SANDPOINT, Idaho, July 27, 2011 (GLOBE NEWSWIRE) — Intermountain Community Bancorp (OTCBB:IMCB), the holding company for Panhandle State Bank, reported second quarter results with improved net interest margin, increased interest income and reduced operating expenses. The net loss applicable to common shareholders for the second quarter totaled .1 million, or .13 per common share, compared to net loss applicable to common shareholders of 2,000, or .05 per common share in the first quarter of 2011, and a net loss of .9 million, or .35 per common share in the second quarter of 2010. Before dividends on preferred stock outstanding, the Company’s net loss was 5,000 for the second quarter of 2011, compared to net income of ,000 in the first quarter of 2011, and a net loss of .5 million in the second quarter of 2010. The increase in net loss applicable to common shareholders for the current quarter compared to the previous quarter is primarily due to an increase in the loan loss provision partially offset by an increase in net interest income and a decrease in operating expenses.
For the first six months of 2011, Intermountain recorded a net loss applicable to common shareholders of .5 million, or .18 per share, a significant improvement over the net loss applicable to common shareholders of .7 million, or .91 per share recorded during the first six months of 2010.
“We continue to improve our credit quality metrics and focus on our strategic objectives of completing our announced capital raise, improving asset quality, reducing expenses, and remaining flexible in this changing economic environment,” said Curt Hecker, Chief Executive Officer. “Our loan loss provision, net chargeoffs, other credit costs and non performing assets are all lower than in 2010. Our net interest margin has also improved, reflecting decreases in interest expense and the deployment of some cash into higher yielding loans and marketable securities.”
Second Quarter 2011 Highlights (at or for the period ended June 30, 2011, compared to June 30, 2010, or March 31, 2011)
On April 6, 2011, the Company announced that it has entered into securities purchase agreements with certain accredited investors (the “Investors”), pursuant to which it expects to raise aggregate gross proceeds of million in a private placement, subject to bank regulatory approvals and confirmations and satisfaction of other customary closing conditions. The Company also plans to conduct a million rights offering after the closing of the private placement that will allow existing shareholders to purchase common shares at the same purchase price per share as the Investors. The Company anticipates that the million private placement will be completed in the third quarter of 2011 and the rights offering will commence shortly after the private placement closes.
Net interest margin increased to 4.14% in the quarter ended June 30, 2011, up from 3.89% in the first quarter of 2011 (“the sequential quarter”) and 3.71% in the second quarter of 2010.
Transaction deposits now comprise 65.52% of total deposits, compared to 63.47% a year ago, as the Company continues to phase out higher cost funding instruments, such as brokered and collateralized certificates of deposit.
Intermountain reduced its average interest cost on deposits by 4 basis points from the prior quarter and 39 basis points from one year ago.
The provision for loan losses for the six months ended June 30, 2011 dropped by .4 million to .3 million compared to the six months ended June 30, 2010. The provision for loan losses for the three months ended June 30, 2011 was .7 million compared to .6 million in the previous quarter and .9 million for the quarter ended June 30, 2010. The increase in the provision from the sequential quarter primarily reflected valuation adjustments on several land development loans.
Nonperforming assets (NPAs) at June 30, 2011 decreased by .9 million, or 17.2% from the end of the first quarter and by .0 million, or 30.1% from June 30, 2010. At 1.93% of total assets versus 2.28% in the sequential quarter and 2.49% at June 30, 2010, the Company’s NPA/Total Asset ratio continues to trend down and be relatively low compared to peer group averages.
Reserves for potential loan losses stood at .7 million, or 2.44% of total loans, compared to .5 million, or 2.26% of total loans in the sequential quarter and .7 million, or 2.16% of total loans at the end of June 2010.
Loan delinquencies (30 days past due and over) have trended down to 0.32% of total loans compared to 0.54% in the first quarter of 2011 and 0.50% in the second quarter of 2010.
Capital ratios were stable during the second quarter. The Company’s estimated Tier 1 Leverage and Total Risk Based Capital ratios were 7.0% and 11.3% in the second quarter, respectively, as compared to 6.8% and 11.6% in the first quarter.
Liquidity continues at historically high levels represented by cash and cash equivalents, marketable securities, loan-to-deposit ratios and the availability of alternative funding sources.
