Intermountain Community Bancorp in Sandpoint, Idaho, said its third-quarter loss narrowed by 76% from the second quarter, to $2.7 million, or 32 cents a share, as asset quality improved.

The $1 billion-asset company had a profit of $226,000, or 3 cents a share, in the third quarter of 2008.

Intermountain, which has been hurt mostly by its residential construction loans, reported a $3.76 million provision for loan losses, compared with $18.68 million in the second quarter and $2.74 million the year earlier.

It charged off $10.4 million of loans, down 12% from the second quarter, but up 352% from the year earlier.

Though he acknowledged that chargeoffs remained "elevated," Curt Hecker, Intermountain's chief executive officer, said in a press release that overall loan trouble has started to moderate.

Nonperforming assets shrunk 11% from the second quarter, to $22.3 million, or 3.47% of total assets. The ratio of loans more than 30 days past due to total loans fell 62 basis points, to 1.48%.

Intermountain paid $416,000 of preferred dividends during the quarter, which also added to the loss available to common shareholders. It issued $27 million of preferred stock to the Treasury Department in December through the Troubled Asset Relief Program.

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