The number of bank loans being made to small businesses declined slightly in the one-year period that ended June 30, but the average size of those loans increased by nearly 11%, according to a report by the bank research firm Veribanc Inc.

In its quarterly analysis of Federal Reserve Board data, Wakefield, Mass.-based Veribanc found that banks made 7.83 million loans to small businesses in the 12 months, down 2.5% from a year earlier. The decline followed four straight years of double-digit growth.

However, the average size of the loans jumped for the first time in four years, from $23,200 in 1997-98 to $25,700 in 1998-99.

Overall, banks lent $201 billion to small businesses during the year, up 8%.

Veribanc classifies small-business loans as those of $1 million or less. The research firm found that the value of such loans increased in all but 10 states Colorado, Connecticut, Florida, Hawaii, Indiana, Louisiana, Michigan, Mississippi, Pennsylvania, and Rhode Island.

Veribanc also concluded that 614 banks lost money in the second quarter, up from 536 in the first quarter. Nearly half of losers were less than two years old, and 17% were agricultural banks. The vast majority had less than $100 million of assets.

Forty-five percent of the banks in Hawaii lost money in the second quarter, by far the highest percentage in any state. Other states where a significant number of banks lost money include Arizona, 22%; Florida, 19%; and North Carolina, 19%. Though the farm economy is still sputtering, only 3.3% of the nation's more than 3,000 agricultural banks lost money. Agricultural banks are defined as those with 15% or more of their loan portfolios devoted to farmers, ranchers and other agriculture-related businesses. -- Alan Kline

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