##### 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, 2007
 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.)
 231 N. Third Avenue, Sandpoint, Idaho 83864
 (208) 263-0505
 þ o
  o þ o
 o þ
  Class
    
    Outstanding as of May 2, 2007Common Stock (no par value)
    
    7,446,567




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##### 



Intermountain Community Bancorp
 FORM 10-Q
For the Quarter Ended March 31, 2007
 TABLE OF CONTENTS
 PART I  Financial InformationItem 1 -
    
    Financial Statements (Unaudited)Consolidated Balance Sheets for March 31, 2007 and December 31, 2006Consolidated Statements of Income for the three months ended March 31, 2007 and 2006Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006Consolidated Statements of Comprehensive Income for the three months ended March 31,
2007 and 2006Notes 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)
 March 31,
    
    
    December 31,2007
    
    
    2006(Dollars in thousands)ASSETS:Cash and cash equivalents:Interest bearing
    
    $
    305
    
    
    $
    72Non-interest bearing and vault
    
    
    17,227
    
    
    
    24,305Restricted cash
    
    
    532
    
    
    
    888Federal funds sold
    
    
    54,250
    
    
    
    35,385Available-for-sale securities, at fair value
    
    
    100,131
    
    
    
    118,490Held-to-maturity securities, at amortized cost
    
    
    6,667
    
    
    
    6,719Federal Home Loan Bank of Seattle (FHLB) stock, at cost
    
    
    1,779
    
    
    
    1,779Loans held for sale
    
    
    4,748
    
    
    
    8,945Loans receivable, net
    
    
    685,068
    
    
    
    664,403Accrued interest receivable
    
    
    6,508
    
    
    
    7,329Office properties and equipment, net
    
    
    27,371
    
    
    
    25,444Bank-owned life insurance
    
    
    7,477
    
    
    
    7,400Goodwill
    
    
    11,662
    
    
    
    11,662Other intangible assets
    
    
    841
    
    
    
    881Prepaid expenses and other assets, net
    
    
    7,101
    
    
    
    6,164Total assets
    
    $
    931,667
    
    
    $
    919,866LIABILITIES:Deposits
    
    $
    715,287
    
    
    $
    693,686Securities sold subject to repurchase agreements
    
    
    92,232
    
    
    
    106,250Advances from Federal Home Loan Bank of Seattle
    
    
    5,000
    
    
    
    5,000Cashiers checks issued and payable
    
    
    6,012
    
    
    
    6,501Accrued interest payable
    
    
    2,209
    
    
    
    1,909Other borrowings
    
    
    25,039
    
    
    
    22,602Accrued expenses and other liabilities
    
    
    5,024
    
    
    
    5,838Total liabilities
    
    
    850,803
    
    
    
    841,786Commitments and contingent liabilitiesSTOCKHOLDERS EQUITY:Common stock, no par value; 26,400,000 shares authorized;
7,506,951 and 7,423,904 shares issued and 7,443,140 and
7,382,912 shares outstanding
    
    
    60,767
    
    
    
    60,395Accumulated other comprehensive income
    
    
    209
    
    
    
    (111
    )Retained earnings
    
    
    19,888
    
    
    
    17,796Total stockholders equity
    
    
    80,864
    
    
    
    78,080Total liabilities and stockholders equity
    
    $
    931,667
    
    
    $
    919,866
  3




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##### Table of Contents



Intermountain Community Bancorp
 
 Consolidated Statements of Income
 (Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands, exceptper share data)Interest income:Loans
    
    $
    15,061
    
    
    $
    11,607Investments
    
    
    1,995
    
    
    
    1,021Total interest income
    
    
    17,056
    
    
    
    12,628Interest expense:Deposits
    
    
    4,434
    
    
    
    2,652Other borrowings
    
    
    1,774
    
    
    
    685Total interest expense
    
    
    6,208
    
    
    
