Spokane Valley-based State Bank Northwest posted a marginal profit of $39,000 for 2010, up from a net loss of $1.2 million in 2009, as reported in financial documents it has filed recently with the Federal Deposit Insurance Corp.

"It's a dramatic improvement over the prior year when we had a handful of loan charge-offs in 2009," says Greg Deckard, the bank's chairman, president, and CEO.

The bank's deposits and assets fell last year, in correlation with loan runoff and weak loan demand, but the banks also had significantly fewer loan losses, at 0.21 percent of average loans compared with 1.58 percent in 2009, says Deckard.

"That's well below what peer bank historical losses ran, so we're seeing improvements," in asset quality, he says. "At the same time, during 2010, we continued to increase our bank's loan loss reserve from 1.89 percent in 2009 to 1.97 percent in 2010. That's considered a pretty healthy reserve."

The bank's total assets decreased to $99.3 million at the end of last year from $111 million at the end of 2009. Total deposits shrunk about the same amount to $89 million in deposits as of Dec. 31, 2010, down from total deposits of $101 million a year earlier.

Meanwhile, the bank ended the year with total loans of $76.2 million, a slight decrease from a year earlier when loans totaled $79.2 million.

"A lot of this is repositioning the balance sheet to increase our liquidity," Deckard says.

For the past year, the privately-held bank focused on that repositioning to be prepared for future growth as the economy showed signs of improvement, he adds. The bank maintains a liquid position, he says, and all deposits are from local customers.

The bank has no plans for branch expansions and is sticking to its core principles of attracting local deposits and loans.

"I don't think there's a better time to be the smallest bank in town," he says. "We have money to lend. We're very liquid, and we're hoping 2011 is the year we see our local economy turn the corner."