Spokane-based Wheatland Bank continues to hold a position of strong liquidity after record 2015 year-end earnings, fueled by its highest percentage loan growth in 36 years, and its CEO expects ongoing gains this year.

Meanwhile, Wheatland will expand office space this summer in its downtown Spokane headquarters, a property it purchased last year as part of a strategic plan to remain a locally-owned, independent community bank, says Susan Horton, president, CEO and chairwoman. 

Horton, who holds the same roles for the bank and its holding company, Community Financial Group Inc., says Wheatland Bank reported 2015 net income of $1.9 million, up 36 percent from 2014 income of $1.4 million. Loan growth rose 35 percent, largely because of a key move into the Tri-Cities market in February of last year. Wheatland ended 2015 with $222 million in loans, $319 million in deposits, and $350 million in total assets.

“This was a record year of performance for us,” Horton says. “We’ve never had 35 percent loan growth.”

Wheatland generated the highest percentage of organic loan growth of any bank in the state of Washington, according to FDIC Call Report data. Two other banks in the state had higher loan percentages but much of that activity came from bank acquisitions, she says. 

The bank’s jump in loans compares with loan growth of 14 percent in 2014. Meanwhile, the bank maintains good loan quality, with no loan losses for 2015, Horton says, and with only 0.7 percent of its loans being delinquent as of Dec. 31. 

She says loans and deposits remained strong among 14 branches in eight counties of Eastern and Central Washington. 

A Pasco location, opening just over a year ago as Wheatland’s 14th branch, drew a large base of Tri-Cities customers, many of whom own agricultural or farm operations. She says Pasco loan officer Steve Lancaster and co-workers developed more than $100 million in new loan commitments and new core deposit business in the branch’s first year of operations. Core deposit growth in that market totaled more than $20 million during the first year.

“It’s always been a strategic goal of ours to expand into the Tri-Cities market because it’s such a high-growth market,” Horton says. “We recruited an amazing leader who was able to assemble a team of experienced bankers.”

She adds, “Of the $100 million, about two-thirds of that was in ag or ag-related businesses, and the other one-third was in commercial or commercial real estate. We’ve had an incredible response from the Tri-Cities community, in particular many agricultural customers ... in addition to commercial and individual new customers.”

Wheatland has 110 employees in all and expects to hire another 10 workers over the next year. 

“We’re not planning any new branches this year,” Horton says. “We feel we have a large branch structure for a bank our size.” 

Based on the bank’s 2015 performance, the holding company’s board in February declared a 4 percent stock dividend and a related stock dividend cash repurchase program. The privately-traded company has 425 shareholders, including many who have been members since Wheatland was established in Davenport, Wash., in 1979.

Last July, Wheatland became owner of the four-story building at 222 N. Wall in downtown Spokane that holds a first-floor branch and third-floor administrative offices. The bank paid $4.3 million for the property, after 15 years as anchor tenant and exercising a first right of refusal when the prior owner decided to sell. With $500,000 budgeted for overall structure upgrades, about $350,000 will pay for third-floor renovations and furnishings in the expanded space. 

Its third-floor space will grow by 4,500 square feet from about 7,200 square feet.  

“We’re developing an expanded commercial lending center on this third floor and actively recruiting commercial lenders, credit analysts, and support staff,” Horton says. “Wheatland Bank’s board decided the purchase makes more sense than leasing based on our occupancy needs, and when you figure we have the opportunity to lease.”

She adds, “Wheatland Bank is digging deeper roots in the community, making significant capital investments and helping support economic activities, including in many rural markets.”

A second-floor, “decades-long” tenant remains in its Spokane structure, and Wheatland is seeking a tenant for about 3,000 square feet of available space on the first floor. Two small-sized tenants occupy part of the fourth floor, but an 11,800-square-foot vacant space on that top level with views of Riverfront Park also is available for lease, Horton says. 

The building’s design would enable construction of a few additional floors if the bank later takes that step, Horton says. She adds that it’s exciting for Wheatland to be based near several downtown revitalization projects, including upcoming park improvements, Urban Outfitters’ planned new store, and any future plans for the vacated Macy’s building. 

Horton says in Spokane last year, the bank also experienced excellent loan growth.

She adds, “In Spokane, we’re seeing more economic vitality today with projects that had been on the back burner, more construction activity, more purchase activity in the commercial real estate market, and commercial businesses beginning to look at their own expansion plans.”

Continued Spokane-market growth is a focus this year, amid higher interest from businesses seeking a local community bank, she contends. “Right now for 2016, our loan officers are in the process of analyzing and considering a $45 million loan pipeline.”  

Horton says the bank is budgeting for net income of about $2.5 million this year and is projecting growth of 12 percent to 15 percent in both loans and assets, and a deposit growth of 2 percent to 5 percent.   

Wheatland’s stable low-cost, core deposit base is one of its major strengths, Horton says, adding, “so we have still a lot of ample liquidity to fund 2016 loan growth, but we still expect continued deposit growth.”   

The bank’s goal is to increase its loan-to-deposit ratio, today at 69 percent, to an 85 percent loan-to-deposit ratio, she adds.

Horton says that during recession years, Wheatland saw a doubling of core deposits positioning it well with “an excess of balance-sheet liquidity” as it entered 2015. Customers had sought a flight to safety to a local bank during the recession, she contends, because Wheatland never has had any regulatory problems.

Also, agricultural and farm operations around 2010-2013 had record crops and strong commodity prices, when they tended to deposit and didn’t need to borrow, she says. However, the bank during that period continued taking the right steps and following rules and regulations, Horton adds. “We were prepared, and our balance sheets were really strong and perfectly positioned for this big wave of loan growth.”

The agriculture industry has experienced a more recent downturn with the challenges of severe weather and other market factors, Horton says, but such operations also have good capital reserves and a good start to 2016 crops. 

“We understand ag isn’t a one-year cycle,” she says. 

Three years ago, at customers’ requests, the bank opened a wealth-management division for in-house brokerage and financial planning services through Investment Centers of America. The division has one financial planner, but a second planner is being recruited. 

“We have a great foundation with our wealth-management division, and we’re looking to grow that,” Horton says. “For financial planning, wealth transition, and succession planning, it makes sense for us to be at the table knowing the industries, in a team approach with legal counsel and their CPAs, to put together their overall financial and estate plan.” 

Wheatland Bank will continue to focus as a full-service bank on serving customers, whether individuals, ag-related operators, or commercial and industrial business owners, Horton says. 

“In our markets including Spokane, Tri-Cities, Yakima and Wenatchee,” she says, “we have a lot of growth potential as we see this big wave of consolidation within our industry.”