Intermountain Community Bancorp, of Sandpoint, has reported third-quarter earnings of $226,000, or 3 cents a share, down almost 91 percent from $2.4 million, or 38 cents a share, in the year-earlier quarter.

The company also has had a reduction in force, although it says it isn't reporting personnel numbers until this week.

Intermountain, which has four divisions with 20 banking locations in three states, blamed its diminished earnings on declining net interest margins, increased credit losses, and a doubling of the amount it set aside in the third quarter to cover potential future loan losses.

"While we believe the measures recently enacted by the government will add some stability and calm to the financial markets, the underlying economy remains weak," says CEO Curt Hecker. He says that despite falling interest rates and a dramatic slowdown in the economy, "Through careful balance sheet management, we've managed to avoid net losses thus far while increasing our risk-based capital, liquidity, and reserve positions."

Doug Wright, Intermountain's chief financial officer, says that while Intermountain's earnings have fallen, they've not plunged nearly as much as those of financial institutions in states hit hard by the nation's credit crisis, Wright says. "We feel very fortunate to this point," he says.

For the nine months ended Sept. 30, the company's earnings plummeted to $4.1 million, or 49 cents a share, compared with $6.7 million, or 78 cents a share, in the first nine months of 2007.

The company says it reduced its employee compensation and benefits expense in 2008's first nine months by $166,000, or almost 1 percent, "as a result of decreased staffing levels and incentive expenses. With the slowdown in the economy and the company's growth, the company has moved to further control personnel expense," it says.

Wright says, "We have reduced the overall number of people we have. We've had relatively minor adjustments outside of the mortgage area. We did make some adjustments in the mortgage area because our volume had gone down so much." Wright says Intermountain will report its personnel numbers this week when it files a quarterly report with the Securities and Exchange Commission.

Intermountain set aside $2.5 million in the third quarter for loan losses, compared with $1.2 million in the year-earlier period. Net charge-offs of bad loans totaled $2.3 million in the quarter, up from $611,000 in the third quarter of 2007.

The company's assets totaled $1.05 billion as of Sept. 30, up 0.71 percent from a year earlier, while deposits fell by 1 percent, to $770.4 million.

Nonperforming assets as of Sept. 30 shot up to $22.7 million, compared with $2.6 million a year earlier. Nonperforming loans totaled $19.9 million, compared with just $1.5 million a year earlier.

The company's banking subsidiary, Panhandle State Bank, has offices in eight North Idaho cities and operates three divisions: Intermountain Community Bank, which has five offices in southern Idaho and one in Oregon; Intermountain Community Bank Washington, which has offices in downtown Spokane and Spokane Valley; and Magic Valley Bank, which has offices in Twin Falls and Gooding, Idaho.