10-Q

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, 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

(Exact name of registrant as specified in its charter)

Idaho	82-0499463
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

231 N. Third Avenue, Sandpoint, Idaho 83864
(Address of principal executive offices) (Zip Code)

(208) 263-0505
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

Class	Outstanding as of May 10, 2005
Common Stock (no par value)	5,763,886

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Intermountain Community Bancorp

FORM 10-Q
For the Quarter Ended March 31, 2005

TABLE OF CONTENTS

 EXHIBIT 3.1

 EXHIBIT 10.1

 EXHIBIT 10.2

 EXHIBIT 31.1

 EXHIBIT 31.2

 EXHIBIT 32

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PART I - Financial Information

Item 1 - Financial Statements

Intermountain Community Bancorp

Consolidated Balance Sheets

(Unaudited)

	March 31,			December 31,
	2005			2004
	(Dollars in thousands)
ASSETS:
Cash and cash equivalents:
Interest bearing	$	18		$	104
Non-interest bearing and vault		20,841			14,098
Restricted		482			1,634
Federal funds sold		775			8,330
Interest bearing certificates of deposit		100			100
Available for sale securities, at fair value		96,346			102,758
Held to maturity securities, at amortized cost		7,307			5,409
Federal Home Loan Bank of Seattle (FHLB) stock, at cost		1,457			1,210
Loans held for sale		4,821			5,686
Loans receivable, net		442,844			418,660
Accrued interest receivable		3,875			3,722
Office properties and equipment, net		14,176			12,941
Bank-owned life insurance		6,868			6,795
Goodwill		11,399			11,399
Other intangible assets		1,190			1,238
Prepaid expenses and other assets, net		4,425			3,596
Total assets	$	616,924		$	597,680
LIABILITIES:
Deposits	$	508,698		$	500,923
Securities sold subject to repurchase agreements		16,587			20,901
Advances from Federal Home Loan Bank of Seattle		12,000			5,000
Cashiers checks issued and payable		5,805			5,478
Accrued interest payable		889			753
Other borrowings		23,927			16,527
Accrued expenses and other liabilities		3,343			3,534
Total liabilities		571,249			553,116
Commitments and contingent liabilities
STOCKHOLDERS’ EQUITY:
Common stock, no par value; 7,084,000 shares authorized; 5,749,360 and 3,784,180 shares issued and outstanding		30,680			30,314
Accumulated other comprehensive income		(1,257	)		(509	)
Retained earnings		16,252			14,759
Total stockholders’ equity		45,675			44,564
Total liabilities and stockholders’ equity	$	616,924		$	597,680

The accompanying notes are an integral part of the consolidated financial statements.

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Intermountain Community Bancorp

Consolidated Statements of Income

(Unaudited)

	Three Months Ended
	March 31,
	2005			2004
	(Dollars in thousands, except per share data)
Interest income:
Loans	$	7,541		$	4,811
Investments		933			742
Total interest income		8,474			5,553
Interest expense:
Deposits		1,613			992
Other borrowings		449			195
Total interest expense		2,062			1,187
Net interest income		6,412			4,366
Provision for losses on loans		(298	)		(136	)
Net interest income after provision for losses on loans		6,114			4,230
Other income:
Fees and service charges		1,724			1,180
Bank owned life insurance		74			64
Loss on sale of securities		(39	)		(21	)
Other		282			150
Total other income		2,041			1,373
Operating expenses		5,806			3,901
Income before income taxes		2,349			1,702
Income tax provision		(854	)		(627	)
Net income	$	1,495		$	1,075
Earnings per share — basic	$	0.26		$	0.23
Earnings per share — diluted	$	0.24		$	0.20
Weighted average shares outstanding — basic		5,703,914			4,771,173
Weighted average shares outstanding — diluted		6,217,487			5,398,919

The accompanying notes are an integral part of the consolidated financial statements.

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Intermountain Community Bancorp

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
	2005			2004
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	1,495		$	1,075
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		415			276
Stock issued as compensation		11			—
Net amortization of premiums on securities		114			122
Stock dividends on FHLB stock		—			(6	)
Provisions for losses on loans		298			136
Amortization of core deposit intangibles		48			18
Loss on sale of securities		39			21
Loss on sale of loans		26			—
Gain on sale of other real estate owned		(60	)		—
Net accretion of loan and deposit discounts and premiums		(50	)		(47	)
Increase in cash surrender value of bank-owned life insurance		(73	)		(64	)
Change in
Loans held for sale		865			(61	)
Accrued interest receivable		(153	)		68
Prepaid expenses and other assets		(580	)		(32	)
Accrued interest payable		136			73
Accrued expenses and other liabilities		137			(880	)
Net cash provided by operating activities		2,668			699
Cash flows from investing activities:
Purchases of available-for-sale securities		(4,557	)		(31,602	)
Proceeds from calls or maturities of available-for-sale securities		6,517			13,468
Principal payments on mortgage-backed securities		3,078			2,601
Purchases of held-to-maturity securities		(1,929	)		(161	)
Proceeds from calls or maturities of held-to-maturity securities		20			199
Origination of loans, net of principal payments		(25,722	)		(4,960	)
Proceeds from sale of loans		1,278			—
Purchase of office properties and equipment		(1,649	)		(400	)
Net change in federal funds sold		7,555			(1,675	)
Purchase of FHLB stock		(247	)		—
Proceeds from sales of other real estate owned		294			—
Net decrease in restricted cash		1,152			13
Investment in affiliate		—			(248	)
Net cash used in investing activities		(14,210	)		(22,765	)

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Intermountain Community Bancorp
Consolidated Statements of Cash Flows (continued)
(Unaudited)

	Three Months Ended
	March 31,
	2005			2004
	(Dollars in thousands)
Cash flows from financing activities:
Net increase in demand, money market and savings deposits	$	5,667		$	5,189
Net increase in certificates of deposit		2,093			13,190
Net change in repurchase agreements		(4,314	)		(4,221	)
Net change in federal funds purchased		7,400			—
Proceeds from exercise of stock options		355			205
Payments for fractional shares		(2	)		—
Repurchase of stock		—			(47	)
Proceeds from debenture issuance		—			8,248
Proceeds from FHLB borrowings		7,000			—
Net cash provided by financing activities		18,199			22,564
Net change in cash and cash equivalents		6,657			498
Cash and cash equivalents, beginning of period		14,202			10,240
Cash and cash equivalents, end of period	$	20,859		$	10,738
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	1,912		$	1,115
Income taxes		213			196

The accompanying notes are an integral part of the consolidated financial statements.

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Intermountain Community Bancorp

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
	2005			2004
	(Dollars in thousands)
Net income	$	1,495		$	1,075
Other comprehensive income (loss):
Change in unrealized gains (losses) on investments, net of reclassification adjustments		(1,232	)		401
Less deferred income tax benefit (provision)		484			(158	)
Net other comprehensive income (loss)		(748	)		243
Comprehensive income	$	747		$	1,318

The accompanying notes are an integral part of the consolidated financial statements.

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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, 2004. In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all 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”) 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 advances from the Federal Home Loan Bank of Seattle totaling $12.0 million at March 31, 2005. The first advance totals $5.0 million, bears a fixed interest rate of 2.71% and matures on June 18, 2008. The second advance totals $7.0 million, bears a fixed interest rate of 3.0% and matures on May 27, 2005.
3.	Other Borrowings:
	The components of other borrowings are as follows (in thousands):

	March 31,		December 31,
	2005		2004
Federal funds purchased	$	7,400	$	—
Term note payable(1)		8,279		8,279
Term note payable(2)		8,248		8,248
Total other borrowings	$	23,927	$	16,527

(1)	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.
(2)	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 March 31, 2005 was 5.46%). The debt is callable by Intermountain in March 2009 and matures in March 2034.
	Intermountain’s obligations under the above debentures issued by its subsidiaries constitute a full and unconditional guarantee by Intermountain of the Statutory Trusts’ obligations under the Trust Preferred Securities. In accordance with Financial Interpretation No. 46 (Revised), “Consolidation of Variable Interest Entities” (“FIN No. 46R”), the trusts are not consolidated and the debentures and related amounts are treated as debt of Intermountain.

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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)
			2005							2004
			Weighted							Weighted
	Net Income		Avg. Shares(1)		Per Share Amount			Net Income		Avg. Shares(1)		Per Share Amount
Basic computations	$	1,495		5,703,914	$	0.26		$	1,075		4,771,173	$	0.23
Effect of dilutive securities:
Common stock options				513,573		(0.02	)				627,746		(0.03	)
Diluted computations	$	1,495		6,217,487	$	0.24		$	1,075		5,398,919	$	0.20
Antidilutive options not included in diluted earnings per share				—							16,667

(1) Weighted average shares outstanding have been adjusted for the 3-for-2 stock split effective March 10, 2005.

5.	Operating Expenses:
	The following table details Intermountain’s components of total operating expenses:

	Three Months Ended
	March 31,
	2005		2004
	(Dollars in thousands)
Salaries and employee benefits	$	3,182	$	2,129
Occupancy expense		942		623
Advertising		131		95
Fees and service charges		303		283
Printing, postage and supplies		292		179
Legal and accounting		292		150
Other expense		664		442
Total operating expenses	$	5,806	$	3,901

6.

Stock Options:

As allowed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), Intermountain has elected to retain the compensation measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and its related interpretations, for stock options. Under APB No. 25, compensation cost is recognized at the measurement date of the amount, if any, that the quoted market price of Intermountain’s common stock exceeds the option exercise price. The measurement date is the date at which both the number of options and the exercise price for each option are known.

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Had compensation cost for Intermountain’s plans been determined based on the fair value at the grant dates for awards under the plans, Intermountain’s reported net income and earnings per share would have been changed to the pro forma amounts indicated below:

	Three Months Ended
	March 31,
	2005			2004
	(Dollars in thousands, except per share amounts)
Reported net income	$	1,495		$	1,075
Add back: Stock-based employee compensation expense, net of related tax effects		7			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(35	)		(40	)
Pro forma	$	1,467		$	1,035
Basic earnings per share:
Reported earnings per share (1)	$	0.26		$	0.23
Stock-based employee compensation, fair value		(0.00	)		(0.01	)
Pro forma earnings per share	$	0.26		$	0.22
Diluted earnings per share:
Reported earnings per share (1)	$	0.24		$	0.20
Stock-based employee compensation, fair value		(0.00	)		(0.01	)
Pro forma earnings per share	$	0.24		$	0.19

(1) Earnings per share amounts have been have been adjusted for the 3-for-2 stock split effective March 10, 2005.

7.	Stock Split:
	On February 24, 2005, the Board of Directors approved a 3-for-2 stock split which was effective March 10, 2005. The Company issued 1,914,809 shares of common stock related to the stock split. All shares outstanding and earnings per share amounts have been adjusted to reflect the stock split.
8.	Subsequent Events:
	Intermountain has announced that effective July 15, 2005, the Jerome, Idaho branch will be closed. All deposits, loans and employees will be transferred to the Twin Falls Branch of Magic Valley Bank, which is located approximately 12 miles from the Jerome branch.
	At the Annual Meeting held on April 30 2005, shareholders approved a proposal which increased the number of authorized common shares from 7,084,000 to 24,000,000.
9.	New Accounting Policies:
	SFAS No. 123 (revised 2004) (“SFAS 123R”), “Share-Based Payment”. In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004). SFAS 123R replaces SFAS No. 123 “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”. SFAS 123R will require that the compensation cost relating to share-based payment transactions be recognized in the Company’s financial statements, eliminating pro forma disclosure as an alternative. That cost will be measured based on the grant-date fair value of the equity or liability instruments issued. SFAS 123R is effective for Intermountain as of January 1, 2006. The Company believes the adoption of SFAS 123R will result in a pre-tax gross compensation expense of $141,000 for the twelve months ending December 31, 2006.

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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, 2004.

General

     Intermountain Community Bancorp (“Intermountain”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Panhandle State Bank (“Panhandle”), a wholly owned subsidiary of Intermountain, was first opened in 1981 to serve the local banking needs of Bonner County, Idaho. Since then, Panhandle has continued to grow by opening additional branch offices throughout Idaho and Oregon.