    3,337Net interest income
    
    
    10,848
    
    
    
    9,291(Provision for) recovery of losses on loans
    
    
    (834
    )
    
    
    96Net interest income after provision for and
recovery of losses on loans
    
    
    10,014
    
    
    
    9,387Other income:Fees and service charges
    
    
    2,517
    
    
    
    2,053Bank-owned life insurance
    
    
    77
    
    
    
    75Other
    
    
    447
    
    
    
    312Total other income
    
    
    3,041
    
    
    
    2,440Operating expenses
    
    
    9,677
    
    
    
    7,704Income before income taxes
    
    
    3,378
    
    
    
    4,123Income tax provision
    
    
    (1,285
    )
    
    
    (1,561
    )Net income
    
    $
    2,093
    
    
    $
    2,562Earnings per share  basic
    
    $
    0.26
    
    
    $
    0.32Earnings per share  diluted
    
    $
    0.24
    
    
    $
    0.30Weighted average shares outstanding  basic
    
    
    8,161,310
    
    
    
    7,967,562Weighted average shares outstanding  diluted
    
    
    8,615,307
    
    
    
    8,455,113
  4




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Intermountain Community Bancorp
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands)Cash flows from operating activities:Net income
    
    $
    2,093
    
    
    $
    2,562Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    576
    
    
    
    480Stock-based compensation expense
    
    
    76
    
    
    
    59Net amortization of premiums on securities
    
    
    (155
    )
    
    
    71Excess tax benefit related to stock-based compensation
    
    
    (188
    )
    
    
    (35
    )Provisions for and (recoveries of) losses on loans
    
    
    834
    
    
    
    (96
    )Amortization of core deposit intangibles
    
    
    40
    
    
    
    43Gain on sale of loans, investments, property and equipment
    
    
    (141
    )
    
    
    Accretion of deferred gain on sale of branch property
    
    
    (4
    )
    
    
    Net accretion of loan and deposit discounts and premiums
    
    
    (11
    )
    
    
    (35
    )Increase in cash surrender value of bank-owned life insurance
    
    
    (77
    )
    
    
    (75
    )Change inLoans held for sale
    
    
    4,197
    
    
    
    (1,614
    )Accrued interest receivable
    
    
    821
    
    
    
    357Prepaid expenses and other assets
    
    
    (1,426
    )
    
    
    (1,147
    )Accrued interest payable
    
    
    300
    
    
    
    52Accrued expenses and other liabilities
    
    
    (1,467
    )
    
    
    97Net cash provided by operating activities
    
    
    5,468
    
    
    
    719Cash flows from investing activities:Purchases of available-for-sale securities
    
    
    (23,929
    )
    
    
    Proceeds from calls or maturities of available-for-sale securities
    
    
    41,224
    
    
    
    2,020Principal payments on mortgage-backed securities
    
    
    1,759
    
    
    
    1,756Purchases of held-to-maturity securities
    
    
    
    
    
    
    (649
    )Proceeds from calls or maturities of held-to-maturity securities
    
    
    42
    
    
    
    Origination of loans, net of principal payments
    
    
    (22,292
    )
    
    
    (8,860
    )Proceeds from sale of loans
    
    
    935
    
    
    
    Purchase of office properties and equipment
    
    
    (4,425
    )
    
    
    (1,345
    )Proceeds from sale of office properties and equipment
    
    
    2,244
    
    
    
    Net change in federal funds sold
    
    
    (18,865
    )
    
    
    (5,410
    )Improvements and other changes in other real estate owned
    
    
    280
    
    
    
    Net decrease in restricted cash
    
    
    356
    
    
    
    73Net cash used in investing activities
    
    
    (22,671
    )
    
    
    (12,415
    )
 5




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Intermountain Community Bancorp
Consolidated Statements of Cash Flows (continued)
(Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands)Cash flows from financing activities:Net change in demand, money market and savings deposits
    
