8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
April 23, 2009

INTERMOUNTAIN COMMUNITY BANCORP

(Exact name of registrant as specified in its charter)

Idaho
(State or other jurisdiction of incorporation)

000-50667	82-0499463
(Commission File Number)	IRS Employer Identification No.

414 Church Street
Sandpoint, Idaho 83864
(Address of principal executive offices) (zip code)

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2 below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act of (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act of (17 CFR 240.13e-4(c))

Item 2.02 — Financial Statements and Exhibits

     On April 29, 2009, Intermountain Community Bancorp (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2009. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein in its entirety by reference.

     The information in this Item 2.02 and Exhibit 99.1 attached hereto is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such document or filing.

Item 8.01 — Other Events

     As stated in the earnings release referenced above, approximately $23.1 million of indebtedness under a loan agreement between the Company and Pacific Coast Bankers’ Bank originally entered into in March 2007 matured on April 23, 2009. The Company has not paid the amounts due under this loan. As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, this indebtedness is collateralized by all of the outstanding stock of the Company’s banking subsidiary, Panhandle State Bank, and the Company’s corporate offices in Sandpoint, Idaho. The Company is currently in the process of negotiating a new loan facility with the existing lenders to refinance and retire the prior indebtedness that matured on April 23, 2009.

Item 9.01 — Financial Statements and Exhibits

     (a)      Financial statements — not applicable.

     (b)      Pro forma financial information — not applicable.

     (c)      Shell company transactions — not applicable

     (d)      Exhibits:

99.1 Press Release dated April 29, 2009 announcing financial results for the first quarter ended March 31, 2009.

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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 hereunto duly authorized.

	INTERMOUNTAIN COMMUNITY BANCORP
Dated: April 29, 2009	By:	/s/ Curt Hecker
		Curt Hecker
		President and Chief Executive Officer

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACT: Carolyn Shaw
Vice President, Risk Manager and Financial Accounting Officer
Intermountain Community Bancorp
(509) 944-3888
carolyng@intermountainbank.com

INTERMOUNTAIN COMMUNITY BANCORP (IMCB) ANNOUNCES FIRST QUARTER RESULTS

Sandpoint, Idaho, April 29, 2009 – Intermountain Community Bancorp (OTCBB – IMCB.OB), the holding company for Panhandle State Bank, announced first quarter 2009 financial results today. The net loss applicable to common shareholders, which includes payment of $414,000 in preferred dividends, was $532,000, compared to a net loss applicable to common shareholders of $2.9 million in the fourth quarter of 2008 and net income of $1.7 million for the same period a year ago. The decline in earnings over first quarter 2008 reflected a decrease in net interest income, increased credit losses and additions to the reserve for loan losses offset by an increase in other income and lower operating expenses. Assets increased to $1.1 billion, a 7.2% increase over March 31, 2008. After payment of the preferred stock dividend, the net loss per fully diluted share applicable to common shareholders for first quarter 2009 was $0.06 compared to fully diluted earnings per share of $0.19 during the same period in 2008.

“Local and national economic conditions continued to worsen in the first quarter, although some local residential markets are showing signs of stabilizing,” noted Chief Executive Officer Curt Hecker. “Generating earnings in this environment is challenging, as slowing business activity pressures revenues and rising unemployment increases credit losses. As we have for the past several quarters, we continue to focus on maintaining a strong capital position, high levels of liquidity and solid reserves against loan losses while we move through this prolonged downturn.”

“We’re also working very hard to partner with other community and business leaders to jump start our local economies,” Hecker added. “During the first quarter, we launched a major new initiative, Powered By Community. Through this community partnership program, we are leveraging our capital and resources to enhance lending and directly invest in our communities. We plan to attract over 1,000 new community volunteer leaders, improve over 100 community education and economic initiatives, and engage 100% of IMCB employees over the next two years,” Hecker noted.

2009 Highlights

§	Deposits increased $84.1 million year over year and $20.9 million from the fourth quarter of 2008 to the first quarter of 2009
§	Total assets rose to $1.1 billion, an increase of $73.4 million or 7.2% over the same period one year ago

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§	Capital ratios remained strong in the first quarter and are substantially above regulatory “well capitalized” levels
§	Liquidity, as represented by cash and cash equivalents, marketable securities and borrowing line availability, remained strong in the first quarter and continues at historically high levels.