     Intermountain conducts its primary business through its bank subsidiary, Panhandle State Bank. Panhandle maintains its main office in Sandpoint, Idaho and has 14 other branches. In addition to the main office, six branch offices operate under the name of Panhandle State Bank, five of the branches operate under the name of Intermountain Community Bank, a division of Panhandle State Bank and three operate under the name of Magic Valley Bank, a division of Panhandle State Bank. Effective November 2, 2004, Panhandle acquired Snake River Bancorp, Inc. (“Snake River”), which included three branches operating under the name of Magic Valley Bank, a division of Panhandle State Bank. Intermountain focuses its banking and other services on individuals, professionals, and small to medium-sized businesses throughout its market area. In March 2005, Intermountain announced that it plans to open a branch in Spokane Valley, Washington. This expansion into Washington State will allow the company to better serve its existing customer base and expand its business banking focus into the Eastern Washington market.

     At March 31, 2005, Intermountain had total consolidated assets of $616.9 million. Panhandle is regulated by the Idaho Department of Finance, the Oregon Division of Finance and Corporate Securities, and by the Federal Deposit Insurance Corporation (“FDIC”), its primary federal regulator and the insurer of its deposits. Intermountain competes with a number of international banking groups, out-of-state banking companies, state-wide banking organizations, several local community banks, savings banks, savings and loans, and credit unions throughout its market area. Based on asset size at March 31, 2005, Intermountain is the largest independent commercial bank headquartered in the state of Idaho.

     Intermountain offers a variety of services to its communities including lending activities, deposit services, investment and other services. Intermountain offers a variety of loans to meet the credit needs of the communities it serves. Types of loans offered include consumer loans, real estate loans, business loans, and agricultural loans. A full range of deposit services are available including checking accounts, savings accounts, money market accounts and various types of certificates of deposit. Investment services are provided through third-party vendors, including annuities, securities, mutual funds and brokerage services.

     Intermountain operates a multi-branch banking system and is executing plans for the formation and acquisition of banks and bank branches that can operate under a decentralized community bank structure. Intermountain plans expansion in markets that are contiguous, within 150 miles of its existing branches in Idaho, Oregon, Washington, and Montana. Intermountain is pursuing a balance of asset and earnings growth by focusing on increasing its market share in its present locations, building new branches and merging and/or acquiring community banks. There can be no assurance that Intermountain will be successful in executing plans for the formation, acquisition or merger of community banks.

Critical Accounting Policies

     The accounting and reporting policies of Intermountain conform to GAAP and to general practices within the banking industry. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Intermountain’s management has identified the accounting policies described below as those that, due to the judgments, estimates and assumptions inherent in those policies, are critical to

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an understanding of Intermountain’s Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Income Recognition. Intermountain recognizes interest income by methods that conform to general accounting practices within the banking industry. In the event management believes collection of all or a portion of contractual interest on a loan has become doubtful, which generally occurs after the loan is 90 days past due, Intermountain discontinues the accrual of interest and reverses any previously accrued interest recognized in income deemed uncollectible. Interest received on nonperforming loans is included in income only if recovery of the principal is reasonably assured. A nonperforming loan is restored to accrual status when it is brought current or when brought to 90 days or less delinquent, has performed in accordance with contractual terms for a reasonable period of time, and the collectibility of the total contractual principal and interest is no longer in doubt.

     Allowance For Loan Losses. In general, determining the amount of the allowance for loan losses requires significant judgment and the use of estimates by management. Intermountain maintains an allowance for loan losses to absorb probable losses in the loan portfolio based on a periodic analysis of the portfolio and expected future losses. This analysis is designed to determine an appropriate level and allocation of the allowance for losses among loan types by considering factors affecting loan losses, including: specific losses; levels and trends in impaired and nonperforming loans; historical loan loss experience; current national and local economic conditions; volume, growth and composition of the portfolio; regulatory guidance; and other relevant factors. Management monitors the loan portfolio to evaluate the adequacy of the allowance. The allowance can increase or decrease based upon the results of management’s analysis.

     The amount of the allowance for the various loan types represents management’s estimate of probable incurred losses inherent in the existing loan portfolio based upon historical loss experience for each loan type. The allowance for loan losses related to impaired loans usually is based on the fair value of the collateral for certain collateral dependent loans. This evaluation requires management to make estimates of the value of the collateral and any associated holding and selling costs.

     Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality classifications, value of collateral, repayment ability of borrowers, and historical experience factors. The historical experience factors utilized are based upon past loss experience, trends in losses and delinquencies, the growth of loans in particular markets and industries, and known changes in economic conditions in the particular lending markets. Allowances for homogeneous loans (such as residential mortgage loans, personal loans, etc.) are collectively evaluated based upon historical loss experience, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each particular lending market.

     Management believes the allowance for loan losses was adequate at March 31, 2005. While management uses available information to provide for loan losses, the ultimate collectibility of a substantial portion of the loan portfolio and the need for future additions to the allowance will be based on changes in economic conditions and other relevant factors. A slowdown in economic activity could adversely affect cash flows for both commercial and individual borrowers, which could cause Intermountain to experience increases in nonperforming assets, delinquencies and losses on loans.

     Investments. Assets in the investment portfolios are initially recorded at cost, which includes any premiums and discounts. Intermountain amortizes premiums and discounts as an adjustment to interest income using the interest yield method over the life of the security. The cost of investment securities sold, and any resulting gain or loss, is based on the specific identification method.

     Management determines the appropriate classification of investment securities at the time of purchase. Held-to-maturity securities are those securities that Intermountain has the intent and ability to hold to maturity, and are recorded at amortized cost. Available-for-sale securities are those securities that would be available to be sold in the future in response to liquidity needs, changes in market interest rates, and asset-liability management strategies, among others. Available-for-sale securities are reported at fair value, with unrealized holding gains and losses reported in stockholders’ equity as a separate component of other comprehensive income, net of applicable deferred income taxes.

     Management evaluates investment securities for other than temporary declines in fair value on a periodic basis. If the fair value of investment securities falls below their amortized cost and the decline is deemed to be other than temporary, the securities will be written down to current market value and the write down will be deducted from earnings. There were no investment securities which management identified to be other-than-temporarily impaired for the three months ended March 31, 2005. Charges to income could occur in future periods due to a change in management’s intent to hold the investments to maturity, a change in management’s assessment of credit risk, or a change in regulatory or accounting requirements.

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     Goodwill and Other Intangible Assets. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. Intermountain’s goodwill relates to value inherent in the banking business and the value is dependent upon Intermountain’s ability to provide quality, cost effective services in a competitive market place. As such, goodwill value is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. Goodwill is not amortized, but is subjected to impairment analysis periodically. No impairment was considered necessary during the three months ended March 31, 2005. However, future events could cause management to conclude that Intermountain’s goodwill is impaired, which would result in Intermountain recording an impairment loss. Any resulting impairment loss could have a material adverse impact on Intermountain’s financial condition and results of operations.

     Other intangible assets consisting of core-deposit intangibles with definite lives are amortized over the estimated life of the acquired depositor relationships.

     Real Estate Owned. Property acquired through foreclosure of defaulted mortgage loans is carried at the lower of cost or fair value less estimated costs to sell. Development and improvement costs relating to the property are capitalized to the extent they are deemed to be recoverable.

     An allowance for losses on real estate owned is designed to include amounts for estimated losses as a result of impairment in value of the real property after repossession. Intermountain reviews its real estate owned for impairment in value whenever events or circumstances indicate that the carrying value of the property may not be recoverable. In performing the review, if expected future undiscounted cash flow from the use of the property or the fair value, less selling costs, from the disposition of the property is less than its carrying value, an allowance for loss is recognized. As a result of changes in the real estate markets in which these properties are located, it is reasonably possible that the carrying values could be reduced in the near term.

Intermountain Community Bancorp
Comparison of the Three Month Period Ended March 31, 2005 and 2004

Results of Operations

     Overview. Intermountain recorded net income of $1.5 million, or $0.24 per diluted share, for the three months ended March 31, 2005, compared with net income of $1.1 million, or $0.20 per diluted share, for the three months ended March 31, 2004. The increase in net income for both periods reflected increases in both net interest income and other income, which were partially offset by increases in operating expenses.

     The annualized return on average assets was 1.00% and 1.03% for the three months ended March 31, 2005 and 2004, respectively. The annualized return on average equity was 13.4% and 15.5% for the three months ended March 31, 2005 and 2004, respectively. The decreases in both return on assets and return on average equity were largely related to the acquisition of Snake River at the end of 2004. The Snake River acquisition contributed approximately $87.9 million in assets, $65.5 million in loans receivable and $69.6 million in deposits. This transaction resulted in large immediate increases in assets and equity, without a corresponding immediate increase in earnings. While the transaction has had a positive impact thus far on overall earnings, it has been proportionately smaller than the impacts on assets and equity because of the relatively short period of time since the acquisition closed.

     Net Interest Income. The most significant component of earnings for the Company is net interest income, which is the difference between interest income, primarily from the Company’s loan and investment portfolios, and interest expense, primarily on deposits and other borrowings. During the three months ended March 31, 2005 and 2004, net interest income was $6.4 million and $4.4 million, respectively, an increase of 46.9%. The positive increase resulted primarily from higher loan balances and slight improvement in the net interest spread.

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     Average interest-earning assets for the three months ended March 31, 2005 and 2004 were $558.2 million and $385.0 million, respectively. Average loans increased by $145.6 million, while average investments increased by $27.6 million over the same period in 2004. The increases in the components of average interest-earning assets are primarily due to the Snake River acquisition in late 2004. Average net interest spread during the three months ended March 31, 2005 and 2004 was 4.62% and 4.52%, respectively. Net interest margin increased slightly due to higher yields on earning assets as increasing market rates caused loan yields to increase, particularly on the Company’s variable rate loans. This was partially offset by an increase in the cost of interest bearing liabilities, resulting from increased deposit costs and additional use of non-deposit borrowings.

     Provision for Losses on Loans. Management’s policy is to establish valuation allowances for estimated losses by charging corresponding provisions against income. This evaluation is based upon management’s assessment of various factors including, but not limited to, current and future economic trends, historical loan losses, delinquencies, underlying collateral values, as well as current and potential risks identified in the portfolio.

     Intermountain recorded provisions for losses on loans of $298 thousand and $136 thousand for the three months ended March 31, 2005 and 2004, respectively. The provision reflects the analysis and assessment of the relevant factors mentioned in the preceding paragraph. The increase in the loss provision from the prior period resulted from the need to adequately reserve for the growth in the loan portfolio.

     The following table summarizes loan loss allowance activity for the periods indicated.

	Three Months Ended March 31,
	2005			2004
	(Dollars in thousands)
Balance at January 1	$	6,902		$	5,118
Allowance associated with the sale of loans		(96	)		—
Provision for losses on loans		298			136
Amounts written off net of recoveries		19			28
Balance at March 31	$	7,123		$	5,282

     At March 31, 2005, Intermountain’s total classified assets were $4.0 million, compared with $2.6 million at March 31, 2004. Total nonperforming loans were $734 thousand at March 31, 2005, compared with $135 thousand at March 31, 2004. The increase in classified assets was primarily attributable to the increase in the loan portfolio and the addition of 3 loan relationships, all of which management feels are adequately collateralized and provided for in the allowance for loan loss. The increase in nonperforming loans was primarily attributable to the addition of 1 loan totaling approximately $493,000. At March 31, 2005, Intermountain’s loan delinquency rate (30 days or more) as a percentage of total loans was 0.30%, compared with 1.07% at March 31, 2004. The loan delinquency rate (30 days or more) has decreased due to sales of delinquent real estate loans during 2004 and early 2005. These loans were acquired in January 2003 through the acquisition of assets of Household Bank.

