Northwest Bancorporation Inc., the Spokane-based parent of Inland Northwest Bank, has reported a third-quarter net loss of $804,000, or 34 cents a share, compared with net income of $203,000, or 9 cents a share, in the year-earlier quarter.

"Third-quarter results show some improvement over second quarter," says Randall L. Fewel, president and CEO of both the bank and its holding company. "The sequential quarterly loss was reduced by $215,000, despite adding $600,000 more to the (allowance for loan and lease losses) than was added in the second quarter."

Fewel adds, "Net loan charge-offs in the third quarter were $496,000, compared to $2.8 million in the second quarter. Although there will likely be additional loan charge-offs in future periods, we believe that the decline in charge-offs, compared to the last quarter, is a positive indicator that charge-offs may have peaked during the second quarter."

The bank's nonperforming assets grew slightly in the third quarter to $17.4 million, or about 4.4 percent of its total assets, as of Sept. 30. Nonperforming assets represented about 3.8 percent of total assets as of June 30 and 2.1 percent as of Sept. 30, 2008.

"We added one significant loan for $2.9 million to (nonperforming assets) in the third quarter, but we also successfully liquidated three foreclosed lots and one house during the quarter," Fewel says.

As of Sept. 30, net loans totaled $318 million, down 4.1 percent from a year earlier, while deposits grew 5.2 percent over the previous 12 months to $326 million. Total assets were $393 million as of Sept. 30, up about 1 percent from a year earlier.

"The decline in loan totals is due to a conscious effort to reduce the bank's exposure to land acquisition, development, and construction loans, as well as nonowner-occupied commercial real estate loans," says Fewel. "These are the areas hardest hit by the recession and therefore carry the biggest risk of default."

Fewel notes that the bank's ratio of total capital to risk-weighted assets was 12.23 percent at quarter-end, well above the 10 percent needed to be classified by the Federal Deposit Insurance Corp. as "well capitalized."

"With $6.3 million in the reserve plus $35.7 million in equity, the company has $42 million to weather these rough economic times," he says.