A Southwest Chicago community bank was slapped with a rare "substantial noncompliance" community reinvestment rating by federal regulators for failing to serve the Hispanic and Polish residents of its community.

Archer National Bank of Chicago received the rating, the worst possible in a CRA exam, in May, but it was not made public by the Office of the Comptroller of the Currency until last week.

The strongly worded evaluation found Archer National lacking in even the most basic of community reinvestment activities and said that the bank's loan underwriting policies and marketing tended to exclude large segments of its community.

According to the OCC, Archer is the only bank in Chicago,a cradle of community banking , with the lowest CRA rating.

Archer National has $97 million of total assets and is the sister bank of $ 107 million-asset Chicago National Bank, both of which are owned by Alpha Financial Corp. Both banks are run by Jerry Stergios, chairman and chief executive, and Daniel T. Derrington, president.

Mr. Derrington said he wasn't surprised by the rating because he didn't know what to expect from the exam. It was the first such exam for Archer National, he said, and Chicago National has never been rated for CRA.

"I think the OCC has its job to do," Mr. Derrington said. "We're still looking at the report and deciding what to, but we've done nothing specific at this point. We will review and strengthen our CRA programs."

The OCC examiner found that the bank and its board had done little to ascertain the credit needs of the community. Even where a credit need is identified, the OCC said, Archer will usually refer the loan application to an outside vendor.

In fact, Archer makes few loans, the report said. About $81 million of its earning assets are in its investment portfolio, the vast majority of which are Treasury notes, and only $7.5 million is in loans. Its risk-based capital ratio on March 31 was a whopping 114%, and its loan-to-deposit ratio was only 9.75%.

|Not Adequate' for Lending

The Woodstock Institute, a Chicago community investment group, put Archer's total mortgage loan portfolio at 15 loans totaling $114,000 in 1991.

"The bank's lending staff consists of one full-time employee and a clerical support person," the OCC examiner said. "It is not adequate to engage in any meaningful level of lending."

The QCC found that only 14% of mortgage loans, 39% of installment loans, and 33% of commercial loans were even inside Archer's delineated community.

"Management could not adequately explain the disparity in the bank's lending patterns," the OCC said.

Finally, the OCC faulted Archer for unreasonably delineating its community.

Willingness to Improve

"The bank's delineated community is shaped like a trapezoid," the OCC evaluation said. "The CRA community is not equidistant from any offices and some low and moderate income areas are excluded on the south."

Mr. Derrington said the bank has redefined its delineated community, "but not in a major way."

He added that the bank has not yet embarked on any new lending initiatives to improve its CRA rating, but isn't that worried about it.

"We want to do what we can to improve our CRA," he said. "But in terms of it restricting our business, I don't think it will impact us at all."

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