It's easy to look at the Utah community banks that failed in the past 16 months under pressure from bad construction and land-development loans, and wonder why they didn't get it.

Most of their leadership was seasoned executives who had survived at least one of the four previous recessions since 1980. And yet they appeared to throw caution aside while loaning millions to developers, apparently believing ever-rising real estate prices would not collapse -- to say nothing of the banks themselves.

Bank of Utah wasn't one of those banks.

"It's obvious to us that their credit cultures were very, very weak," said James Anderson, president of the Ogden-based lender.

"We knew that whatever they were saying they had in problem loans was much greater than they were admitting."

Regulators have closed five banks in Utah since early 2009. Four -- Centennial Bank and Barnes Bank, this year; and AmericaWest and Magnet Bank, last year -- were brought down by construction and land development loans that borrowers couldn't repay when the housing bubble burst. The fifth failure, Advanta, was an industrial loan bank that primarily provided credit cards for small-business owners nationwide.

Eight other banks are still carrying large numbers of overdue or defaulted real estate loans on their books. Their "troubled asset ratios," a gauge of stress that compares a bank's bad loans to its capital and loan loss reserves, exceeded 100 percent at the end of last year. Anderson said he wouldn't be surprised to see other failures.

"They got completely away from fundamental bank lending credit analysis. They just got caught up in, 'We've done this 10 times before. It'll just keep working,' " he said.

The opposing view espoused by many Utah bankers says there were good reasons to make big numbers of those type loans. Credit unions, with their income tax exemption, have undercut banks' commercial loan business with lower interest rates. Community banks, this line of reasoning goes, had no choice but to find other borrowers, and the big business of land development in Utah was a reasonable fall-back.

"I know for a fact that Barnes Bank grew their franchise outside Davis County, and they did that due to competitive pressures brought on by the tax-subsidized competition (from) large credit unions that are so prevalent in Davis County," said Howard Headlee, executive director of the Utah Bankers Association.

The bankers also contend that land-development and construction loans historically have not been too risky. Many lenders say default rates have been extremely low, even during previous recessions. That record led many banks to believe loans made earlier in the decade while land prices were escalating would be repaid.

"What if all banks had acted like Barnes, or all banks had acted like Bank of Utah?" Headlee said.

"Obviously if they all responded to the market like Barnes they would all be out of business. If they all responded to the market like Bank of Utah, I don't think that would be possible, either," he said.

"Most banks were trying to find a balance."

For its part, instead of loading up on loans to land developers and high-end home builders, Bank of Utah focused on builders who constructed starter homes for first-time buyers and, occasionally, for buyers moving up into second homes.

The bank also demanded evidence from borrowers that they had enough income to repay their loans even if they couldn't find buyers for the properties they developed.

And it insisted its loan officers approve no loan unless it could be sold to a secondary investor. Bank of Utah makes 30-year fixed mortgages but usually holds them only a few years before selling them into the secondary market.

In the process, Bank of Utah developed a reputation for being too conservative, said Anderson, who will retire at the end of this year after 43 years in banking. He will hand over leadership of the bank to Douglas DeFries, Bank of Utah's executive vice president and chief financial officer.

"We had a lot of good customers who were getting upset with us because we weren't doing what the guy across the street would do," Anderson said.

Bank of Utah earned $9.3 million last year. Although profits were off 16 percent from 2008, the bank did far better than many of its rivals. Collectively, the 58 commercial banks that operated in Utah during 2009 lost $1.1 million, according to the Federal Deposit Insurance Corp., a number that would have been higher if not for profitable lenders such as Bank of Utah.

One of its competitors was cross-town rival Centennial, seized by Utah regulators in March. Another, Barnes Bank, based in Kaysville, went down in January. Both were heavily involved in construction and land-development lending. As a percentage of its total loans Centennial's development and construction portfolio was twice as big as Bank of Utah's; Barnes' was even bigger.

The difference was "fiscal policy," said Dave Hardman, president and CEO of the Ogden Weber Chamber of Commerce.

"That's the answer. One (Bank of Utah) has a more conservative policy in the way they do lending and the companies they choose to do business with," Hardman said.

"The others fell into a trap that many organizations did, and that was the feeling that the business climate would continue as it was in 2006 and 2007, and it obviously did not, especially in real estate," he said.

Anderson said Bank of Utah knew the loans its rivals were making were lucrative. Some banks' return on equity -- a

measure of how much a company earns on the investment of its shareholders -- was as high as 25 percent, DeFries said.

Even so, he and Anderson were determined to

stick to their principles. They regarded the loans as unacceptably risky because the collateral was high land prices that they believed couldn't last.

So did the board of directors, which included Douglas Stephens and son Bruce, owners of Southtown Development, a land development company in Ogden. They stopped developing new ground, certain that land prices would crater.

"Of course, we enjoyed the price increases as they came along, but in 2007 we kind of said to ourselves, these prices are out of whack," Bruce Stephens said.

"Everything was going up so fast that we could see it was just unsustainable, so we just quit making new subdivisions in 2008. We used up our inventory in 2008, and that's when (prices) started going in the other direction, and 2009 was disastrous," Stephens said.

Scott Parkinson, senior vice president of retail banking at Bank of Utah, said some of his younger loan officers had to be reined in. They saw loans going to the bank's rivals that they believed Bank of Utah should have made.

"We saw some of this overbuilding, euphoria, you know, everybody can do anything and it will be OK next year next year or next month," Anderson said.

"And we just said, maybe so, but we were taught correct lending principles in banking, underwriting principles. And we said, 'We are going to what we should be doing.' It was fairly painful (to be cautious) when things were just going nuts," he said.

CFO DeFries said Bank of Utah hasn't completely avoided the real estate bust that hurt so many lenders. The bank charged off $5.4 million in loans last year and set aside $9.7 million to cover future bad loans.

It seemed that the bank's troubled asset loan ratio, at 30 percent, had peaked in the third quarter of last year, amid signs that the recession was easing. But the ratio probably climbed again during the first three months of this year, DeFries said.

"So we've had our share of them, just not even close to the degree that you've seen (with other banks)."

DeFries isn't planning to change Bank of Utah's business strategies when he takes over in January. To reduce the need to rely on construction and land-development loans, the bank has boosted business-development lending. Its trust business is booming. And it's bet on first-time home borrowers is paying off. Although overall loan demand is down, some builders in northern Utah have hardly slowed down, DeFries said.

"I do not have a huge change planned. Things are working very well."