Intermountain Community Bancorp Reports First Quarter Earnings

SANDPOINT, Idaho, April 23, 2013 (GLOBE NEWSWIRE) -- Intermountain Community Bancorp (Nasdaq:IMCB), the holding company for Panhandle State Bank, reported $1.1 million, or $0.16 per diluted share, in net income applicable to common shareholders for the first quarter 2013, as compared to net income of $910,000, or $0.14 per share, and $335,000, or $0.08 per share, in the fourth and first quarters of 2012, respectively. Lower operating expenses and loan loss provisions drove the improvements over both prior quarters and offset lower net interest income.

"These results show steady improvement in lowering credit costs and operating expenses amidst a very challenging interest rate environment," said Chief Executive Officer Curt Hecker. "Our local markets continue to improve, and we anticipate that seasonal activity will pick up over the next couple quarters," he added.

First Quarter 2013 Highlights (at or for the period ended March 31, 2013, compared to December 31, 2012, and March 31, 2012)

• Loan loss provision dropped to $179,000 during the first quarter, down from $619,000 and $959,000 in the fourth and first quarters of 2012, respectively, as the credit portfolio continued to improve.
• Operating expenses were down $493,000 from the sequential quarter and $120,000 from the first quarter last year as the Company's expense reduction initiatives continued to pay off.
• Interest expense continued to decline, totaling $985,000 for the first quarter, compared to $1.0 million in the fourth quarter of 2012 and $1.5 million in the first quarter of 2012. The Company's cost of interest bearing liabilities totaled 0.49% for the quarter, compared to 0.49% in the fourth quarter and 0.72% in the first quarter of 2012.
• Nonperforming assets (NPAs) dropped to 1.05% of total assets at March 31, 2013 from 1.18% at December 31, 2012 and 1.56% at March 31, 2012, as the Company continued to reduce problem assets.
• Loan delinquencies (30 days past due and over) continue to remain very low, at 0.14% of total loans compared to 0.13% in the fourth quarter and 0.19% in the first quarter of 2012.
• The Company received GoBankingRates.com's first National Financial Institution award for its community involvement, customer service and client benefits.

Assets and Loan Portfolio Summary

Assets totaled $933.9 million at March 31, 2013, down from $972.1 million and $949.1 million at December 31, 2012 and March 31, 2012, respectively. The reduction from year-end 2012 reflects lower seasonal loan balances and the use of cash to pay down non-core liabilities, including brokered Certificates of Deposit ("CDs") and non-local secured savings accounts. The decrease from March 31, 2012 also largely reflects the use of cash to pay down non-core liabilities, including brokered CDs and Federal Home Loan Bank advances.

Net loans receivable decreased by $22.0 million during the quarter, largely as a result of seasonal factors, including pay downs on the Company's agricultural and commercial credit lines, and the payoff of one larger municipal credit. Investments available for sale increased by $2.6 million during the quarter, as the Company continued to reinvest cash into fixed income investments.

The following tables summarize the Company's loan portfolio by type and geographic region, and provide trending information over the prior year.

Asset Quality

Nonperforming loans totaled $5.1 million at March 31, 2013, down from $6.5 million at December 31, 2012 and $8.0 million at the end of the same period last year. The allowance for loan loss coverage of non-performing loans increased to 149.5% in the first quarter, up from 121.7% at December 31, 2012 and 142.2% at March 31, 2012, respectively.

Total nonperforming assets (NPAs) were $9.8 million at quarter end, compared to $11.5 million at December 31, 2012, and $14.9 million at March 31, 2012. Troubled debt restructured loans totaled $7.8 million, up from $6.7 million at December 31, 2012 and $6.5 million at March 31, 2012.

Classified loans totaled $25.3 million at quarter end, up slightly from $24.9 million at year end and down significantly from $49.5 million at March 31, 2012. Classified loans are loans in which the Company anticipates potential problems in obtaining repayment of principal and interest per the contractual terms, but does not necessarily believe that losses will occur.