     Other Income. Total other income was $2.0 million and $1.4 million for the three months ended March 31, 2005 and 2004, respectively. Fees and service charge income increased by 46.1% to $1.7 million for the three months ended March 31, 2005 from $1.2 million for the same period last year. Deposit service fees increased, reflecting continued account and customer growth and the addition of the Snake River accounts. Expanded mortgage banking income and contract income from the bank’s secured deposit program also contributed to the increase in other income.

     Operating Expenses. Operating expenses were $5.8 million and $3.9 million for the three months ended March 31, 2005 and 2004, respectively. Expanded staffing, the addition of the three Magic Valley branches and recent upgrades of core data and item processing systems all contributed to the increase in operating expenses over first quarter 2004. The Company also incurred additional legal, accounting and professional fees incurred in 2005 related to its first annual public filing as a registered company with the Securities and Exchange Commission and obtaining approval for the new branch in Washington State.

     Salaries and employee benefits were $3.2 million and $2.1 million for the three months ended March 31, 2005 and 2004, respectively. The employee costs reflected increased branch staffing due to the addition of branches in the fourth quarter of 2004 as noted above, increased mortgage banking staff and additional administrative staff as a result

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of continued new branch growth and expansion. At March 31, 2005, full-time-equivalent employees were 279, compared with 214 at March 31, 2004.

     Occupancy expenses were $942 thousand and $623 thousand for the three months ended March 31, 2005 and 2004, respectively. The increase was primarily due to costs associated the three branches added in November 2004 following the Snake River acquisition and additional square footage associated with administrative staff needed to support bank growth.

     Income Tax Provision. Intermountain recorded federal and state income tax provisions of $854 thousand and $627 thousand for the three months ended March 31, 2005 and 2004, respectively. The increased tax provision in 2005 over 2004 is due to the increase in pre-tax net income. The effective tax rates for both the three month periods were 36.4% and 36.8%, respectively.

Financial Position

     Assets. At March 31, 2005, Intermountain’s assets were $616.9 million, up $19.2 million or 3.2% from $597.7 million at December 31, 2004. Growth in assets primarily reflected an increase in loans receivable, which was offset by a slight decrease in investments. The increase in loans receivable was supported by increases in customer deposits and advances from the Federal Home Loan Bank of Seattle.

     Investments. Intermountain’s investment portfolio at March 31, 2005 was $105.1 million, a decrease of $4.3 million or 3.9% from the December 31, 2004 balance of $109.4 million. The decrease was primarily due to the principal paydown on the mortgage-backed securities portion of the investment portfolio. Funds from these payments were used to help fund the expansion of the loan portfolio. As of March 31, 2005, the balance of the unrealized loss, net of federal income taxes, was $1,257,000, compared to an unrealized loss at year-end 2004 of $509,000. Generally, falling interest rates will increase the amount recorded as unrealized gain, and rising rates will decrease any unrealized gains, as the market value of securities inversely adjusts to the change in interest rates.

     Loans Receivable. At March 31, 2005, net loans receivable were $442.8 million, up $24.1 million or 5.8% from $418.7 million at December 31, 2004. The increase was primarily due to net increases in business and agricultural loans. During the three months ended March 31, 2005, total loan originations were $116.9 million compared with $94.9 million for the prior year’s comparable period, reflecting growing loan demand in the company’s markets.

     The following table sets forth the composition of Intermountain’s loan portfolio at the dates indicated. Loan balances exclude deferred loan origination costs and fees and allowances for loan losses.

	March 31, 2005					December 31, 2004
	Amount			%		Amount			%
				(Dollars in thousands)
Commercial (includes commercial real estate)	$	336,022			74.61	$	304,783			71.58
Residential real estate		86,716			19.26		94,170			22.12
Consumer		26,109			5.80		24,245			5.69
Municipal		1,470			0.33		2,598			0.61
Total loans receivable		450,317			100.00		425,796			100.00
Net deferred origination fees		(350	)				(234	)
Allowance for losses on loans		(7,123	)				(6,902	)
Loans receivable, net	$	442,844				$	418,660
Weighted average yield at end of period		7.07	%				6.81	%

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     The following table sets forth Intermountain’s loan originations for the periods indicated.

	Three Months Ended
	March 31,
	2005		2004		% Change
	(Dollars in thousands)
Commercial (includes commercial real estate)	$	90,830	$	75,993		19.5
Residential real estate		18,982		15,094		25.8
Consumer		7,035		3,774		86.4
Municipal		50		15		233.3
Total loans originated	$	116,897	$	94,876		23.2

     BOLI and All Other Assets. Bank-owned life insurance (“BOLI”) and other assets increased to $15.2 million at March 31, 2005 from $14.1 million at December 31, 2004. The increase was primarily due to an increase in the net deferred tax asset, an increase in prepaid expenses, and an increase in accrued interest receivable.

     Deposits. Total deposits increased $7.8 million or 1.6% to $508.7 million at March 31, 2005 from $500.9 million at December 31, 2004, primarily due to increases in interest bearing demand accounts, savings and certificates of deposit accounts. The deposit market was very competitive during the recently ended quarter, with leveraged competitors offering high interest rates on various deposit products, particularly certificates of deposit. In response, Intermountain is refocusing its sales efforts on expanding deposit sales in its existing markets by targeting market segments with high levels of excess funds.

     The following table sets forth the composition of Intermountain’s deposits at the dates indicated.

	March 31, 2005					December 31, 2004
	Amount		%			Amount		%
			(Dollars in thousands)
Demand	$	106,242		20.9		$	109,627		21.9
NOW and money market 0.0% to 3.0%		174,561		34.3			171,474		34.2
Savings and IRA 0.0% to 6.65%		67,077		13.2			61,112		12.2
Certificate of deposit accounts		160,818		31.6			158,710		31.7
Total deposits	$	508,698		100.0		$	500,923		100.0
Weighted average interest rate on certificates of deposit				3.07	%				2.85	%

     Borrowings. Deposit accounts are Intermountain’s primary source of funds. Intermountain does, however, rely upon advances from the Federal Home Loan Bank of Seattle, repurchase agreements and other borrowings to supplement its funding and to meet deposit withdrawal requirements. These borrowings totaled $52.5 million and $42.4 million at March 31, 2005 and December 31, 2004, respectively. See “Liquidity and Sources of Funds” for additional information.

Interest Rate Risk

     The results of operations for financial institutions may be materially and adversely affected by changes in prevailing economic conditions, including rapid changes in interest rates, declines in real estate market values and the monetary and fiscal policies of the federal government. Like all financial institutions, Intermountain’s net interest income and its NPV (the net present value of financial assets, liabilities and off-balance sheet contracts), are subject to fluctuations in interest rates. Currently, Intermountain’s interest-bearing liabilities, consisting primarily of deposits, mature or reprice more rapidly, or on different terms, than do its interest-earning assets, consisting primarily of loans

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receivable and investments. The fact that liabilities mature or reprice more frequently on average than assets may be beneficial in times of declining interest rates; however, such an asset/liability structure may result in declining net interest income during periods of rising interest rates. The level of non-interest bearing deposits, the nature of Intermountain’s short-term deposits and the use of pricing strategies on the liability side, combined with variable rate loan products tied to an internal cost of funds and the prime lending rate index typically mitigates the negative impact in a rising interest rate environment.

     To minimize the impact of fluctuating interest rates on net interest income, Intermountain promotes a loan pricing policy of utilizing variable interest rate structures that associates loan rates to Intermountain’s internal cost of funds and to the nationally recognized prime lending rate. This approach historically has contributed to a consistent interest rate spread and reduces pressure from borrowers to renegotiate loan terms during periods of falling interest rates. Intermountain currently maintains over fifty percent of its loan portfolio in variable interest rate assets.

     Additionally, the extent to which borrowers prepay loans is affected by prevailing interest rates. When interest rates increase, borrowers are less likely to prepay loans. When interest rates decrease, borrowers are more likely to prepay loans. Prepayments may affect the levels of loans retained in an institution’s portfolio, as well as its net interest income. Intermountain maintains an asset and liability management program intended to manage net interest income through interest rate cycles and to protect its NPV by controlling its exposure to changing interest rates.

     Intermountain uses a simulation model designed to measure the sensitivity of net interest income and NPV to changes in interest rates. This simulation model is designed to enable Intermountain to generate a forecast of net interest income and NPV given various interest rate forecasts and alternative strategies. The model is also designed to measure the anticipated impact that prepayment risk, basis risk, customer maturity preferences, volumes of new business and changes in the relationship between long-term and short-term interest rates have on the performance of Intermountain.

     Intermountain is continuing to pursue strategies to manage the level of its interest rate risk while increasing its net interest income and NPV; 1) through the origination and retention of variable-rate consumer, business banking, construction and commercial real estate loans, which generally have higher yields than residential permanent loans; 2) by the sale of certain long-term fixed-rate loans and investments; and 3) by increasing the level of its core deposits, which are generally a lower-cost, less rate-sensitive funding source than wholesale borrowings. There can be no assurance that Intermountain will be successful implementing any of these strategies or that, if these strategies are implemented, they will have the intended effect of reducing interest rate risk or increasing net interest income.

     Intermountain also uses gap analysis, a traditional analytical tool designed to measure the difference between the amount of interest-earning assets and the amount of interest-bearing liabilities expected to reprice in a given period. Intermountain calculated its one-year cumulative repricing gap position to be 35.7% and a negative 16.5% at March 31, 2005 and December 31, 2004, respectively. Management attempts to maintain Intermountain’s gap position between positive 20% and negative 20%. At March 31, 2005, Intermountain’s gap positions were within limits established by its Board of Directors. Management is pursuing strategies to increase its net interest income without significantly increasing its cumulative gap positions in future periods. There can be no assurance that Intermountain will be successful implementing these strategies or that, if these strategies are implemented, they will have the intended effect of increasing its net interest income. See “Results of Operations – Net Interest Income” and “Capital Resources.”

Liquidity and Sources of Funds

     As a financial institution, Intermountain’s primary sources of funds from assets include the collection of loan principal and interest payments, cash flows from various securities it invests in, and occasional sales of loans, investments or other assets. Financing activities from liabilities consist primarily of customer deposits, advances from FHLB Seattle and other borrowings. Deposits increased to $508.7 million at March 31, 2005 from $500.9 million at December 31, 2004, primarily due to increases in interest bearing demand accounts, non-interest demand accounts and certificates of deposit. The net increase in deposits was used to fund the increase in loan volume. At March 31, 2005 and December 31, 2004, securities sold subject to repurchase agreements were $16.6 million and $20.9 million, respectively. These borrowings are required to be collateralized by investments with a market value exceeding the face value of the borrowings. Under certain circumstances, Intermountain could be required to pledge additional securities or reduce the borrowings.

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     During the three months ended March 31, 2005, cash used in investing activities consisted primarily of the funding of new loan volumes. During the same period, cash provided by financing activities consisted primarily of increases in demand deposits, money market accounts and savings deposits and the issuance of additional FHLB of Seattle advances and federal funds purchased.

     Intermountain’s credit line with FHLB Seattle provides for borrowings up to a percentage of its total assets subject to general collateralization requirements. At March 31, 2005, the Company’s credit line represented a total borrowing capacity of approximately $19.4 million, all of which was being utilized. In March 2005, Intermountain borrowed $7.0 million through an advance from the Federal Home Loan Bank of Seattle. This fixed rate advance matures in May 2005 and was at an interest rate of 3.00% as of March 31, 2005. Intermountain also borrows on an unsecured basis from correspondent banks and other financial entities and has additional borrowing capacity using specific securities as collateral at the FHLB of Seattle. As of March 31, 2005 there were no outstanding amounts.

     Intermountain actively manages its liquidity to maintain an adequate margin over the level necessary to support expected and potential loan fundings and deposit withdrawals. This is balanced with the need to maximize yield on alternative investments. The liquidity ratio may vary from time to time, depending on economic conditions, savings flows and loan funding needs.

