04/24/2007

Associated Press

Some community banks in Central Oregon have seen their share prices drop by double-digit percentage points this year because of weaker housing and construction markets, analysts say.

The decline also may reflect the high investor expectations for community bank stocks after strong financial results in the past year drove shares to record levels late in 2006, according to the analysts.

Joe Morford, equity analyst with RBC Capital Markets in San Francisco, said Oregon-based banks have seen their year-to-date stock prices drop 10 percent to 20 percent, on average.

In comparison, large national banks listed on the S&P 500 index have seen dips of only about 3 percent so far this year, Morford said.

"The biggest decline has been in the Pacific Northwest," he said.

Patricia Moss, president and CEO of Cascade Bancorp, said she isn't concerned, noting the company has seen its share price rise from $5 in early 2001.

"It's one quarter," Moss said. "We look at the (stock's) performance over long periods of time."

But Louis Feldman, vice president of research with New York-based research firm Punk Ziegel & Co. in Portland, said Cascade's first-quarter numbers contributed to his company downgrading its rating for Cascade shares from "market perform" to "sell."

Feldman added that expectations remain the key culprit in terms of the dip in community bank stock prices so far this year. He noted that, in Cascade's case, some investors may have gotten used to the company's historically high growth rates.

Cascade's net income grew by 40 percent and 59 percent in 2005 and 2006, respectively. In the first quarter this year, the company's net income levels dropped by 6.9 percent compared with fourth quarter 2006.

"For a bank that usually knocks the ball out of the park, all of a sudden, the balls are falling short," Feldman said. "And the possibility that the company is actually mortal is scary (to investors)."

Community banks also feel the brunt of the Northwest's slowing because of their regional nature, said RBC's Morford.

"Bigger banks have more diverse income streams and a wider geographical footprint, which means they can weather the current market conditions a little better," he said.

Community banks with a significant Central Oregon presence that have seen their share prices drop include:

_ Cascade Bancorp, the Bend-based holding company of Bank of the Cascades, saw prices rise to almost $32 per share in late December. Cascade shares closed at $23.14 Friday, down 27.7 percent from their December peak.

_ The Dalles-based Columbia Bancorp, which operates Columbia River Bank, saw prices reach $28 per share in November, but the company released earnings guidance earlier this month that Columbia will miss estimates in first quarter 2007. Its shares closed at $21.25 Friday, down 24.1 percent from the November high.

_ Portland-based Umpqua Holdings Corp., which saw its share price close at $25.81 Friday, is down 15.4 percent from prices that reached $30.50 per share in mid-December.

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Information from: The Bulletin, http://www.bendbulletin.com