The following table summarizes nonperforming assets by type and provides trending information over the prior year.

The Company's delinquent, non-performing and classified loan totals continue to trend down from prior periods in most segments. Although land and land development loans still comprise the greatest proportion of NPA totals, the remaining exposure is substantially reduced. One large relationship continues to comprise the majority of the remaining balance in this category. Commercial real estate NPAs increased modestly in the first quarter, as one larger loan was placed in non-accrual status but is expected to be resolved in the next quarter. The majority of NPAs are in the North Idaho/Eastern Washington region, reflecting the Company's higher loan totals in these areas.

OREO balances totaled $4.7 million at March 31, 2013, compared to $5.0 million at December 31, 2012 and $6.9 million at March 31, 2012. The Company sold 3 properties totaling $656,000 in the first quarter, had net valuation adjustments of $26,000 and added 2 properties totaling $394,000. A total of 5 properties remained in the OREO portfolio at quarter end, consisting of $4.6 million in land and land development and $16,000 in commercial real estate. 

Investment Portfolio, Deposit, Borrowings and Equity Summary

Investments available for sale increased by $2.6 million during the quarter, as new investment purchases were largely offset by rapid prepayments of the Company's mortgage-backed securities. The $18.5 million increase from March 31, 2012 reflects the investment of funds raised in the Company's 2012 capital offerings.  

Deposits totaled $719.5 million at March 31, 2013, compared to $748.9 million at December 31, 2012 and $722.0 million at the end of the first quarter last year. The decrease from the fourth quarter reflects additional reductions in higher-cost brokered and retail CDs, the release of savings balances from the termination of a contract to maintain savings balances securing credit cards held by another company, and tax and operating payments made by clients. The table below provides information on both current composition and trends in the deposit portfolio. 

Non-interest bearing demand deposits now comprise 32.8% of the deposit portfolio, as compared to 26.2% a year ago. Overall, low-cost transaction deposits represent 77.9% of the deposit portfolio, up from 70.3% at March 31, 2012. The Company has no remaining brokered CDs outstanding.

Stockholders' equity totaled $115.9 million at March 31, 2013, compared to $114.4 million at December 31, 2012 and $102.9 million at March 31, 2012. The increase from the sequential quarter reflects earnings and improvements in the unrealized gain on the Company's securities portfolio. The increase over last year is a result of the Company's successful rights offering, earnings improvement, and larger unrealized gains on the securities portfolio. Tangible book value per common share totaled $13.85 at March 31, 2013, compared to $13.64 at December 31, 2012 and $23.10 at March 31, 2012. The March 31, 2012 numbers have been adjusted for a 1-for-10 reverse stock split implemented by the Company in the fourth quarter of 2012. 

Tangible stockholders' equity to tangible assets was 12.4%, compared to 11.8% at December 31, 2012 and 10.9% at the end of March last year. Tangible common equity to tangible assets was 9.6%, compared to 9.0% at December 31, 2012 and 5.0% at March 31, 2012.

Income Statement Summary

Net income applicable to common shareholders for the first quarter totaled $1.1 million, or $0.16 per common diluted share, compared to a net income applicable to common shareholders of $910,000, or $0.14 per common diluted share in the fourth quarter of 2012, and $335,000, or $0.08 per common diluted share in the first quarter of 2012. Per share results for March 31, 2012 have been adjusted for the impact of the 1-for-10 reverse stock split, which became effective in October, 2012. 

First quarter 2013 net interest income before provision totaled $7.3 million, down from $7.6 million in both the fourth and first quarters of 2012. The decrease from both quarters reflects continued pressure on the Company's loan and investment yields, as market rates, particularly for fixed income securities, continued to trend down, and prepayments in the investment portfolio remained very high. Net interest margin declined to 3.44% from 3.53% and 3.56% in the fourth and first quarters of 2012, respectively, as decreases in the earning asset yield more than offset reductions in the cost of interest-bearing liabilities. "Mortgage application activity appeared to slow down in the first quarter, but prepayments on the Company's mortgage-backed securities remained at very high levels," said Chief Financial Officer Doug Wright.

