SAN FRANCISCO - For BankAmerica Corp., the decision to close its Bernal Heights branch was simple economics: Deposit volume was low and the customer base was small.

But the nation's second-biggest bank hadn't counted on the reaction from the San Francisco community. The 66-year-old branch was the only one serving the neighborhood of 23,000 residents, who saw it as part of their economic lifeblood.

After months of tough negotiations, BankAmerica decided to give the office a reprieve.

"Given the circumstances, it was the right business decision to make," said senior vice president Barbara J. Desoer, San Francisco district manager for the company's flagship California bank.

Thorny Problems

The conflict over Bernal Heights illutrates the thorny economic, community relations, and public relations problems confronting all banks on a local level.

For BankAmerica, which has carried out a sweeping overhaul of its retail network since acquiring Security Pacific Corp. last year, the issues have been particularly sensitive.

In just one year, the bank has shuttered 422 of the two companies' 1,441 California branches. Another 13 remain to be closed. It's one of the most far-reaching consolidations ever carried out in banking.

For the most part, the process has gone smoothly. BankAmerica has reversed only one other branch-closing decision.

But the Bemal Heights episode is one that no bank today can afford to ignore. Experts warn that planned closures are increasingly subject to scrutiny from community groups, politicians, and regulators.

Exception to Consolidation

When the branch is in a low-income neighborhood with few banking outlets - as was Bernal Heights - the likelihood of a challenge increases.

"Banks are going to run into this situation over and over again," says Jeanine Catalano, a community relations consultant with the Secura Group in San Francisco. "There will be more [cases like] Bernal Heights."

The neighborhood of Bernal Heights lies in the southeastern corner of San Francisco, far from the tourist meccas of Fisherman's Wharf and the Golden Gate. It's lined with wood-frame houses built for blue-collar families in the years after the city's 1906 earthquake.

Bernal Heights is remarkably diverse - with whites, Hispanics, Asians, and blacks well represented. While the neighborhood is mostly lower income, middle-class homesteaders have ventured in recently in search of moderately priced housing. A disproportionately high number of older people also live there.

A Neighborhood Fixture

The main commercial strip along Cortland Avenue seems frozen in time, filled with small groceries, bars, and an old-fashioned drugstore.

The Bank of America branch fits right in. A cramped storefront with no parking lot, its site was selected by founder A. P. Giannini himself 66 years ago, when his company was still known as Bank of Italy.

It was sometime last spring that BankAmerica targeted Bernal Heights for extinction. The plan was to move local accounts to a larger branch in an adjoining neighborhood a little over half a mile away.

When neighborhood groups learned of the plan last May, they confronted bank officials.

Resistance Increases

"They told us it was a done deal," recalls Imre Mandoki, owner of a specialty foods store on Cortland Avenue and head of the neighborhood merchants association. "And we said, |You go back to your boss and say we're not accepting this done deal."'

Despite BankAmerica's assurances that the neighborhood would be adequately served by the nearby branch, broad opposition to the shutdown grew.

Many residents complained they lacked cars, and would have to take two buses to the neighboring branch. The strongest protests came from merchants, who feared they would be abandoned for stores outside the neighborhood.

"People go to the bank, then the dry cleaner, and then the grocery," explained Jeffrey Bachman, a manager of the nonprofit Bernal Heights Housing Corp.

Residents Rally Behind Bank

In June, a rally was held. The protesters, many of them elderly, paraded in front of the bank with signs reading, "Don't close our Bernal branch."

Organizers made sure to invite television cameras.

BankAmerica quickly countered with a proposal to defuse the increasingly volatile situation. If the branch could attract 1,000 new accounts by March 1993, it would be kept open. 88 It was a tall order, Only checking accounts qualified, and no transfers from other branches would be counted.

"At least we had some breathing room," said Mr. Bachman.

From BankAmerica's perspective, the plan worked brilliantly. Instead of protesting, community residents beat the bushes for new business. The whole community was mobilized. Even Father O'Malley, the priest at St. Kevin's Church, urged parishioners from his pulpit to switch to BanckAmerica.

But after six months, only about 500 new accounts were brought in to Bernal Heights. Bank officials stressed that 1,000 was an inflexible target.

In January, a bank executive said in a letter to a city official that the branch would close.

The news quickly leaked out to community leaders, who demanded an explanation. Within a month, BankAmerica backed off. Neighborhood groups were told the letter was mistakenly sent out. Bernal Heights would be kept open, the bank promised, even though only 600 new accounts were brought in.

Luck of the Moment

Community leaders suspect they benefited from good timing. Local papers had just reported internal plans by BankAmerica to cut the work hours of thousands of tellers in its California branch network. BankAmerica, they said, couldn't afford more bad press.

Ms. Desoer said bank management was simply impressed with the neighborhood's efforts to save the branch. "We saw real interest in there."

Community leaders and bankers still seem wary of each other, but both sides express satisfaction with the outcome.

Ms. Catalano of the Secura Group says Bernal Heights shows that banks can't avoid social and political pressures, and must be ready to compromise.

"BankAmerica responded as it should have," she contends. "A bank has no choice but to have a dialogue with the community."

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