##### 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, 2005
 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
(State or other jurisdiction of
incorporation or organization)
    
    82-0499463
(I.R.S. Employer
Identification No.)
 231 N. Third Avenue, Sandpoint, Idaho 83864
 (208) 263-0505
 þ o
 o þ
  Class
    
    Outstanding as of August 8, 2005Common Stock (no par value)
    
    5,813,287




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Intermountain Community Bancorp
 FORM 10-Q
For the Quarter Ended June 30, 2005
 TABLE OF CONTENTS
  
 PART I -Financial InformationItem 1- Financial Statements (Unaudited)Consolidated Balance Sheets-for June 30, 2005 and December 31, 2004Consolidated Statements of Income for the three and six months ended June 30, 2005 and 2004Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2005 and 2004Notes 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 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 31,2005
    
    2004(Dollars in thousands)ASSETS:Cash and cash equivalents:Interest bearing
    
    $
    365
    
    
    $
    104Non-interest bearing and vault
    
    
    16,547
    
    
    
    14,098Restricted
    
    
    629
    
    
    
    1,634Federal funds sold
    
    
    
    
    
    
    8,330Interest bearing certificates of deposit
    
    
    100
    
    
    
    100Available for sale securities, at fair value
    
    
    104,912
    
    
    
    102,758Held to maturity securities, at amortized cost
    
    
    7,294
    
    
    
    5,409Federal Home Loan Bank of Seattle (FHLB) stock, at cost
    
    
    1,774
    
    
    
    1,210Loans held for sale
    
    
    6,378
    
    
    
    5,686Loans receivable, net
    
    
    496,332
    
    
    
    418,661Accrued interest receivable
    
    
    4,295
    
    
    
    3,722Office properties and equipment, net
    
    
    15,182
    
    
    
    12,941Bank-owned life insurance
    
    
    6,941
    
    
    
    6,795Goodwill
    
    
    11,399
    
    
    
    11,399Other intangible assets
    
    
    1,143
    
    
    
    1,238Prepaid expenses and other assets, net
    
    
    4,258
    
    
    
    3,595Total assets
    
    $
    677,549
    
    
    $
    597,680LIABILITIES:Deposits
    
    $
    539,935
    
    
    $
    500,923Securities sold subject to repurchase agreements
    
    
    39,910
    
    
    
    20,901Advances from Federal Home Loan Bank of Seattle
    
    
    15,000
    
    
    
    5,000Cashiers checks issued and payable
    
    
    9,282
    
    
    
    5,478Accrued interest payable
    
    
    1,197
    
    
    
    753Other borrowings
    
    
    21,277
    
    
    
    16,527Accrued expenses and other liabilities
    
    
    2,862
    
    
    
    3,534Total liabilities
    
    
    629,463
    
    
    
    553,116Commitments and contingent liabilitiesSTOCKHOLDERS EQUITY:Common stock, no par value; 24,000,000 and 7,084,000
shares authorized; 5,819,486 and 3,784,180 shares issued;
5,798,366 and 3,784,180 shares outstanding
    
    
    31,379
    
    
    
    30,314Unearned compensation  restricted stock
    
    
    (335
    )
    
    
    Accumulated other comprehensive loss
    
    
    (785
    )
    
    
    (509
    )Retained earnings
    
    
    17,827
    
    
    
    14,759Total stockholders equity
    
    
    48,086
    
    
    
    44,564Total liabilities and stockholders equity
    
    $
    677,549
    
    
    $
    597,680
  3




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##### Table of Contents



Intermountain Community Bancorp
 
 Consolidated Statements of Income
(Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(Dollars in thousands, except per share data)Interest income:Loans
    
    $
    8,785
    
    
    $
    5,131
    
    
    $
    16,327
    
    
    $
    9,941Investments
    
    
    959
    
    
    
    803
    
    
    
    1,892
    
    
    
    1,545Total interest income
    
    
    9,744
    
    
    
    5,934
    
    
    
    18,219
    
    
    