    $
    35,010
    
    
    $
    6,717Net change in certificates of deposit
    
    
    (13,411
    )
    
    
    5,759Net change in repurchase agreements
    
    
    (14,018
    )
    
    
    (5,373
    )Principal reduction of note payable
    
    
    (9
    )
    
    
    Excess tax benefit related to stock-based compensation
    
    
    188
    
    
    
    35Proceeds from exercise of stock options
    
    
    152
    
    
    
    112Proceeds from other borrowings
    
    
    2,446
    
    
    
    Net cash provided by financing activities
    
    
    10,358
    
    
    
    7,250Net change in cash and cash equivalents
    
    
    (6,845
    )
    
    
    (4,446
    )Cash and cash equivalents, beginning of period
    
    
    24,377
    
    
    
    23,875Cash and cash equivalents, end of period
    
    $
    17,532
    
    
    $
    19,429Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    7,099
    
    
    $
    3,279Income taxes
    
    
    475
    
    
    
    450Noncash investing and financing activities:Restricted stock issued
    
    
    684
    
    
    
    435Deferred gain on sale/leaseback
    
    
    312
    
    
    
    Purchase of land
    
    
    
    
    
    
    1,130
  6




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Intermountain Community Bancorp
 
 Consolidated Statements of Comprehensive Income
 (Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands)Net income
    
    $
    2,093
    
    
    $
    2,562Other comprehensive income (loss):Change in unrealized gains (losses)
on investments, net of reclassification
adjustments
    
    
    529
    
    
    
    (446
    )Less deferred income tax (expense) benefit
    
    
    (209
    )
    
    
    194Net other comprehensive income (loss)
    
    
    320
    
    
    
    (252
    )Comprehensive income
    
    $
    2,413
    
    
    $
    2,310
  7




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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, 2006. 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:The Company had an advance from the Federal Home Loan Bank of Seattle totaling $5.0 million
at March 31, 2007. The advance bears a fixed interest rate of 2.71% and matures on June 18,
2008.3.
    
    Other Borrowings:The components of other borrowings are as follows (in thousands):
 March 31,
    
    
    December 31,2007
    
    
    2006Term note payable (1)
    
    $
    8,279
    
    
    $
    8,279Term note payable (2)
    
    
    8,248
    
    
    
    8,248Term note payable (3)
    
    
    1,006
    
    
    
    1,015Term note payable (4)
    
    
    7,506
    
    
    
    Term note payable (5)
    
    
    
    
    
    
    5,060Total other borrowings
    
    $
    25,039
    
    
    $
    22,602
 
 (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 at 6.75%, with interest only paid quarterly starting in
June 2003. The debt is callable by the Company in March 2008 and matures in March
2033.(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 (London
Inter-Bank Offering Rate) index plus 2.8%, with interest only paid quarterly. The rate
on this borrowing was 8.16% at March 31, 2007. The debt is callable by the Company
after five years and matures in April 2034.(3)
    
    In January 2006, the Company purchased land to build the Financial and
Technical 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 March 2007, the Company entered into a borrowing agreement with Pacific
Coast Bankers Bank in the amount of $18.0 million. The borrowing agreement is a
revolving line of credit with a variable rate of interest of Prime less 1.00%. At
March 31, 2007, the balance outstanding was $7,506,000 at 7.25%.(5)
    
    In January 2006, the Company entered into a borrowing agreement with US Bank in
the amount of $5.0 million which was raised to $10.0 million in September 2006. The
borrowing agreement was a revolving line of credit with a variable rate of interest
tied to LIBOR. This line of credit was paid off in March 2007. 8




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##### Table of Contents



4.
    
    Earnings Per Share:The following table presents the basic and diluted earnings per share computations:
 Three Months Ended March 31,(Dollars in thousands, except per share amounts)2007
    
    
    2006Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    
    Avg.
    
    
    Per Share
    
    
    Net
    
    
    Avg.
    