Earnings Results Summary:

Net loss applicable to common shareholders for the quarter ended March 31, 2009 totaled $532,000, compared to a net loss of $2.9 million in the fourth quarter of 2008 and net income of $1.7 million in the first quarter of 2008. Earnings results reflected margin improvement and lower loan loss provisions from the fourth quarter of 2008, but both factors remained weaker than a year ago.

Net interest income before provision for loan losses totaled $9.9 million for the quarter ended March 31, 2009, an increase of $515,000, or 5.5%, from the fourth quarter 2008 (sequential quarter) and a decline of $1.4 million from the first quarter of 2008. The improvement from the sequential quarter reflected improved margin, as asset yields stabilized and funding costs dropped. The deterioration from 2008 resulted from rapidly declining asset yields last year, as market rates decreased substantially during the past year. At quarter end, the margin was 4.03%, versus 3.82% for the sequential quarter and 4.87% for the same quarter last year. A 0.31% drop in the cost of interest-bearing liabilities produced the sequential quarter improvement. The margin improved despite the dampening effect of maintaining a conservative and liquid asset mix with a quarterly average balance of $40.4 million in low-yielding Fed Funds investments. Reversal of interest on loans placed in non-accrual status also reduced the margin by approximately 11 basis points during the quarter.

The provision for losses on loans totaled $2.8 million for the first quarter of 2009, compared to a provision of $5.5 million in the sequential quarter and $258,000 for the first quarter of 2008. Net charge offs for the current quarter totaled $1.8 million compared to $2.1 million in the sequential quarter and $77,000 for March 31, 2008. The 2009 total equates to an annualize net charge off rate of 0.96% of total loans compared to 1.11% in the fourth quarter of 2008 and 0.04% in the first quarter of 2008. First quarter chargeoffs reflect continued weakness and writedowns in the Company’s residential construction and development portfolio as well as additional economic stress on its other borrowers. The loan loss allowance to total loans ratio increased to 2.35% at March 31, 2009, compared to 2.14% at December 31, 2008 and 1.57% at March 31, 2008. Management continues to carefully evaluate the loan portfolio and collateral positions, and make adjustments to its allowance to reflect changing economic and borrower conditions.

Other income for the first quarter totaled $3.5 million, compared to $2.9 million for the sequential quarter and $2.8 million for the first quarter 2008. Other income results in 2009 were enhanced by a gain on the sale of $26.0 million in investment securities in March 2009 resulting in a $1.3 million pre-tax gain for the quarter. Fees and service charges decreased $96,000 from the previous three-month period, largely driven by decreases in investment and overdraft fees caused by the economic slowdown. Loan related fee income decreased by $171,000 from the sequential quarter due to lower SBA loan sale income and reduced commercial and commercial real estate loan activity. Mortgage banking activity and income increased from the sequential quarter. Secured credit card contract income also dropped in 2009 as credit-wary borrowers reduced credit card application volume significantly.

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During the first quarter, the Company recorded an other-than-temporary impairment (“OTTI”) of $1,751,000 on one non-agency guaranteed mortgage-backed security. Of the total $1,751,000 OTTI, $244,000 was related to credit losses, and under newly issued accounting guidance, is a charge against earnings. The remaining $1,507,000 reflects non-credit value impairment and was charged against the Company’s other comprehensive income and reported capital on the balance sheet. At this time, the Company anticipates holding the security until its value is recovered or maturity, and will continue to adjust its other comprehensive income and capital position to reflect the security’s current market value. The Company calculated the credit loss charge against earnings by subtracting the estimated present value of future cash flows on the security from its amortized cost.

Non-interest expense for the first quarter of 2009 totaled $10.8 million, a decrease of $1.3 million or 10.7% over the sequential quarter and a decrease of $487,000 or 4.3% over first quarter 2008. The 2009 decreases in non-interest expense were largely comprised of reductions in employee compensation and benefits and reduced other real estate owned (“OREO”) writedowns.

Employee compensation and benefits expense decreased $1.2 million or 17.9%, over the same three-month period last year as a result of decreased staffing levels and lower incentive expense. Efforts to control compensation expense continue in 2009, as the Company has suspended salary increases for executives and officers, maintained a hiring freeze and adjusted other compensation plans.

Occupancy expenses increased $316,000 for the three-month period ended March 31, 2009 compared to the same period one year ago. These increases were comprised of additional building expense from the Sandpoint Center which was opened in the second quarter of 2008 and additional computer hardware and software purchased to enhance security, compliance and business continuity. The Company expects these expenses to stabilize throughout 2009, as it has postponed building expansion plans, limited new hardware and software purchases, and begun to lease out excess space in its Company headquarters building.