    11,486Interest expense:Deposits
    
    
    1,959
    
    
    
    1,063
    
    
    
    3,572
    
    
    
    2,055Other borrowings
    
    
    610
    
    
    
    274
    
    
    
    1,060
    
    
    
    469Total interest expense
    
    
    2,569
    
    
    
    1,337
    
    
    
    4,632
    
    
    
    2,524Net interest income
    
    
    7,175
    
    
    
    4,597
    
    
    
    13,587
    
    
    
    8,962Provision for losses on loans
    
    
    (994
    )
    
    
    (693
    )
    
    
    (1,292
    )
    
    
    (829
    )Net interest income after provision for losses on
loans
    
    
    6,181
    
    
    
    3,904
    
    
    
    12,295
    
    
    
    8,133Other income:Fees and service charges
    
    
    2,145
    
    
    
    1,558
    
    
    
    3,869
    
    
    
    2,738Bank owned life insurance
    
    
    73
    
    
    
    63
    
    
    
    147
    
    
    
    127Gain (Loss) on sale of securities
    
    
    (2
    )
    
    
    8
    
    
    
    (41
    )
    
    
    (13
    )Other
    
    
    253
    
    
    
    231
    
    
    
    535
    
    
    
    382Total other income
    
    
    2,469
    
    
    
    1,860
    
    
    
    4,510
    
    
    
    3,234Operating expenses
    
    
    6,197
    
    
    
    4,364
    
    
    
    12,003
    
    
    
    8,265Income before income taxes
    
    
    2,453
    
    
    
    1,400
    
    
    
    4,802
    
    
    
    3,102Income tax provision
    
    
    (879
    )
    
    
    (474
    )
    
    
    (1,733
    )
    
    
    (1,101
    )Net income
    
    $
    1,574
    
    
    $
    926
    
    
    $
    3,069
    
    
    $
    2,001Earnings per share  basic
    
    $
    0.27
    
    
    $
    0.19
    
    
    $
    0.53
    
    
    $
    0.42Earnings per share  diluted
    
    $
    0.25
    
    
    $
    0.17
    
    
    $
    0.49
    
    
    $
    0.37Weighted average shares outstanding  basic
    
    
    5,773,798
    
    
    
    4,821,348
    
    
    
    5,739,049
    
    
    
    4,796,261Weighted average shares outstanding  diluted
    
    
    6,236,688
    
    
    
    5,377,937
    
    
    
    6,226,981
    
    
    
    5,359,011
  4




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##### Table of Contents



Intermountain Community Bancorp
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Six Months EndedJune 30,2005
    
    2004(Dollars in thousands)Cash flows from operating activities:Net income
    
    $
    3,069
    
    
    $
    2,001Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation
    
    
    791
    
    
    
    532Stock issued as compensation
    
    
    23
    
    
    
    Amortization of unearned compensation
    
    
    3
    
    
    
    Net amortization of premiums on securities
    
    
    152
    
    
    
    266Stock dividends on FHLB stock
    
    
    
    
    
    
    (16
    )Provisions for losses on loans
    
    
    1,292
    
    
    
    829Amortization of core deposit intangibles
    
    
    94
    
    
    
    33Loss on sale of securities
    
    
    41
    
    
    
    13(Gain) Loss on sale of loans
    
    
    26
    
    
    
    (12
    )Gain on sale of other real estate owned
    
    
    (88
    )
    
    
    Net accretion of loan and deposit discounts and premiums
    
    
    (75
    )
    
    
    (122
    )Increase in cash surrender value of bank-owned life insurance
    
    
    (147
    )
    
    
    (127
    )Change inLoans held for sale
    
    
    (692
    )
    
    
    (206
    )Accrued interest receivable
    
    
    (573
    )
    
    
    (266
    )Prepaid expenses and other assets
    
    
    (920
    )
    
    
    (88
    )Accrued interest payable
    
    
    444
    
    
    
    209Accrued expenses and other liabilities
    
    
    3,268
    
    
    
