There are signs that investors are increasingly willing to bet on a Golden State economic recovery. For example, KBWR has just over $50 million in assets under management, but over $27 million of that total has come into the ETF in the past year. In just the past month, KBWR is up nearly 9% while the Financial Select Sector SPDR (NYSEArca: XLF) is up just 5%.

While California is one of the most competitive banking markets in the country, the dominant banks in the state, as is the case with other large banking markets such as New York and Texas, are among the country’s largest. In addition to San Francisco-based Wells Fargo (NYSE: WFC), Bank of America (NYSE: BAC) and J.P. Morgan Chase (NYSE: JPM) are among California’s banking giants.

Previous cycles pared the number of independent California banks down to 200, according to KBW, but as the research firm notes, the upshot of that scenario is that weaker institutions have been shaken out. That could prove to be a positive for KBWR.

Other California-based banks in the ETF include Los Angeles-based City National (NYSE: CYN), which was not highlighted in the KBW note. The stock, which is 1.8% of the ETF’s weight, is up 35% in the past year.

PowerShares KBW Regional Banking Portfolio