Oregon's community banks are enjoying a banner 1997, thanks to a bustling state economy and the continued fallout from two mammoth bank mergers.

Oregon's 40 community banks held $4.03 billion of deposits on Sept. 30, 20% more than a year earlier, and loan portfolios were up 17%, to $3.1 billion. Return on assets topped the national average for all banks and thrifts, by 1.72% to 1.22%, in the first half, as did return on equity, by 15.64% to 14.47%.

"What you're seeing is an amazing series of events taking place at the same time," said Robert J. Rogowski, principal at Columbia Financial Advisors in Seattle, who follows community banks throughout the Northwest.

The most noteworthy event is the state's successful transition from a timber-and-fishing economy to one that leans more heavily on technology.

Growth in the technology sector-firms such as Hyundai Electronics America have committed to $12 billion in new plant construction over the next few years-continues to lower unemployment and boost population. That, say analysts and bankers, has led to increased deposits and higher demand for home and business loans.

The other event has been the sale of the state's two biggest banks to out-of-state interests. First, Portland's First Interstate Bancorp was acquired by Wells Fargo & Co. in 1996. Then U.S. Bancorp of Portland was sold this year for $8.4 billion to First Bank Systems Inc., Minneapolis.

The result: "In the last year 80% of the market has been tossed up in the air," said Mr. Rogowski. All of which, bankers say, has allowed community banks to pick up a fair share of disgruntled First Interstate and U.S. Bancorp customers.

"People in the Northwest are very independent, and having loan decisions made in Minneapolis doesn't sit well with them," said Victor L. Bartruff, president and chief executive officer at West Coast Bancorp in Lake Oswego, which owns three community banks in Oregon.

On paper, the loss of First Interstate and U.S. Bancorp dragged deposit totals in Oregon down 55% in the year ended Sept. 30, and loans by 72%. But most community banks are reporting double-digit loan and deposit growth.

For example, the loan portfolio at $480 million-asset Centennial Bank in Eugene climbed 33%, to $335 million, while deposits grew 24%, to $406 million. And assets of South Umpqua Bank in Roseburg grew 31%, to $260 million, thanks mainly to a 38% jump in commercial loans.

The strength of the Oregon economy has also created a healthy environment for start-up banks. Bank of the Northwest in Portland, which opened in October 1996, had $53 million of assets by Sept. 30 of this year. And 21-month-old Community Bank of Grants Pass, with $23 million of assets on Sept. 30, saw its loan portfolio grow nearly 200% and its deposit base 92% in the preceding 12 months.

Still, there is concern about the types of customers flocking to community banks.

Dallas H. Enger, president and chief executive officer at Linn-Benton Bank in Albany said that though deposits jumped 47% and assets 42%, not all new customers are making money for the bank.

Once customers are in the door, he said, the bank's staff must be diligent about selling additional products to them "to make them profitable," he said.

As big banks "shoo out unprofitable customers," Mr. Enger said, "we have to be cautious about not loading up on those customers."

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