This year has been better than 2009, and 2011 should be better than 2010, but the economy won't completely turn around until 2012, bankers here believe.

"We anticipate that 2012 will be the turnaround year for the economy," says Jack Heath, president and chief operating officer of Washington Trust Bank. "It's going to take time to absorb the unemployment numbers that we have. We have to get people back to work."

While many of the bank's business customers are doing better than they were, they're not making the capital investments that they would if they believed the economy had rebounded fully, Heath says. Meanwhile, even though the Federal Reserve has increased liquidity in the nation's financial system, and the Spokane market has held up better than many others, issues such as the European debt crisis and Washington state's budget shortfall hang over the economy, he says.

"There's a lot of moving parts out there," Heath says. "Uncertainty creates a hesitancy to invest."

Washington Trust's home-loan center is especially busy, and some businesses are taking advantage of low interest rates and favorable terms to borrow money, but the Spokane area needs more jobs, perhaps from outside companies, Heath says.

"We have had big companies out looking at the Kaiser Aluminum building and others," real estate sources have told him, Heath says. Meanwhile, he says, valuations on properties have been coming in lower than customers would like.

"Appraisals are so down," says Randall L. Fewel, president and CEO of Inland Northwest Bank. Fewel believes 2011 will be better than 2010, but doesn't expect major improvement, partly because of national tax and deficit issues, and deficit problems on the state and local levels.

"A number of our manufacturing customers seem to be doing much better. They're not hiring or borrowing, but their profits are up," Fewel says. "I tend to be an optimistic guy. We are opening a lot of accounts. Our core deposits are up. We gained a little market share. I'd be happy if I could grow 4 percent or 5 percent in loans" in 2011.

Sue Horton, chairwoman, president, and CEO of Wheatland Bank, says, "We feel like we're nearing the bottom, and things are going to turn around, if not in early or mid-2011, then late in 2011 or in 2012."

Loan demand has been slow, and there's a lot of competition to make loans, Horton says. She and Heath both believe rates will remain low in 2011, which would be an advantage for borrowers. Horton says that Wheatland, having completed an expansion in Central Washington and having raised capital in 2010, is adding staff because it believes it will have a chance to serve more customers, especially in the Spokane area.

"You have to be prepared," she says. "You don't want to react late." The bank also intends to continue to serve agricultural customers, which has been one of its historic focuses, Horton says. She says agriculture has been strong.

Meanwhile, bankers here are glad to see that Sterling Savings Bank and AmericanWest Bank have been able to recapitalize. They say the community needs the jobs and stability those institutions can provide.

—Richard Ripley