Bank expects lower profit.

Byline: ED RUSSO The Register-Guard

PORTLAND - The weak economy and business failures forced Centennial Bancorp on Thursday to announce that its first-quarter profit will be dampened by an extra $1.8 million set aside for loan losses.

The holding company for Centennial Bank said it boosted its allowance for credit losses because several commercial customers went out of business, and because it has extended credit to real estate markets hurt by high unemployment and soft demand. The firm also said it was taking a "critical look" at its loans to the hospitality industry. Part of the loan loss provision will cover an expected increase in write-offs, Centennial said.

"With our focus as a business bank, we were among the first to be impacted when businesses led the recession," said Ted Winnowski, chief executive of Centennial Bancorp. "Many companies in our geographic region have experienced deteriorating business conditions and balance sheets, and many of our customers have, in turn, seen their revenues and profits erode."

With the $1.8 million loan loss provision - before taxes - Centennial said it expects to report earnings of 7 cents to 9 cents a share in the quarter ended March 31. The bank's allowance for losses as a percent of loans on March 31 is expected to rise to 1.9 percent, compared with 1.5 percent at the same time a year ago.

While there are signs that the national economy is recovering, the loan loss reserve is needed in case the Northwest economy takes more time to recover, Winnowski said.

"We remain one of the strongest capitalized banks in the nation," he said. "We have continued to closely evaluate our current portfolio, and while we can't predict the future, we are reasonably confident that our credit monitoring measures going forward will continue to quickly bring credit difficulties to light should they surface." Centennial, with six branches in Lane County, expects to report its first quarter earnings April 18. On Thursday, the publicly traded firm said it will issue a 4 cents per share dividend May 1, a 40 percent split-adjusted increase over the prior quarter.