Blame single-family home sales. Blame the seductive attractions of the financial cousins Freddie Mac and Fannie Mae. Blame the economy.

Along with several other regional banks, Tacoma-based Columbia Banking System this week announced its third-quarter earnings.

They’re down.

Columbia on Thursday reported a quarterly loss of $8.8 million, compared to net income of $9.3 million for the third quarter of 2007.

Earnings per share reflected a loss of 49 cents, compared to earnings of 53 cents a year earlier.

Still, the bank holding company reported strong liquidity and a healthy core business.

“The fundamentals of our business remain sound during this challenging economic environment,” said Melanie Dressel, Columbia president and CEO, in a statement released early Thursday.

During a call with analysts later in the day, Dressel said the company “will stay the course” established since the company was founded 15 years ago.

“We believe Columbia is in a good position to ride out” the troubled economy, she said.

“We expect the pressure on our earnings to continue,” said Gary Schminkey, Columbia chief financial officer.

“We were hopeful by the end of the first half of 2009 that we’d see things improving,” said Dressel, in an interview later Thursday. “Just listening to our customers – people are being very conservative. Business owners are thinking two or three times if they will make capital investments. It’s really going to get back to consumer confidence.”

Concerning the quarterly loss, Dressel said the company had expected to profit from investments in Freddie Mac and Fannie Mae, which failed earlier this year. She said that as a bank, Columbia had “been incentivised to invest in government agencies that help us do business. We had an incentive from a financial standpoint.”

Along with offering tax incentives, the investments had provided the expectation of an approximate 8.25 percent return on its preferred stock, which had been highly respected by ratings agencies.

Columbia invested $20 million in the stocks, and has recorded an “impairment,” or loss, of $18.5 million – or $11.9 million after tax – in the investment.

In the release, Dressel emphasized that Columbia has made no investments in such vehicles as collateralized debt obligations, trust preferred securities, “private label collateralized mortgage obligations or private label mortgage-backed securities.”

She said Columbia will concentrate on the proven fundamentals of the business.

Chief Credit Officer Andy McDonald said Columbia is seeking no further banking relationships with builders of individual homes.

“It just doesn’t make sense to go looking for that business, because the housing market is struggling,” he said.

The company has 35 percent of its loan portfolio dedicated to commercial business loans, and less than 20 percent in real estate construction loans, according to figures released Thursday.

Nonperforming loans were $78.2 million at the end of the quarter, compared to $72.3 million at the end of the second quarter and $14.6 million at the end of 2007. Among the nonperforming loans, 66 percent came from residential construction gone sour.

Schminkey said Columbia may take part in the new federal initiative TARP (Troubled Assets Relief Program) – which could make some $78 million available to Columbia for use in loans and other investments.

With details still being developed, no decisions have been made, Dressel said.

“Even if we didn’t get the capital under TARP, we are still well-capitalized,” said Schminkey.

The TARP funds could be used to make loans – or to acquire banks in difficulty.

Speaking with analysts, Dressel said Columbia sees “a wide variety of options, in Eastern Washington and Idaho.”

“I should also have said Oregon,” she said later. “We aren’t in a lot of places we would like to be.”

Columbia has 52 branches in 10 counties in Washington and Oregon. Dressel said she expects to announce soon the details of another branch.

C.R. Roberts: 253-597-8535

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LOCAL BANKS RELEASE THIRD-QUARTER EARNINGS

Rainier Pacific

Earnings: Loss of $3 million

Per share: Loss of 49 cents

Probable cause: $6 million addition to loan loss provision

CEO says: “The core fundamentals of Rainier Pacific’s underlying business remain stable.”

Stock: Down 79.54 percent year-to-date

Heritage Financial

Earnings: $2.081 million

Per share: 31 cents

Probable cause: Net interest margin improves; efficiency ratio declines.

CEO says: “The fundamentals of community banking continue to be our focus.”

Stock: Down 29.65 percent year-to-date

Columbia Bank

Earnings: Loss of $8.8 million

Per share: Loss of 49 cents

Probable cause: Investments in Fannie Mae and Freddie Mac

CEO says: Liquidity remains strong.

Stock: Down 54.02 percent year-to-date

Frontier Bank

Earnings: Loss of $17.8 million

Per share: Loss of 38 cents

Probable cause: $42.1 million provision for loan losses

CEO says: He will take a 10 percent reduction in base salary; no discretionary bonuses; executive total compensation reduced 34 percent from 2007.

Stock: Down 60.10 percent year-to-date