A cooling housing market isn’t freezing expansion plans for Central Oregon banks.

In fact, many area bank executives — confident in the region’s economic fundamentals — are planning new branches in Bend and throughout Central Oregon in the next few years.

Banks that have just come out of the ground or are on the drawing board:

•Prineville’s Community First Bank opened its new Redmond branch earlier this year, and two more branches are scheduled to open in Bend this year.

•Klamath Falls-based South Valley Bank this month launched a branch in Prineville, and officials said the bank has broken ground, or will do so soon, at three more locations in Sisters, Madras, and on the north side of Bend. The bank also is building a new branch to replace its current location in east Bend.

•Lake Oswego-based West Coast Bank opened retail branches on the east side of Bend this year.

•A new Bend-based bank, High Desert Bank, is expected to start operations later this summer on the west side of the city.

•Roseburg’s Umpqua Bank is planning to set up a retail location in Bend’s NorthWest Crossing neighborhood, and several other banks — including Bend’s Bank of the Cascades — also have expressed interest in that area.

Ray Davis, president and CEO of Portland-based Umpqua Holdings Corp., the bank’s holding company, said its NorthWest Crossing branch should open within two months, and he isn’t ruling out additional branches locally in the near future.

“Our acceptance in Bend has been phenomenal,” he said. “So the short answer is, yes, absolutely, there’ll be more.”

The continued branch expansion doesn’t surprise one local banking official.

“We feel it is really important to support our customers however they want to bank,” said Julie Miller, executive vice president and regional manager for Bank of the Cascades. “Consumers want that face-to-face contact, and a brick-and-mortar branch continues to be a key part of banking.”

The trend counters opinions from several industry analysts who have said previously that community banks face a challenging year with the slowing residential real estate market. They’ve speculated that bank mergers could result.

South Valley high on region

Housing contractions aren’t plaguing South Valley, one of the most aggressive in expanding in the local market, said Bill Castle, the bank’s president and CEO.

Castle, whose bank focuses on setting up banking relationships with specific businesses and, by convenience, capturing the business of those companies’ employees, said South Valley’s business model is more insulated from the residential real estate market’s frost.

“We have a pretty solid residential real-estate lending group, but it’s not the core of our bank,” he said. “We haven’t relied on that, and that’s a good thing. If you’re heavily concentrated in residential real estate, you’re not having a good time right now. But that’s not our focus.”

For Castle, South Valley’s rapid expansion in Central Oregon — the bank will go from three local branches at the beginning of 2006 to eight in two years — is directly related to Washington Mutual’s closing of its business banking division in Bend about three years ago.

“We were Johnny-on-the-spot,” Castle said, noting that South Valley hired many of Washington Mutual’s business bankers. “We basically hired the first 19 people on the spot. And with business banking, when you hire the right people, the relationships with customers come with them. That’s why these hirings are so important for us. This team comes with existing business banking relationships in this market.”

The branches, Castle noted, are simply the retail side of South Valley’s business catching up to the commercial banking side. Each branch costs roughly $2 million to launch, Castle said, which would put his bank’s investment in Central Oregon at about $10 million in the next year.

“With the rapid expansion of business banking clients we have here, we must give those clients the convenience of our branches,” he said.

South Valley opened its Prineville branch June 15 and has additions planned in Sisters, Madras and north Bend. But Castle said his bank isn’t stopping there.

“Within five years, we need to have five branches in Bend,” he said, adding that South Valley also is interested in a NorthWest Crossing presence. “One for each of north-, south-, east- and west-side town.”

Field getting more crowded

South Valley’s newest branch in Prineville brings it onto the home turf of another aggressively expanding bank.

Community First Bank officials said in May that they’re looking at adding four branches — three in Bend and one in Prineville — to their existing network in the next two or three years.

Robin Freeman, president and CEO of Community First, isn’t surprised that his bank’s home market is attracting competition, noting the number of housing developments and destination resorts planned for the area.

The 2,100-acre Remington Ranch and 1,800-acre Brasada Ranch resorts have already been approved, while a third — Hidden Canyon — is still awaiting approval. IronHorse, a mixed-use community that could bring 2,900 homes to Prineville, also is constructed.

“When you look at Prineville, assuming that Central Oregon continues to grow, the city will be attractive because of lower costs for housing (versus Bend),” Freeman said. “And if that’s the case, other banks will continue to move in.”

South Valley’s Castle agreed, noting that Prineville is one the key locations his bank has highlighted in Central Oregon.

“Those are the type of markets our bank tends to do well in,” he said. “We think it’ll be the next fastest-growing community in Oregon for sure, and we feel awfully good about having a presence so close to the (destination) resorts and the various businesses there. It’s a competitive market, but in our view, there’s enough growth to benefit us, too, (in addition to other banks).”

Community First’s Freeman noted, however, that his bank is ready for the competition. The bank has budgeted its second branch on the east side of Prineville for 2008, Feeman said.

“It’s been our corporate home, and we plan to continue our growth here,” he said.

Some content to hold

Not every bank is looking to expand in Central Oregon, however.

The Dalles-based Columbia River Bank, for instance, is focusing expansion efforts in Vancouver, Wash., and that state’s Tri-Cities area, said Senior Vice President and Regional Manager Mike Anderson, noting that his bank only recently entered those markets.

“We don’t have anything planned hard and fast (in Central Oregon) right now,” Anderson said, but added that Columbia River does have one or two more branches in Bend and Redmond in mind.

But even as new bank branches sprout up throughout the region, local officials said they aren’t worried about Central Oregon becoming too saturated with banks — even with the residential real estate market cooling.

“This is still a very robust area, even if it’s slowing down,” Anderson said. “It’s still a very good market. We do see new branches all the time, and as the local population grows, consumers will need the convenience (of having branches). We continue to see the economy expand here, and I think it can support all of us.”

Bank of the Cascades’ Miller agrees.

“The growth here hasn’t stopped,” she said. “It has slowed, but only to the level of what we were seeing a few years ago. It’s not a boom-crash scenario. It’s a sustained growth.”

Miller added that, regardless of how the Central Oregon economy fares in the next few years, each bank has to have a clear idea of who their target market is. If a bank can do that, it can sustain its branch network, she said.

“Markets move,” Miller said. “And you have to weather the storm. If someone comes into the market based on the frenzied growth we’ve seen in the last year and a half, that’s not a good plan. A bank’s success is based on strategy. If we differentiate ourselves, we’ll be able to sustain our growth. If you don’t plan your niche well, you won’t.”

That’s why South Valley isn’t wavering from its commercial-centric strategy, Castle said.

“So far, in this marketplace, there hasn’t been a spillover (of real estate slowdown) to the business-commercial side, which remains robust,” he said. “Even if the market slips, you’re not going to see a rapid decline like what some of the metropolitan areas are seeing. We are not answering to investors in New York City. We answer to our board and 300 owners in Klamath Falls, and they believe in what we are doing, and they support our game plan.

“Anybody can make capital investments and build branches,” Castle added. “It’s just bricks and mortar, and just by themselves, they don’t get you very far.”