    (1,118
    )Net cash provided by operating activities
    
    
    6,708
    
    
    
    1,928Cash flows from investing activities:Purchases of available-for-sale securities
    
    
    (18,891
    )
    
    
    (39,602
    )Proceeds from calls or maturities of available-for-sale securities
    
    
    9,303
    
    
    
    18,475Principal payments on mortgage-backed securities
    
    
    6,807
    
    
    
    7,814Purchases of held-to-maturity securities
    
    
    (1,929
    )
    
    
    (161
    )Proceeds from calls or maturities of held-to-maturity securities
    
    
    25
    
    
    
    199Origination of loans, net of principal payments
    
    
    (80,158
    )
    
    
    (31,313
    )Proceeds from sale of loans
    
    
    1,278
    
    
    
    1,543Purchase of office properties and equipment
    
    
    (3,031
    )
    
    
    (964
    )Net change in federal funds sold
    
    
    8,330
    
    
    
    (4,955
    )Purchase of FHLB stock
    
    
    (565
    )
    
    
    (433
    )Proceeds from maturities of certificates of deposit
    
    
    
    
    
    
    298Proceeds from sales of other real estate owned
    
    
    526
    
    
    
    Net (increase) decrease in restricted cash
    
    
    1,005
    
    
    
    (479
    )Investment in affiliate
    
    
    
    
    
    
    (248
    )Net cash used in investing activities
    
    
    (77,300
    )
    
    
    (49,826
    )
 5




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##### Table of Contents



Intermountain
Community Bancorp
 Consolidated Statements of Cash Flows (continued)
(Unaudited)
 Six Months EndedJune 30,2005
    
    2004(Dollars in thousands)Cash flows from financing activities:Net increase in demand, money market and savings deposits
    
    $
    28,141
    
    
    $
    32,741Net increase in certificates of deposit
    
    
    10,834
    
    
    
    15,737Net change in repurchase agreements
    
    
    19,009
    
    
    
    (4,806
    )Net change in federal funds purchased
    
    
    4,750
    
    
    
    Proceeds from exercise of stock options
    
    
    570
    
    
    
    328Payments for fractional shares
    
    
    (2
    )
    
    
    Repurchase of stock
    
    
    
    
    
    
    (47
    )Proceeds from debenture issuance
    
    
    
    
    
    
    8,248Repayments of FHLB borrowings
    
    
    (7,000
    )
    
    
    Proceeds from FHLB borrowings
    
    
    17,000
    
    
    
    Net cash provided by financing activities
    
    
    73,302
    
    
    
    52,201Net change in cash and cash equivalents
    
    
    2,710
    
    
    
    4,303Cash and cash equivalents, beginning of period
    
    
    14,202
    
    
    
    10,240Cash and cash equivalents, end of period
    
    $
    16,912
    
    
    $
    14,543Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    4,151
    
    
    $
    2,315Income taxes
    
    
    1,998
    
    
    
    1,431Restricted shares issued
    
    
    338
    
    
    
    
  6




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##### Table of Contents



Intermountain Community Bancorp
 
 Consolidated Statements of Comprehensive Income
 (Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(Dollars in thousands)Net income
    
    $
    1,574
    
    
    $
    926
    
    
    $
    3,069
    
    
    $
    2,001Other comprehensive income (loss):Change in unrealized gains (losses) on
investments, net of reclassification adjustments
    
    
    778
    
    
    
    (2,406
    )
    
    
    (454
    )
    
    
    (2,005
    )Less deferred income tax benefit (provision)
    
    
    (306
    )
    
    
    944
    
    
    
    178
    
    
    
    786Net other comprehensive income (loss)
    
    
    472
    
    
    
    (1,462
    )
    
    
    (276
    )
    
    
    (1,219
    )Comprehensive income (loss)
    
    $
    2,046
    
    
    $
    (536
    )
    
    $
    2,793
    
    
    $
    782
  7




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##### Table of Contents



Intermountain Community Bancorp
 
 Notes to Consolidated Financial Statements
 1.
    