Other expenses increased $437,000 for the three-month period over the same period last year but decreased $687,000 from the fourth quarter of 2008. The decrease from the fourth quarter is primarily due to reduced charges on the Company’s OREO portfolio. The increase in other expenses over last year is largely a result of significant increases in loan collection expenses, an additional $354,000 charge to increase the Company’s reserve for unfunded borrowing commitments and increased FDIC insurance assessments.

Balance Sheet and Loan Portfolio Quality Summary:

As of March 31, 2009, assets totaled $1.1 billion, a decrease of $14.4 million, or 1.3%, over December 31, 2008, and an increase of $73.4 million, or 7.2% over March 31, 2008. Total deposits increased $20.9 million, or 2.6%, over December 31, 2008, and loans receivable decreased $29.5 million, or 3.9%, over the same period. Total deposits increased $84.1 million, or 11.6%, from March 31, 2008 to a total of $811.3 million, while loans receivable decreased $25.2 million, or 3.4%, over the same time period.

NOW account and retail CD growth generated most of the deposit growth, as the Company continued to focus on gathering low-cost retail deposits to build both its customer base and long-term franchise value. The deposit growth over both periods occurred despite lower rates and a

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highly competitive deposit environment, and reflected improved sales and marketing efforts by bank staff.

The Company’s loan production efforts intensified in the first quarter, but were offset by reductions in residential real estate construction balances, seasonal declines in agricultural and business operating lines, and reduced borrowing demand. As part of its Powered by Community initiative, the Company is implementing several new residential and commercial lending programs to ensure the credit needs of its communities are met.

Reflective of the challenging economy and increasing weakness in the real estate markets, the Company’s overall credit portfolio remained pressured. Non-performing assets increased to $38.4 million at March 31, 2009, compared to $31.8 million at December 31, 2008 and $9.2 million at March 31, 2008. Non-performing loans totaled $29.3 million at March 31, 2009, versus $27.3 million and $7.1 million at December 31, 2008 and March 31, 2008, respectively. Other real estate owned totaled $9.1 million at March 31, 2009, versus $4.5 million and $2.1 million at December 31, 2008 and March 31, 2008, respectively. Non-performing assets comprised 3.52% of total assets at March 31, 2009 compared to 2.88% at December 31, 2008 and 0.90% at March 31, 2008. The 30-day and-over loan delinquency rate was 1.91% at March 31, 2009, versus 0.90% and 1.13% at December 31, 2008 and March 31, 2008, respectively.

Residential land and construction assets continue to comprise most of the non-performing loan and other-real-estate owned totals, reflecting the ongoing severe weakness in the housing market. General economic pressures are also starting to impact the Company’s other loan portfolios. As a result, elevated levels of non-performing assets are likely to continue for the next several quarters, although the Company is moving aggressively towards resolving or liquidating its position in these assets. Management continues to hold strong capital and reserve positions to offset continuing economic pressures on its loan portfolio.

Available-for-sale investments totaled $196.0 million at March 31, 2009, an increase of $48.4 million, or 32.8%, over December 31, 2008, and an increase of $52.5 million, or 36.6%, over March 31, 2008. During the first quarter, management moved funds from low-yielding Fed Funds investments to higher-yielding, but still liquid, agency-backed securities to increase its interest income.

Office properties and equipment totaled $43.6 million at March 31, 2009, a decrease of $671,000, or 1.5%, over December 31, 2008, and a decrease of $1.1 million, or 2.4%, over March 31, 2008. The sequential quarter decrease primarily reflects depreciation on office properties and equipment. The decrease of $1.1 million from March 31, 2008 was primarily due to depreciation offset by office properties and equipment purchases related to completing and occupying the Sandpoint Center in second quarter 2008.

As of March 31, 2009, Federal Home Loan Bank advances totaled $46.0 million, reflecting no change from December 31, 2008 and an increase of $17.0 million over March 31, 2008. Federal Home Loan Bank advances were primarily used to fund decreases in repurchase agreements. Other borrowings totaled $40.6 million, remaining static from December 31, 2008, and a decrease of $14.8 million over March 31, 2008. The company is in the process of negotiating a new loan facility with its existing lenders to refinance an existing holding company credit line used to construct the Sandpoint Center into three longer-term, amortizing loans. The existing indebtedness of $23.1 million matured, as extended, on April 23, 2009. The Company anticipates repaying these loans within three years through the sale of the building. At March 31, 2009, the Company

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maintained borrowing line availability of $144.4 million, providing additional liquidity for the Bank.

