Coeur d'Alene-based Mountain West Bank is relying on its strengths in small-business, commercial real estate, and residential lending to remain profitable through the recent recession and the recovery from it, says Russ Porter, the bank's president and chief operating officer.

While a consolidated earnings statement issued by the bank's parent company, Kalispell-Mont.-based Glacier Bancorp, says Mountain West's total loans dipped to $957.5 million as of Dec. 31, 2009, down 1.4 percent from a year earlier, the bank's commercial real estate portfolio rose by 28 percent, and its residential loan volume edged up 1.5 percent. The U.S. Small Business Administration says Mountain West's federally backed loan volume climbed 13 percent.

"We do substantial amounts of residential real estate lending," Porter says. "Also, the refinancing side is doing well."

Mountain West is seeing strong demand for commercial loans, although the bank's challenge is to find potential borrowers that haven't been damaged significantly by the weak economy, he says.

Mountain West has been the top lender of U.S. Small Business Administration-backed 7(a) loans in the SBA's Spokane District since 2002, and Porter says he expects such lending to continue to grow. The SBA district here includes 30 counties in Eastern Washington and North Idaho.

In fiscal 2009, Mountain West made 127 SBA loans ranging from $10,000 to $1.5 million, the SBA says. The bank's 2009 SBA loans totaled $25.8 million, up from $22.9 million in 2008.

The 7(a) loans are limited to $2 million and can be used to buy or improve land or buildings, or acquire long-term equipment. They also can be used as startup and working capital. Banks can sell the guaranteed portion of the loans on the secondary market to raise capital, Porter says.

Adding to the incentives to lend, the federal stimulus package allocated $375 million to the SBA to waive loan fees, and it raised the federal guarantee on certain loans to 90 percent from the previous 75 percent to 80 percent. To a borrower, the fee waiver works out to a savings of more than 2 percent for 7(a) loans.

"It gives us a wonderful reason to lend," Porter says. "We can lend with less risk than if we didn't have the SBA."

Porter says he expects the SBA incentives to be extended via a federal jobs bill, and he's hearing some discussion of raising the loan limit.

Mountain West wasn't immune, however, to problem loans in its portfolio. The bank had a total loan-loss provision of $50.5 million in 2009, up sharply from $11.2 million in 2008.

"You don't get through this battle unscathed unless you're not involved in real estate and construction loans," Porter says.

While some other banks are struggling to raise capital, Mountain West has remained well capitalized, he says. "We're in a good position," Porter says, "We're not forced to go out and pay extra to increase deposits to raise capital."

Porter, former president of Glacier Bank, a Whitefish, Mont.-based subsidiary of Glacier Bancorp., has worked at Mountain West for nearly two years. He says he will take over as CEO eventually, as current CEO Jon Hippler eases into retirement, although there's no hard date set for Hippler's retirement yet. Hippler was the original president when Mountain West opened its first branch in a trailer at the northwest corner of Ironwood Drive and Government Way, in north Coeur d'Alene, in 1993.

The trailer has been replaced by a freestanding branch that the bank owns, next to its administrative offices, in the 29,000-square-foot Mountain West Plaza, at 101 Ironwood Drive, where the bank leases about 20,000 square feet of office space.

Last year, Mountain West opened a 31,800-square-foot operations center at 2123 N. Government Way, just north of its administrative offices. More than 50 of Mountain West's 390 employees are based at the operations center, where Mountain West has consolidated its data processing, collections, mailroom, call center, and marketing operations from locations scattered around Coeur d'Alene and Hayden.

Today, Mountain West has 24 branches in Idaho, Washington, and Utah, including two Coeur d'Alene branches, one in Post Falls, and one in Hayden, Idaho, and one branch at its financial center in Spokane Valley that opened in late 2008.

The bank's leadership transition, which is occurring gradually as Porter manages day-to-day activities at Mountain West, will be invisible to bank customers and most bank personnel, he says.

"I come from a background with an almost identical philosophy," Porter says. "It's not my style to come in and go for rapid changes."

Mountain West is one of 11 community bank subsidiaries held by Glacier Bancorp, and each subsidiary operates with a high degree of independence under its own charter and board of directors, Porter says.

Glacier bought Mountain West in 2000, and retained all of the bank's managers and employees.

"I'm not aware of any personnel changes," he says. "Glacier Bancorp. wants to acquire personnel when it acquires banks. It wants to leave them as community banks."

Glacier's 2009 year-end earnings statement consolidates the performances of its 11 banks, but doesn't break out the income, deposit, and asset figures of individual banks.

Porter says he declines to disclose those figures for Mountain West Bank, because they are still being audited. He says, however, that Mountain West's deposits increased by more than 2 percent at the end of 2009, compared with a year earlier.

Porter says Mountain West also has maintained a healthy net interest margin. "Compared to our peers we're in the upper percentiles," he says.

Net interest margin is the difference between interest income and interest expense expressed as a percentage of earning assets.

The combined subsidiaries of Glacier Bancorp had a net interest margin of 4.82 percent in 2009, up 12 basis points from 2008. A hundred basis points equals 1 percent.

The holding company says its 2009 earnings totaled $35.4 million, or 56 cents a share, down from $65.7 million, or $1.19 a share, in 2008. Its assets grew to 6.2 billion as of the end of 2009, an 11 percent gain from a year earlier.

Porter says he doesn't expect that Mountain West Bank will acquire any more banks or open new branches this year, although it plans to move its Ione, Wash., branch to new, larger quarters in June.

The branch will integrate a 105-year-old oak-and-iron teller line and old vaults that are in an aging structure on Main Street in Ione.

Stratford Building Corp. of Rathdrum is manufacturing a 2,600-square-foot modular structure that will house the Ione branch. The new structure will be placed on a vacant lot on the same block as the current bank building, and the old 1,800-square-foot structure will be demolished, Porter says.

Mountain West acquired the former American West Bank branch, in Ione, in 2004.

Porter says he expects a slow recovery from the recession, but he's optimistic about 2010.

"There is a lot of interest in lower-end, starter homes, and we're starting to see investor interest in some projects that have been struggling," he says.