Capital Resources

     Intermountain’s total stockholders’ equity was $45.7 million at March 31, 2005 compared with $44.6 million at December 31, 2004. The increase in total stockholders’ equity was primarily due to the increase in net income partially offset by the increase in unrealized losses on securities. Stockholders’ equity was 7.4% of total assets at March 31, 2005 compared with 7.5% at December 31, 2004. The slight decrease in this ratio is due to the increase in total assets at March 31, 2005 as compared to December 31, 2004 which was proportionately larger than the increase in equity due to net income. On February 24, 2005, the Board of Directors approved a 3-for-2 stock split to shareholders, effective March 10, 2005. Intermountain issued 1,914,809 shares of common stock related to the stock split.

     At March 31, 2005, Intermountain had an unrealized loss of $1.3 million, net of related income taxes, on investments classified as available for sale. At December 31, 2004, Intermountain had an unrealized loss of $509 thousand, net of related income taxes, on investments classified as available for sale. Fluctuations in prevailing interest rates continue to cause volatility in this component of accumulated comprehensive loss in stockholders’ equity and may continue to do so in future periods.

     Intermountain issued and has outstanding $16.5 million of Trust Preferred Securities. The indenture governing the Trust Preferred Securities limits the ability of Intermountain under certain circumstances to pay dividends or to make other capital distributions. The Trust Preferred Securities are treated as debt of Intermountain. These Trust Preferred Securities can be called for redemption beginning in March 2008 by the Company at 100% of the aggregate principal plus accrued and unpaid interest. See Note 3 of “Notes to Consolidated Financial Statements.”

     Intermountain and Panhandle are required by applicable regulations to maintain certain minimum capital levels and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier I capital to average assets. Intermountain and Panhandle will endeavor to enhance its capital resources and regulatory capital ratios through the retention of earnings and the management of the level and mix of assets, although there can be no assurance in this regard. At March 31, 2005, Intermountain exceeded all such regulatory capital requirements and was “well-capitalized” pursuant to FFIEC regulations.

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     The following tables set forth the amounts and ratios regarding actual and minimum core Tier 1 risk-based and total risk-based capital requirements, together with the amounts and ratios required in order to meet the definition of a “well-capitalized” institution as reported on the quarterly FFIEC call report at March 31, 2005.

						Capital					Well-Capitalized
	Actual					Requirements					Requirements
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)		56,860		10.97	%		41,469		8.00	%		51,836		10.00	%
Tier 1 capital to (to risk-weighted assets)		49,987		9.64			20,734		4.00			31,102		6.00
Tier 1 capital (to average assets)		49,987		8.45			23,671		4.00			29,589		5.00

Off Balance Sheet Arrangements and Contractual Obligations

     Intermountain, in the conduct of ordinary business operations routinely enters into contracts for services. These contracts may require payment for services to be provided in the future and may also contain penalty clauses for the early termination of the contracts. Intermountain is also party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Management does not believe that these off-balance sheet arrangements have a material current effect on Intermountain’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources but there is no assurance that such arrangements will not have a future effect.

     The following table represents Intermountain’s on-and-off balance sheet aggregate contractual obligations to make future payments as of March 31, 2005.

	Payments Due by Period
			Less than				Over		More than
	Total		1 year		1 to 3 years		3 to 5 years		5 years
	(Dollars in thousands)
Long-term debt(1)	$	21,527	$	—	$	—	$	5,000	$	16,527
Short-term debt (1)		14,400		14,400		—		—		—
Capital lease obligations		—		—		—		—		—
Operating lease obligations		5,792		552		957		850		3,433
Purchase obligations(2)		1,128		1,128		—		—		—
Other long-term liabilities reflected on the registrant’s balance sheet under GAAP		—		—		—		—		—
Total	$	42,847	$	16,080	$	957	$	5,850	$	19,960

(1)	Excludes 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.

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New Accounting Policies

     SFAS No. 123 (revised 2004) (“SFAS 123R”), “Share-Based Payment”. In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004). SFAS 123R replaces SFAS No. 123 “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”. SFAS 123R will require that the compensation cost relating to share-based payment transactions be recognized in the Company’s financial statements, eliminating pro forma disclosure as an alternative. That cost will be measured based on the grant-date fair value of the equity or liability instruments issued. SFAS 123R is effective for Intermountain as of January 1, 2006. The Company believes the adoption of SFAS 123R will result in a pre-tax gross compensation expense of $141,000 for the twelve months ended December 31, 2006.

Forward-Looking Statements

     From time to time, Intermountain and its senior managers have made and will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are contained in this report and may be contained in other documents that Intermountain files with the Securities and Exchange Commission. Such statements may also be made by Intermountain and its senior managers in oral or written presentations to analysts, investors, the media and others. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Also, forward-looking statements can generally be identified by words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “seek,” “expect,” “intend,” “plan” and similar expressions.

     Forward-looking statements provide our expectations or predictions of future conditions, events or results. They are not guarantees of future performance. By their nature, forward-looking statements are subject to risks and uncertainties. These statements speak only as of the date they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made. There are a number of factors, many of which are beyond our control, which could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. These factors, some of which are discussed elsewhere in this report, include:

•   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

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•   Intermountain’s success at managing the risks involved in the foregoing.

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

The information set forth under the caption Item 7A. Quantitative and Qualitative Disclosures about Market Risk included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, is hereby incorporated herein by reference.

Item 4 - Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures: An evaluation of Intermountain’s disclosure controls and procedures (as required by section 13a — 15(b) of the Securities Exchange Act of 1934 (the “Act”)) was carried out under the supervision and with the participation of Intermountain’s management, including the Chief Executive Officer and the Chief Financial Officer. Our Chief Executive Officer and Chief Financial Officer concluded that based on that evaluation, our disclosure controls and procedures as currently in effect are effective, as of the end of the period covered by this report, in ensuring that the information required to be disclosed by us in the reports we file or submit under the Act is (i) accumulated and communicated to Intermountain’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b) Changes in Internal Controls: In the quarter ended March 31, 2005, Intermountain Bank did not make any significant changes in, nor take any corrective actions regarding, its internal controls or other factors that could significantly affect these controls.

PART II — Other Information

Item 1 — Legal Proceedings

     Intermountain and Panhandle are parties to various claims, legal actions and complaints in the ordinary course of business. In Intermountain’s opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the consolidated financial position or results of operations of Intermountain.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3 — Defaults Upon Senior Securities

Not applicable.

Item 4 — Submission of Matters to a Vote of Security Holders

Not Applicable

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Item 5 — Other Information

Not Applicable

Item 6 — Exhibits

Exhibit No.	Exhibit
3.1	Amended and Restated Articles of Incorporation
10.1	Amended and Restated Director Stock Plan
10.2	Form of Director Restricted Stock Purchase Agreement
31.1	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

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	INTERMOUNTAIN COMMUNITY BANCORP
	(Registrant)
May 12, 2005	By:	/s/ Curt Hecker
Date		Curt Hecker
		President
		and Chief Executive Officer
May 12, 2005	By:	/s/ Doug Wright
Date		Doug Wright
		Executive Vice President
		and Chief Financial Officer

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EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

INTERMOUNTAIN COMMUNITY BANCORP

     The following Amended and Restated Articles of Incorporation are executed by the undersigned, an Idaho corporation:

ARTICLE I
Name Of The Corporation

The name of this Corporation is “Intermountain Community Bancorp.”

ARTICLE II
Authorized Shares

     The total number of shares that the Corporation shall have authority to issue is Twenty-Four Million (24,000,000) shares of no par value Common Stock.

ARTICLE III
Duration of Corporate Existence

     The corporate existence of this Corporation is perpetual.

ARTICLE IV
Corporate Purposes

     The Corporation may engage in any and all activities authorized for a bank holding company and its subsidiaries under The Bank Holding Company Act of 1956, as amended (12 USC 1841 et. seq.), and regulations promulgated thereunder by the Federal Reserve Board and other regulatory authorities which have jurisdiction over the activities of bank holding companies and their subsidiaries. Subject to any limitations imposed by the Bank Holding Company Act of 1956, as amended, the Corporation may also engage in any and all activities authorized for an Idaho corporation pursuant to The Act.

ARTICLE V
Board of Directors

     Section 1. NUMBER, CLASSIFICATION, TERM AND ELECTION OF DIRECTORS: The Board of Directors shall consist of not less than five (5) nor more than fifteen (15) members, the exact number to be fixed and determined from time-to-time by resolution of the Board of Directors. Except as otherwise provided herein, all directors shall serve until the next annual meeting of shareholders and until their successors are duly elected and qualified.

     In the event that the number of directors is fixed at nine (9) or more, then the directors shall be classified with respect to the time for which they severally hold office, into three classes: Class I, Class II, and Class III, which shall be as nearly equal in number as possible and shall be adjusted from time to time in the discretion of the Chair of the Board of Directors of the Corporation or the Board of Directors in order to maintain such proportionality.

     In the event that the number of directors is fixed at nine (9) or more directors, then the directors shall be classified into classes by the Chair of the Board of Directors or the Board of Directors of the Corporation. Each director in Class I shall hold office for a term expiring at the annual meeting of shareholders held one year after his or her classification; each director in Class II shall hold office for a term expiring at the annual meeting of the shareholders held two years after his or her classification, and each director in Class III shall hold office for a term

1

expiring at the annual meeting of shareholders held three years after his or her classification. Notwithstanding the foregoing provision of this Article V, each director shall serve until his or her successor shall be duly elected and qualified or until his or her earlier death, resignation, or removal. At each annual meeting of shareholders beginning with the annual meeting following the classification of the Board of Directors, the successors to the class of directors whose terms shall expire at that meeting shall be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election and until their successors shall have been duly elected and qualified or until their earlier death, resignation, or removal. No decrease in the number of directors by amendment to these Articles shall have the effect of shortening the term of any incumbent director.

     Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a shareholders’ meeting at which a quorum is present. Shareholders do not have the right to cumulate their votes when voting for the election of directors.

     Section 2. CERTAIN BOARD ACTIONS: When evaluating any offer of another party for a tender or exchange offer for any equity security of the Corporation, or any proposal to merge or consolidate the Corporation with another corporation, or to purchase or otherwise acquire all of substantially all of the properties and assets of the Corporation, the directors of the Corporation may, in determining what they believe to be in the best interests of the Corporation and its shareholders, give due consideration to the social, Legal, and economic effects on employees, customers, and suppliers of the Corporation and its subsidiaries, and on the communities and geographical areas in which the Corporation and its subsidiaries operate, the economy of the state and the nation, the long-term as well as short-term interests of the Corporation and its shareholders, including the possibility that these interests maybe best served by the continued independence of the Corporation and other relevant facts.

     Section 3. REMOVAL FOR CAUSE: The shareholders of the Corporation may remove one or more directors in the midst of the director’s term only for “cause.” A director may be removed by the shareholders only at a meeting called for the purpose of removing the director and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director. For the purposes of this Article V, “cause” shall be defined as:

     (1) receipt of a financial benefit to which he or she is not entitled;

     (2) an intentional infliction of harm to the Corporation or its shareholders;

     (3) a violation of § 30-1-833, Idaho Code in effect as of the date these Articles are filed or as may be subsequently amended; or

     (4) an intentional violation of criminal law.

     Section 4. VACANCIES: Subject to applicable statutes and regulations regarding director approval by regulatory authorities having jurisdiction over the activities of the Corporation and its subsidiaries, any vacancy occurring in the Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors although less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office for the unexpired portion of the term of the director whose position shall be vacant and until his or her successor shall be elected and qualified.

     Section 5. ARTICLE AMENDMENT OR REPEAL: Notwithstanding any other provisions of the Articles or the Bylaws of the Corporation, the provisions of this Article V may not be amended or repealed, and no provisions inconsistent herewith may be adopted by the Corporation, without the affirmative vote of two-thirds (2/3) of all votes entitled to be cast on the matter.

ARTICLE VI
Exemption From Personal Liability

     Section 1. ELIMINATION OF LIABILITY: No director of the Corporation shall be personally liable to the Corporation or its shareholders, for monetary damages for conduct as a director, provided, however, that this Article VI shall not eliminate or limit the liability of a director for:

     (1) the amount of a financial benefit received by a director to which he or she is not entitled;

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     (2) an intentional infliction of harm on the Corporation or the shareholders;

     (3) a violation of § 30-1-833, Idaho Code in effect as of the date these Articles are filed or as may be subsequently amended; or

     (4) an intentional violation of criminal law.