    
    Per ShareIncome
    
    
    Shares(1)
    
    
    Amount
    
    
    Income
    
    
    Shares(1)
    
    
    AmountBasic computations
    
    $
    2,093
    
    
    
    8,161,310
    
    
    $
    0.26
    
    
    $
    2,562
    
    
    
    7,967,562
    
    
    $
    0.32Effect of dilutive
securities:Common stock
options and stock
grants
    
    
    
    
    
    
    453,997
    
    
    
    (0.02
    )
    
    
    
    
    
    
    487,551
    
    
    
    (0.02
    )Diluted computations
    
    $
    2,093
    
    
    
    8,615,307
    
    
    $
    0.24
    
    
    $
    2,562
    
    
    
    8,455,113
    
    
    $
    0.30
 
 (1)
    
    Weighted average shares outstanding have been adjusted for the
10% common stock dividend declared April 25, 2007, payable May 31, 2007 to shareholders of
record on May 15, 2007. 5.
    
    Operating Expenses:The following table details Intermountains components of total operating expenses:
 Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands)Salaries and employee benefits
    
    $
    6,120
    
    
    $
    4,617Occupancy expense
    
    
    1,392
    
    
    
    1,115Advertising
    
    
    219
    
    
    
    157Fees and service charges
    
    
    278
    
    
    
    219Printing, postage and supplies
    
    
    346
    
    
    
    352Legal and accounting
    
    
    273
    
    
    
    290Other expense
    
    
    1,049
    
    
    
    954Total operating expenses
    
    $
    9,677
    
    
    $
    7,704
 6.
    
    Equity Compensation Plans:Effective January 1, 2006, the Company adopted FASB Statement No. 123 (R), Share-Based
Payment. Statement 123 (R) requires that compensation cost relating to share-based payment
transactions be recognized in financial statements. The cost is measured based on the fair
value of the equity or liability instruments issued. Statement 123 (R) covers a wide range
of share-based compensation arrangements including share options, restricted share plans,
performance-based awards, share appreciation rights, and employee share purchase plans.
 9




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The Company adopted Statement 123 (R) using the modified prospective transition method.
Under this method, the Company is required to record compensation expense for all awards
granted after the date of adoption and for the unvested portion of previously granted awards
that remain outstanding as of the beginning of the period of adoption. The Company measured
share-based compensation cost using the Black-Scholes option pricing model for stock option
grants prior to January 1, 2006 and anticipates using this pricing mode for future grants.
Forfeitures did not affect the calculated expense based upon historical activities of option
grantees.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 March 31, 2007, there were
222,578 shares available for grant. The Company did not grant options to purchase
Intermountain common stock during either the three months ended March 31, 2007 or 2006.For the periods ended March 31, 2007 and 2006, stock option expense totaled $32,000 and
$29,000, respectively. The Company has approximately $232,000 remaining to expense related
to the non-vested stock options outstanding at March 31, 2007. This expense will be recorded
over a weighted average period of 16.0 months. The expense for the stock option expense was
based on the fair value of options granted calculated using the Black-Scholes valuation
model per FAS 123R. 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
   Three months ended March 31, 2007(dollars in thousands, except per share amounts)Weighted
    
    WeightedNumber
    
    Average
    
    Averageof
    
    Exercise
    
    RemainingShares
    
    Price
    
    life(Years)Beginning Options Outstanding
    
    
    523,570
    
    
    $
    5.89Options Granted
    
    
    
    
    
    
    Exercises
    
    
    27,136
    
    
    
    5.58Ending options outstanding
    
    
    496,434
    
    
    
    5.90
    
    
    
    3.8Exercisable at March 31
    
    
    441,265
    
    
    $
    5.42
    
    
    
    3.5
  10




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Weighted-AverageGrant-DateNonvested Shares
    
    Shares
    
    
    Fair ValueNonvested at January 1, 2007
    
    
    40,992
    
    
    $
    18.95Granted
    
    
    28,497
    
    
    
    23.99Vested
    
    
    (4,488
    )
    
    
    19.46Forfeited
    
    
    (1,190
    )
    
    
    19.93Nonvested at March 31, 2007
    
    
    63,811
    
    
    $
    21.15
  7.
    
