




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##### Table of Contents



Capital Resources
      Well-CapitalizedActual
    
    Capital Requirements
    
    RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal capital (to risk-weighted
assets):The Company
    
    $
    106,974
    
    
    
    11.88
    %
    
    $
    72,053
    
    
    
    8
    %
    
    $
    90,066
    
    
    
    10
    %Panhandle State Bank
    
    
    107,769
    
    
    
    11.97
    %
    
    
    72,053
    
    
    
    8
    %
    
    
    90,067
    
    
    
    10
    %Tier I capital (to risk-weighted
assets):The Company
    
    
    95,695
    
    
    
    10.62
    %
    
    
    36,026
    
    
    
    4
    %
    
    
    54,040
    
    
    
    6
    %Panhandle State Bank
    
    
    96,490
    
    
    
    10.71
    %
    
    
    36,027
    
    
    
    4
    %
    
    
    54,040
    
    
    
    6
    %Tier I capital (to average assets):The Company
    
    
    95,695
    
    
    
    9.39
    %
    
    
    40,773
    
    
    
    4
    %
    
    
    50,966
    
    
    
    5
    %Panhandle State Bank
    
    
    96,490
    
    
    
    9.71
    %
    
    
    39,732
    
    
    
    4
    %
    
    
    49,665
    
    
    
    5
    %
 24




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##### Table of Contents



Off Balance Sheet Arrangements and Contractual Obligations
   Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1 to 3 years
    
    
    3 to 5 years
    
    
    5 years(Dollars in thousands)Long-term debt (1)
    
    $
    112,143
    
    
    $
    2,586
    
    
    $
    40,305
    
    
    $
    32,117
    
    
    $
    37,135Short-term debt (1)
    
    
    122,391
    
    
    
    122,391
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations (2)
    
    
    14,542
    
    
    
    1,065
    
    
    
    1,657
    
    
    
    1,363
    
    
    
    10,457Purchase obligations (3)
    
    
    488
    
    
    
    488
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities
reflected on the registrants
balance sheet under GAAP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    249,564
    
    
    $
    126,530
    
    
    $
    41,962
    
    
    $
    33,480
    
    
    $
    47,592
 
 (1)
    
    Includes interest payments.(2)
    
    Excludes recurring accounts payable, accrued expenses and other liabilities, repurchase
agreements and customer deposits, all of which are recorded on the Companys balance sheet.(3)
    
    The Company is completing construction of the 94,000 square foot Sandpoint Center. The
Sandpoint branch and administrative staff was relocated to the Sandpoint Center during the
second quarter of 2008. New Accounting Pronouncements
    25




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##### Table of Contents



Business Combinations Business Combinations
     Forward-Looking Statements
   26




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##### Table of Contents




    
    the strength of the United States economy in general and the strength of
the local economies and real estate markets in which Intermountain conducts its operations;
    
    the effects of inflation, interest rate levels and market and monetary
fluctuations;
    
    trade, monetary and fiscal policies and laws, including interest rate
policies of the federal government;
    
    applicable laws and regulations and legislative or regulatory changes;
    
    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;
    
    Intermountains success in gaining regulatory approvals, when required;
    
    technological and management changes;
    
    announcement and successful and timely implementation of growth,
acquisition and efficiency strategies;
    
    Intermountains ability to successfully integrate entities that may
be or have been acquired;
    
    changes in consumer spending and saving habits; 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
 27




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##### Table of Contents



PART II  Other Information
 
 Item 1  Legal Proceedings
  
 Item 1A Risk Factors
 As a financial holding company, our earnings are dependent upon the performance of our bank as well
as by business, economic and political conditions.
    A downturn in the local economies or real estate markets could negatively impact our banking
business.
   Changes in market interest rates could adversely affect our earnings.
  28




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##### Table of Contents



Competition may adversely affect our ability to attract and retain customers at current levels.
   Additional market concern over investment securities backed by mortgage loans could create losses
in the Companys investment portfolio
  29




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##### Table of Contents



We may not be able to successfully implement our internal growth strategy.
  There are risks associated with potential acquisitions.
  We may not be able to replace key members of management or attract and retain qualified
relationship managers in the future.
  The allowance for loan losses may be inadequate.
    30




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We are expanding our lending activities in riskier areas.
  Our stock price can be volatile.
   Current subprime and prime mortgage market volatility could have a negative impact on the Companys
lending operations.
  An increase in FDIC deposit insurance assessments as the FDIC increases payouts for failing
institutions may have an adverse impact on Company earnings
  Negative publicity regarding liquidity of financial institutions may have a negative impact on
Company operations
  
 Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3  Defaults Upon Senior Securities
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Item 4  Submission of Matters to a Vote of Security Holders
 (a)
    
    The annual meeting of Shareholders of Intermountain Community Bancorp was held
on April 23, 2008.(b)
    
    Not Applicable(c)
    
    A brief description of each matter voted upon at the Annual Meeting and the
number of votes cast for, against or withheld, including a separate tabulation with
respect to each nominee to serve on the Board is presented below:
 1. Election of 4 directors for terms expiring in 2008.Charles L. BauerVotes cast for:
    
    
    6,353,396Votes withheld:
    
    
    110,279Maggie Y. LyonsVotes cast for:
    
    
    6,345,900Votes withheld:
    
    
    117,775Ronald JonesVotes cast for:
    
    
    6,353,240Votes withheld:
    
    
    110,435Barbara StrickfadenVotes cast for:
    
    
    6,352,543Votes withheld:
    
    
    111,1322. Approval of BDO.Votes cast for:
    
    
    6,408,498Votes cast against:
    
    
    37,350Votes abstained:
    
    
    17,8273. Approval of Shareholder Proposal.Votes cast for:
    
    
    1,304,405Votes cast against:
    
    
    3,643,988Votes abstained:
    
    
    110,360
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Item 5  Other Information
  
 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)August 8, 2008
    
    By:
    
    /s/ Curt HeckerDate
    
    
    
    Curt HeckerPresidentand Chief Executive OfficerAugust 8, 2008
    
    By:
    
    /s/ Doug WrightDate
    
    
    
    Doug WrightExecutive Vice Presidentand Chief Financial Officer
 34