A pair of former big-bank executives have launched an investment fund that will specialize in the stock of small California-based banks.

Richard W. Decker and former Postmaster General Anthony M. Frank formed the California Community Financial Institutions Fund last month with $75 million raised from investors.

Mr. Decker had been chief operating officer of First Interstate and chief executive officer of Westamerica Bank. Mr. Frank had been president and chairman of First Nationwide.

Both men say they are bullish on the prospects for community banks in their home state and are eager to pump capital their way.

"There's never been a better time to be a community bank in California than now, with the megamergers and the economy on the mend," Mr. Decker said.

Mr. Frank and Mr. Decker, chairman and president, respectively, of Belvedere Capital Partners, the fund's general partner, hope to provide bank managements with capital for expansion or liquidity while advising them on plans. But they don't want to gain full control of any bank. "We're not planning to replace management," said Mr. Frank.

By early February, the duo had raised cash from a diverse group of institutional investors and wealthy families to capitalize their fund. Among the major investors is the California Public Employees Retirement System, with a 24.9% stake.

The two men also plan to register the fund as a bank holding company, which would let it purchase more than 10% of a bank. They hope to raise as much as $100 million more by yearend. Over the next four years, they plan to target 7 to 10 banks from among the 300 in California with less than $500 million of assets for investment.

The fund is also authorized by its investors to target thrifts, though it won't do so initially.

Investors have replaced large banks as the primary acquirers of community banks in California. Despite frequent rumblings that Charlotte, N.C.-based NationsBank, Columbus, Ohio-based Banc One Corp., and Norwest Corp. of Minneapolis have designs on California, none of them have entered the state. And analysts predict they would target large franchises anyway, not community banks.

"As the state gets healthier and healthier, there may be more interest from these big banks," said Mr. Decker. "In the meantime, there's a lot of consolidation activity."

Among the most frequent buyers have been Castle Creek Capital, a group of wealthy families led by John Eggemeyer; Dartmouth Capital Group and Huntington Beach, Calif.-based Commerce Security Bancorp, led by Robert P. Keller; and First Banks Inc. of St. Louis, owned by James F. Dierberg.

"We view our mission as a partnership with the bank," Mr. Eggemeyer said. "We do not manage any of the banks. Our mission is simply to see that they are effectively managed."

"They're all seeing value here. I think that's positive," said Steven J. Didion, a bank analyst at Hoefer & Arnett in San Francisco. "They don't feel like they're buying into a market that they don't see as improving."

Mr. Frank sold First Nationwide to Ford Motor Co. in 1985 and left in 1988 to become postmaster general.

Both men worked with the former commissioner of Major League Baseball, Peter Ueberroth, in 1993 to establish Independent Bancorp of Arizona, and Mr. Frank had been chairman.

The largest de novo in history, Independent bought Caliber Bank, with 49 branches and $1.7 billion in assets, from BankAmerica Corp. The San Francisco giant was divesting branches as part of its purchase in 1991 of Security Pacific Corp.

Caliber was the fifth-largest bank in the state, and the largest independent, but was sold to Norwest in 1994 after being hammered with $50 million in derivatives losses. Ironically, Mr. Keller was the last president of Caliber.

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