Bend is a small town.
At twice the size, metro area.
If it was twice the size, it might turn into what?
Salem? Only without the state government, or many small towns around it, or less than an hour from Portland or Eugene on a usually snow free interstate?
Or Eugene? Only without the interstate or the University of Oregon?
Or Medford? Again, without a 4 year college or an interstate.
Hell, we're not even a Corvallis, with OSU; or an Albany, with actual jobs. (Did I say interstate?)
Poverty with a view.
A thin veneer of rich people, a small amount of sophistication, does not make us a city. Nor does Trader Joes, or any number of (going out of business) fine dining.
Come here. Live here. Get used to it.
Wishing won't make it different. We've seen waves of aspirational lifestyle seekers before, and we thank you. But proclaiming over and over again that 'we're different' won't cut it.
Spend your money, or retire here and spend your money. Great. Give us a magazine to show us how to live, bring a big time chef, tell us about your commute or your long-distance job, and especially how rich you are.
We like that you're rich.
We like that you're willing to spend your entire nest egg, your entire trust fund, the entire proceeds of your big house sale. We thrive on your willingness.
But we're still a small town.
Isolated.
Without much industry. And why would industry move to such an isolated place?
We've maintained a pretty good surface veneer. Stores have been leaving beautiful husks for years. We continue to fail upward. Thank you for the nice renovations.
After all, people do want to live here. Nice and smart people. Many who understand that they have to accept less income to live here.
But many don't. Many seem to think they've moved somewhere -- different.
At least we do have lots of great scenery, and lots of minimum wage tourism jobs.
Enjoy.
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In other words: It's the SCENERY stupid.
That's why Bend still exists. Tourism and retirees.
As a small business owner, I know that I couldn't survive without the tourists.
But I also never forget that servicing tourists, even rich tourists, and servicing retirees, even rich retirees, is mostly a minimum wage job.
What about the big boys, you ask. What about the Trader Joes? Why would they move here?
Ah, you're assuming they know what the hell they're doing.
I don't assume that.
I think a little red light flashes on their computer that says, "METRO AREA" and they're off to build.
They hear Bend is a pretty nice place.
Oh, some will do great. Brand names are powerful. Even local brand names, like McMenimens or Deschutes Brewery.
Others, like Gottshalks, or Eddie Bauer, or Kohl's will wonder why they hell they came here.
Once here, many of the big guys won't leave, even if the numbers don't hold up.
But....Barnes and Nobles isn't strong nationally, neither is Pier One, or Gottshalks, and we'll see some of these guys decide to exit, too.
Because Bend was a bubble town. Built on the premise that we could turn into a city. But without the proper foundations.
Now we got lots of bubble businesses that are looking around and saying,
Is that all there is?
That's all there ever was.
Scenery. Darn nice scenery.
Bend sounds a lot like other places that fancy themselves to be "different" and "special," such as Santa Fe, Austin, Corvallis, Raleigh, Charleston, Flagstaff, Langley, and so on and so forth.
Some are big, some are small, but all of them overprice their property, squabble about the root of their problems (usually settling on "newcomers with money who think they're so great" as the cause), have a core of pseudo-hippies who try to block most anything progressive while complaining loudly about the lack of "true" progression as defined by their drug-addled old minds, don't invest in their own communities, don't bother to build responsible ways to pay for support services other than to raise property taxes and not-so-secretly support the overpriced homes nonsense, and end up as nasty little crime-ridden places where the serfs prey directly on the nobles that prey indirectly on them. And then they wring their hands and look around for someone to blame. The Republicans are handy.
God love 'em, they are welcome to their Different and Cooler-Than-Thou communities! Knock yourselves out!
Dunc, Good post for New Year.
The following 'blogger fodder' is the kiss of death I have been predicting for years. This Oregonian reporter is the same guy who did the recent Summit-1031 story's. In this article he points out what Bankers all over Oregon and the USA are saying. "That Bankers that played in Oregon were idiots, now saddled with ton's of non-performing loans ( aka deadbeat borrowers )" This is the KISS of DEATH for BEND, it means from now on only MOB money, as +10% interest rates. Bend is finished. Happy New Year, Best blogger-fodder so far in 2009.
State bank's real estate caution nets good results
Thursday, January 01, 2009
RYAN FRANK
The Oregonian Staff
In the thick of the housing bubble, bankers deep inside Eugene-based Pacific Continental Bank pushed to move into the lucrative home construction and land development game.
They'd watched business boom at Columbia River Bank and West Coast Bank from 2004 to 2006. Yet, Pacific Continental Bank's head real estate banker, Charlotte Boxer, had no interest in chasing speculative deals in fast-growing Bend, Happy Valley or Medford.
She steered clear of sprawling subdivisions and big production builders to focus on in-fill projects by small builders. The bank offered no subprime loans and generally tried to stick with its core customers: Nonprofits and small businesses.
It paid off.
