HEPPNER — The Bank of Eastern Oregon hasn’t changed the way it does business, but the institution’s old school philosophy seems to be back in fashion.

Case in point: BEO recently appeared on not just one but two lists of the nation’s best community banks.

In June, the Heppner-based bank was ranked in the Top 20 among the nation’s highest-performing publicly traded banks with less than $2 billion in assets by Capital Performance Group and American Banker magazine.

Then, in July, it made the charts again, earning a spot on the Independent Community Bankers Association and Independent Banker magazine’s Top 20 list of agricultural lenders with assets between $300 million and $1 billion.

The secret to the bank’s success is really no secret at all, according to President and CEO Jeff Bailey.

“I think it’s our commonsense approach to banking,” he said. “We’re not trying to do anything cute. We take in deposits, we make loans.”

A history of measured growth

The Bank of Eastern Oregon traces its roots to the waning days of World War II, when a group of farmers and ranchers in Arlington founded it as the Gilliam County Bank. 

“They wanted to have local decision-making in their communities,” Bailey said. “We haven’t forgotten that.”

The institution grew slowly at first, then began a steady expansion. 

In the 1950s, the Bank of Gilliam County added branches in Ione and Heppner (where it moved its headquarters) and changed its name to the Bank of Eastern Oregon.

The bank enjoyed a growth spurt in the late 1990s and early 2000s, when it added branches in Condon, Irrigon and Boardman, then acquired a number of branches from Klamath First Federal Savings and Loan. That deal gave Bank of Eastern Oregon a presence in Burns, Moro, John Day, Prairie City and Fossil. The bank added loan production offices in Ontario, Hermiston and Enterprise.

In 2012, BEO expanded yet again, opening loan production offices in Pendleton, Island City and Lakeview. The same year it made its first move into Washington with a loan production office in Pomeroy, then in the next several years it opened loan offices or branches in Colfax, Dayton and LaCrosse, all of which now operate under the Bank of Eastern Washington banner.

In 2019, the bank added branches in La Grande and Hermiston, and in 2020 opened a loan office in Caldwell, Idaho.

There’s been some reshuffling of locations throughout the years, with some loan centers being converted into full-service branches. Today, BEO operates 21 branches and three loan production offices across 15 counties in the region where Oregon, Washington and Idaho come together.

Now, when big national banks are closing branches, BEO looks to open new ones within its core service area. The company recently bought a building at 800 SW Dorion Ave. in Pendleton, where it already has a loan production office, to serve as its first branch in that city. Pending regulatory approval, Bailey said he hopes the Pendleton branch will open before the end of this year.

“I’ve sat in conferences and heard people say, ‘Everybody’s banking on their phone now, we don’t need brick-and-mortar branches,’ and I don’t agree,” he said. “We still have customers who want to come in and sit down and talk to someone.”

By the numbers

That traditional small town banking model is working just fine, thanks, and Bailey said that’s what boosted BEO’s stock in the community bank performance rankings.

“It really comes down to numbers,” he said. “Return on average equity over the last three years is the benchmark they use — in essence, the profitability of the bank.”

A number of circumstances have come together to push that number upward, Bailey said, and they just happen to fit neatly into BEO’s style of banking.

First, he said, government stimulus payments during the pandemic swelled the bank’s deposits, in turn giving the bank more money to lend, leading to an expanded loan portfolio. 

Meanwhile, with inflation on the rise, interest rates on government-guaranteed securities also were rising, which gave the bank a safe and profitable place to park excess deposits that weren’t going out as loans.

As a result, BEO’s three-year average return on average equity climbed to 19.59%, good enough for No. 13 on the list of top-performing community banks under $2 billion in assets.

At the same time, the bank’s loan portfolio scored 87.8 out of 100 on the Independent Community Bankers’ Association performance matrix, ranking it 18th among agricultural lenders in the $300 million to $1 billion asset range.

While the recognition from making those two Top 20 lists is welcome, Bailey said, it’s really just a reflection of the bank’s fundamental business model, which is tailored to serve the farmers and ranchers that founded the institution and the rural communities in which they live.

As an illustration, he described what a typical day might look like for a BEO loan officer.

“You might give an ag operating line of credit to a rancher in the morning, make a loan to a hardware store in the afternoon and by evening you could be loaning somebody money for a car or a refrigerator,” Bailey said.

“We’re heavily invested in agriculture, but if you think about it, even the Main Street businesses in our communities are reliant on agriculture, because farmers and ranchers are their customers.”

Holding the course

Bailey described the bank’s board of directors — chaired by John Day accountant Bob Armstrong, with Painted Hills Natural Beef financial controller Gabrielle Homer as vice chair — as opportunistic, but only when the opportunities fit within the bank’s tried-and-true operating framework.

For example, when the owners of tiny Farmington State Bank in Eastern Washington were looking to close down the financially troubled institution in August 2023 in the wake of a cryptocurrency scandal, BEO agreed to purchase Farmington’s roughly $3 million in deposits and $12 million in loans — but not its building or other physical assets.

“We had branches in the general vicinity already,” Bailey explained, “and we could increase our market share by acquiring the deposits and acquiring the loans.”

For the foreseeable future, Bailey said, that’s how BEO will continue to operate — keeping one eye open for opportunities while keeping the other firmly fixed on the bank’s longtime guiding principles of sound financial policy and solid customer service. He said for the next five years, the Bank of Eastern Oregon will look for opportunities that fit the organization.

“We don’t have any grand design to grow and sell the company,” Bailey said. “It sounds a bit cliche, but we really are here to serve the needs of our customers and our communities.”

FOUNDED: 1945

HEADQUARTERS: Heppner

EMPLOYEES: 160

SERVICE AREA: 11 counties in Eastern Oregon, four in Eastern Washington (under the name Bank of Eastern Washington) and one in Western Idaho

BRANCHES: 21

LOAN OFFICES: 3

ETC.: Nearly 12% of the bank’s shares are owned by employees through an employee stock ownership plan

TOTAL ASSETS: $852.3 million

NET LOANS: $563.3 million

DEPOSITS: $754.7 million

SHAREHOLDER EQUITY: $71.76 million

Bank of Eastern Oregon financials at the end of second quarter 2024, as reported by BEO Bancorp