     Section 2. SUBSEQUENT STATUTORY AMENDMENTS: If Idaho law is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by Idaho law as so amended.

     Section 3. ARTICLE AMENDMENT OR REPEAL: Notwithstanding any other provisions of the Articles or the Bylaws of the Corporation, the provisions of this Article VI may not be amended or repealed, and no provisions inconsistent herewith may be adopted by the Corporation, without the affirmative vote of two-thirds (2/3) of all votes entitled to be cast on the matter. Further, no amendment to or repeal of this Article VI shall apply to or have any effect upon the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions which occurred prior to such amendment or repeal.

ARTICLE VII
No Preemptive Rights

     All shares of stock of this Corporation shall be without preemptive rights.

ARTICLE VIII
Indemnification and Advancement of Expenses

     Section 1. INDEMNIFICATION: To the fullest extent permitted by The Act, the Corporation shall indemnify any director or officer of the Corporation made a party to a proceeding because the person is a director or officer of the Corporation against liability incurred in that proceeding; provided, however, no indemnification pursuant to this Section 1 shall indemnify any director from or an account of:

     (1) receipt of a financial benefit to which he or she is not entitled;

     (2) an intentional infliction of harm on the Corporation or its shareholders;

     (3) a violation of § 30-1-833, Idaho Code in effect as of the date these Articles are filed or as maybe subsequently amended; or

     (4) an intentional violation of criminal law.

     Section 1. ADVANCEMENT OF EXPENSES: The Corporation may, but shall not be required to, pay for or reimburse the reasonable expenses incurred by a director or officer who is a party to a proceeding in advance of the final disposition of the proceeding to the fullest extent permitted by The Act, and in particular § 30-1-853, Idaho Code in effect as of the date these Articles are filed or as may be subsequently amended.

     Section 3. CERTAIN DEFINITIONS: For purposes of this Article VIII, the terms “corporation, director, disinterested director, expenses, liability, official capacity, party and proceeding” shall have the meaning given to them in § 3-1-850, Idaho Code as in effect as of the date these Articles of Incorporation are filed or as maybe subsequently amended.

     Section 4. INSURANCE: The Corporation may purchase and maintain insurance on behalf of any person who is a director or officer of the Corporation or one of its subsidiaries or is serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity against liability asserted against or incurred by that person in such capacity or arising out of his status as such, whether or not the Corporation would have the power

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to indemnify that person against the same liability under the provisions of this Article VIII or under applicable Idaho law.

     Section 5. PURPOSE AND EXCLUSIVITY: The indemnification referred to in the various subsections of this Article VIII shall be deemed to be in addition to and not in lieu of any other rights to which those indemnified may be entitled under any statute, specifically but without limitation § 30-1-850 through 30-1-859, Idaho Code in effect as of the date these Articles are filed, or as may be subsequently amended, rule of law or equity, agreement, vote of the shareholders or Board of Directors or otherwise. The Corporation is authorized to enter into agreements of indemnification. The purpose of this Article VIII is to augment the provisions of applicable Idaho law dealing with indemnification.

     Section 6. SEVERABILITY: If any of the provisions of this Article VIII are found, in any action, suit or proceeding, to be invalid or ineffective, the validity and the effect of the remaining provisions shall not be affected.

     Section 7. ARTICLE AMENDMENT OR REPEAL: Notwithstanding any other provisions of the Articles or the Bylaws of the Corporation, the provisions of this Article VIII may not be amended or repealed, and no provisions inconsistent herewith may be adopted by the Corporation, without the affirmative vote of two-thirds (2/3) of all votes entitled to be cast on the matter.

ARTICLE IX
Merger Vote

     Section 1. REQUIRED SHAREHOLDER VOTE: In order for a Plan of Merger or Share Exchange that would result in a Change in Control (as defined below) of the Corporation to be approved, the holders of two-thirds (2/3) of the Corporation’s shares entitled to vote must vote in favor of the plan.

     “Change in Control” means any transaction in which the Corporation merges into or consolidates with another entity, or merges another entity into the Corporation, and as a result less than 50% of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were the holders of the Corporation’s voting securities immediately before the merger or consolidation.

     Section 2. ARTICLE AMENDMENT OR REPEAL: Notwithstanding any other provisions of the Articles or the Bylaws of the Corporation, the provisions of this Article IX may not be amended or repealed, and no provisions inconsistent herewith may be adopted by the Corporation, without the affirmative vote of two-thirds (2/3) of all of the votes entitled to be cast on the matter.

ARTICLE X
Shareholder Meeting Provisions

     Any action required or permitted to be taken by the shareholders of this Corporation must be effected at a duly called annual or special meeting of such shareholders and may not be effected by any consent in writing by such shareholders. At any annual meeting or special meeting of shareholders of this Corporation, only such business shall be conducted as shall have been brought before such meeting in the manner provided by the Bylaws of this Corporation.

ARTICLE XI
Amendments

     Section 1. AMENDMENTS TO ARTICLES BY SHAREHOLDERS: Except as otherwise provided by The Act or by these Articles, no amendment, addition, alteration, change or repeal of these Articles shall be made, unless such is first proposed by the Board of Directors of the Corporation and thereafter approved by the shareholders by a majority of the total votes eligible to be cast at a legal meeting. Any amendment, addition, alteration, change or repeal so acted upon, shall be effective upon filing in accordance with statutory and regulatory procedures.

     Section 2. AMENDMENTS TO ARTICLES BY BOARD OF DIRECTORS: To the extent permitted by The Act, the Board of Directors may amend the Articles by resolution adopted by a majority of the directors, so

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long as its Articles, as amended, contain only such provisions as might lawfully be contained in original Articles at the time of making such amendment.

These Amended and Restated Articles of Incorporation are executed by the corporation by its duly authorized officer.

Dated: May 6, 2005

INTERMOUNTAIN COMMUNITY BANCORP
By	/s/ Curt Hecker
	Curt Hecker, President and CEO

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EX-10.1

EXHIBIT 10.1

INTERMOUNTAIN COMMUNITY BANCORP

AMENDED AND RESTATED DIRECTOR STOCK PLAN

1.

Purpose of the Plan. The purpose of this Amended and Restated Director Stock Plan (“Plan”) is to provide additional incentives to Directors of Intermountain Community Bancorp, an Idaho corporation (“Bancorp”) and any of its existing or future Subsidiaries, thereby helping to attract and retain the best available personnel for positions as directors of Bancorp and otherwise promoting the success of the business activities of Bancorp. Bancorp intends that Options issued under this Plan will constitute nonqualified stock options.

2.

Definitions. As used in this Plan, the following definitions apply:

a.	“Bancorp” has the meaning set forth in paragraph 1 of this Plan.
b.	“Board” means the Board of Directors of Bancorp.
c.	“Code” means the Internal Revenue Code of 1986, as amended.
d.	“Common Stock” means Bancorp’s common stock, currently with no par value.
e.	“Committee” has the meaning set forth in subparagraph 4.a of this Plan.
f.	“Continuous Status as a Director” means the absence of any interruption or termination of service as a Director.
g.	“Date of Grant” of an Option or a Restricted Stock Award means the date on which the Committee makes the determination granting such Option or Restricted Stock Award, or such later date as the Committee may designate. The Date of Grant shall be specified in the Option agreement or the Restricted Stock Purchase Agreement, as the case may be.
h.	“Director” means any person serving as a member of the Board of Bancorp, or a Subsidiary of Bancorp that is currently in existence or is hereafter organized or is acquired by Bancorp.
i.	“Exercise Price” has the meaning set forth in subparagraph 4.b(2) of this Plan.
j.	“Fair Market Value” shall mean, when referring to the Common Stock, the fair market value of such stock, as determined by the Board in good faith. The determination of the Board shall be conclusive and binding on all persons.
k.	“Grantee” means a Director who receives a Restricted Stock Award.
l.	“Option” means a stock option granted under this Plan, which constitutes a nonqualified stock option.
m.	“Optionee” means a Director who receives an Option.
n.	“Plan” has the meaning set forth in paragraph 1 of this Plan.
o.	“Parent” means any corporation owning at least eighty percent (80%) of the total voting power of the issued and outstanding stock of Bancorp, and eighty percent (80%) of the total value of the issued and outstanding stock of Bancorp.
p.	“Purchase Price” means the amount, determined as provided in paragraph 7.b of this Plan, that a Grantee is required to pay to acquire shares of Common Stock pursuant to a Restricted Stock Award.
q.	“Restricted Stock Award” means an offer by Bancorp to issue to a Director shares of Common Stock that are subject to restrictions, as provided in this Plan.

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r.	“Restricted Stock Purchase Agreement” has the meaning set forth in subparagraph 7.a of this Plan.
s.	“Subsidiary” means any corporation of which not less than fifty percent (50%) of the voting shares are held by Bancorp or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by Bancorp or a Subsidiary.

3.   Stock Subject to Options

a.

Number of Shares Reserved. The sum of all shares of Common Stock that are (i) subject to or issued under Options granted under this Plan and (ii) issued pursuant to Restricted Stock Awards under this Plan shall not exceed 219,615 shares, subject to adjustment as provided in subparagraph 6.j of this Plan, of the Common Stock of Bancorp. During the term of this Plan, Bancorp will at all times reserve and keep available a sufficient number of shares of its Common Stock to satisfy the requirements of this Plan.

b.

Expired Options and Unvested Restricted Stock. If any outstanding Option expires or becomes unexercisable for any reason without having been exercised in full, or shares of Common Stock subject to a Restricted Stock Purchase Agreement are forfeited or repurchased by the Bancorp pursuant to such agreement, then the shares of Common Stock allocable to the unexercised Option or Restricted Stock Award, or that are forfeited or repurchased by Bancorp pursuant to such Restricted Stock Purchase Agreement or Option agreement, will again become available for other Options and/or Restricted Stock Awards hereunder.

4.   Administration of the Plan.

a.   The Committee. The Board will administer this Plan directly, acting as a Committee of the whole, or if the Board elects, by a separate Committee appointed by the Board for that purpose and consisting of at least three Board members. All references in the Plan to the “Committee” refers to this separate Committee, if any is established, or if none is then in existence, refers to the Board as a whole. Once appointed, any Committee will continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause), appoint new members in substitution, and fill vacancies however caused. The Committee will select one of its members as chairman, and will hold meetings at such times and places as the chairman or a majority of the Committee may determine. At all times, the Board will have the power to remove all members of the Committee and thereafter to directly administer this Plan as a Committee of the whole.

(1)

Members of the Committee who are eligible for Options or Restricted Stock Awards, or who have been granted Options or Restricted Stock Awards, will be counted for all purposes in determining the existence of a quorum at any meeting of the Committee and will be eligible to vote on all matters before the Committee respecting the granting of Options or Restricted Stock Awards and respecting other matters relating to the administration of this Plan.