    Subsequent Events:At the annual shareholder meeting held on April 25, 2007, Intermountain announced a 10%
stock dividend effective May 31, 2007 to shareholders of record as of May 15, 2007.
Earnings per share have been adjusted for the 10% stock dividend.8.
    
    New Accounting Policies:
    11




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12




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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, 2006.
 General
        13




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Critical Accounting Policies
  Income Recognition .
 Allowance For Loan Losses.
    Investments .
  14




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Goodwill and Other Intangible Assets .
  Real Estate Owned.
  Intermountain Community Bancorp
Comparison of the Three Month Periods Ended March 31, 2007 and 2006
 Results of Operations
 Overview
    15




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Net Interest Income
  Provision for Losses on Loans.
   Three Months Ended March 31,2007
    
    
    2006(Dollars in thousands)Balance at January 1
    
    $
    9,837
    
    
    $
    8,100Provision (recovery) for losses on loans
    
    
    834
    
    
    
    (96
    )Amounts written off, net of recoveries
    
    
    (101
    )
    
    
    (26
    )Transfers
    
    
    (2
    )
    
    
    5Allowance  loans, March 31
    
    $
    10,568
    
    
    $
    7,983Allowance  unfunded commitments, January 1
    
    
    482
    
    
    
    417Transfers
    
    
    2
    
    
    
    (5
    )Allowance  unfunded commitments, March 31
    
    
    484
    
    
    
    412Total credit allowance
    
    $
    11,052
    
    
    $
    8,395
   16




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##### Table of Contents



Other Income.
 Operating Expenses
    Income Tax Provision
 Financial Position
 Assets
 Investments.
 Loans Receivable
 17




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March 31, 2007
    
    
    December 31, 2006Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Commercial (includes commercial real estate)
    
    $
    553,629
    
    
    
    79.48
    
    
    $
    527,345
    
    
    
    78.03Residential real estate
    
    
    107,840
    
    
    
    15.48
    
    
    
    112,569
    
    
    
    16.66Consumer
    
    
    31,157
    
    
    
    4.47
    
    
    
    31,800
    
    
    
    4.71Municipal
    
    
    3,930
    
    
    
    0.57
    
    
    
    4,082
    
    
    
    0.60Total loans receivable
    
    
    696,556
    
    
    
    100.00
    
    
    
    675,796
    
    
    
    100.00Net deferred origination fees
    
    
    (920
    )
    
    
    
    
    
    
    (1,074
    )Allowance for losses on loans
    
    
    (10,568
    )
    
    
    
    
    
    
    (10,319
    )Loans receivable, net
    
    $
    685,068
    
    
    
    
    
    
    $
    664,403Weighted average yield at end of period
    
    
    8.65
    %
    
    
    
    
    
    
    8.65
    %
  Three Months EndedMarch 31,2007
    
    
    2006
    
    
    % Change(Dollars in thousands)Commercial
    
    $
    136,956
    
    
    $
    103,420
    
    
    
    32.4Residential real estate
    
    
    21,310
    
    
    
    22,084
    
    
    
    (3.5
    )Consumer
    
    
    5,453
    
    
    
    5,653
    
    
    
    (3.5
    )Municipal
    
    
    200
    
    
    
    79
    
    
    
    153.2Total loans originated
    
    $
    163,919
    
    
    $
    131,236
    
    
    
    24.9
 BOLI and All Other Assets
 Deposits
 18




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##### Table of Contents



March 31, 2007
    
    
    December 31, 2006Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Demand
    
    $
    141,558
    
    
    