Shareholder’s equity totaled $109.4 million at March 31, 2009, a decrease from fourth quarter of $1.1 million and an increase of $17.1 million over March 31, 2008. The decline from the fourth quarter reflects a decrease in the market value of the available-for-sale investment portfolio and the payment of preferred share dividends to the U.S. Treasury on the funds received through the Treasury’s Capital Purchase Program. The increase from a year ago includes the impact of the December 2008 issuance of $27.0 million of preferred stock to the U.S. Treasury, offset by a decrease in the market value of the available-for-sale investment portfolio. Book value per common share at March 31, 2009 totaled $10.06 compared to $10.24 at December 31, 2008 and $11.14 at March 31, 2008.

About Intermountain Community Bancorp:

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

All data contained in this report have been prepared on a consolidated basis for Intermountain Community Bancorp. IMCB’s shares are listed on the OTC Bulletin Board, ticker symbol IMCB.OB.

Additional information on Intermountain Community Bancorp, and its internet banking services, can be found at www.intermountainbank.com.

This news release contains forward-looking statements within the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include but are not limited to statements about the Company’s plans, objectives, expectations and intentions and other statements contained in this report that are not historical facts. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. Actual results may differ materially from the results discussed in these forward-looking statements because of numerous possible risks and uncertainties. These include but are not limited to: the possibility of adverse economic developments that may, among other things, increase default and delinquency risks in the Company’s loan portfolio; shifts in interest rates that may result in lower interest rate margins; shifts in the demand for the Company’s loan and other products; lower-than-expected revenue or cost savings in connection with acquisitions; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; and changes in laws, regulations and the competitive environment.

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INTERMOUNTAIN COMMUNITY BANCORP
CONSOLIDATED BALANCE SHEETS
(Unaudited)

	March 31,			December 31,			March 31,
	2009			2008			2008
	(Dollars in thousands,
	except per share amounts)
ASSETS
Cash and Cash Equivalents	$	54,436		$	94,825		$	30,057
Loans Receivable, Net		723,160			752,615			748,349
Loans Held for Sale		3,545			933			3,143
Investments and Asset-Backed Securities (“ABS”) Available for Sale		195,980			147,618			143,518
Investments and ABS Held to Maturity		17,575			17,604			11,293
Federal Home Loan Bank of Seattle stock, at cost		2,310			2,310			1,779
Office properties and equipment, net		43,625			44,296			44,701
Goodwill		11,662			11,662			11,662
Other Intangible Assets, net		542			576			686
Bank-owned life insurance		8,127			8,037			7,788
Prepaid expenses and other assets		30,163			25,079			14,725
Total assets	$	1,091,125		$	1,105,555		$	1,017,701
LIABILITIES
Deposits	$	811,286		$	790,412		$	727,148
Advances from Federal Home Loan Bank		46,000			46,000			29,000
Repurchase Agreements		76,512			109,006			105,006
Other borrowings		40,603			40,613			55,402
Accrued expenses and other liabilities		7,367			9,039			8,863
Total liabilities		981,768			995,070			925,419
STOCKHOLDERS’ EQUITY
Common stock		78,319			78,261			76,746
Preferred stock		25,226			25,149			—
Accumulated other comprehensive income (loss), net of tax (1)		(6,666	)		(5,935	)		2,070
Retained earnings		12,478			13,010			13,466
Total stockholders’ equity		109,357			110,485			92,282
Total liabilities and stockholders’ equity	$	1,091,125		$	1,105,555		$	1,017,701
Book value per common share, excluding preferred stock	$	10.06		$	10.24		$	11.14
Tangible Book Value per common share, excluding preferred stock (2)	$	8.60		$	8.77		$	9.65
Shares outstanding at end of period		8,361,472			8,333,009			8,283,176
Shareholders’ Equity to Total Assets		10.02	%		9.99	%		9.07	%
Tangible Shareholders’ Equity to Tangible Assets (3)		9.00	%		8.99	%		7.95	%

(1)	Net of deferred income taxes
(2)	Amount represents common shareholders’ equity less net goodwill and other intangible assets divided by total shares outstanding.
(3)	Amount represents shareholders’ equity less net goodwill and other intangible assets divided by assets less net goodwill and other intangible assets.