(2)

At least annually, the Committee shall present a written report to the Board indicating the Directors to whom Options or Restricted Stock Awards have been granted since the date of the last such report, and in each case the Date of Grant, the number of shares subject to such Options or granted under such Restricted Stock Awards, and the per-share Exercise Price or Purchase Price, as the case may be.

b.   Powers of the Committee. All actions of the Committee shall be either (i) by a majority vote of the members of the full Committee at a meeting of the Committee, or (ii) by unanimous written consent of all members of the full Committee without a meeting. All decisions, determinations and interpretations of the Committee will be final and binding on all persons, including, without limitation, all Optionees, any other holders or persons interested in any Options, Grantees and persons holding shares of Common Stock subject to a Restricted Stock Purchase Agreement, unless otherwise expressly determined by a vote of the majority of the entire Board. No member of the Committee or of the Board will be liable for any action or determination made in good faith with respect to the Plan, any Option or any Restricted Stock Award. Subject to all provisions and limitations of the Plan, the Committee will have the authority and discretion:

2

(1)	to determine the Directors to whom Options and Restricted Stock Awards are to be granted, the Dates of Grant, and the number of shares to be subject to each Option or Restricted Stock Award;
(2)	to determine the price at which shares of Common Stock are to be issued under an Option, subject to subparagraph 6.b of this Plan (“Exercise Price”), or under a Restricted Stock Award;
(3)	to determine all other terms and conditions of each Option and Restricted Stock Award granted under this Plan (including, without limitation, specification of the dates upon which Options become exercisable, the dates at which Common Stock become nonforfeitable under a Restricted Stock Purchase Agreement and whether the right to exercise an Option or the nonforfeiture of shares of Common Stock pursuant to a Restricted Stock Purchase Agreement are conditioned on performance standards, periods of service or otherwise), which terms and conditions can vary among Options and Restricted Stock Awards, as the case may be;
(4)	to modify or amend the terms of any Option or Restricted Stock Award previously granted, or, in the case of Options, to grant substitute Options, subject to subparagraphs 6.l and 6.m of this Plan;
(5)	to authorize any person or persons to execute and deliver Option agreements and Restricted Stock Purchase Agreements, or to take any other actions deemed by the Committee to be necessary or appropriate to effect the grant of Options or Restricted Stock Awards by the Committee; and
(6)	to interpret this Plan and to make all other determinations and take all other actions that the Committee deems necessary or appropriate to administer this Plan in accordance with its terms and conditions.

5.

Eligibility. Options and Restricted Stock Awards under this Plan may be granted only to Directors. The granting of Options and Restricted Stock Awards under this Plan will be entirely discretionary with the Committee. Adoption of this Plan will not confer on any Director any right to receive an Option or a Restricted Stock Award under this Plan unless and until said Option or Restricted Stock Award, as the case may be, is granted by the Committee in its sole discretion. Neither the adoption of this Plan nor the granting of any Options or Restricted Stock Awards under this Plan will confer upon any Optionee, Grantee or any other Director any right with respect to continuation of status as a Director, nor will the same interfere in any way with his or her right or with the right of the shareholders of Bancorp or any Subsidiary to terminate his or her status as a Director at any time.

6.

Terms and Conditions of Options. All Options granted under this Plan shall be authorized by the Committee, and shall be documented in written Option agreements in such form as the Committee will approve from time to time, which agreements shall comply with and be subject to all of the following terms and conditions:

a.	Number of Shares; Annual Limitation. Each Option agreement shall state the number of shares subject to Option. Any number of Options may be granted to a single eligible Director at any time and from time to time.
b.	Exercise Price and Consideration. Each option agreement must state the Exercise Price for the shares of Common Stock to be issued under the Option, which price must be not less than the greater of (1) the Fair Market Value of the Common Stock or (2) the net book value of the Common Stock at the time of grant, as is determined by the Committee. The Exercise Price shall be payable either (i) in United States dollars upon exercise of the Options, or (ii) if approved by the Board or Committee, other consideration including without limitation Common Stock, services, debt instruments or other property.
c.	Term of Option. Subject to other applicable provisions of this Plan including but not limited to subparagraphs 6(g), 6(h) and 6(i), the term of each Option will be determined by the Committee in its discretion.

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d.	Non-transferability of Options. No Option may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.
e.	Manner of Exercise. An Option will be deemed to be exercised when written notice of exercise has been given to Bancorp in accordance with the terms of the Option by the person entitled to exercise the Option, together with full payment for the shares of Common Stock subject to said notice.
f.	Rights as Shareholder. An Optionee shall have none of the rights of a shareholder with respect to any shares covered by his or her Option unless and until the Optionee has exercised such Option and submitted full payment for the shares.
g.	Death of Optionee. In the event of the death of an Optionee who at the time of his or her death was a Director and who had been in Continuous Status as a Director since the Date of Grant of the Option, the Option will terminate on the earlier of (i) one year after the date of death of the Optionee, or (ii) the expiration date otherwise provided in the Option agreement, except that if the expiration date should occur during the 180-day period immediately following the Optionee’s death, such Option will terminate at the end of such 180-day period. The Option will be exercisable at any time prior to such termination by the Optionee’s estate, or by such person or persons who have acquired the right to exercise the Option by bequest or by inheritance or by reason of the death of the Optionee.
h.	Disability of Optionee. If an Optionee’s status as a Director is terminated at any time during the Option period by reason of a disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code) and if said Optionee had maintained Continuous Status as a Director at all times between the date of grant of the Option and the termination of his or her status as a Director, his or her Option shall terminate no later than the earlier of (i) one year after the date of termination of his or her status as a Director, or (ii) the expiration date otherwise provided in his or her Option agreement.
i.	Termination of Status as a Director.

(1)

If an Optionee’s status as a Director is terminated at any time after the grant of an Option to such Director for any reason other than death or disability (as described in subparagraphs 6.g and 6.h of this Plan, and excepting if the Director is removed for cause, as provided in subparagraph (2) below), then such Option will terminate no later than the earlier of (i) the same day of the sixth month after the date of termination of his or her status as a Director, or (ii) the expiration date otherwise provided in his or her Option agreement.

(2)

If an Optionee is removed as a Director for cause at any time after the grant of an Option to such Director, then such Option shall terminate at the end of the day on the date of termination of his or her status as a Director. For this purpose, “cause” includes fraud or willful misconduct or any other conduct that the Board reasonably believes will cause or has caused Bancorp substantial injury as a result of gross negligence or dishonesty.

j.   Adjustments Upon Changes in Capitalization. Subject to any required action by the shareholders of Bancorp, the number of shares of Common Stock covered by each outstanding Option, the number of shares of Common Stock available for grant of additional Options, and the per-share Exercise Price in each outstanding Option, will be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from any stock split or other subdivision or consolidation of shares, the payment of any stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such shares of Common Stock effected without receipt of consideration by Bancorp; provided, however, that conversion of any convertible securities of Bancorp will not be deemed to have been “effected without receipt of consideration.” Such adjustment will be made by the Committee, whose determination in that respect will be final, binding and conclusive.

(1)   Except as otherwise expressly provided in this subparagraph 6(j), no Optionee will have any rights by reason of any stock split or the payment of any stock dividend or any other increase or decrease in the number of shares of Common Stock, and no issuance by Bancorp of shares of stock of any class, or securities convertible into shares of stock of any class, will affect the number of shares or Exercise Price subject to any Options, and no

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adjustments in Options will be made by reason thereof. The grant of an Option under this Plan will not affect in any way the right or power of Bancorp to make adjustments, reclassifications, reorganizations or changes of its capital or business structure.

k.	Conditions Upon Issuance of Shares. Shares of Common Stock will not be issued with respect to an Option granted under this Plan, unless the exercise of such Option and the issuance and delivery of such shares pursuant thereto will comply with all applicable provisions of law, including, without limitation, applicable federal and state securities laws. As a condition to the exercise of an Option, Bancorp may require the person exercising such Option to represent and warrant at the time of exercise that the shares of Common Stock are being purchased only for investment and without any present intention to sell or distribute such Common Stock if, in the opinion of counsel for Bancorp, such a representation is required by any of the aforementioned relevant provisions of law.
l.	Corporate Sale Transactions. In the event of the merger or reorganization of Bancorp with or into any other corporation, the sale of substantially all of the assets of Bancorp, or a dissolution or liquidation of Bancorp (collectively, “Sale Transaction”), (1) all outstanding Options that are not then fully exercisable will become exercisable upon the date of closing of any sale transaction or such earlier date as the Committee may fix; and (2) the Committee may, in the exercise of its sole discretion, terminate all outstanding Options as of a date fixed by the Committee. In such event, however, the Committee shall notify each Optionee of such action in writing not less than sixty (60) days prior to the termination date fixed by the Committee, and each Optionee shall have the right to exercise his or her Option prior to said termination date.
m.	Substitute Stock Options. In connection with an internal reorganization of Bancorp, the Committee is authorized, in its discretion, to substitute for any unexercised Option, a new option for shares of the resulting entity’s stock.
n.	Tax Compliance. Bancorp, in its sole discretion, may take actions reasonably believed by it to be required to comply with any local, state, or federal tax laws relating to the reporting or withholding of taxes attributable to the grant or exercise of any Option or the disposition of any shares of Common Stock issued upon exercise of an Option, including, but not limited to (i) withholding from any Optionee exercising an Option a number of shares of Common Stock having a Fair Market Value equal to the amount required to be withheld by Bancorp under applicable tax laws, and (ii) withholding from any form of compensation or other amount due an Optionee, or holder, of shares of Common Stock issued upon exercise of an Option any amount required to be withheld by Bancorp under applicable tax laws. Withholding or reporting will be considered required for purposes of this subparagraph if the Committee, in its sole discretion, so determines.
o.	Other Provisions. Option agreements executed under this Plan may contain such other provisions as the Committee will deem advisable.

7.   Restricted Stock Awards. The Committee will determine all terms and conditions of a Restricted Stock Award (including, without limitation, to which Directors a Restricted Stock Award will be granted, the number of shares of Common Stock the Director may purchase pursuant thereto, and the restrictions to which the shares of Common Stock so purchased will be subject), subject to the following:

a.

Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by a written agreement (the “Restricted Stock Purchase Agreement”). The Restricted Stock Purchase Agreement will be in substantially a form (which may differ among Grantees) that the Committee shall from time to time approve, and will comply with and be subject to the terms and conditions of the Plan. A Grantee can accept a Restricted Stock Award only by signing and delivering to Bancorp the Restricted Stock Purchase Agreement, and paying in full the Purchase Price, if any, within thirty (30) days after the date that the Restricted Stock Purchase Agreement is delivered to the Grantee. If the Grantee does not so accept the Restricted Stock Award, then the offer represented by the Restricted Stock Award will terminate without the need for further action by any party, unless the Committee determines otherwise.

b.

Purchase Price. The Purchase Price for shares acquired by Grantee under a Restricted Stock Award will be determined by the Committee, and may be less than the Fair Market Value of the shares of Common Stock on the date the Restricted Stock Award is granted. The Purchase Price, if any, shall be payable in

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	accordance with any procedures established by Bancorp and may be paid in the form of either (i) United States dollars, or (ii) if approved by the Board, other consideration including without limitation Common Stock, services, debt instruments or other property.
c.	Terms of Restricted Stock Awards. Shares of Common Stock acquired pursuant to a Restricted Stock Awards shall be subject to all restrictions, if any, that the Committee may impose. These restrictions may be based on completion of a specified number of years of service with Bancorp and/or upon completion of performance goals that are set forth in the Restricted Stock Purchase Agreement entered into by Grantee in connection with the Restricted Stock Award. The Restricted Stock Purchase Agreement shall be in such form and contain such other provisions (which may differ among Grantees) as the Committee shall from time to time approve and shall comply with, and be subject to the terms and conditions of, this Plan. Prior to the grant of a Restricted Stock Award, the Committee shall: (i) determine the nature, length and starting date of any period that the Grantee must maintain Continuous Status as a Director before shares of Common Stock received pursuant to a Restricted Stock Award shall vest; (ii) select from the factors to be used to measure performance goals, if any; and (iii) determine the number of shares of Common Stock that may be awarded to the Grantee.
d.	Termination During Performance Period. Restricted Stock Awards that have not vested, as provided in the Restricted Stock Purchase Agreement, shall cease to vest immediately if a Grantee ceases to maintain Continuous Status as a Director for any reason, unless the Committee determines otherwise, and Bancorp shall have the right, at the discretion of the Committee, to repurchase all or a portion of the shares of Common Stock that have not yet vested and that were acquired by Grantee pursuant to a Restricted Stock Award. The purchase price required to be paid by Bancorp for each share of Common Stock upon exercise of its rights under this subparagraph 7.d of the Plan shall be the original per share Purchase Price paid by the Grantee for such shares.
e.	Conditions Upon Issuance of Shares. Shares of Common Stock will not be issued pursuant to a Restricted Stock Award granted under this Plan, unless the issuance and delivery of such shares pursuant thereto will comply with all applicable provisions of law, including, without limitation, applicable federal and state securities laws. As a condition to the issuance of shares of Common Stock pursuant to a Restricted Stock Award, Bancorp may require the Grantee to represent and warrant prior to issuance that the shares of Common Stock are being purchased only for investment and without any present intention to sell or distribute such Common Stock if, in the opinion of counsel for Bancorp, such a representation is required by any of the aforementioned relevant provisions of law.
f.	Tax Compliance. Bancorp, in its sole discretion, may take actions reasonably believed by it to be required to comply with any local, state, or federal tax laws relating to the reporting or withholding of taxes attributable to the granting of a Restricted Stock Award, including, but not limited to withholding from any form of compensation or other amount due a Grantee any amount required to be withheld by Bancorp under applicable tax laws. Withholding or reporting will be considered required for purposes of this subparagraph if the Committee, in its sole discretion, so determines.
g.	Other Provisions. Restricted Stock Purchase Agreements executed under this Plan may contain such other provisions as the Committee shall deem advisable.

