Spokane Valley-based State Bank Northwest posted a net loss of $1.2 million for last year, down from net income of $652,000 in 2008, according to year-end financial documents it has filed with the Federal Deposit Insurance Corp.

Though the bank's deposits and assets grew modestly, its loans fell sharply and its charge-offs and provision for loan and lease losses rose dramatically, the filings show.

Greg Deckard, the bank's chairman, president, and CEO, says the loss was due solely to a jump in nonperforming assets—resulting in 10 loans the bank charged off or wrote down—that peaked last June.

Its core earnings remain strong, though, he says, adding, "I'm seeing increasing trends in our asset quality, so I'm hoping we've experienced the worst of it."

The FDIC data show that the bank ended last year with loans of $77.7 million, down 18 percent from a year earlier, while deposits grew 2 percent to $101.4 million.

"We de-leveraged the bank a little intentionally," thereby maintaining strong capital and liquidity ratios, Deckard says. "We have a ton of money to lend, but we did increase our lending standards and pull back a bit" on loans approved.

State Bank's assets at the end of 2009 totaled $111.7 million, up slightly from $111.1 million a year earlier, when it crested the $100 million milestone for the first time.

The bank had charge-offs of $1.4 million and added provisions for loan and lease losses of $1.8 million in 2009, both of which were more than triple its $465,000 in charge-offs and $538, 000 in loan-loss provisions the prior year, the FDIC data show.

"We're the victim of the broader economy," Deckard says. "I don't look at these particular credit issues as self-inflicted, but as more reflective of unprecedented economic times." He says the bank is budgeting for a return to strong profitability this year.

State Bank offers business, consumer, and agricultural banking services, as well as residential and commercial mortgages, and employs 27 people. The bank's headquarters is located at 12902 E. Sprague, and it also has branches at 9729 N. Nevada on Spokane's North Side and in Garfield, Wash., and a real estate lending office in downtown Spokane at 827 W. First.

The bank was founded in Garfield in 1902 and formerly operated under the name State National Bank.

It moved its headquarters to Spokane Valley in 2000 and changed its name to State Bank Northwest in 2007 when it converted to a state charter from a national charter.