SANDPOINT, Idaho, April 19, 2011 (GLOBE NEWSWIRE) -- Intermountain Community Bancorp (OTCBB:IMCB), the holding company for Panhandle State Bank, reported first quarter results with improved net interest margin, lower credit losses and reduced operating expenses producing near break-even performance. The net loss applicable to common shareholders for the first quarter totaled $442,000, or $0.05 per common share, compared to net losses of $1.1 million, or $0.13 per common share in the fourth quarter of 2010, and net losses of $4.7 million, or $0.56 per common share in the first quarter of 2010. Before dividends on preferred stock outstanding, the Company's net income was $1,000 for the first quarter of 2011, compared to net losses of $626,000 in the fourth quarter of 2010, and $4.3 million in the first quarter of 2010.
First Quarter 2011 Highlights (at or for the period ended March 31, 2011, compared to March 31, 2010, or December 31, 2010)
- After the end of the quarter, 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 $70 million, subject to bank regulatory approvals and confirmations and satisfaction of other customary closing conditions. The Company also plans to conduct a $5 million rights offering after the closing of the capital raise that will allow existing shareholders to purchase common shares at the same purchase price per share as the Investors.
- Net interest margin decreased slightly to 3.89% from 3.97% in the fourth quarter and improved from 3.57% in the first quarter, 2010.
- Low-cost transaction deposits increased by $5.5 million from the fourth quarter. Transaction deposits now comprise 65.38% of total deposits, compared to 61.90% 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 6 basis points from the prior quarter and 52 basis points from a year ago.
- The provision for loan losses dropped by $0.6 million in the first quarter to $1.6 million, down from $2.2 million in the fourth quarter, and $6.8 million in the quarter ended March 31, 2010.
- Although increased from the fourth quarter, nonperforming assets (NPAs) have decreased by $12.0 million, or 34.84% from the prior year. At 2.28% of total assets versus 1.59% at year end and 3.20% at March 31, 2010, the Company's NPA/Total Asset ratio continues to be relatively low compared to peer group averages.
- Reserves for potential loan losses stood at $12.5 million, or 2.26% of total loans, compared to $12.5 million, or 2.16% of total loans at year end and $18.3 million, or 2.85% of total loans at the end of the March 2010.
- Loan delinquencies (30 days past due and over) were stable at 0.54% of total loans compared to 0.55% in the fourth quarter of 2010 and 0.33% in the first quarter of 2010.
- The Total Risk Based Capital Ratio improved to an estimated 11.6% from 11.3% at year end and the Tier 1 Leverage Ratio was stable at 6.8% at March 31, 2011.
- Liquidity continues at historically high levels represented by cash and cash equivalents, marketable securities, local deposit growth and borrowing line availability.
"First quarter operating results continued to show encouraging trends for the Company," said Chief Executive Officer Curt Hecker. "We saw Company performance improve to break-even operating levels with stronger margins, lower credit costs and reduced non-interest expense, even during what is traditionally our least robust seasonal quarter."
"Our capital raise announcement represents an important step forward and sets the foundation for our future plans to continue serving our communities through customized relationship banking," Hecker added. "This investor vote of confidence in our Company and the communities we serve reflects well on our market position as a premier community bank in Idaho, Eastern Oregon and Eastern Washington."
Hecker explained that the Company continues to be very active in developing business in all of its markets. "As our local and regional economies gradually improve, we are vigorously cultivating new loan demand in our region and assisting businesses and community organizations to enhance their profitable operations through our targeted Powered by Community initiatives."
Nonperforming loans totaled $18.7 million at March 31, up from $11.5 million at the end of December, but down from $22.8 million at the end of the same period last year. Total nonperforming assets (NPAs) were $22.4 million at quarter-end, up from $15.9 million at year-end, and down from $34.4 million at March 31, 2010. At quarter end, the ratio of NPAs to total assets was 2.28% versus 1.59% at December 31, 2010 and 3.20% at March 31, 2010. Two credit relationships comprise the bulk of the increase in NPAs since year-end, both of which are expected to be resolved in the near future with no or minimal additional loss. At 0.54%, loan delinquencies (30 days or more past due) were slightly down from 0.55% in the prior quarter and up from the 0.33% rate experienced a year ago.