8.   Term of the Plan. This Plan will become effective, and Options and Restricted Stock Awards may be granted, upon adoption of the Plan by the Board, subject to shareholder approval. Unless sooner terminated as provided in subparagraph 8.a of this Plan, this Plan will terminate on the tenth (10th) anniversary of the original effective date of the Plan. Options and Restricted Stock Awards may be granted at any time after the effective date and prior to the date of termination of this Plan.

a.

Amendment or Early Termination of the Plan. The Board may terminate this Plan at any time. The Board may amend this Plan at any time and from time to time in such respects as the Board may deem advisable, except that, without approval of the shareholders, no revision or amendment will increase the number of shares of Common Stock subject to this Plan other than in connection with an adjustment under subparagraph 6.j of this Plan.

b.

Effect of Amendment or Termination. No amendment or termination of this Plan will affect Options or Restricted Stock Awards granted prior to such amendment or termination, and all such Options and

6

Restricted Stock Awards shall remain in full force and effect notwithstanding such amendment or termination.

9.   Shareholder Approval. Adoption of this Plan shall be subject to ratification by affirmative vote of shareholders owning at least a majority of the outstanding Common Stock at a duly convened meeting.

*************

7

CERTIFICATE OF ADOPTION

     I certify that the foregoing Amended and Restated Director Stock Plan was originally approved by the Board of Directors of Intermountain Community Bancorp (f/n/a Panhandle Bancorp) on January 14, 1999, and amended by the Board of Intermountain Community Bancorp on February 24, 2005.

/s/ Terry L. Merwin

Terry L. Merwin, Secretary

     I further certify that the foregoing Amended and Restated Director Stock Plan was originally approved by the shareholders of Intermountain Community Bancorp (f/n/a Panhandle Bancorp) on August 18, 1999, and that the amendments thereto were approved by the shareholders of Intermountain Community Bancorp on April 30, 2005.

/s/ Terry L. Merwin

Terry L. Merwin, Secretary

8

EX-10.2

                                  EXHIBIT 10.2

                                                      Director Form of Agreement

                         INTERMOUNTAIN COMMUNITY BANCORP
                       RESTRICTED STOCK PURCHASE AGREEMENT

THIS RESTRICTED STOCK PURCHASE AGREEMENT ("Agreement") is entered into by and
between Intermountain Community Bancorp ("Bancorp") and the Grantee, named
below, on ___________________, __________.

Grantee: _______________________________________________________________________
___________________

Shares: ________________________ Purchase Price: ________________________

Date of Grant: __________________________

This Agreement is subject to the terms and conditions of Bancorp's Amended and
Restated Director Stock Plan (the "Plan"). Such terms and conditions are
incorporated herein by this reference. In the event of a conflict between the
terms and conditions of this Agreement and the terms and conditions of the Plan,
the terms and condition of the Plan shall govern.

1.    PURCHASE OF SHARES

      a..   General. In connection with a Restricted Stock Award (as defined in
            the Plan) that Bancorp has granted to the Grantee, Bancorp offers to
            sell to the Grantee, for the per share purchase price set forth
            above (the "Purchase Price"), the number of shares of Bancorp's
            Common Stock identified above (the " Shares").

      b.    Conditions to Sale of Shares. As a condition precedent to Bancorp's
            obligation to sell shares under paragraph 1.a, the Grantee shall
            deliver to Bancorp, within thirty (30) days following the Date of
            Grant, (i) an original of this Agreement duly executed by the
            Grantee, and (ii) the aggregate Purchase Price, in cash or cash
            equivalent; and in the event the Grantee fails to do so, then the
            rights and obligations of Bancorp and the Grantee hereunder shall
            terminate without the need for further action by any party, and
            Bancorp and the Grantee shall have no further rights or obligations
            with respect to the Restricted Stock Award described in paragraph
            1.a.

      c.    Issuance of Shares and Delivery of Certificates. Concurrently with
            the payment by the Grantee of the aggregate Purchase Price, as
            described in paragraph 1.b, Bancorp shall issue the Shares to the
            Grantee. All certificates representing the Shares so issued shall be
            held by the Secretary of Bancorp, as provided in paragraph 3, in
            escrow.

      d.    Rights Upon Issuance of Shares. Until such time as Bancorp exercises
            its Repurchase Right (defined below) under this Agreement, and
            subject to any restrictions contained in the Plan or this Agreement,
            the Grantee (or his or her successor in interest) shall have the
            rights of a stockholder (including voting, dividend and liquidation
            rights) with respect to the Shares, including Unvested Shares
            (defined below).

      e.    Vesting Schedule. The Shares shall vest as provided in the vesting
            schedule set forth below. In no event shall any portion of the
            Shares vest after the Grantee first ceases to maintain Continuous
            Status as a Director (as defined in the Plan). That portion of the
            Shares that is not vested at the time that the Grantee first ceases
            to maintain Continuous Status as a Director (the "Unvested Shares")
            shall be subject to the Repurchase Right (defined below) of Bancorp,
            as described in paragraph 2.

                                        1




Number of Complete Years of Continuous Status as a Director From the      Percent of the Original
Date of Grant                                                          Number of Shares that Vest *
- --------------------------------------------------------------------   ----------------------------
                                                                    
1                                                                      25%

2                                                                      25%

3                                                                      25%

4                                                                      25%


* The number of Shares that vest each year, resulting from multiplying the
original number of Shares by the percentage shown, shall be rounded up to the
nearest whole number, but the total number of Shares that vest over the entire
vesting period shall not exceed, in the aggregate, the total number of Shares
identified in this Agreement above.

2.    REPURCHASE RIGHT

      a.    General. Notwithstanding any provisions contained in this Agreement
            to the contrary, Bancorp shall have the right, but not the
            obligation, to repurchase all or any portion of the Unvested Shares
            (the "Repurchase Right") at the Purchase Price originally paid by
            the Grantee for such Unvested Shares. Such Repurchase Right shall be
            exercisable at any time during the ninety (90) day period that
            immediately follows the date on which Grantee, for any reason, first
            ceases to maintain Continuous Status as a Director.

      b.    Exercise of Repurchase Right. If Bancorp elects to exercise the
            Repurchase Right for all or any portion of the Unvested Shares, it
            shall do so by delivering a written notice of exercise to the
            Grantee prior to the expiration of the ninety (90) day period
            described in paragraph 2.a. Such notice shall specify the number of
            Unvested Shares that Bancorp will repurchase and the date on which
            the repurchase is to be effected, which date shall be not more than
            thirty (30) days after the date of the notice. To the extent that
            one or more certificates representing Unvested Shares may have been
            previously delivered out of escrow to the Grantee, the Grantee
            shall, prior to the close of business on the date specified for the
            repurchase, deliver to the Secretary of Bancorp the certificates
            representing the Unvested Shares to be repurchased, each certificate
            to be properly endorsed for transfer. Bancorp shall, concurrently
            with the receipt of such stock certificates (either from escrow or
            from the Grantee as herein provided), pay to the Grantee, in cash or
            cash equivalents, an amount equal to the Purchase Price originally
            paid by the Grantee for the Unvested Shares that Bancorp elects to
            repurchase. If Bancorp does not elect to exercise the Purchase Right
            for all or any portion of the Unvested Shares, in the manner and
            within the time period described above, then Bancorp shall cease to
            have any further Repurchase Right with respect to the Unvested
            Shares that it does not elect to repurchase (provided, however, that
            such Shares shall continue to be subject to the right of first
            refusal described in paragraph 6).

      c.    Additional Shares or Substitute Securities. In the event of a stock
            dividend, stock split, recapitalization or other change affecting
            Bancorp's outstanding Common Stock as a class (effected, in each
            case, without receipt by Bancorp of consideration), then any new,
            substituted or additional securities or other property (including
            money paid, other than as a regular cash distribution) that is by
            reason of such transaction distributed with respect to the Shares
            shall be immediately subject to the Repurchase Right, but only to
            the extent that such Shares are at the time Unvested Shares.
            Appropriate adjustments to reflect the distribution of such
            securities or property shall be made to the number of Shares at the
            time subject to the Repurchase Right hereunder, and to the price per
            share to be paid upon the exercise of the Repurchase Right, in order
            to reflect the effect of any such transaction upon Bancorp's capital
            structure; provided, however, that the aggregate Purchase Price
            shall remain the same.

3.    ESCROW

      a.    Deposit. The Grantee hereby authorizes Bancorp to hold in escrow, in
            accordance with this paragraph 3, all certificates representing
            Unvested Shares. In the event any such certificates shall come into
            the possession of the Grantee, the Grantee shall immediately deliver
            the same to the Secretary of Bancorp for such purposes. The Grantee
            further agrees to deliver, at the time any Unvested Shares are
            issued to him, a duly executed Assignment Separate From Certificate,
            in the form attached hereto as Exhibit A, to accompany any
            certificates representing Unvested Shares. The

                                        2


            certificates representing Unvested Shares shall remain in escrow
            until such time or times as they are released or surrendered in
            accordance with paragraph 3.b.

      b.    Release/Surrender. As to Shares in which the Grantee acquires a
            vested interest (as described in paragraph 1.e), the certificates
            representing such Shares shall be released from escrow and delivered
            to the Grantee as soon as practicable after the Grantee acquires
            such vested interest. As to Shares that are Unvested Shares at the
            time that the Grantee first ceases to maintain Continuous Status as
            a Director, (i) if Bancorp elects to exercise the Repurchase Right
            with respect to all or any portion of such Unvested Shares, as
            provided in paragraph 2, certificates representing the Unvested
            Shares that Bancorp elects to repurchase shall be delivered to
            Bancorp, concurrently with the payment to the Grantee, in cash or
            cash equivalent, of an amount equal to the aggregate Purchase Price
            for such Unvested Shares, and the Grantee shall cease to have any
            further rights or claims with respect to such Unvested Shares, and
            (ii) if Bancorp does not elect to exercise the Purchase Right, as
            provided in paragraph 2, or elects to exercise the Repurchase Right
            with respect to less than all of the Unvested Shares, certificates
            for Unvested Shares that Bancorp does not elect to repurchase shall
            be delivered to the Grantee, and Bancorp shall cease to have any
            further Repurchase Right with respect to such Unvested Shares
            (provided, however, that such Shares shall continue to be subject to
            the right of first refusal described in paragraph 6).

      c.    Prohibition on Transfer. The Grantee shall not sell, transfer,
            pledge, hypothecate or otherwise dispose of Unvested Shares, and any
            such sale, transfer or pledge in violation of this Agreement shall
            be void. Bancorp shall not be required (i) to transfer on its books
            any Shares that shall have been sold or transferred in violation of
            this Agreement, or (ii) to accord any rights (including, without
            limitation, the right to vote, to receive dividends, or to receive
            the proceeds of liquidation) to any transferee to whom such Shares
            shall have been so transferred.

4.    LEGENDS. In order to reflect restrictions on disposition of the Unvested
      Shares, each certificate representing Shares shall be endorsed with a
      legend substantially as follows, in addition to any other legends that
      Bancorp deems to be necessary or advisable:

            THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
            THE RESTRICTIONS AND RIGHT OF FIRST REFUSAL SET FORTH IN A
            RESTRICTED STOCK PURCHASE AGREEMENT, DATED _______________, A COPY
            OF WHICH IS ON FILE AT THE OFFICE OF bancorp AND THE PROVISIONS OF
            WHICH ARE INCORPORATED HEREIN BY REFERENCE.

