The Inland Northwest's economy is beginning to show signs of recovery, although those signs are both early and modest, says Randall L. Fewel, president and CEO of both Northwest Bancorporation Inc., of Spokane, and its principal subsidiary, Inland Northwest Bank.

The Spokane bank-holding company reported Oct. 27 that its third-quarter results marked its third consecutive quarter of profitability.

"I believe that three quarters signifies the beginning of a trend, and the trend looks positive," Fewel says. "We recognize that the economy of the Inland Northwest is still hurting, and unemployment remains too high, but we are starting to see some modest signs of a nascent," or quite early, "recovery."

Fewel adds that Inland Northwest Bank is "eager" to make loans to community businesses, "but we are not seeing as much demand as we would like right now. It picked up slightly in the third quarter, but is still significantly off historical levels for us, which we believe continues to be indicative of the slow pace of recovery in our region."

For the third quarter, Northwest Bancorporation reported net income available for common shareholders of $358,000, or 12 cents a diluted share, up sharply from a net loss of $804,000, or 34 cents a diluted share, in the year-earlier period. For the nine months ended Sept. 30, the company reported net income available for common shareholders of $875,000, compared with a net loss of $2.16 million in the first nine months of 2009.

The bank made progress in increasing its core deposits, which it defines as all deposits other than certificates of deposit, during the first nine months of 2010, increasing them to $204.7 million as of Sept. 30, up from $149.2 million, or 37.2 percent, from a year earlier, the company says. Regulators have been urging banks to reduce their reliance on brokered certificates of deposit, which are placed by brokers, and increase their conventional deposits.

"We are proud of the job our bankers are doing in growing core deposits," Fewel says. "We have intentionally allowed approximately $42 million in high-cost certificates of deposit to run off. This has had a positive impact on the bank's net interest income."

Even though interest income declined to $15.8 million through the first nine months, dropping by $618,000, interest expense fell by $1.5 million, to $4.9 million.

The bank set aside $2.1 million through the first nine months in its provision for loan losses, down from $5.4 million in the year-earlier period. Through the provision, it puts aside money to cover loans for which it believes it might not be repaid. Charge-offs of loans that had gone bad fell to $1.7 million through the first nine months, compared with $3.8 million in the first nine months of 2009.

Northwest Bancorporation concluded a rights offering of common stock to current shareholders on July 15, raising about $2.6 million in additional capital. It said it invested $900,000 of that capital in Inland Northwest Bank during the third quarter, and retained the balance in Northwest Bancorporation.