Western community banks that rely heavily on commercial real estate lending could be at risk if a slowdown in high-tech job growth persists, the Federal Deposit Insurance Corp. warns.

In a report released last week, the FDIC singled out four "high-tech cluster" markets-San Jose, Calif.; Sacramento; Portland, Ore.; and Salt Lake City/Provo-where banks with less than $1 billion of assets are unusually dependent on commercial real estate and construction lending.

Such dependence could be dangerous, the FDIC cautions, if growth in high-technology employment continues to decline and exports remain flat.

"Those banks should consider the potential risk of continued weakness in the high-tech sector and its effects on their local economies," the FDIC wrote in a recent report.

According to the FDIC, the average U.S. community bank has about 16.5% of its assets tied up in commercial real estate loans. In San Jose, Salt Lake City, and Sacramento, commercial real estate loans often equal one- third of a bank's assets.

The explosion of commercial real estate and construction lending in those markets has been triggered by the rapid expansion of such major employers as Intel Corp. and Gateway Inc. Suppliers, small machine shops, retailers, and start-up firms have all sprouted up in support of those tech giants.

But the high-tech boom is showing signs of cooling. For example, the number of new computer manufacturing jobs in California, Oregon, and Washington dropped by more than 50% last year. Meanwhile, the lingering crisis in Asia has drastically reduced demand for U.S. technology.

Despite the downturn, the FDIC said there is "little evidence" that the weakened high-tech market has bruised the financial performance of banks in those markets.

At yearend 1998 the return on assets for small banks in San Jose was 1.25%, Portland 1.24%, and Salt Lake City/Provo 1.71%. The national peer average is 1.24%.

Bankers in those markets appeared unfazed by the FDIC's report.

"We don't see any risk in our real estate portfolio," said James Kenny, president and chief executive officer of $357 million-asset San Jose National Bank.

Still, some are taking steps to protect themselves in case the real estate market sours.

Hal Fick, CEO of $288 million-asset Borel Bank and Trust Co. in San Mateo, Calif., said his bank is increasing loan-loss reserves.

"The real estate market is still hot," Mr. Fick said. "But, of course we're thinking about any downturn."

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