LOCAL ELECTIONS / L.A. MAYOR : Losses Aside, Patsaouras Cites Bank as a Model for Policies

A bank founded by Nick Patsaouras lost $2.9 million last year, nearly one-quarter of its basic capital, but the Los Angeles mayoral candidate continues to hold up the institution as a model for the business acumen and progressive social policies he wants to bring to the city.

After years of strong performance, Marathon National Bank’s sharp loss in 1992 now makes it a troubled institution, said a private bank analyst. Another analyst was more generous, saying that he was surprised by the bank’s downturn but that he expects it to rebound.

Patsaouras, the bank’s chairman of the board, said he is proud of its record, which includes solid marks for lending in poor and minority communities. He blamed last year’s loss in part on housing loans in the impoverished Pico-Union neighborhood that turned into losses because of the riots.

“This is the price you pay for being a good corporate citizen,” Patsaouras said. “I am very proud of this bank.”

Banking practices have already become an issue in the mayor’s race for early front-runner Michael Woo. Rivals have accused Woo of talking about improving minority loan practices while doing little to encourage a bank with ties to his family and campaign to make home loans to African-Americans and Latinos.

Patsaouras’ bank has not yet become an issue. But the candidate has said he welcomes an examination of Marathon as a measure of how he would serve as mayor.

Patsaouras brought together friends and business associates to form Marathon National Bank a decade ago, when he was already operating a successful electrical engineering firm and serving as a board member for the Southern California Rapid Transit District.

The bank opened a single office in West Los Angeles and specialized in loans to small and medium-size businesses and developers. Through the boom years of the 1980s, the bank flourished and was ranked as a premier institution from 1986 to 1990 by the Findley Report, an Orange County-based newsletter that evaluates financial institutions.

But that ranking slipped to commendable in 1991. And in 1992, the bank will not be rated because its loss and lower capital levels make it a troubled institution, said Gary Findley, who edits the newsletter. The loss cut Marathon’s basic capital--the final cushion against losses--from $12.9 million to $9.9 million.

“They were not visionaries. They did not see the problems coming,” Findley said. “That was a big ouch last year. . . . They don’t have a lot of capital left for any future additional problems.”

He said the bank’s loan delinquency rate of about 4% is not huge but still presents a concern about potential future losses.

But Barry Rubens, who runs a Santa Monica-based bank consulting firm, said Marathon is still on solid footing. Its 7% ratio of capital to total assets of $141 million is not low for banks in West Los Angeles, Rubens said.

“We took all the hits at once, and we are going to make money this year,” Patsaouras said. He said Marathon avoided larger problems suffered by other institutions by avoiding ego moves, such as opening more branches.

Those practices, however, did not save the bank in the last year from coming under a special regulatory order from the federal government.

The Office of the Comptroller of the Currency placed Marathon under an agreement that required the bank to draft a comprehensive business plan, to maintain minimum asset levels and to hire a management consultant.

Such corrective actions, however, have become commonplace among financial institutions. About 30% of the nation’s federally regulated banks were under some form of corrective action in 1992--some more severe and some less severe. In Southern California, banking experts estimate that up to 70% of financial institutions are under special government regulation.

By other measures, Marathon received solid marks from government and private analysts.

The bank was ranked as satisfactory in meeting the credit needs of low- and moderate-income neighborhoods, according to a report by the comptroller’s office.

Sixty percent of the bank’s loans went to low and moderate-income areas, the report said.

A 1989 survey by the Western Center on Law and Poverty gave Marathon a B grade for loaning to poor and minority communities. And a report to another federal agency in 1991 showed that of the bank’s few home loans, four went to Anglos, one to an Asian-American and one to a Latino.

Patsaouras said the bank lost several hundred thousand dollars when an apartment building secured by a Marathon loan burned in the riots.

“You can’t be a good citizen and say you have an obligation and then avoid making loans in those areas,” Patsaouras said. “But then you have to deal with the consequences.”