5.    SECTION 83(b) ELECTION. The Grantee understands and acknowledges that:

      (i)   Under Section 83 of the Internal Revenue Code of 1986, as amended
            (the "Code"), the excess of the fair market value of the Shares at
            the time that any restrictions on the Shares lapse over the Purchase
            Price for the Shares is taxed, as ordinary income, in the taxable
            year in which such restrictions lapse. In this context,
            "restriction" means the right of Bancorp to buy back the Shares
            pursuant to the Repurchase Right.

      (ii)  If Section 83 of the Code is applicable, the Grantee may file a
            special election ("Section 83(b) Election") so that the excess of
            the fair market value of the Shares at the time the Shares are
            transferred to him/her (rather than the time that any restrictions
            on the Shares lapse) over the Purchase Price for the Shares is
            taxed, as ordinary income, in the taxable year in which the Shares
            are transferred to him/her (rather than the taxable year in which
            any restrictions lapse). Even if the fair market value of the Shares
            equals the amount paid for the Shares, the election must be made to
            avoid adverse tax consequences in the future.

      (iii) The Participation will not be entitled to a deduction for any
            ordinary income previously recognized as a result of making a
            Section 83(b) Election, if the Unvested Shares are subsequently
            forfeited to Bancorp.

                                        3


      (iv)  If the value of the Unvested Shares declines after a Section 83(b)
            Election, such election may cause the Grantee to recognize more
            compensation income than he/she would have otherwise recognized.

      (v)   There may be tax reporting, payroll tax and withholding tax
            requirements relating to the acquisition, and/or the subsequent
            vesting, of Shares.

      (vi)  THE FORM FOR MAKING A SECTION 83(b) ELECTION IS ATTACHED HERETO AS
            EXHIBIT B. IF THE GRANTEE CHOOSES TO MAKE SUCH AN ELECTION, THIS
            FORM MUST BE FILED NO LATER THAN THIRTY (30) DAYS AFTER THE SHARES
            ARE TRANSFERRED TO HIM. FAILURE TO MAKE A TIMELY SECTION 83(b)
            ELECTION MAY RESULT IN THE RECOGNITION OF ORDINARY INCOME BY THE
            GRANTEE AS THE REPURCHASE RIGHT LAPSES. IT IS THE GRANTEE'S SOLE
            RESPONSIBILITY, AND NOT BANCORP'S, TO MAKE A TIMELY SECTION 83(b)
            ELECTION.

      (vii) THE GRANTEE IS ADVISED TO SEEK INDEPENDENT ADVICE REGARDING THE
            APPLICABLE PROVISIONS OF ANY TAX LAWS RELATING TO HIS ACQUISITION OF
            ANY SHARES.

6.    RIGHT OF FIRST REFUSAL. All Shares acquired by the Grantee pursuant to
      this Agreement shall be subject to the right of first refusal of Bancorp
      described in this paragraph 6.

      a.    In the event the Grantee proposes to sell, assign or otherwise
            transfer such Shares, after the Shares are no longer Unvested
            Shares, to any person(s) in a bona fide sale, the Grantee shall
            submit in writing to Bancorp a notice ("Notice of Proposed Sale")
            that identifies the number of Shares that the Grantee proposes to
            sell, the person(s) who proposes to buy such Shares, the sales price
            for such Shares and all other material terms and conditions of the
            proposed sale. For a period of thirty (30) days from the date it
            first receives the Notice of Proposed Sale ("Option Period"),
            Bancorp shall have the right, but not the obligation, to purchase
            all, but not less than all, of the Shares that the Grantee proposes
            to sell at the sales price identified in the Notice of Proposed
            Sale.

      b.    If Bancorp wishes to exercise the right of first refusal identified
            in paragraph 6.a to purchase the Shares that the Grantee proposes to
            sell, it shall give to the Grantee a written notice of exercise to
            that effect within the Option Period; and the purchase and sale of
            such Shares shall close within ten (10) days after the time Bancorp
            gives such written notice. At such closing Bancorp shall pay the
            sales price, in full, in cash or cash equivalent.

      c.    If Bancorp does not give the notice of exercise described in
            paragraph 6.b within the Option Period, or if it waives its right of
            first refusal identified in paragraph 6.a, then the Grantee may sell
            the Shares identified in the Notice of Proposed Sale to the person,
            at the sales price and subject to all other terms and conditions
            identified in such notice; provided, however, that if such sale by
            the Grantee does not close within thirty (30) days following the
            expiration of Bancorp's right of first refusal, then the Shares
            identified in the Notice of Proposes Sale shall again be subject to
            all the provisions of this paragraph 6.

      d.    Prior to the time that Shares are first sold to any person at fair
            market value in a bona fide sale, such Shares shall continue to be
            subject to the restrictions set forth in this paragraph 6, as if the
            person who proposes to sell those shares were the Grantee.

      e.    All sales, assignments or other transfers of Shares in violation of
            the right of first refusal of Bancorp described in this paragraph 6
            shall be void.

7.    SECURITIES LAW COMPLIANCE. Notwithstanding any contrary provisions of this
      Agreement, the Shares may not be sold, assigned or transferred, unless
      they are registered under applicable Federal and state securities laws and
      regulations or, if the Shares are not then so registered, an exemption
      from such registration is AVAILABLE.

8.    MISCELLANEOUS

                                        4


      a.    Successors in Interest. This Agreement and all of its terms,
            conditions and covenants are intended to be fully effective and
            binding, to the extent permitted by law, on the heirs, executors,
            administrators, successors and permitted assigns of the parties
            hereto.

      b.    Spousal Consent. If the Grantee is married, the Grantee shall obtain
            the signature of the Grantee's spouse as set forth on the Consent of
            Spouse below. The Grantee's failure to obtain such consent shall
            constitute a representation by the Grantee, on which Bancorp shall
            rely, that the Grantee is unmarried and that the Grantee has sole
            authority with respect to the Grantee's actions regarding the
            Shares.

      c.    No Right to Continuing Status as a Director. Nothing in this
            Agreement shall affect in any manner whatsoever the right or power
            of Grantee or of the shareholders of Bancorp to terminate Grantee's
            status as Director of Bancorp at any time.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first indicated above.

GRANTEE:                                 INTERMOUNTAIN COMMUNITY BANCORP,
                                         an Idaho corporation

____________________________________     By: __________________________________

Print Name: ________________________     Title: ________________________________

Address: ___________________________
         ___________________________
         ___________________________

Social Security No. ________________

Grantee hereby acknowledges that he have received a copy of the Plan.

_____________________________________________________________________
Print Name: _______________________________

                                        5


                             SPOUSAL ACKNOWLEDGEMENT

The undersigned spouse of Grantee has read and hereby approves the foregoing
Agreement. In partial consideration of Bancorp granting to Grantee the right to
acquire the Purchased Shares in accordance with the terms of this Agreement, the
undersigned hereby agrees to be irrevocably bound by all the terms of such
Agreement, including, without limitation, the right of the Bancorp to purchase
any Purchased Shares of Grantee pursuant to this Agreement.

_____________________________________________________________________
Print Name: _______________________________

                                         Address: ______________________________
                                         _________________________________
                                         _________________________________

                                         Social Security No. ___________________

                                        6


                                    EXHIBIT A

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

      FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto, ________________________________, ________________________ (_______)
shares of the Common Stock of Intermountain Community Bancorp, an Idaho
corporation, standing in the undersigned's name on the books of said corporation
represented by Certificate No. ____ herewith, and does hereby irrevocably
constitute and appoint ____________ as attorney-in-fact, to transfer the said
stock on the books of the said corporation with full power of substitution in
the premises.

Dated: _____________________, _____

                                         _____________________________________
                                         Print Name: ___________________________
                                         _______

                                        7


                                    EXHIBIT B

                           SECTION 83(b) TAX ELECTION

The undersigned hereby elects pursuant to Internal Revenue Code Section 83(b)
with respect to the property described in paragraph 2 below and supplies the
following information in accordance with the regulations promulgated thereunder:

1. The name, address and taxpayer identification number of the undersigned are:

__________________________________
__________________________________
__________________________________

Taxpayer I.D. No. ________________

2. Description of property with respect to which the election is being made:

      _____________ shares of Common Stock, no par value, in Intermountain
      Community Bancorp (the "Bancorp"). Such shares were already owned by
      taxpayer at the time the restrictions described in paragraph 4 were
      imposed.

3. Date on which property is transferred and taxable year for which the election
is made:

      The transfer of the property described in paragraph 2 occurred on
      ____________, when the restrictions described in paragraph 4 were imposed.

      The taxable year for which this election is made is calendar year
      ___________.

4. The nature of the restriction(s) to which the property is subject is:

      The subject shares are subject to a Restricted Stock Purchase Agreement
      between the shareholder and Bancorp dated ________________, _________ (the
      "Purchase Agreement") pursuant to which the shares are subject to a right
      of purchase by Bancorp in the event that the shareholder's service to
      Bancorp is voluntarily terminated or terminated for cause, as defined in
      the Repurchase Agreement. If the right of repurchase is exercised, the
      purchase price is the price originally paid for the share by taxpayer. The
      right of repurchase lapses as to ____________ of the original number of
      shares acquired by taxpayer as the shareholder completes each year of
      continuous service with Bancorp.

      The property is non-transferable in the taxpayer's hands, by virtue of
      language to that effect stamped on the stock certificate.

5. Fair market value:

      On the date the restrictions described in paragraph 4 were imposed, the
      shares described in paragraph 2 had a fair market value of ______________.

6. Amount paid for property:

      Taxpayer paid fair market value for the property described in paragraph 2.

7. Furnishing statement to issuer:

      A copy of this statement has been furnished to Bancorp, as required by
      Reg. Section 1.83(b)-2(d).

                                        8


Dated: _____________________.

                                    ___________________________________________
                                    Print Name:_________________________________

THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS. THE ELECTION MUST BE FILE
WITHIN THIRTY (30) DAYS AFTER THE TRANSFER OF SHARES TO HIM. THIS FILING SHOULD
BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED. PURCHASER
MUST RETAIN TWO (2) COPIES OF THE COMPLETED FORM FOR FILING WITH HIS OR HER
FEDERAL AND STATE TAX RETURNS FOR THE CURRENT TAXABLE YEAR AND AN ADDITIONAL
COPY FOR HIS OR HER RECORDS.

                                        9

EX-31.1

                                  EXHIBIT 31.1

                                 CERTIFICATIONS*

I, Curt Hecker, certify that:

1.    I have reviewed this quarterly report of Intermountain Community Bancorp;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      (c)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant's board of directors (or persons performing the equivalent
      functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: May 12, 2005

/s/ Curt Hecker
- ------------------
Curt Hecker
President and Chief Executive Officer

EX-31.2

                                  EXHIBIT 31.2

                                 CERTIFICATIONS*

I, Doug Wright, certify that:

5.    I have reviewed this quarterly report of Intermountain Community Bancorp;

6.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

7.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

8.    The registrant's other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      (c)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant's board of directors (or persons performing the equivalent
      functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: May 12, 2005

/s/ Doug Wright
- ---------------
Doug Wright
Executive Vice President and Chief Financial Officer

EX-32

                                   EXHIBIT 32

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Intermountain Community Bancorp (the
"Company") on Form 10-Q for the period ending March 31, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), we, Curt
Hecker, Chief Executive Officer, and Doug Wright, Chief Financial Officer,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

      (1)   The Report fully complies with the requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The information contained in the Report fairly presents, in all
            material respects, the financial condition and results of operations
            of the Company.

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

Date: May 12, 2005

/s/ Curt Hecker                                         /s/ Doug Wright
- -----------------------                                 ------------------------
Curt Hecker                                             Doug Wright
Chief Executive Officer                                 Chief Financial Officer