Nathan L.

2008 was a dismal year for the industry, but Community Bank posted significant earnings

Community Bank announced earnings Tuesday of

$1.19 million for the fourth quarter of 2008, and $4.1 million for the

year andndash; both significant improvements from 2007.

The Joseph-based bank's loans grew by $29 million, or 14.3 percent,

last year mostly due to increased lending to agricultural and small

business customers. Despite growth in the loan portfolio, credit

quality remains strong, according to AJ Tarnasky, Community Bank's

chief credit officer.

"We've steadily grown our loan portfolio by focusing on relationships

with local farmers and businesses, not speculative real estate deals

outside our market areas," Tarnasky said.

President Tom Moran said the Baker City branch posted one of the higher percentage growth rates among Community Bank's 15 branches.

"Baker County is one of our top performing branches," Moran said. "Our team there of Jeremy Gilpin, Sony Vela and Travis Messenger contributed to Community Bank hitting those numbers this year.

"These earnings are a result of a concerted effort by Community Bank employees to adhere to a conservative approach to banking. With much of the financial industry experiencing a deterioration in asset quality and capital levels in 2008, we've improved them," Moran said.

Small business and owner-occupied businesses accounts make up the largest portion of Community Bank's loan portfolio, but Moran said the agricultural portfolio grew substantially in 2008 and now makes up 22 percent to 25 percent of the portfolio.

At the Baker City branch, the small business and agricultural loan portfolios grew by 46 percent last year, due in part to success helping clients tap into government backed or guaranteed loans, Gilpin said.

"We have 12 to 15 government loan programs we work with," Gilpin said. Some of the most widely used government backed or guaranteed loan programs are available though the USDA or the state of Oregon, including loans available through the Northeast Oregon Economic Development Department and the Farm Service Agency.

Gilpin said government programs provide low-cost lines of credit and other types of loans with 60 percent bank financing combined with a 40 percent loan guarantee at interest rates as low as 4.4 percent.

By sticking to its longtime policy of focusing on loaning locally-deposited money locally, Gilpin said Community Bank has avoided the pitfalls of speculative and high-risk lending practices that left many of the nation's larger banks plagued by a plethora of bad loans.

Because of its local focus, Gilpin said Community Bank remains well-capitalized and ready to make loans at a time when the national corporate chains were tightening up on credit.

During these hard times, Gilpin said he's seen more people transfer their accounts from large banks to Community Bank, citing dissatisfaction with aggressive fee policies, including reports of potentially illegal activity such as of shuffling the order of deposits, checks and debits to maximize fees.

Rather than giving billions of dollars to troubled banks, mortgage firms and credit card companies to kickstart the credit markets, Gilpin believes Congress might need to tighten regulations on fee policies, as well as mortgage and credit card policies that have undermined consumer confidence with adjustable rate mortgages or low introductory credit card interest rates that mushroom later.

He said Community Bank has never participated in adjustable rate mortgages, and instead offers a low fixed rate that people can depend on.

Homeowners with fixed-rate mortgages needn't worry about their interest rate going through the roof after they move in, as has happened to many of the estimated 2 percent of homeowners who faced foreclosure in 2008.

Meanwhile, in addition to nearly doubling the business and agricultural loan portfolio at the Baker City branch, Gilpin said Community Bank's consumer loans, auto loans and real estate mortgages also grew in 2008, along with deposits and customer numbers at the Baker City and other Community Bank branches.

Community Bank has $315 million in assets and 150 employees. It is a subsidiary of Community Bancshares, Inc., headquartered in Joseph.

The bank will open its 16th branch, in Heppner, during the second quarter of 2009, and will convert its Loan Production Office in Clarkston, Wash., to a full service branch before the end of this year.