OAKLAND, Calif. - To the traditional banker, Oakland looks like anything but a land of opportunity.

A declining manufacturing base and a troubled reputation built on crime, poverty, and tough neighborhoods have made the city one of the West Coast's most noticeable problem spots.

But Cecil Adams thinks Oakland and the surrounding area may be ready for a change. Community Bank of the Bay, headed by Mr. Adams, will step into a longtime void in the area when it opens its doors in Oakland early next year.

Geared to lending in low- and middle-income neighborhoods, Community Bank of the Bay has its eye on areas that have been ignored by conventional banks.

"It's really not going to be different than any other bank, except for the focus of the target lending market," said Mr. Adams, Community's president and chief executive officer. "It'll really be the only bank in the area that focuses on lending money in underserved areas."

Community will serve neighborhoods that include parts of San Francisco, Richmond, Berkeley, East Palo Alto, and San Rafael.

"The credit needs in low- and medium-income neighborhoods demand and justify something special," said Ed Voris, Community's director of development. "There is a need for credit in the $50,000 to $200,000 range in most of these neighborhoods, which is an area not attractive to most banks."

Many neighborhoods in the bay area have been in decline since the end of the shipbuilding boom during World War II.

"What we have in low-income areas is incredible levels of discouragement," said chairman Lyndon Comstock. "We need to turn that around and create hope.

"The bank is the opposite dynamic of everything going to ruin, which has been happening around here since the '50s."

The concept behind Community Bank of the Bay stretches back to the 1970s, when South Shore Bank of Chicago began as the nation's first community development bank.

Since then, similar institutions have been opened in Brooklyn (Community Capital Bank) and in Arkadelphia, Ark. (Elk Horn Bank and Trust of Arkadelphia).

Two other West Coast community banks, Neighborhood Bank Corp. of San Diego and Albina Bank of Portland, Ore., are slated to open soon, and a Washington development bank is in the works.

Community Bank of the Bay has a $6 million stock offering slated for late in the year. The plan is to open by early next year.

The bank has experience going for it. Mr. Comstock is also the chairman of Brooklyn's Community Capital Bank, and Mr. Adams headed Unity National Bank of Houston in the late 1980s. Unity, in a low-income neighborhood, was a community development bank in everything but name.

Most banks shy away from extending credit in low- and middle-income neighborhoods, but loans made there aren't especially risky, Mr. Comstock said.

"Historically, you'll find that the loss ratio experienced by South Shore, Community Capital Bank, and Elk Horn Bank and Trust is really comparable to the loss ratio of the major banks in the industry," Mr. Adams said. "Loans in this market can be made, it's just a matter of having the resources.

"The principle issue is not the location of the businesses, it's the size of the loan," he added. "It just wasn't feasible for most traditional banks to take on the smaller loans. "

Community Bank of the Bay, which will direct much of its efforts to small businesses and multi-unit housing loans, won't be competing with many traditional banks. Larger banks in the area have even offered support.

Rick Hartnack, vice chairman of San Francisco-based Union Bank and a member of Community's advisory board, said community development banks enable the industry to target areas with special needs.

"It's difficult for large banks to develop unique solutions to highly localized problems," said Mr. Hartnack, whose own bank is mostly owned by Bank of Tokyo. "Any relatively small niche is going to be better served by a specialist."

Last fall President Clinton signed the Community Development Banking and Financial Institution Act of 1994, which created a fund to support institutions with a primary goal of promoting community development. Mr. Adams said he is interested in securing a portion of the $6 million in capital needed through the fund.

Mr. Dietrich is a freelance writer based in Brookdale, Calif.

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