The same two credit relationships resulted in an increase in classified loans in the first quarter to $61.2 million from $54.1 million at year-end, although the total was down $9.8 million, or 13.8% from 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.
"Although we're disappointed that these relationships produced an increase in our NPA and classified numbers in the first quarter, we believe that the overall quality of our credit portfolio has improved significantly over the past year," noted Hecker. "The losses we are now taking, even on these two credits, are much lower than one or two years ago, and our aggressive earlier efforts are paying off in reduced chargeoffs and loss provision numbers now," he added.
The following tables summarize nonperforming assets by type and geographic region, and provide trending information over the prior year.
The increase in non-performing land and land development loans during the quarter reflects the addition of the relationships noted above, but is still trending down from the peak levels of a year-and-a-half ago, as the Company has worked aggressively to reduce exposure in this area. Commercial and commercial real estate NPAs are up slightly from year-end, largely reflecting slow seasonal factors, but down from totals a year ago. "Our credit officers and special assets group continue to work aggressively to reduce exposure in our overall portfolio and have already liquidated or resolved the highest risk construction and development loans," Hecker said. "As such, our NPA levels continue to be below many of our peers, allowing us to focus more on future loan growth opportunities."
At $3.7 million, OREO balances continue to trend down, dropping by 16.8% from the prior quarter and 68.1% from March 2010. The Company has sold 17 properties totaling $1.3 million and written off $0.4 million since December 31, 2010, partially offset by the addition of 10 properties totaling $0.9 million for the quarter ended March 31, 2011. A total of 43 properties remained in the OREO portfolio at quarter end, consisting of $1.5 million in construction and land development properties, $0.8 million in commercial real estate properties, and $1.4 million in residential real estate. "We anticipate that OREO balances may temporarily increase in the second quarter, as the Company works to resolve the increased non-performing loan balances," Hecker observed, "but overall the trend has shown strong improvement."
Assets and Loan Portfolio Summary
Assets totaled $981.9 million at March 31, 2011, down slightly from $1.0 billion at December 31, 2010, and from $1.07 billion at March 31, 2010. Net loans receivable of $540.6 million at March 31, 2011 declined 4.0% from the preceding quarter and were down 13.3% year-over-year. Reductions in land development, residential and commercial construction loans totaled $55.8 million, or 41.0% from a year ago, reflecting management's ongoing efforts to reduce these higher-risk assets. Smaller reductions 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, resulting in high profit levels, higher cash levels and lower borrowing needs, although agricultural loan balances did start increasing in March. "We continue to promote responsible loan growth in our communities and work with businesses, farmers and consumers to meet their credit and ongoing business needs," Hecker said.
Deposit, Investment Portfolio and Equity Summary
Deposits totaled $767.6 million at March 31, 2011, down from $778.8 million at year-end and $826.0 million at March 31, 2010. The year-over-year reduction was comprised largely of planned decreases of brokered and single-account large retail CD accounts totaling $29.9 million, as the Company focused on reducing its non-core funding and cost of funds. Transaction deposits increased by $5.5 million from year-end, reflecting higher money market balances from core customers. They now represent 65.4% of total deposits, up from 63.7% at year-end and 61.9% at March 31, 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 $173.5 million at March 31, 2011, a decrease of 7.5% from March 31, 2010. The decrease largely reflects paydowns in the Company's mortgage-backed securities portfolio. "While we continue to maintain a conservative cash and investments position, we have recently purchased approximately $40 million in new agency-guaranteed securities that will settle in April to improve overall asset yield," Chief Financial Officer Doug Wright said.
Stockholders' equity totaled $59.1 million at March 31, 2011, compared to $59.4 million at December 31, 2010, and $84.6 million at March 31, 2010. Tangible book value per common share totaled $3.92 compared to $3.96 in the fourth quarter and $5.60 at March 31, 2010. Tangible stockholders' equity to tangible assets was 3.36% compared to 3.31% at year end and 4.42% at the end of the first quarter 2010.