“We continue to be encouraged with improvements in operating results,” said Hecker. “Virtually every aspect of the income statement has improved significantly over the prior year. However we are not yet satisfied with our position and our team continues to be very focused on returning the Company to strong levels of profitability. We are moving forward in our strategic plan by aggressively reducing credit losses and other expenses, maintaining our strong net interest margin, and re-deploying assets to improve yield at reasonable levels of risk. Amidst continuing economic challenges, we continue to work closely with our customers and communities to boost local growth, improve our customers’ profitability, and add value to these relationships.”
Asset Quality
Nonperforming loans totaled .7 million at June 30, 2011 down from .7 million at the end of March 2011, and down from .8 million at the end of the same period last year. The allowance for loan loss coverage of non-performing loans totaled 127.5% in the second quarter, up from 66.7% in the first quarter and 77.4% at June 30, 2010.
Total nonperforming assets (NPAs) were .6 million at quarter end, down from .4 million at March 31, 2011, and down from .5 million at June 30, 2010.�At quarter end, the ratio of NPAs to total assets was 1.93% versus 2.28% at March 31, 2011 and 2.49% at June 30, 2010.�At 0.32%, loan delinquencies (30 days or more past due) were down from 0.54% in the prior quarter and down from the 0.50% rate experienced a year ago.
Classified loans totaled .7 million at quarter end, compared to .2 million for the sequential quarter and .8 million a year ago.�Classified loans are loans in which the Bank anticipates potential problems in obtaining repayment of principal and interest per the contractual terms, but does not necessarily believe that losses will occur.
The following tables summarize nonperforming assets by type and geographic region, and provide trending information over the prior year.
NPAs trended down from both last year and the first quarter, as the Company continued its aggressive focus on this area.�”While our NPA levels continue to be below many of our peers and the risk of potential loss from problem credits is significantly reduced, we still have work to do, and will continue our efforts in these areas,” noted Hecker.
At .8 million, OREO balances increased by .1 million from March 31, 2011, primarily due to the addition of one land development project totaling .9 million.�OREO balances decreased 6,000, or 10.7% from one year ago.�The Company sold 25 properties totaling .1 million in the second quarter, had net valuation adjustments of ,000 and added 8 properties totaling .2 million. For the first six months of 2011, the Company sold 39 properties totaling .4 million, wrote off 6,000 and added 18 properties totaling .1 million for the six months ended June 30, 2011. The dollar additions for both the three- and six-month periods primarily reflect the addition of the larger land development loan noted above.�A total of 26 properties remained in the OREO portfolio at quarter end, consisting of .8 million in construction and land development properties, 2,000 in commercial real estate properties, and 0,000 in residential real estate.
Assets and Loan Portfolio Summary
Assets totaled 0.7 million at June 30, 2011, down slightly from 0.9 million at March 31, 2011, and from .07 billion at June 30, 2010.�Net loans receivable of 8.2 million at June 30, 2011 increased .6 million, or 1.4% from the sequential quarter and were down .9 million, or 12.0% year-over-year.�The increases over the first quarter reflected growth in the commercial, commercial real estate and agricultural portfolios, offset by continued reductions in land development and commercial construction balances.�These increases reflected a slight rebound in lending demand as business activity in the Company’s markets improved, combined with seasonal factors. Since June 30, 2010, land development and commercial construction loans have decreased by .6 million, or 30.7%, reflecting management’s ongoing efforts to reduce these higher-risk assets.�Smaller year-over-year reductions during the last twelve months in most other portfolio categories are indicative of the muted economic climate and reduced loan demand from cautious borrowers. Reductions in the agricultural portfolio reflect very strong market conditions within the industry, resulting in high profit levels, higher cash levels and lower borrowing needs, although agricultural loan balances did start increasing in second quarter 2011.�”Loan demand is closely tied with both current and expected economic conditions, and while the climate is better than a year ago, it remains challenging,” noted Hecker.�”However, the close relationships we have with customers and our communities, and the expertise we hold in certain sectors, including agribusiness, municipalities, small manufacturing, and professional services are providing opportunities for loan production,” he added.�
Deposit, Investment Portfolio and Equity Summary
Deposits totaled 6.0 million at June 30, 2011, down from 7.6 million at March 31, 2011 and 6.8 million at June 30, 2010.�The year-over-year reduction was comprised largely of planned decreases of brokered and retail CD accounts totaling .4 million, as the Company focused on reducing its non-core funding and cost of funds.�Non-interest bearing deposit balances were stable during this period, while money market and NOW accounts decreased, reflecting the impacts of continued rate reductions, usage by businesses to fund operations and reduce debt, and conversion of both CD and money market funds into non-FDIC investments offered through the Company’s Trust and Investments division.�Transaction deposits now represent 65.5% of total deposits, up from 65.4% at March 31, 2011 and 63.5% at June 30, 2010.�Jumbo, brokered and collateralized deposits continued to decline, both in absolute terms and as a percent of the overall portfolio, reflecting the ongoing strategy to build lower cost core deposits.�
Available-for-sale investments totaled 0.1 million at June 30, 2011, an increase of 17.4% from June 30, 2010.�The increase reflects partial deployment of excess federal funds which had been held to maintain a conservative cash and investment position. “The partial deployment of these funds into high-quality marketable securities with relatively short durations should improve overall asset yield at a reasonable risk level,” Chief Financial Officer Doug Wright said.
