Bank of Whitman President and Chief Financial Officer Bill Knox says the Colfax-based bank, which currently is under orders from state and federal regulators to boost its capital, has developed a strategy that it expects will allow it to relieve current regulatory pressure.

"We're optimistic," Knox says. "We have a plan in place, and we're continuing to carry out that plan."

In a directive issued Feb. 9, the Federal Reserve System's board of governors characterized Bank of Whitman as significantly undercapitalized and said the bank needs to raise capital, be acquired, merge with another institution, or shut down. The agreement said the bank needs to take action within 90 days, or by early May, though the board can extend that deadline at its discretion.

In the meantime, according to the federal directive, the bank can't accept or renew deposit accounts that exceed the prevailing effective rates on deposits.

Knox declines to disclose whether the bank is working to raise capital or if it is in negotiations to sell to or merge with another bank. He says he can't elaborate on the plan the bank is working on due to nondisclosure agreements he has signed. However, he says he expects to have a plan in place within 60 days.

Knox took over as the bank's top executive earlier this year after longtime bank CEO James Tribbett resigned. Former Bank of Whitman Chief Loan Officer Craig Conklin resigned at about the same time as Tribbett.

The efforts to relieve regulatory pressure come as the bank continues to report significant losses. The bank reported a net loss of $17.5 million in 2010, following a $17 million loss in 2009, according to data the bank filed with the Federal Deposit Insurance Corp.

Bank of Whitman reported net loans and leases of $502.1 million on Dec. 31, 2010, down 19 percent from $619 million in loans and leases a year earlier. Its total assets fell more precipitously. At year-end, the bank reported total assets of $681.8 million, down 20 percent from $857.1 million a year earlier.

Knox says the bank continues to be aggressive in writing off bad loans, and he says that practice is reflected in its losses during the past two years.

The federal directive issued in February formally is called a Prompt Corrective Action Directive and follows a written agreement reached last July 8 by the Federal Reserve Bank, Bank of Whitman, Whitman Bancorporation Inc., and the Bank of Whitman Employee Stock Ownership Plan.

Separately, the Washington state Department of Financial Institutions issued a similar order last Oct. 22. As of mid-March, the state hadn't taken any further action.

Founded in Colfax in 1977, Bank of Whitman has about 20 branches in Eastern Washington. In the Spokane area, it operates branches downtown, at 619 W. Riverside; on the West Plains, at 8727 W. U.S. 2, and in the Wandermere area, at 12812 N. Addison.