Intermountain Community Bancorp Reports Second Quarter Earnings

SANDPOINT, Idaho, July 25, 2013 (GLOBE NEWSWIRE) -- Intermountain Community Bancorp (Nasdaq:IMCB), the holding company for Panhandle State Bank, reported $1.5 million, or $0.23 per diluted share, in net income applicable to common shareholders for the second quarter 2013, as compared to net income of $1.1 million, or $0.16 per share, and $301,000, or $0.05 per share, in the first quarter of 2013 and the second quarter of 2012, respectively. Higher net interest income and other income produced the improvement over first quarter 2013, and lower loan loss provisions drove the improvement over the second quarter last year.

For the six-month period ending June 30, 2013, net income applicable to common shareholders, was $2.5 million, or $0.39 per diluted share, compared to $636,000, or $0.12 per diluted share for the same time period in 2012 as a result of lower loan loss provisions and higher non-interest income, which offset lower net interest income.

"We continue to see steady improvement in earnings despite continuing tight interest rate spreads," said Chief Executive Officer Curt Hecker. "This is a reflection of the growing strength of our local economies and the loyalty of our targeted business base. We are encouraged by the pickup in economic activity and the recent moderate increase in longer term rates," he added.

Second Quarter 2013 Highlights (at or for the period ended June 30, 2013, compared to March 31, 2013, and June 30, 2012)

• Net loans grew almost $24 million, or 4.8% during the second quarter of 2013.
• Interest expense continued to decline, totaling $951,000 for the second quarter of 2013, compared to $985,000 for the first quarter of 2013 and $1.3 million in the second quarter of 2012. At $8.5 million, interest income also improved from the first quarter total of $8.3 million, although it was lower than the $9.1 million recorded in the quarter ending June 30, 2012.
• Other income increased to $2.9 million from $2.6 million in the first quarter of 2013 and $2.8 million in the second quarter of last year, as both investment services and mortgage origination income improved during the quarter.
• Loan loss provision totaled $247,000 during the second quarter, up modestly from $179,000 in the first quarter of 2013, but down significantly from the $1.6 million reported in the second quarter of 2012.
• Nonperforming assets (NPAs) dropped to 1.00% of total assets at June 30, 2013 from 1.05% at March 31, 2013 and 1.24% at June 30, 2012, as the Company continued to reduce problem assets. The Company's "Texas Ratio" (Non-performing assets divided by tangible equity plus the allowance for loan loss) now stands at 7.7%.
• Loan delinquencies (30 days past due and over) continue to remain very low, at 0.22% of total loans compared to 0.14% in the first quarter of 2013 and 0.25% in the second quarter of 2012.
• The Company was recognized as the "2013 Best Place to Work" and "2013 Friendliest Bank" in Bonner County, the Company's headquarters location, by the Bonner County Daily Bee.
• The Company opened its new downtown Spokane office at the corner of Riverside and Howard Streets.

Assets and Loan Portfolio Summary

Assets totaled $930.6 million at June 30, 2013, compared to $933.9 million at March 31, 2013 and $953.6 million at June 30, 2012, respectively. The reduction from prior periods reflects the sale of securities and the use of cash to pay down non-core liabilities, including brokered Certificates of Deposit ("CDs") and Federal Home Loan Bank advances. Net loans receivable increased by $24.0 million during the quarter, as seasonal agricultural and commercial borrowing picked up, and commercial real estate activity increased.

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 $4.8 million at June 30, 2013, down from $5.1 million at March 31, 2013 and $6.6 million at the end of the same period last year. The allowance for loan loss coverage of non-performing loans increased to 167.6% in the second quarter, up from 149.5% at March 31, 2013 and 155.2% at June 30, 2012, respectively.

Total nonperforming assets (NPAs) were $9.3 million at quarter end, compared to $9.8 million at March 31, 2013, and $11.9 million at June 30, 2012. Outstanding troubled debt restructured loans totaled $11.8 million, up from $7.8 million at March 31, 2013 and $5.2 million at June 30, 2012.

Classified loans totaled $26.3 million at quarter end, up slightly from $25.3 million at March 31, 2013 and down significantly from $35.8 million at June 30, 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 Company anticipates the resolution of several larger classified loans in the latter half of this year.

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. Land and land development loans still comprise the greatest proportion of NPA totals, primarily as a result of one large relationship. Commercial, commercial real estate and land development NPAs all showed moderate decreases from the prior quarter, reflecting paydowns from sales activity. 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 $4.5 million at June 30, 2013, compared to $4.7 million at March 31, 2013 and $5.3 million at June 30, 2012. The Company sold 2 properties totaling $162,000 in the second quarter and had net valuation adjustments of $9,000. A total of 3 properties remained in the OREO portfolio at quarter end, all of which are in land and land development. 