    Basis of Presentation:
   2.
    
    Advances from the Federal Home Loan Bank of Seattle:
  3.
    
    Other Borrowings:
  June 30,
    
    December 31,2005
    
    2004Federal funds purchased(1)
    
    $
    4,750
    
    
    $
    Term note payable(2)
    
    
    8,279
    
    
    
    8,279Term note payable(3)
    
    
    8,248
    
    
    
    8,248Total other borrowings
    
    $
    21,277
    
    
    $
    16,527
 
 (1)
    
    Intermountain had federal funds purchased in the amount of $4,750,000 outstanding
at June 30, 2005. The borrowing matures on July 1, 2005 and bears an interest rate of
3.75%.(2)
    
    In January 2003, Intermountain issued $8.0 million of debentures through its subsidiary
Intermountain Statutory Trust I. The debt associated with these securities bear interest at
6.75%. Interest only payments are made quarterly starting in June 2004. The debt is
callable by Intermountain in March 2008 and matures in March 2033.(3)
    
    In March 2004, Intermountain issued $8.0 million of debentures through its subsidiary
Intermountain Statutory Trust II. The debt associated with these securities bear interest
based on the London Interbank Offering Rate (LIBOR) with a beginning rate of 3.91%, adjusted
and paid quarterly (the rate at June 30, 2005 was 5.94%). The debt is callable by
Intermountain in March 2009 and matures in March 2034. 8




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##### Table of Contents



4.
    
    Earnings Per Share:
  Three Months Ended June 30,(Dollars in thousands, except per share amounts)2005
    
    
    
    
    
    
    
    
    
    2004Weighted
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    Avg.
    
    Per Share
    
    Net
    
    Avg.
    
    Per ShareIncome
    
    Shares(1)
    
    Amount
    
    Income
    
    Shares(1)
    
    AmountBasic computations
    
    $
    1,574
    
    
    
    5,773,798
    
    
    $
    0.27
    
    
    $
    926
    
    
    
    4,821,348
    
    
    $
    0.19Effect of dilutive
securities:Common stock
options and
restricted shares
    
    
    
    
    
    
    462,890
    
    
    
    (0.02
    )
    
    
    
    
    
    
    556,589
    
    
    
    (0.02
    )Diluted computations
    
    $
    1,574
    
    
    
    6,236,688
    
    
    $
    0.25
    
    
    $
    926
    
    
    
    5,377,937
    
    
    $
    0.17Antidilutive
options not included in
diluted earnings per
share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Six Months Ended June 30,(Dollars in thousands, except per share amounts)2005
    
    
    
    
    
    
    
    
    
    2004Weighted
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    Avg.
    
    Per Share
    
    Net
    
    Avg.
    
    Per ShareIncome
    
    Shares(1)
    
    Amount
    
    Income
    
    Shares(1)
    
    AmountBasic computations
    
    $
    3,069
    
    
    
    5,739,049
    
    
    $
    0.53
    
    
    $
    2,001
    
    
    
    4,796,261
    
    
    $
    0.42Effect of dilutive
securities:Common stock
options and
restricted
shares
    
    
    
    
    
    
    487,932
    
    
    
    (0.04
    )
    
    
    
    
    
    
    562,750
    
    
    
    (0.05
    )Diluted computations
    
    $
    3,069
    
    
    
    6,226,981
    
    
    $
    0.49
    
    
    $
    2,001
    
    
    
    5,359,011
    
    
    $
    0.37Antidilutive
options not
included in diluted
earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,946
 
 (1)
    
    Weighted average shares outstanding have been adjusted for the
3-for-2 stock split effective March 10, 2005. 9




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##### Table of Contents



5.
    