    19.8
    
    
    $
    141,601
    
    
    
    20.4NOW and money market 0.0% to 5.8%
    
    
    322,223
    
    
    
    45.0
    
    
    
    291,412
    
    
    
    42.0Savings and IRA 0.0% to 3.8%
    
    
    86,197
    
    
    
    12.1
    
    
    
    81,955
    
    
    
    11.8Certificate of deposit accounts
    
    
    165,309
    
    
    
    23.1
    
    
    
    178,718
    
    
    
    25.8Total deposits
    
    $
    715,287
    
    
    
    100.0
    
    
    $
    693,686
    
    
    
    100.0Weighted average interest rate
on certificates of deposit
    
    
    
    
    
    
    4.63
    %
    
    
    
    
    
    
    4.47
    %
 Borrowings
 Interest Rate Risk
      19




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##### Table of Contents



Net Interest Income
 Liquidity and Sources of Funds
     20




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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
    
    $
    93,738
    
    
    
    11.68
    %
    
    $
    64,219
    
    
    
    8
    %
    
    $
    80,273
    
    
    
    10
    %Panhandle State Bank
    
    
    92,832
    
    
    
    11.56
    %
    
    
    64,219
    
    
    
    8
    %
    
    
    80,273
    
    
    
    10
    %Tier I capital (to risk-weighted
assets):The Company
    
    
    83,697
    
    
    
    10.43
    %
    
    
    32,109
    
    
    
    4
    %
    
    
    48,164
    
    
    
    6
    %Panhandle State Bank
    
    
    82,791
    
    
    
    10.31
    %
    
    
    32,109
    
    
    
    4
    %
    
    
    48,164
    
    
    
    6
    %Tier I capital (to average assets)
The Company
    
    
    83,697
    
    
    
    9.16
    %
    
    
    36,531
    
    
    
    4
    %
    
    
    45,663
    
    
    
    5
    %Panhandle State Bank
    
    
    82,791
    
    
    
    9.21
    %
    
    
    35,972
    
    
    
    4
    %
    
    
    44,965
    
    
    
    5
    %
 Off Balance Sheet Arrangements and Contractual Obligations
  21




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##### Table of Contents



Payments Due by PeriodLess than
    
    
    1 to 3
    
    
    3 to 5
    
    
    More thanTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(Dollars in thousands)Long-term debt (1)
    
    $
    93,465
    
    
    $
    3,261
    
    
    $
    10,605
    
    
    $
    34,962
    
    
    $
    44,637Short-term debt (1)
    
    
    69,792
    
    
    
    69,792
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations (2)
    
    
    14,378
    
    
    
    1,095
    
    
    
    1,661
    
    
    
    1,251
    
    
    
    10,371Purchase obligations (3)
    
    
    8,124
    
    
    
    8,124
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities
reflected on the registrants
balance sheet under GAAP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    185,759
    
    
    $
    82,272
    
    
    $
    12,266
    
    
    $
    36,213
    
    
    $
    55,008
 
 (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 constructing a 94,000 square foot Sandpoint Financial and Technical
Center and a 16,000 square foot facility in Spokane Valley, Washington. New Accounting Policies
    22




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##### Table of Contents



Forward-Looking Statements
   23




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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
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
  
 Item 4  Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control over Financial Reporting
 24




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##### Table of Contents



PART II  Other Information
 
 Item 1  Legal Proceedings
  
 Item 1A Risk Factors
  
 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
  
 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.
 25




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##### Table of Contents



Signatures
  INTERMOUNTAIN COMMUNITY BANCORP(Registrant)May 9, 2007

Date
    
    
    
    By:
    
    /s/ Curt Hecker

Curt HeckerPresident
and Chief Executive OfficerMay 9, 2007

Date
    
    
    
    By:
    
    /s/ Doug Wright

Doug WrightExecutive Vice President
and Chief Financial Officer
 26