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Factors influencing community bank performance in California

The California banking industry began to rebound in 1992, well before the state's slow economic recovery took hold. Yet as late as 1994, many of the state's small or community banks still struggled with poor asset quality and weak earnings or losses--indeed, 22.5 percent of the state's 333 community banks lost money; in sharp contrast, countrywide less than 4 percent of small banks recorded losses in 1994, and outside of the West no other group of banks, whether compiled according to size or region, reported losses at more than 6 percent of banks.

This paper examines several factors that may have influenced community bank performance in California, factors that may explain why their asset ...

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