    Operating Expenses:
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(Dollars in thousands)Salaries and employee benefits
    
    $
    3,472
    
    
    $
    2,354
    
    
    $
    6,653
    
    
    $
    4,483Occupancy expense
    
    
    915
    
    
    
    611
    
    
    
    1,857
    
    
    
    1,234Advertising
    
    
    172
    
    
    
    130
    
    
    
    303
    
    
    
    225Fees and service charges
    
    
    205
    
    
    
    297
    
    
    
    509
    
    
    
    580Printing, postage and supplies
    
    
    261
    
    
    
    216
    
    
    
    554
    
    
    
    395Legal and accounting
    
    
    317
    
    
    
    243
    
    
    
    609
    
    
    
    393Other expense
    
    
    855
    
    
    
    513
    
    
    
    1,518
    
    
    
    955Total operating expenses
    
    $
    6,197
    
    
    $
    4,364
    
    
    $
    12,003
    
    
    $
    8,265
 6.
    
    Stock Options:
  10




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Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(Dollars in thousands, exceptper share amounts)Reported net income
    
    $
    1,574
    
    
    $
    926
    
    
    $
    3,069
    
    
    $
    2,001Add back: Stock-based employee compensation
expense, net of related tax effects
    
    
    7
    
    
    
    
    
    
    
    14
    
    
    
    Deduct: Total stock-based employee compensation
expense determined under fair value based method for
all awards, net of related tax effects
    
    
    (34
    )
    
    
    (34
    )
    
    
    (69
    )
    
    
    (74
    )Pro forma
    
    $
    1,547
    
    
    $
    892
    
    
    $
    3,014
    
    
    $
    1,927Basic earnings per share:Reported earnings per share (1)
    
    $
    0.27
    
    
    $
    0.19
    
    
    $
    0.53
    
    
    $
    0.42Stock-based employee compensation, fair value
    
    
    (0.00
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.02
    )Pro forma earnings per share
    
    $
    0.27
    
    
    $
    0.18
    
    
    $
    0.52
    
    
    $
    0.40Diluted earnings per share:Reported earnings per share (1)
    
    $
    0.25
    
    
    $
    0.17
    
    
    $
    0.49
    
    
    $
    0.37Stock-based employee compensation, fair value
    
    
    (0.00
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.01
    )Pro forma earnings per share
    
    $
    0.25
    
    
    $
    0.16
    
    
    $
    0.48
    
    
    $
    0.36
 
 (1)
    
    Earnings per share amounts have been have been adjusted for the
3-for-2 stock split effective March 10, 2005. 7.
    
    Stock Split:
  8.
    
    Subsequent Events:
   9.
    
    New Accounting Policies:
 SFAS No. 123 (revised 2004) (SFAS 123R), Share-Based Payment.
 11




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##### Table of Contents



SFAS No. 154Accounting Changes and Error Corrections. Accounting Changes, Reporting Accounting Changes in Interim Financial Statements,
 
 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, 2004.
 General
     12




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Critical Accounting Policies
  Income Recognition .
 Allowance For Loan Losses.
    13




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##### Table of Contents



Investments .
   Goodwill and Other Intangible Assets .
  Real Estate Owned.
  14




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##### Table of Contents



Intermountain
Community Bancorp
 Comparison of the Three and Six Month Periods Ended June 30, 2005 and 2004
 Results of Operations
 Overview
  Net Interest Income
   15




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##### Table of Contents



Provision for Losses on Loans.
   Six Months Ended June 30,2005
    
    2004(Dollars in thousands)Balance at January 1
    
    $
    6,902
    
    
    $
    5,118Allowance associated with the sale of loans
    
    
    (96
    )
    
    
    (140
    )Provision for losses on loans
    
    
    1,292
    
    
    
    829Amounts written off net of recoveries
    
    
    (11
    )
    
    
    1Balance at June 30
    
    $
    8,087
    
    
    $
    5,808
  Other Income.
 Operating Expenses
  16




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##### Table of Contents



Income Tax Provision
 Financial Position
 Assets
 Investments.
 Loans Receivable
  June 30, 2005
    
    December 31, 2004Amount
    
    %
    
    Amount
    
    %(Dollars in thousands)Commercial (includes commercial real
estate)
    
    $
    382,635
    
    
    
    75.76
    
    
    $
    304,783
    
    
    
