Randall L. Fewel, president and CEO of Inland Northwest Bank, has projected that the Spokane-based institution will return to profitability this year.

The bank's parent, Northwest Bancorporation Inc., reported recently a fourth-quarter net loss of $1.7 million, or 72 cents a diluted share, compared with a net loss of $1.4 million, or 60 cents a year, in the year-earlier quarter.

Yet, the company said Inland Northwest bank had core earnings of $4.6 million last year. It defined core earnings as the bank's net before it set aside funds for potential loan losses and accounted for write-offs from bank-owned real estate.

"Based upon improvements we expect to see in the credit-loss arena, as well as our solid core earnings, we expect the bank to be able to return to profitability in 2010," says Fewel, who's also president and CEO of Northwest Bancorporation. "Any such profits are unlikely to be near the level we want them to be, but they would be a welcome improvement over 2009."

For all of 2009, Northwest Bancorporation posted a net loss of $3.9 million, or $1.63 a share, compared with a net loss of $275,000, or 12 cents a share, in 2008.

The bank reported deposit growth of 6.9 percent during 2009, and had deposits of $337.8 million on Dec. 31.

Its net loans, $314.2 million as of year-end, were down by 6 percent from the end of 2008.

The bank set aside $2 million in the fourth quarter for potential loan losses, down from $3 million in the year-earlier period. For all of 2009, the bank set aside $7.3 million for potential credit losses, up from $4 million in 2008.

The bank's premiums for federal deposit insurance tripled to $805,000 last year, but except for that and write-downs of repossessed real estate, it would have cut its noninterest expense as a percentage of average assets, Fewel says. Even though its FDIC insurance premiums have risen by another $250,000 in 2010, the management team believes it can cut noninterest expense this year through strict controls and continued benefits from cuts last year, when the bank trimmed its employment rolls by nine full-time equivalent employees. It ended the year with 107 people.