Washington - David J. Shryock runs President Clinton's favorite bank.

During the 1992 campaign, candidate Clinton praised South Shore Batik for its innovative lending in low-income areas of Chicago. So, as South Shore's president, Mr. Shryock might be expected to be one of the nation's biggest proponent's of the Community Reinvestment Act.

Not so fast.

Mr. Shryock shares many of the gripes that other bankers have about the law intended to spark lending to poor neighborhoods. He even groused about the year-old examiner the Federal Deposit Insurance Corp. last sent to evaluate his $270 million-asset bank. Mr. Shryock is not thrilled with the Clinton administration's reform of CRA, either.

"Some people might say we are the national model" for the CRA, Mr. Shryock said. "I share, and the institution shares, completely in its goals."

But he is impatient with the costs of complying with the law, particularly with proposals to require institutions to report the race and gender of small business loan applicants.

Mr. Shryock also noted that CRA rules require banks to focus on their entire communities - a requirement that can diffuse a bank's efforts so much that it doesn't do much good anywhere.

South Shore has found that focusing on one neighborhood can spur a local renaissance, which is more difficult to do with a few loans in several troubled areas.

That's important because a neighborhood's renewal means borrowers have a better chance of succeeding, and a bank is more likely to get its money back, Mr. Shryock said.

Although he shares man bankers, sentiments, he doesn't share their backgrounds.

In 1980, he graduated magna cum laude from Harvard College, where he majored in social studies. He spent the next three years working for an Indiana nonprofit social service organization before attending Yale University, where he earned his MBA in

He joined South Shore that year as a commercial lender, and later ran the department. In 1992, he was promoted to executive vice president and chief operating officer. He was named South Shore's president in October.

Mr. Shryock said he has encountered no problems as a white executive lending in an overwhelmingly black neighborhood. In part, he said, that is because South Shore had already won the community's trust by the time he joined.

"My experience with minority borrowers is that they care about the quality of the banking services that they receive from their lender, and they don't care about the color of the lender," Mr. Shryock said.

Studies show lending discrimination is widespread, and Mr. Shryock said that data is borne out in his conversations with African Americans. "There is a strong sense that those disparities exist, and I think they really do," he said. "Banks and bankers have not done nearly enough in terms of investing 7in inner-city neighborhoods."

One reason for the discrimination is that the industry, "does not have enough people ... looking at these neighborhoods," he said.

His bank is trying to set a different example.

Lenders at South Shore who say they "can't find attractive opportunities in this neighborhood or with minority-owned businesses" lose their jobs, Mr. Shryock said. Mr. Shryock (pronounced Shrie-ock) is convinced that lending to people of modest means can be profitable.

"This is a marvelous market," he said. "People pay. They don't sue you for lender liability." Just $2.3 million of South Shore's $178 million loan portfolio is not being repaid on time.

Still, the bank is not a stellar earnings producer. At the end of last month, South Shore had a return on equity of 12.5%, a return on assets of 0.85%, and a loan-to-deposit ratio of

"South Shore Bank is not wildly profitable," Mr. Shryock acknowledged, "but we have been consistently profitable in lines of business most banks believe can never be profitable.

"One of the things we would like people to take away from the South Shore experience is that this is something other banks can do on a for-profit basis."

Mr. Shryock does not face quite the same demands from stockholders as most other bankers do. His shareholders are nonprofit foundations, religious orders, and socially conscious individuals. Several area banks also invest in South Shore and earn CRA credit for their holdings.

"The pressure from the shareholders is very much to produce neighborhood redevelopment" and be reasonably profitable, Mr. Shryock said.

Last year, BankAmerica Corp., First Chicago Corp., LaSalle National Corp., Harris Bankcorp, and Northern Trust Corp. were among investors that bought $11 million in South Shore stock.

South Shore's nontraditional owners help it be a nontraditional lender.

Mr. Shryock seldom sees audited financial statements on borrowers. Three quarters of the bank's residential loans are on apartments. And South Shore lends to businesses with less than $1 million in annual sales.

South Shore sticks with specific geographic or product niches, like loans to local manufacturers and landlords. Often, South Shore dips its toe in a new market by working with a local nonprofit organization until comfortable. It is cautious until it feels confident it knows the market well, Mr. Shryock said.

Looking forward, Mr. Shryock said "We are looking to continue to grow our loan niches," keeping the bank's loan-to-deposit ratios high. He plans to hold down loan losses to the industry average or lower, and originate more single-family loans for sale to the secondary markets.

Looking back on his eight years of lending in South Shore, he says he has learned a few rules to live by.

To build a successful loan portfolio, South Shore concentrated on a handful of key elements, Mr. Shryock said.

* Its employees keep their ears to the ground in the neighborhood where South Shore lends. The bank does not make loans in areas it does not know well.

* It prefers to lend to "ma-and-pa operators," Mr. Shryock said. Stable, blue-collar local families who have saved money for years to start a small business go to great lengths to pay their loans back, South Shore has found.

* The bank is careful to extend enough credit so borrowers can rehabilitate the buildings they buy. If they can't afford to borrow the higher amount, South Shore is unlikely to make the loan, because its chances for success are dim. This is particularly true for the small apartment buildings that the bank often finances.

* South Shore trains its lenders to use all government programs available to help support the loans, especially Federal Home Administration loans and Small Business Administration programs.

* The bank is extremely careful about whom it hires to make loans - quality lenders are crucial to the bank's success. The bank also carefully documents its loan files, in part to make regulators more comfortable.

* Finally, South Shore has built a reputation of aggressively collecting overdue debts, to ward off any perception that it is a community do-gooder.

Some community development banks fear their profits will be pinched as other, larger banks begin to target inner-city communities. But South Shore thinks there is room for all. Mr. Shryock said price pressure will come only for top-quality inner-city business loans, not the smaller loans to family-owned outfits he likes to lend to.

He said big banks are good at lending in $5 million to $15 million increments, which does not provide much competition for the $150,000 commercial loans South Shore often makes.

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