Everyone with any interest in community banking in the Northwest knew City Bank of Lynnwood was in trouble. Since the recession began the bank, heavily dependent on loans to home builders and commercial real estate developers, has been bleeding red.

After several warnings from the state and federal regulators to improve its balance sheet, City Bank was on the ropes. The only question was when it would fold and who would buy it.

It came as quite a surprise Friday evening when regulators announced that Oak Harbor-based Whidbey Island bank had acquired most of City Bank’s assets. Those would be the good assets, such as the eight mainland branches and its non-brokered deposits, which are the best kind. Whidbey Island Bank didn’t have to take many millions of dollars in brokered deposits and bad real estate loans.

Under the leadership of CEO Jack Wagner, Whidbey Island Bank came through the recession far better than many small banks. It accepted some federal money to help stimulate local loans, but quickly paid it back. In recent years it has added off-island branches in Stanwood, Smokey Point, Mount Vernon, Bellingham and elsewhere. Now it has the City Bank branches in Snohomish and King counties, and an estimated $1.7 billion in assets once the City Bank takeover is complete.

This reminds us of another Whidbey Island banking success story. Oak Harbor’s Island Savings & Loan grew to include branches off the island, eventually changed its name to InterWest and then Pacific Northwest Bank, before selling to Wells Fargo. Stockholders came out just fine in the deal.

Whidbey Island Bank seems to be on a similar trajectory to success, although we hope the board doesn’t succumb to the temptation to sell out to one of the banking behemoths. We need local banks run by local business people who deeply care about helping the community with its home-owning and business development needs. That’s how Whidbey Island Bank operates today, and we hope it stays that way.

One more thing: Keep the name. We think even big-city residents will enjoy banking with a company called Whidbey Island Bank, and it’s a great way to keep our name in the public eye.