Intermountain recorded a $179,000 provision for loan losses in the first quarter, down from the $619,000 expense recorded in the fourth quarter of 2012, and the $959,000 provision recorded in the comparable period last year. Net chargeoffs totaled $444,000 during the quarter, compared to $1.8 million in the sequential quarter and $2.3 million in the first quarter of 2012. "The lower provision and net chargeoff levels reflect the hard work performed by our team in prior years to aggressively reduce problem assets," Hecker said.

The table below provides information on other income for the current three-month period in comparison to prior periods. 

Other income in the first quarter was $2.6 million, down from $3.1 million in the fourth quarter of 2012 and up from $2.4 million in the same period last year. Lower mortgage origination income and security gains were the primary factors in the change from the fourth quarter, while positive fair value adjustments offset lower security gains in driving the increase over first quarter 2012 results. 

The table below provides information on operating expenses for the current three-month period in comparison to prior periods. 

Operating expenses totaled $8.2 million in the first quarter of 2013, compared to $8.7 million in the sequential quarter and $8.3 million in the first quarter of last year. Decreases in occupancy, advertising, legal, and OREO expenses offset higher operating losses and FDIC assessment expenses from the fourth quarter, 2012. The lower fourth quarter FDIC assessment expense reflected adjustments made to revise prior quarters' estimated expense. The drop in operating expenses from the first quarter of last year primarily reflects reductions in occupancy, printing, and FDIC assessments, which offset higher operating losses. "While some expense categories have now stabilized after significant decreases in the past couple years, we are implementing additional cost reduction plans in other areas, including data processing and occupancy expense," said Wright. "We expect that these new efforts will result in additional cost savings in future periods." 

The Company did not record any income tax provision or benefit during the quarter as it offset taxable income with net operating losses that it has carried forward from prior years.   The Company maintains an $8.1 million tax valuation allowance, resulting in a net deferred tax asset of $12.1 million. 

About Intermountain Community Bancorp:

Intermountain is headquartered in Sandpoint, Idaho, and operates as four separate divisions with nineteen banking locations in three states. Its banking subsidiary, Panhandle State Bank, offers financial services through northern Idaho offices in Sandpoint, Ponderay, Bonners Ferry, Priest River, Coeur d'Alene, Post Falls, Rathdrum and Kellogg. Intermountain Community Bank, a division of Panhandle State Bank, operates branches in southwest Idaho in Weiser, Payette, Nampa, Caldwell and Fruitland, as well as in Ontario, Oregon. Intermountain Community Bank Washington, a division of Panhandle State Bank, operates branches in downtown Spokane and Spokane Valley, Washington. Magic Valley Bank, a division of Panhandle State Bank, operates branches in Twin Falls and Gooding, Idaho. 

All data contained in this report have been prepared on a consolidated basis for Intermountain Community Bancorp. IMCB's shares are quoted on the NASDAQ, ticker symbol IMCB. Additional information on Intermountain Community Bancorp, and its internet banking services, can be found at www.intermountainbank.com.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include but are not limited to statements about the Company's plans, objectives, expectations and intentions and other statements contained in this report that are not historical facts. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control. Actual results may differ materially from the results discussed in these forward-looking statements because of numerous possible risks and uncertainties. These include but are not limited to the following and the other risks described in the "Risk Factors," "Business," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections, as applicable, of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012; the possibility of adverse economic developments that may, among other things, increase default and delinquency risks in the Company's loan portfolio; shifts in interest rates that may result in lower interest rate margins; shifts in the demand for the Company's loan and other products; declines in the housing and real estate market; increases in unemployment or sustained high levels of unemployment; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; and changes in laws, regulations and the competitive environment. Readers are cautioned that forward-looking statements in this release speak only as of the date of this release. The Company does not undertake any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.