    71.58Residential real estate
    
    
    89,044
    
    
    
    17.63
    
    
    
    94,170
    
    
    
    22.12Consumer
    
    
    31,929
    
    
    
    6.32
    
    
    
    24,245
    
    
    
    5.69Municipal
    
    
    1,479
    
    
    
    0.29
    
    
    
    2,598
    
    
    
    0.61Total loans receivable
    
    
    505,087
    
    
    
    100.00
    
    
    
    425,796
    
    
    
    100.00Net deferred origination fees
    
    
    (668
    )
    
    
    
    
    
    
    (233
    )Allowance for losses on loans
    
    
    (8,087
    )
    
    
    
    
    
    
    (6,902
    )Loans receivable, net
    
    $
    496,332
    
    
    
    
    
    
    $
    418,661Weighted average yield at end of period
    
    
    7.24
    %
    
    
    
    
    
    
    6.81
    %
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Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    % Change
    
    2005
    
    2004
    
    % Change(Dollars in thousands)Commercial (includes
commercial real estate)
    
    $
    132,670
    
    
    $
    66,371
    
    
    
    99.9
    
    
    $
    223,500
    
    
    $
    142,364
    
    
    
    57.0Residential real estate
    
    
    27,973
    
    
    
    23,688
    
    
    
    18.1
    
    
    
    46,956
    
    
    
    38,782
    
    
    
    21.1Consumer
    
    
    10,904
    
    
    
    3,322
    
    
    
    228.2
    
    
    
    17,938
    
    
    
    7,096
    
    
    
    152.8Municipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    15
    
    
    
    233.3Total loans originated
    
    $
    171,547
    
    
    $
    93,381
    
    
    
    83.7
    
    
    $
    288,444
    
    
    $
    188,257
    
    
    
    53.2
 Office Properties and Equipment.
 BOLI and All Other Assets
 Deposits
  June 30, 2005
    
    December 31, 2004Amount
    
    %
    
    Amount
    
    %(Dollars in thousands)Demand
    
    $
    114,411
    
    
    
    21.2
    
    
    $
    109,627
    
    
    
    21.9NOW and money market 0.0% to 3.0%
    
    
    186,772
    
    
    
    34.6
    
    
    
    171,474
    
    
    
    34.2Savings and IRA 0.0% to 6.65%
    
    
    69,171
    
    
    
    12.8
    
    
    
    61,112
    
    
    
    12.2Certificate of deposit accounts
    
    
    169,581
    
    
    
    31.4
    
    
    
    158,710
    
    
    
    31.7Total deposits
    
    $
    539,935
    
    
    
    100.0
    
    
    $
    500,923
    
    
    
    100.0Weighted average interest rate
on certificates of deposit
    
    
    
    
    
    
    3.23
    %
    
    
    
    
    
    
    2.85
    %
 Borrowings
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Interest Rate Risk
      Net Interest Income
 19




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Liquidity and Sources of Funds
     Capital Resources
   20




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Capital
    
    Well-CapitalizedActual
    
    Requirements
    
    RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Total capital
(to risk-weighted
assets)
    
    $
    55,374
    
    
    
    9.55
    %
    
    $
    46,380
    
    
    
    8.00
    %
    
    $
    57,975
    
    
    
    10.00
    %Tier 1 capital to
(to risk-weighted
assets)
    
    
    48,117
    
    
    
    8.30
    
    
    
    23,190
    
    
    
    4.00
    
    
    
    34,785
    
    
    
    6.00Tier 1 capital (to
average assets)
    
    
    48,117
    
    
    
    7.45
    
    
    
    25,826
    
    
    
    4.00
    
    
    
    32,283
    
    
    
    5.00
 Off Balance Sheet Arrangements and Contractual Obligations
  21




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##### Table of Contents



Payments Due by PeriodLess than
    
    
    
    
    
    Over
    
    More thanTotal
    
    1 year
    
    1 to 3 years
    
    3 to 5 years
    
    5 years(Dollars in thousands)Long-term debt(1)
    