Income Statement Summary
First quarter 2011 net interest income before provision totaled $8.7 million, down from $9.1 million in the fourth quarter, but up from $8.4 million in the first quarter last year. The decrease from fourth quarter reflects continued reductions in asset yields resulting from loan pay downs and reversed interest income on non-accrual loans, partially offset by reductions in interest expense. The increase from last year primarily reflects lower funding costs as rates paid on interest-bearing liabilities have declined significantly.
Net interest margin was 3.89% for the first quarter, compared to 3.97% for the sequential quarter and 3.57% for the same period last year. The slight decrease from the sequential quarter reflects higher balances of low-yielding cash assets and interest reversed on non-performing loans. The increase in margin from a year ago reflects a substantial decrease in the Bank's cost of interest-bearing liabilities, which is now at 0.78% versus 0.87% in the prior quarter and 1.33% in the first quarter of 2010. The continued reduction in the cost of interest-bearing liabilities reflects the strong, low-cost funding mix resulting from the high percentage of local core deposits in the deposit base. "As industry and Company risk subsides, we plan to re-deploy some of the lower yielding cash into high-quality investments and loans," Wright noted. "We've already begun this process with increasing loan balances in March and the purchase of additional marketable securities in April. We will continue to look for more opportunities to assist strong borrowers in growing their businesses in future quarters," he said.
Intermountain recorded a $1.6 million provision for loan losses in the first quarter, down from $2.2 million in the fourth quarter and $6.8 million in the same period a year ago. For the first quarter, net charge-offs (NCOs) were $1.6 million compared to $4.1 million in the prior quarter and $5.1 million in the first quarter of 2010. "Net charge-offs are down significantly as we've already worked many of our problem loans through the credit process," stated Hecker. At March 31, 2011, the allowance for loan losses totaled 2.26% of total loans compared to 2.16% of total loans at December 31, 2010 and 2.85% at March 31, 2010.
Other income in the first quarter of 2011 was $2.7 million, unchanged from $2.7 million in the fourth quarter of 2010, but up from $2.5 million in the same period a year ago. The increase from a year ago reflected higher debit card, trust, investment and secured savings income, which offset lower overdraft fee income.
Operating expenses for the first quarter of 2011 totaled $9.7 million, down $0.4 million from the fourth quarter and $1.8 million from the first quarter last year, as the Company continued to implement its cost reduction plans. Careful management of staffing led to an $885,000 reduction in compensation expense from the same period last year. Reductions in leased space and depreciation on equipment reduced occupancy expense by $41,000, and lower deposit totals produced the $24,000 reduction in FDIC assessments. Improving asset quality and a much lower OREO balance led to the significant reduction in OREO operations expense over last year. The $83,000 reduction in other expenses reflected Company efforts to improve efficiency in a variety of areas, including computer services, telecommunications, training, legal, marketing, consulting, courier and armored car costs.
"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 as we refine operations to generate higher revenue levels at a lower overall cost."
Because pre-tax income was near break-even and the Company had previously recorded a non-cash valuation allowance against the Company's deferred tax assets (DTA), it did not record a tax provision for the first quarter. The net deferred tax asset remained stable for the quarter as well, totaling $15.2 million, including an $8.8 million valuation allowance.
Planned Capital Raise
On April 6, 2011, the Company announced that it had entered into securities purchase agreements with certain accredited investors ("Investors"), pursuant to which it expects to raise aggregate gross proceeds of $70 million, subject to bank regulatory approvals and confirmations and satisfaction of other customary closing conditions, through the issuance and sale of 70 million shares of common stock at $1.00 per share. The Company also plans to conduct a $5 million rights offering after the closing of the capital raise that will allow existing shareholders to purchase common shares at the same purchase price per share as the Investors. Certain 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 capital raise 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 transaction to close in the second 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 .
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; 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.
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 email@example.com Doug Wright, Executive Vice President & CFO Intermountain Community Bancorp (509) 363-2635 firstname.lastname@example.org Carolyn Shaw, Senior Vice President, Risk Manager and Financial Accounting Officer Intermountain Community Bancorp (509) 944-3888 email@example.com