Investment Portfolio, Deposit, Borrowings and Equity Summary

Investments available for sale decreased by $26.2 million during the quarter, as the Company sold some longer-term securities to reduce interest rate risk and moved several municipal bonds, totaling $8.2 million, into the held-to-maturity portfolio. Higher market rates also reduced the value of the Company's investment portfolio, and the Company continued to experience rapid prepayments on its mortgage-backed securities, although these speeds are expected to slow down with the recent rise in mortgage rates. "It continues to be a tough fixed income investment climate, as low overall market rates combined with the threat of additional increases in these rates requires a cautious approach," said Chief Financial Officer Doug Wright. "However, higher market rates also offer the opportunity for higher yields in both the Company's investment and loan portfolio," he added.

Deposits totaled $699.5 million at June 30, 2013, compared to $719.5 million at March 31, 2013 and $716.5 million at the end of the second quarter last year. The decrease from the first quarter reflects additional reductions in higher-cost retail CDs and the use of funds for operating and tax purposes by clients. The table below provides information on both current composition and trends in the deposit portfolio.

Non-interest bearing demand deposits comprise 32.0% of the deposit portfolio, as compared to 25.7% a year ago. Overall, low-cost transaction deposits represent 78.2% of the deposit portfolio, up from 70.3% at June, 2012. The Company has no remaining brokered CDs outstanding.

Stockholders' equity totaled $113.0 million at June 30, 2013, compared to $115.9 million at March 31, 2013 and $111.7 million at June 30, 2012. The decrease from the sequential quarter reflects the negative $4.4 million impact of higher market rates on the value of the Company's securities portfolio. The increase over last year is a result of earnings improvement, which more than offset the reduction in the value of the Company's securities portfolio. Tangible book value per common share totaled $13.38 at June 30, 2013, compared to $13.85 at March 31, 2013 and $13.22 at June 30, 2012. The June 30, 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 12.1%, compared to 12.4% at March 31, 2013 and 11.7% at the end of June last year. Tangible common equity to tangible assets was 9.3%, compared to 9.6% at March 31, 2013 and 8.9% at June 30, 2012.

Income Statement Summary

Net income applicable to common shareholders for the second quarter totaled $1.5 million, or $0.23 per common diluted share, compared to a net income applicable to common shareholders of $1.1 million, or $0.16 per common diluted share in the first quarter of 2013, and $301,000, or $0.05 per common diluted share in the second quarter of 2012. For the six-month period ended June 30, 2013, net income applicable to common shareholders totaled $2.5 million, or $0.39 per common diluted share, compared to $636,000, or $0.12 per common diluted share for the same time period in 2012. Per share results for the quarter and six-month period ending June 30, 2012 have been adjusted for the impact of a 1-for-10 reverse stock split, which became effective in October, 2012. 

Second quarter 2013 net interest income before provision totaled $7.5 million, up from $7.3 million in the first quarter of 2013, but down from $7.8 million in the second quarter of 2012. The increase from the first quarter reflects continued lower funding costs and higher loan interest income as loan balances increased. The decrease from the June quarter last year reflects lower loan and investment interest income, as lower yields on these portfolios more than offset lower funding costs. The net interest margin was 3.59% for the second quarter, compared to 3.44% in the first quarter of 2013 and 3.67% in the second quarter of 2012.   The yield on interest earning assets improved over first quarter results while funding costs remained stable. Both the yield on earning assets and funding costs were down from the same period in 2012.

Intermountain recorded a $247,000 provision for loan losses in the second quarter, up modestly from the $179,000 provision recorded in the first quarter, but down from the $1.6 million expense recorded in the second quarter of 2012. The Company experienced net recoveries of $117,000 during the second quarter, compared to net charge-offs of $444,000 and $2.7 million in the periods ending March 31, 2013 and June 30, 2012 respectively. For the six-month period end June 30, 2013, net charge-offs were $327,000 versus $5.0 million for the same period in 2012.

The tables below provide information on other income for the current three- and six-month periods in comparison to prior periods.

Other income in the second quarter of 2013 was $2.9 million, up from $2.6 million and $2.8 million in the first quarter of 2013 and second quarter of 2012, respectively. Higher investment services income and net gains on sales of securities offset lower secured savings contract income for both periods. "We're seeing a strong expansion of client demand for trust and investment services, which is offsetting continued pressure on some of our traditional deposit fees," said Hecker.

The tables below provide information on operating expenses for the current three- and six-month periods in comparison to prior periods.

Operating expenses were stable at $8.2 million in the second quarter of 2013, compared to $8.2 in both prior periods, as increases in salary, legal and professional expenses were offset by decreases in printing, supplies, FDIC assessment and OREO operations expenses. Salary, professional and occupancy expenses included one-time costs related to system upgrades that are expected to result in 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 a $7.5 million tax valuation allowance, resulting in a net deferred tax asset of $15.1 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.