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Factors influencing community bank performance in California


  • Gary C. Zimmerman


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.

Suggested Citation

  • Gary C. Zimmerman, 1996. "Factors influencing community bank performance in California," Economic Review, Federal Reserve Bank of San Francisco, pages 26-40.
  • Handle: RePEc:fip:fedfer:y:1996:p:26-40:n:1

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    References listed on IDEAS

    1. Carolyn Sherwood-Call, 1993. "Whither California?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue aug8.
    2. Mark E. Levonian, 1994. "Interstate banking and risk," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jul22.
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    5. Sherrill Shaffer, 1989. "Challenges to small banks' survival," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 15-27.
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    7. 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, issue Nov, pages 3-15.
    8. Roy H. Webb & William Whelpley, 1989. "Labor market data," Economic Review, Federal Reserve Bank of Richmond, issue Nov, pages 15-22.
    9. 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, issue Win, pages 24-38.
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    Cited by:

    1. Mary C. Daly & John Krainer & Jose A. Lopez, 2003. "Does regional economic performance affect bank health? New analysis of an old question," Working Paper Series 2004-01, Federal Reserve Bank of San Francisco.
    2. Albert DePrince & William Ford & Pamela Morris, 2011. "Some causes of interstate differences in community bank performance," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 35(1), pages 22-40, January.
    3. Bostic, Raphael W. & Robinson, Breck L., 2004. "The impact of CRA agreements on community banks," Journal of Banking & Finance, Elsevier, vol. 28(12), pages 3069-3095, December.
    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, vol. 4(1), pages 74-82, April.
    5. Magdalena Petrovska & Elena Mucheva Mihajlovska, 2013. "Measures of Financial Stability in Macedonia," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 2(3), pages 85-110.
    6. Md.Thasinul Abedin & Md. Muzammel Dawan, 2016. "A Panel Data Analysis for Evaluating the Profitability of the Banking Sector in Bangladesh," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 3(2), pages 163-171.
    7. 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, vol. 56(12), pages 1009-1019, December.
    8. Yeager, Timothy J., 2004. "The demise of community banks? Local economic shocks are not to blame," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2135-2153, September.
    9. Kevin Stiroh, 2004. "Do Community Banks Benefit from Diversification?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 135-160, April.
    10. 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.
    11. Dean F. Amel & Robin A. Prager, 2016. "Community Bank Performance: How Important are Managers?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(2), pages 149-180, March.
    12. Amel, Dean F. & Prager, Robin A., 2014. "Community Bank Performance: How Important are Managers?," Finance and Economics Discussion Series 2014-26, Board of Governors of the Federal Reserve System (U.S.).


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