The bank's relatively tiny rate of bad loans led investors to drive the stock price for the bank's parent company, Pacific Continental Corp., in 2008. While other banks' nonperforming assets rise as high as 7 percent of total assets, Pacific Continental Bank's rate was six-tenths of a percent as of Sept. 30.
The company's stock rose from $12.28 to a Wednesday close of $14.97 a share. That's a 19 percent increase for last year, the biggest stock gain among The Oregonian Index of publicly traded companies in Oregon and southwest Washington.
The go-go real estate boom was "a lucrative game that many, many banks had trouble saying no to," said Jeff Rulis, vice president and research analyst at D.A. Davidson & Co., in Lake Oswego. Based on their performance through Sept. 30, "Pacific Continental Bank was able to keep their nose clean."
Bankers warned
The 2004 to 2006 housing bubble fueled massive growth in new home construction in Oregon. All that growth required billions of dollars. And much of that money came in loans from Northwest banks.
Regulators warned bankers in the boom about putting too much of their loan business into the cyclical real estate industry. But some got in trouble anyway.
In 2005, West Coast Bank's parent company, Lake Oswego-based West Coast Bancorp, had 11 percent of its loans in construction development. That figure jumped to nearly 24 percent in the first quarter of 2008.
State bank's real estate caution nets good results
Page 2 of 3
At one point lasst year, banks in only five other states had higher exposure to construction and development loans than those in Oregon, according to Federal Deposit Insurance Corp. numbers.
Pacific Continental Bank peaked with 12 percent of its loans in residential construction in 2006.
Boxer had plenty of chances to make big housing bets when prices rocketed up in the boom.
She gave two examples:
In central Oregon, the cost for an acre of raw land sold for new homes grew from about $100,000 to $400,000.
In Beaverton, a home under construction was appraised for $450,000. The builder listed it for $550,000. It sold in a bidding war for $575,000.
The rising prices made it difficult for builders to sell homes at prices buyers could afford and still allow builders to turn a profit. Those rising prices in part made Boxer steer clear.
"You never go into a market at the top," Boxer said.
"The builders were making so much money on the houses," Boxer said. "People were coming in and buying them because no one thought prices would go down.
"But all real estate is cyclical," she said.
Smart Bankers Avoid Bend ...
State bank's real estate caution nets good results
Page 3 of 3
The boom times started to fade in 2007. Boxer drove through subdivisions and saw "For Sale" signs sprouting like crabgrass. She halted loans on speculative new homes by mid-2007.
"It takes discipline to say no in a market where there's so much money to be made," Boxer said. "But that's what we did."
Few subprimes Outside of real estate construction loans, Pacific Continental Bank didn't offer the toxic adjustable-rate subprime loans that now see rising default rates. In fact, their mortgage division exists largely to serve the business clients when they're ready to buy a personal home.
In general, chief financial officer Mick Reynolds said the bank tried to stick to its mission as a business bank that targets nonprofits and small business. The largest concentration of the bank's loans, about 12 percent, goes to dentists.
While other banks opened new branches in Oregon to chase the growth, Reynolds said they didn't move beyond their markets in Eugene, Portland and Seattle.
The payoff is visible in its performance.
Rulis said five years ago bank stocks traded on their earnings. Amid the financial meltdown today, all investors want to know is the amount of bad debt is there and whether the banks can survive.
Rulis tracks 37 banks across the West and found the average rate of nonperforming assets compared to total assets was 3.9 percent compared to less than 1 percent for Pacific Continental Bank.
Pacific Continental's parent company reported $3 million in net income in the third quarter. That's down 11 percent compared to the same quarter a year earlier but not bad at a time when banks are racing to the federal government for a handout.
Other Oregon banks had dismal years.
West Coast Bank has been forced to pump millions into reserves for expected loan losses on a program it created to entice new home buyers. Its stock fell 64 percent in 2008. Columbia Bancorp, parent of Columbia River Bank, closed its mortgage business and hired a new CEO and CFO. Its stock price fell 87 percent.
Investors may wonder whether Pacific Continental Bank has reported the depths of its problems in residential real estate loans. In general, banks can delay publicly acknowledging their loan troubles by tapping interest reserves and dropping interest rates to help troubled borrowers.
Rulis said it's possible that the bank is forestalling bad news but he doubts that's the case. In the third quarter, the bank said it had no delinquent loans with home builders or developers. But it does have some nonperforming real estate loans that are at least 90 days past due: A $1.7 million loan on a Seattle office building and about $1.5 million in home construction loans made to consumers.
Boxer said the bank has "a few projects that are giving us heartburn, but our issues are not dragging down our earnings."
Boxer talks reluctantly about the bank's success in 2008 when there's plenty of general economic danger in the future.
In a historic financial collapse like this one, she muses, who knows what may happen six months from now?
Ryan Frank: 503-221-8519; ryanfrank@news.oregonian.com; blog.oregonlive.com/frontporch.
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