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INTERMOUNTAIN COMMUNITY BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three Months Ended
	March 31,			December 31,			March 31,
	2009			2008			2008
	(Dollars in thousands,
	except per share amounts)
Interest income:
Loans	$	11,648		$	12,556		$	15,017
Investments		2,699			2,122			2,184
Total interest income		14,347			14,678			17,201
Interest expense:
Deposits		3,342			3,708			4,029
Borrowings		1,103			1,583			1,846
Total interest expense		4,445			5,291			5,875
Net interest income		9,902			9,387			11,326
Provision for losses on loans		(2,770	)		(5,512	)		(258	)
Net interest income after provision for losses on loans		7,132			3,875			11,068
Other income:
Fees and service charges		1,669			1,836			1,765
Loan related fee income		540			711			645
Net gain on sale of securities		1,295			—			—
Other-than-temporary impairment		(244	)		—			—
(impairment loss of $244, consisting of $1,751 of total other-than-temporary impairment losses, net of $1,507 recognized in other comprehensive income, for the quarter ended March 31, 2009)
Bank-owned life insurance		90			85			74
Other income		163			283			294
Total other income		3,513			2,915			2,778
Operating expenses:
Salaries and employee benefits		5,706			6,379			6,946
Occupancy expense		1,968			1,900			1,652
Other expenses		3,098			3,785			2,661
Total operating expenses		10,772			12,064			11,259
Income (loss) before income taxes		(127	)		(5,274	)		2,587
Income tax (provision) benefit		9			2,379			(933	)
Net income (loss)		(118	)		(2,895	)		1,654
Preferred stock dividend		414			45			—
Net income (loss) applicable to common shareholders	$	(532	)	$	(2,940	)	$	1,654
Earnings per share — basic	$	(0.06	)	$	(0.35	)	$	0.20
Earnings per share — diluted	$	(0.06	)	$	(0.35	)	$	0.19
Weighted-average common shares outstanding — basic		8,348,238			8,315,234			8,271,104
Weighted-average common shares outstanding — diluted		8,348,238			8,315,234			8,564,618

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INTERMOUNTAIN COMMUNITY BANCORP
KEY PERFORMANCE RATIOS

	THREE MONTHS ENDED
	March 31,			December 31,			March 31,
	2009			2008			2008
Net Interest Spread:
Yield on Loan Portfolio		6.27	%		6.46	%		7.89	%
Yield on Investments & Cash		4.52	%		4.13	%		5.16	%
Yield on Interest-Earning Assets		5.84	%		5.97	%		7.40	%
Cost of Deposits		1.71	%		1.87	%		2.20	%
Cost of Advances		3.96	%		3.78	%		4.55	%
Cost of Borrowings		2.02	%		3.32	%		3.85	%
Cost of Interest-Bearing Liabilities		1.86	%		2.17	%		2.56	%
Net Interest Spread		3.98	%		3.80	%		4.84	%
Net Interest Margin		4.03	%		3.82	%		4.87	%
Performance Ratios:
Return on Average Assets		(0.04	)%		(1.07	)%		0.64	%
Return on Average Common Shareholders’ Equity		(2.55	)%		(13.42	)%		7.29	%
Return on Average Common Tangible Equity		(2.98	)%		(15.62	)%		8.44	%
Operating Efficiency		80.30	%		98.06	%		79.83	%
Noninterest Expense to Average Assets		3.98	%		4.45	%		4.38	%

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INTERMOUNTAIN COMMUNITY BANCORP
LOAN DATA

	March 31,			December 31,			March 31,
	2009			2008			2008
	(Dollars in thousands)
Net Charge-Offs to Average Net Loans (Annualized)		0.96	%		1.11	%		0.04	%
Loan Loss Allowance to Total Loans		2.35	%		2.14	%		1.57	%
Nonperforming Assets:
Accruing Loans-90 Days Past Due	$	709		$	913		$	890
Nonaccrual Loans		28,606			26,365			6,160
Total Nonperforming Loans		29,315			27,278			7,050
OREO		9,052			4,541			2,143
Total Nonperforming Assets (“NPA”)	$	38,367		$	31,819		$	9,193
NPA to Total Assets		3.52	%		2.88	%		0.90	%
NPA to Total Loans Receivable		5.29	%		4.23	%		1.23	%
NPA to Risk Based Capital		29.53	%		24.58	%		8.77	%
NPA to Tangible Equity + Allowance for Loan Loss		33.48	%		27.75	%		10.01	%
Loan Delinquency Ratio (30 days and over)		1.91	%		0.90	%		1.13	%

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