A study of independent-bank performance in California shows wide disparities in the performance of community banks in the state as it struggles out of recession.

While the state's 364 community banks earned a dismal 0.15% return on assets overall, 95 banks in the group earned a 1% ROA or better last year, according to the study by Smith & Crowley Inc., San Francisco.

Of the 95 best community banks, only 22 were in Southern California.

Donald Crowley, principal of the firm that prepared the study, said those 22 "deserve the most credit" for surviving their region's crushing real estate recession. "They managed to record an average ROA of 1.61%," he said of Southern California's best banks, "and a return on average equity of 14.4%, despite the severity of the Southland's recession."

Overall, Southern California's 207 independent banks posted a negative 0.09% ROA.

In Northern California, where the recession's impact on community banks was far less severe, average ROA for the 157 community banks was 0.55%. Nonperforming assets in the north averaged 4.71% of average assets; in the south, the average was 8.22%.

Mr. Crowley's prognosis for California community banks, which for the last two years have been the single most battered sector of the industry, is upbeat.

What will especially help southern banks, he said, is the rush of liquidity into the real estate market.

"Meanwhile, the rise in interest rates should begin to reflate net interest margins," he added, "particularly with core deposit costs remaining low and mortgage refinancing trends abating." -- Terrence O'Hara

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