tech money, Oregon's community banks could be on the verge of an unprecedented period of growth, observers say. Merger activity by regional banks and heavy semiconductor-industry expansion slated for the next decade bodes well for small banks, which can begin chipping away at the leviathan market share held by bigger institutions. "If community banks are properly capitalized and properly focused, there's a lot of opportunity because of all the consolidation going on out there," said Ron R. Peery, president of $300 million-asset Centennial Bank in Eugene. "As long as we continue to do our job well and are responsive to our customers' needs, we'll continue to succeed." Several factors fuel the optimism for the state and its community banks, says Thatcher S. Thompson of Seattle's Dain Bosworth Inc. "There's going to be an awful lot of economic growth in Oregon," he said. "They've got $13 billion worth of computer-chip growth slated over the next 10 years - and with that, you get fairly good-paying jobs, great construction growth, and smaller businesses springing up to serve the big businesses." Factor in the merger mania taking place between regional banks doing business in the state - including Oregon powerhouses U.S. Bancorp and First Interstate Bancorp - and you have the makings of a golden opportunity for community banks, Mr. Thompson said. "The bigger banks are only going to get bigger, and that means inevitably there'll be customer fallout from those mergers," Mr. Thompson said. "The small banks will be the ones to pick up the customers." Big banks still dominate much of the state. U.S. Bank of Oregon, First Interstate, BankAmerica, Keycorp, Washington Mutual, West One Bancorp, and First Security handle nearly 86% of Oregon's deposits. The biggest share held by a community bank, 2.7% is that of $425 million-asset Western Bank of Coos Bay, which itself is being bought by Washington Mutual. But smaller institutions are making inroads in some key regions. Bank of Newport now has 25% of the deposit market in Lincoln County, south of Portland, and its holding company, West Coast Bancorp, has seen loans grow at a 15% clip this year. Cascade Bancorp and Centennial Bancorp posted even better showings, with loan portfolios jumping 53% and 31%, respectively. Community banks weren't doing so well 15 years ago. Frank E. Brawner, president of the Oregon Bankers Association, said the state, relying heavily on lumber, had yet to diversify its economy. When that industry began to struggle, the state and its banks followed suit. With Oregon's economy now spread among high-tech, agricultural, and secondary wood products, in addition to lumber, the state is thriving. While there were but four bank start-ups over the last decade, four more are now in the application process and two should be complete by the end of the year. Not surprisingly, several of the state's established community banks have shown excellent growth over the last year. Mr. Thompson identified Eugene's Centennial Bancorp, Bend's Cascade Bancorp, and Lake Oswego's West Coast Bancorp as holding companies for banks that have posted impressive increases over the last year. "There has been healthy loan growth in the small-business sector at the expense of the bigger banks," Mr. Thompson said. "The small banks are all focused on that segment, and it's almost too small for bigger banks to get interested in." Overall community bank profitability has been solid. Through June 30, the state's 34 small institutions posted an average return on assets of 1.64%, up from 1.54% the year before and well above the 1.26% national average for community banks, according to Sheshunoff Information Services Inc., Austin, Tex. The Bank of Salem led the way with an ROA of 3.13%, followed by Pioneer Trust Bank at 2.66% and Valley Community Bank at 2.50%.

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