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Factors influencing community bank performance in California

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  • Gary C. Zimmerman

Abstract

Community bank performance in California lagged well behind the industry and larger banks in the state during the first half of the 1990s. This paper identifies several factors that influenced the performance of these banks, which have less than $300 million in assets and typically operate in only one region of California, during the period from 1990 to 1994. The results suggest that regional conditions within California were an important factor in community bank performance. Management decisions, especially regarding loan portfolio concentration, also were a contributing factor. Community banks' increased reliance on real estate loans, and especially higher-risk commercial real estate and construction loans over the 1984 to 1994 period, played a significant role in lowering asset quality over the period studied.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (1996)
Issue (Month): ()
Pages: 26-40

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Handle: RePEc:fip:fedfer:y:1996:p:26-40:n:1

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Keywords: Banks and banking - California ; California;

References

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  1. Mark E. Levonian, 1994. "Interstate banking and risk," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue jul22.
  2. Katherine A. Samolyk, 1994. "U.S. banking sector trends: assessing disparities in industry performance," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-17.
  3. Benton E. Gup & John R. Walter, 1989. "Top performing small banks: making money the old-fashioned way," Economic Review, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Nov, pages 23-35.
  4. Sherrill Shaffer, 1989. "Challenges to small banks' survival," Business Review, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of Philadelphia, issue Sep, pages 15-27.
  5. Leonard I. Nakamura, 1994. "Small borrowers and the survival of the small bank: is mouse bank Mighty or Mickey?," Business Review, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
  6. Fred Furlong & Gary C. Zimmerman, 1995. "Consolidation: California style," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue oct27.
  7. Carolyn Sherwood-Call, 1993. "Whither California?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue aug8.
  8. Elizabeth S. Laderman & Ronald H. Schmidt & Gary C. Zimmerman, 1991. "Location, branching, and bank portfolio diversification: the case of agricultural lending," Economic Review, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Win, pages 24-38.
  9. Roy H. Webb & William Whelpley, 1989. "Labor market data," Economic Review, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Nov, pages 15-22.
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Citations

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Cited by:
  1. Bostic, Raphael W. & Robinson, Breck L., 2004. "The impact of CRA agreements on community banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(12), pages 3069-3095, December.
  2. Yeager, Timothy J., 2004. "The demise of community banks? Local economic shocks are not to blame," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(9), pages 2135-2153, September.
  3. Andrew P. Meyer & Timothy J. Yeager, 2001. "Are small rural banks vulnerable to local economic downturns?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 25-38.
  4. Hussein A. Hassan Al-Tamimi & Husni Charif, 2011. "Multiple approaches in performance assessment of UAE commercial banks," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, Emerald Group Publishing, vol. 4(1), pages 74-82, April.
  5. Mary Daly & John Krainer & Jose A. Lopez, 2003. "Does regional economic performance affect bank health? New analysis of an old question," Working Paper Series, Federal Reserve Bank of San Francisco 2004-01, Federal Reserve Bank of San Francisco.
  6. Dwyer, Sean & Richard, Orlando C. & Chadwick, Ken, 2003. "Gender diversity in management and firm performance: the influence of growth orientation and organizational culture," Journal of Business Research, Elsevier, Elsevier, vol. 56(12), pages 1009-1019, December.
  7. Albert DePrince & William Ford & Pamela Morris, 2011. "Some causes of interstate differences in community bank performance," Journal of Economics and Finance, Springer, Springer, vol. 35(1), pages 22-40, January.
  8. Magdalena Petrovska & Elena Mucheva Mihajlovska, 2013. "Measures of Financial Stability in Macedonia," Journal of Central Banking Theory and Practice, Central bank of Montenegro, Central bank of Montenegro, vol. 2(3), pages 85-110.
  9. Kevin Stiroh, 2004. "Do Community Banks Benefit from Diversification?," Journal of Financial Services Research, Springer, Springer, vol. 25(2), pages 135-160, April.

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