As part of a major business line reorganization, Imperial Bancorp has transferred its small-business lending to a new subsidiary.

Crown American Bank-which is not actually a bank, but rather a state- chartered industrial loan company-last month began offering loans of $100,000 to $2 million, most of them guaranteed by the Small Business Administration.

Moving small-business lending into a small entity "allows it to become a very specific core focus," said Robert M. Franko, president of Los Angeles- based Crown American, which has $50 million of assets. "The idea of a $1 million business loan can get lost in a big bank like BankAmerica or Imperial."

Observers said the move will enhance Los Angeles-based Imperial's ability to compete with other small-business lenders.

"By separating this out, management will be more focused on this business than before," said Mark Morgan, an analyst with Dain Rauscher in Minneapolis. "That is a key advantage."

Mr. Franko said that Crown American will emulate-and compete head to head with-Money Store and San Diego-based Bank of Commerce, two lenders with a focus on SBA loans.

Crown American will lend through nine offices in California, Nevada, Arizona, and Oregon, Mr. Franko said, and it plans to add more. "Our intent is to expand throughout the western states and beyond."

The creation of Crown American came about in part because of a mandate from federal regulators.

The Federal Reserve in December 1996 notified $5.7 billion-asset Imperial Bancorp that its 23% interest in Imperial Credit Industries, a specialty finance company, was barred by the Bank Holding Company Act. To solve the problem, Imperial Bancorp could have sold its Imperial Credit stock, but would have faced an $80 million tax payment, Mr. Franko said.

Instead, Imperial Bancorp decided to spin off several units into a new, separate holding company, Imperial Financial Group, which would hold the nine million shares of Imperial Credit.

The strategic decision to push small-business lending into the new holding company required chartering an institution that was not subject to the Bank Holding Company Act. A state-chartered industrial loan company filled the bill, Mr. Franko said.

Imperial Bancorp's spinoff plan got a long-awaited nod from the Internal Revenue Service in March and is expected to take effect Oct. 1.

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