Stockholders’ equity totaled .4 million at June 30, 2011, compared to .1 million at March 31, 2011, and .6 million at June 30, 2010.�Tangible book value per common share totaled .07 compared to .92 in the first quarter 2011 and .47 at June 30, 2010. Tangible stockholders’ equity to tangible assets was 3.56% compared to 3.36% at March 31, 2011 and 4.36% at the end of the second quarter 2010.�
Income Statement Summary
The net loss applicable to common shareholders for the second quarter totaled .1 million, or .13 per common share, compared to net loss applicable to common shareholders of 2,000, or .05 per common share in the first quarter of 2011, and a net loss applicable to common shareholders of .9 million, or .35 per common share in the second quarter of 2010.�Before dividends on preferred stock outstanding, the Company’s net loss was 5,000 for the second quarter of 2011, compared to net income of ,000 in the first quarter of 2011, and a net loss of .5 million in the second quarter of 2010.�The increase in net loss applicable to common shareholders for the current quarter compared to the previous quarter is primarily due to an increase in the loan loss provision partially offset by an increase in net interest income and a decrease in operating expenses.
Second quarter 2011 net interest income before provision totaled .0 million, up from .7 million in the first quarter 2011, and up from .8 million in the second quarter last year.�The increase from first quarter reflects increased yields on investment securities and decreased cost of deposits.�The increase from last year primarily reflects lower funding costs as rates paid on interest-bearing liabilities have declined significantly.
Net interest margin was 4.14% for the second quarter, compared to 3.89% for the sequential quarter and 3.71% for the same period last year. The increase from the sequential quarter is a result of improvement in the yield on investments and cash, as the Company converted some of its cash position into higher-yielding investments, and prepayments slowed on its mortgage-backed security portfolio.�The increase in margin from a year ago reflects a substantial decrease in the Bank’s interest cost on deposits, which is now at 0.62% versus 0.66% in the prior quarter and 1.01% in the second quarter of 2010.�The continued reduction in the cost of deposits and interest-bearing liabilities reflects ongoing efforts to reduce non-core deposits and re-price the remaining liabilities down.�”During the second quarter we also began the process of conservatively boosting loan balances and purchasing high-quality but better yielding marketable securities with a portion of our excess cash balances. We will continue to look for more opportunities to assist strong borrowers in growing their businesses in future quarters,” Wright said.
Intermountain recorded a .7 million provision for loan losses in the second quarter, up from .6 million in the sequential quarter and down from .9 million in the same period a year ago.�For the second quarter, net charge-offs (NCOs) were .5 million compared to .6 million in the prior quarter and .5 million in the second quarter of 2010. “The loss provision was up from first quarter primarily due to decreases in collateral values in the very few remaining large land development loans we still hold,” stated Hecker, “but we believe our overall risk of additional loss continues to decrease and is significantly lower than in 2009 and 2010.”�
Other income in the second quarter of 2011 was .7 million, unchanged from .7 million in the sequential quarter but down from .0 million in the same period a year ago.�The decrease from a year ago reflected reduced overdraft fee income and lower mortgage origination activity offset by the decrease in other-than-temporary impairment (OTTI) credit loss of 7,000.�There was no OTTI credit loss in the second quarter of 2011.
