Wheatland Bank, skirting the turbulent waters that have wreaked havoc with many financial institutions around the country, says it recorded net income of more than $1 million last year, added to its record loan growth of the prior year, and had double-digit percentage gains in deposits and assets.

"We posted a great year both in profits and growth," says Susan M. Horton, president, CEO, and chairwoman of both the bank, which has its administrative offices in Spokane, and its holding company, Community Financial Group Inc. "One of the key factors was we have really enjoyed exceptional asset quality, and a real strong core deposit base."

Based on the bank's performance, the holding company's board earlier this month declared a 4 percent stock dividend and approved a dividend repurchase program for any of its 370 shareholders who might want to receive their dividend in cash rather than stock.

Horton says Wheatland generated the net income despite having to pay more than $350,000 in Federal Deposit Insurance Corp. premiums for 2009, up sharply from the year earlier, and after absorbing the first full year of operating costs for four branches it opened in Central Washington over about a 15-month period. The earnings equated to a 0.47 percent return on average assets, which Horton says is healthy, particularly considering the bank's added expenses.

The bank's total loans grew 4 percent last year, to $175 million as of Dec. 31, following record loan growth of 26 percent in 2008, when it opened three of its four new Central Washington branches. Its deposits and assets jumped 13 percent and 15 percent, respectively, to $198 million and $241 million.

"Our deposit growth was directly related to that 'flight to safety'" by depositors looking for a safe place to put their money, Horton says.

Meanwhile, the bank continues to maintain what it calls one of the lowest levels of delinquent loans in the country with only 2 percent of its loans delinquent as of the end of last year and with a net charge-off rate of just 0.22 percent. Horton notes that Wheatland now has received a 5-Star Superior rating, or the highest rating attainable, from national bank rating company BauerFinancial Inc., of Coral Gables, Fla., for 11 consecutive quarters.

She says the 30-year-old bank, which was founded in Davenport, Wash., and has 13 branches in seven counties, is budgeting for net income of about $1.6 million this year and is projecting growth of 10 percent in loans and assets and 11 percent in deposits.

The bank is well-capitalized by all regulatory standards and has plenty of liquidity and capacity to make loans to qualified commercial, agricultural, and individual borrowers, she adds.

Wheatland's holding company plans to conduct a private placement of common shares of its stock to shareholders and key customers later this year, Horton says. Though the company has no current need for cash, she says, "We believe that there will be many opportunities in the coming years to gain market share in our new and existing markets, and want to raise the capital within our local communities to take advantage of future growth potential."

Horton was in Yakima last week for the open house at an expanded branch now occupying most of a 10,000-square-foot building on Yakima Avenue that Wheatland bought and has remodeled at an overall cost of about $3 million. The bank opened its first Central Washington branch, in Wenatchee, in December 2007, then opened branches in Yakima, Ellensburg, and Chelan the following year, all in leased spaces.

Late last year, it bought a former fast-food restaurant property in Wenatchee for about $700,000, then razed the building that was there, and it plans to spend about $1.2 million erecting a 5,500-square-foot building to house its Wenatchee branch, which currently occupies space next to the building site, Horton says. Construction of that building is expected to begin this spring, and the branch should move into the building in the fourth quarter of this year, she says.

As with the Yakima project, Bernardo-Wills Architects PC, of Spokane, is the architect for that project, and Vandervert Construction Inc., of Spokane, is the general contractor. Vandervert Construction founder Dick Vandervert is a member of Wheatland's board of directors.

Wheatland doesn't plan to open any additional branches this year, but Horton says, "We do plan on more branching in Spokane over time."

The bank's downtown Spokane branch and administrative offices are located at 222 N. Wall. Horton says Wheatland hopes to open branches on the South Hill, on north Division Street midway between downtown and its branch at 10801 N. Newport Highway in the Pine Water Plaza development, and midway between downtown and its Spokane Valley Mall branch.

"We're going to continue to infill in Spokane for customer convenience," Horton says.

As it has said previously, Wheatland also continues to view the Tri-Cities as a strong potential branch site.

Along with its three branches here and the four it has opened in Central Washington after the last couple of years, Wheatland has branches in Davenport, Moses Lake, Odessa, Quincy, Ritzville, and Wilbur, and serves more than 10,000 customers.

Horton says the bank has stayed profitable by sticking to conservative lending policies, devoting close attention to risk management, employing experienced loan officers who know their customers and local markets well, and keeping its loan portfolio diversified.

Though Wheatland has been viewed as predominantly serving agricultural markets, the bank actually is "just as large in commercial as in ag," and even within the ag sector, is well-diversified, she says.

Most community banks have grown through commercial real estate lending, which in many cases has come back to haunt them during the recession, but "our commercial real estate portfolio as a percentage of capital is one of the lowest in our area," Horton says.

Horton, a certified public accountant who took over as CEO at Wheatland Bank in 1999, says, "As a CPA, I know it's all about internal controls."

She began her career with a prominent accounting firm in Seattle and says she spent her first four years in the late 1980s "working exclusively on big banks and thrifts, being exposed to numerous bank failures, and auditing huge nonperforming loan and real estate-owned portfolios."

She says, "I really saw firsthand what overly zealous, high-risk development and real estate lending led to in the '80s, and how appraised values can freefall overnight. It was a lesson of what not to do, and the vision and lessons learned from working seven days a week onsite at the banks, revaluing and writing down their toxic assets, was forever imprinted on my mind."