NEW YORK -- It may be a sign of these difficult times that the largest minority-owned commercial bank in the nation's largest city has only $55 million in assets.

But at least New York National Bank is alive.

Having survived a recession-induced bout with bad loans and averted the fate of what used to be the city's biggest minority bank - the $100 million-asset Freedom National, which failed two years ago - New York National is proclaiming it is here to stay.

South Bronx Celebration

The bank is celebrating its anniversary with the slogan "10 Years of Banking Where Banking Wouldn't Be" - namely, the South Bronx.

Serafin Mariel, president and chief executive officer of New York National, knew the neighborhood and had great faith in its ability to support a bank. He managed a Bankers Trust Co. branch there in the 1970s.

That branch became New York National when Mr. Mariel, who had risen into an international banking post, organized a group of investors to buy it from the money-center institution downtown.

He encountered much skepticism about his ability to succeed in an area that had become a national code word for urban blight.

Energetic Advocate

Mr. Mariel has gotten past all the hurdles so far and has become a tireless advocate for his community and the cause of minority-controlled community banking.

"Some of us saw the growing evidence of a shift by the big banks away from the inner cities as an opportunity," said the 48-year-old executive. "My own bank, Bankers Trust, decided to get completely out of the branch banking business, and a lot of other banks were closing branches in areas like the South Bronx."

Within two years of its opening, New York National acquired two branches from the former Manufacturers Hanover, one in the South Bronx and one in the East Harlem section of Manhattan.

"We feel at home in these neighborhoods," said Mr. Mariel, "but the late 1980s were tougher years for all banks than anyone ever expected." Especially minority banks.

A Focus on Workouts

After a healthy growth rate in its first half-decade, New York National was forced into concentrating on workouts in its loan portfolio. In 1987, it wrote off $2.2 million and showed a $1.5 million loss. But at the end of that year, it raised $857,000 in capital, bringing it to 5% of assets.

"In 1990, we again showed a loss because the regulators felt that we should be more aggressive in writing off loans," Mr. Mariel said. "Since then, we showed a profit in 1991 while adding nothing to the reserve.

"Then the regulators came in and said. |You guys didn't put anything into the reserve.' But we showed them the portfolio was cleaned up - with their help - and it worked. This year we didn't have to put anything into the reserve either."

He said the bank has been profitable since that time and would show a profit for 1992. In the first nine months, it had net income of $180,000, 319% better than the $43,000 for the 1991 period.

Back in a growth mode, New York National plans to acquire additional branches in the Bronx and Harlem. Mr. Mariel said it has an agreement with a savings bank to acquire a $50 million Bronx branch, but he would not divulge details.

"Our mission has not changed and we will continue providing banking service to communities that other banks might find unattractive," with a concentration on small neighborhood business, Mr. Mariel said.

"One of the critical things minority banks need is capital and we have been looking at three sources" that could provide $2 million to $3 million to finance the planned branch acquisitions and other growth, said Mr. Mariel.

"I've been working with the major banks trying to formulate what I call a |CRA alliance' so they will invest some Tier 1 capital into New York National Bank. We have been talking about perpetual noncumulative stock. Those funds would enable us to make the acquisitions and go forward."

A second capital source is Minbanc, established by the American Bankers Association in 1972 to help infuse capital into minority banks. Minbanc funded a $450,000 subordinated debenture that covered the branch acquisition costs in 1984.

Help from Consortium

New York National has also received a favorable indication from the Business Consortium Fund, a subsidiary of the National Minority Suppliers Development Council, formed in 1972 to channel aid from Fortune 500 companies to small, minority-owned businesses.

Mr. Mariel, who has been on that fund's board since his days at Bankers Trust, said the fund was conducting an experiment in investing $1 million in healthy minority banks that are effective in building up their communities.

Mr. Mariel aims to virtually double New York National's assets within a year, to $100 million, which would create the economies that could help generate even more rapid growth. He sees $350 million or $500 million as within reach - provided capital continues to flow in.

A Burden on Capital

"Our communities have lost a number of businesses, including nonminority firms," he said. "So the impact of recession has not been only on minority businesses. But our capital base has gotten thinner, and when we face a problem, it really has an impact."

Mr. Mariel contrasts his plight with that of Citibank and other industry giants, where "it takes a long time for those problems to affect their capital bases."

Last April, New York National completed a $475,000 stock offering to bring its capital ratio back to the well-capitalized level of 5%.

"We went out to show the institutional investors that the community still had confidence in us even after the failure of Freedom National and Capital National Bank," Mr. Mariel said. "The people in the minority community, both blacks and Hispanics, were willing to buy shares in the bank." New York's Capital National failed in July 1990.

Its reputation for community service is stellar, though it has not obtained a regulatory Community Reinvestment Act rating. A report by the New York City Department of Finance in 1990 singled out New York National as "the smallest of the banks and a minority-owned bank, [but it] has the highest rating" for serving low-income areas. "This bank is performing on a par with banks a hundred times its size."

In recent Senate Banking Committee testimony, Mr. Mariel was critical of larger banks' CRA initiatives.

Impact of Funding Doubted

"Sometimes, and especially in recent years, major banks have been providing funding to local or state governments" for high-profile CRA initiatives, the banker said. "But too often not much happens."

"And even if all that was supposed to happen took place, the aggregate amount of such funds is minuscule if measured by either the needs of minority-owned businesses or by the relationship of such risk assets to the overall risk assets of the major banks."

"More and more," he added, "I come to the conclusion that a great mistake is being made when government loan funds are created to make up for what the banks should be doing. And more and more, I see banks using their participation in such government funds as a public relations-type, preemptive CRA defense of their further disinclinations to provide financing to minorities."

Mr. Mariel still wins praise from the larger members of the banking establishment.

"I have known Serafin Mariel for a few years and he's very important to his bank and community," said Mark Willis, president of Chase Community Development Corp., a subsidiary of Chase Manhattan Corp. "His efforts made it possible for us to work in the South Bronx. It's an important relationship for our bank."

"I enjoy being a banker - with and without the problems," said Mr. Mariel. "There are so little resources in the community, and we have to work together and form partnerships to gains economic parity."

The slow economy has left many minority banks with "a very thin capital cushion," he said. "If we are going to build up our industries, build up our businesses, we need capital and access to it from the establishment."

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