Operating expenses for the second quarter of 2011 totaled .6 million, down .1 million from the first quarter of 2011 and .7 million from the second quarter last year, as the Company continued to implement its cost reduction plans.�Continued reductions in staffing led to a 1,000 reduction in compensation expense from the same period last year, even with severance expense and catch-up incentive accruals temporarily offsetting some of the reduction.�Reductions in leased space and depreciation on equipment and software reduced occupancy and technology expense by ,000, and lower deposit totals and a revised FDIC assessment calculation produced the 0,000 reduction in FDIC assessments.�Improving asset quality and a lower average OREO balance led to a .2 million reduction in OREO operations expense over last year.�
“Improving efficiency continues to be a very high priority for us,” said Hecker, “and we are making strong and sustained gains in this area.�We expect this to be an ongoing process with the culmination of several significant projects in the third quarter of this year as we refine operations to generate revenue levels at a lower overall cost.”
The Company did not record a tax provision or benefit for the second quarter.�The net deferred tax asset was reduced by .5 million from March 31, 2011, primarily due to the increase in the unrealized gain on investment securities, after tax, totaling .7 million. The net deferred tax asset has an .8 million valuation allowance against the net operating losses.�
Planned Capital Raise
On April 6, 2011, the Company announced that it had entered into securities purchase agreements with certain accredited investors, pursuant to which it expects to raise aggregate gross proceeds of million, subject to bank regulatory approvals and confirmations and satisfaction of other customary closing conditions, through the issuance and sale in a private placement of 70 million shares of common stock at .00 per share. The Company also plans to conduct a million rights offering after the closing of the private placement that will allow existing shareholders to purchase common shares at the same purchase price per share as the Investors. Certain of the Investors have agreed, subject to applicable regulatory limitations, to purchase shares any existing shareholders do not purchase in the rights offering. The Company expects to use the proceeds from the private placement and the rights offering to make capital contributions to and strengthen the balance sheet of the Bank, for other general corporate purposes and as otherwise provided for in the agreements. The Company presently expects the private placement to close in the third quarter.
About Intermountain Community Bancorp:
Intermountain is headquartered in Sandpoint, Idaho, and operates as four separate divisions with nineteen banking locations in three states.�Its banking subsidiary, Panhandle State Bank, offers financial services through northern Idaho offices in Sandpoint, Ponderay, Bonners Ferry, Priest River, Coeur d’Alene, Post Falls, Rathdrum and Kellogg.�Intermountain Community Bank, a division of Panhandle State Bank, operates branches in southwest Idaho in Weiser, Payette, Nampa, Caldwell and Fruitland, as well as in Ontario, Oregon.�Intermountain Community Bank Washington, a division of Panhandle State Bank, operates branches in downtown Spokane and Spokane Valley, Washington. Magic Valley Bank, a division of Panhandle State Bank, operates branches in Twin Falls and Gooding, Idaho.�
All data contained in this report have been prepared on a consolidated basis for Intermountain Community Bancorp.�IMCB’s shares are quoted on the OTC Bulletin Board, ticker symbol IMCB.�Additional information on Intermountain Community Bancorp, and its internet banking services, can be found at www.intermountainbank.com.�
The Intermountain Community Bancorp logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8745
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.�Such forward-looking statements may include but are not limited to statements about the Company’s plans, objectives, expectations and intentions and other statements contained in this report that are not historical facts.�These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control.�Actual results may differ materially from the results discussed in these forward-looking statements because of numerous possible risks and uncertainties.�These include but are not limited to the following and the other risks described in the “Risk Factors,” “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections, as applicable, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2011; any failure to obtain required regulatory approvals and satisfy other closing conditions under the securities purchase agreements and any resulting inability to complete the issuance and sale of the securities in the manner intended; 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; a continued decline in the housing and real estate market; a continued increase in unemployment or sustained high levels of unemployment; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; and changes in laws, regulations and the competitive environment. Readers are cautioned that forward-looking statements in this release speak only as of the date of this release.�The Company does not undertake any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Additional Information
This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
CONTACT: Curt Hecker, CEO
Intermountain Community Bancorp
(208) 263-0505
curt.hecker@panhandlebank.com
Doug Wright, Executive Vice President & CFO
Intermountain Community Bancorp
(509) 363-2635
doug.wright@intermountainbank.com
Carolyn Shaw, Senior Vice President, Risk Manager and
Financial Accounting Officer
Intermountain Community Bancorp
(509) 944-3888
carolyn.shaw@intermountainbank.com
http://bit.ly/pj3SEo
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