    $
    51,431
    
    
    $
    1,184
    
    
    $
    7,364
    
    
    $
    2,098
    
    
    $
    40,785Short-term debt (1)
    
    
    14,766
    
    
    
    14,766
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    5,518
    
    
    
    570
    
    
    
    955
    
    
    
    801
    
    
    
    3,192Purchase obligations(2)
    
    
    284
    
    
    
    284
    
    
    
    
    
    
    
    
    
    
    
    Other long-term
liabilities reflected on the
registrants balance sheet
under GAAP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    71,999
    
    
    $
    16,804
    
    
    $
    8,319
    
    
    $
    2,899
    
    
    $
    43,977
 
 (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. New Accounting Policies
 SFAS No. 123 (revised 2004) (SFAS 123R), Share-Based Payment.
 SFAS No. 154Accounting Changes and Error Corrections. Accounting Changes, Reporting Accounting Changes in Interim Financial Statements,
 Forward-Looking Statements
  22




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##### Table of Contents




    
    the strength of the United States economy in general and
the strength of the local economies 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;
    
    growth and acquisition 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
  23




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##### Table of Contents



Item 4  Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Controls
 
 PART II  Other Information
 
 Item 1  Legal Proceedings
  
 Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3  Defaults Upon Senior Securities
  
 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 30, 2005.(b)
    
    Not Applicable(c)
    
    A brief description of each matter voted upon at the Annual Meeting and 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 five directors for terms expiring in 2008 and of
one director for term expiring in 2006, or until their successors have been
elected and qualified.
 Directors with terms expiring in 2008:Charles L. BauerVotes Cast for:
    4,359,757Votes Withheld
    44,003Votes Abstained
    0
 24




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##### Table of Contents



Maggie Y. LyonsVotes Cast for:
    4,364,688Votes Withheld
    39,072Votes Abstained
    0
 Ron JonesVotes Cast for:
    4,401,130Votes Withheld
    2,630Votes Abstained
    0
 Barbara StrickfadenVotes Cast for:
    4,401,130Votes Withheld
    2,630Votes Abstained
    0
 Douglas P. WardVotes Cast for:
    4,239,828Votes Withheld
    163,932Votes Abstained
    0
 Directors
with terms expiring in 2006:Jim PatrickVotes Cast for:
    4,399,735Votes Withheld
    4,025Votes Abstained
    0
 2.
    
    To approve an amendment to the Companys Articles of
Incorporation to increase the number of authorized shares of common stock to
24,000,000.
 Votes Cast for:
    4,327,052Votes Withheld
    66,387Votes Abstained
    10,321
 3.
    
    To approve an amendment to the Articles of Incorporation to
change the supermajority voting provisions for approval of mergers and
acquisitions.
 Votes Cast for:
    4,045,321Votes Withheld
    72,830Votes Abstained
    13,269
 4.
    
    
    To approve an amendment to the Articles to Incorporation make
certain technical changes.
 Votes Cast for:
    4,359,335Votes Withheld
    32,741Votes Abstained
    11,684
 5.
    
    To approve amendments to the Director Stock Option Plan to (a)
provide for the grant of restricted stock awards, and b) make related technical
changes.
 Votes Cast for:
    3,532,412Votes Withheld
    585,784Votes Abstained
    13,224
 25




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##### Table of Contents



6.
    
    To ratify the appointment of BDO Seidman, LLP as the
independent public accountants for Intermountain Community Bancorp for 2005.
 Votes Cast for:
    4,396,792Votes Withheld
    2,718Votes Abstained
    4,250
 
 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.
 
 Signatures
  INTERMOUNTAIN
COMMUNITY BANCORP(Registrant)August 10,
2005
    
    By:
    
    /s/ Curt HeckerDate
    
    
    
    Curt HeckerPresidentand Chief Executive OfficerAugust 10,
2005
    
    By:
    
    /s/ Doug WrightDate
    
    
    
    Doug WrightExecutive Vice Presidentand Chief Financial Officer
 26