SBA Guarantees Help D.C. Bank Boost Assets - And Its CRA Rating

Patriot National Bank has used the Small Business Administration's loan guarantees to build assets and boost Community Reinvestment Act-related lending.

With banks everywhere tweaking community reinvestment programs to match to regulators' new emphasis on lending performance over paperwork, Patriot president and chief executive Carroll C. Markley said, working with the SBA can help score points with regulators.

The subsidiary of Washington's First Patriot Bankshares received a satisfactory CRA rating last year, matching its 1992 rating. But Mr. Markley said increased small-business lending made a positive difference in its CRA exam. He added that it could give struggling banks' CRA efforts a shot in the arm if they are willing to take a chance.

"Some banks don't make SBA loans because they're risky," Mr. Markley said last week at a community development conference sponsored by the Office of the Comptroller of the Currency. "Well, yes, they are risky. But at the end of 1995, we had no nonperforming loans, and no chargeoffs."

Patriot made $17 million of these loans last year, more than any other bank in the area. Its total lending grew 42% last year, to $106 million.

Mr. Markley said Patriot is open from 8 a.m. to 8 p.m. to make it as easy as possible for small business customers to get loans. And when the loans are made, they are backed by SBA funds. Loans under $100,000 are 90% guaranteed, while guarantees on larger loans range from 70% to 80%.

Still, Small Business Administrator Philip Lader told bankers at the OCC conference, the smaller the loan, the better.

"They can range to as small as you could imagine, though most microloans are being done by community groups," Mr. Lader said.

"We're trying to emphasize that SBA loans should be made to as many people as possible, thus keeping the (average) loan size down."

To get the agency's backing, the borrower must have fewer than 500 employees and $5 million in sales, and request less than $1 million.

Patriot's assets grew 52% last year to $158 million according to Mr. Markley, thanks in part to SBA-related lending. The guaranteed part of SBA loans can be sold on the secondary market, which generates revenue and raves from regulators.

"Regulators love to see SBA loans on our balance sheet because it's liquid," Mr. Markley said.

Patriot's track record drew praise from Comptroller Eugene A. Ludwig at the conference. It also helped Patriot become the first mid-Atlantic region bank to be deemed a preferred lender by the SBA, Mr. Markley said. That means the bank can authorize loans without first getting the agency's approval.

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