California community bankers are dismissing as simplistic a report by the Federal Reserve Bank of San Francisco that blamed the early-1990s' community bank crisis in the state on economic conditions and an increase in commercial real estate lending.

A Jan. 19 study of 333 institutions with assets of less than $300 million highlighted those two factors as the primary causes of community bank woes in the state between 1990 and 1994. Dozens of small banks failed during that time.

Bankers, however, said that though economic conditions worsened in the period, many banks also avoided problems by employing sound strategy.

"I thought it was a rather cavalier attitude for them to take," said James R. Kenny, president and chief executive of San Jose National Bank, a $255 million-asset institution. "A lot of Northern California banks have done fine and I think any bank that kept a close eye on its guidelines and underwriting criteria was able to fare all right."

The Fed study, by economist Gary C. Zimmerman, said banks' performances generally depended on underlying economic conditions. He said that local factors, such as nonagricultural job losses in Southern California and plummeting real estate prices across much of the state, wielded a strong influence on community banks.

An overall trend away from diversified loan portfolios toward increased commercial real estate and construction lending also was a factor, according to Mr. Zimmerman.

But bankers said such conclusions neglect the role of management in contributing to the crisis.

"There's no question commercial real estate did have an impact," said Herbert C. Foster, chairman and CEO of $250 million-asset CivicBank of Commerce, Oakland. "But the fact is management is something that has more impact on results than anything else.

"It would be simple to say 'the economy went into the tank, commercial real estate went into the tank, and it wasn't our fault.' But I don't think you can get off that easily. You've got to blame management and the board for some of that. There's more to the situation than saying 'commercial real estate turned out to be a bad idea.'"

Frank V. Riolo, president and CEO of Borrego Springs Bank, Borrego Springs, Calif., agreed that small banks need to bear some of the responsibility.

"I'd like to blame all the problems on the economy, and certainly it affected us, but we did a lot of it to ourselves by not keeping up on changes in the industry," Mr. Riolo said. "The bank was reactive, it wasn't reactionary, and that was the problem. We didn't keep up with things and it hurt us."

Borrego Springs Bank, with just over $30 million in assets, was hit hard by plunging real estate prices in Southern California.

"Before deregulation it was easy to make money. After deregulation the economy was good, so it was still pretty easy to do well by sticking to the status quo," Mr. Riolo said. "But when the economy went south, little problems became big problems. Really bad times can make problems quite glaring, and that's what happened with us."

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