Add churches to the list of nonbanks that want a piece of the trust business.
A handful of religious organizations have established trust companies in recent months. The churches want to manage their own foundations instead of relying on outside trustees, and in some cases to offer trust services to their parishioners and others.
The Aid Association of Lutherans, for example, filed an application with the Office of Thrift Supervision on Dec. 30 to charter a trust-only federal savings bank. The Appleton, Wis.-based fraternal benefits society has $17.7 billion of assets and 1.7 million members nationwide.
"It's just a different form of a mutual insurance company," said Robert M. Taylor 3d, a partner at Day, Berry & Howard, Hartford, Conn. "It's probably no different than an insurance company that focuses on retired persons. The needs of the clients are no different."
The Presbyterian Church (USA) Foundation, Jefferson, Ind., opened a national trust bank, New Covenant Trust Co., on Jan. 2. And the Baptist Foundation of Texas in Dallas opened a trust company in December 1996.
Churches are only the latest group of nonbanks that want to become professional trustees, whose ranks once included only banks. Brokerage and law firms, mutual fund companies, investment advisers, and insurance companies have all applied or received trust powers under federal thrift or state bank charters.
Mr. Taylor, the Lutheran society's attorney, said the religious organization's motivation is the same as that of insurance companies-it wants to offer an array of financial services.
The proposed AAL Trust Co. would be owned by AAL Holdings Inc., a for- profit stock subsidiary of the society that already owns a registered investment adviser. It also has insurance policies with a face value of $78 billion as of Sept. 30.
The Presbyterian trust company, New Covenant, is designed to manage the church's $1.6 billion foundation. It will limit personal trust administration to revocable trusts set up by people planning to leave money to the church, said Larry Carr, president of the foundation and chairman of the trust company.
Mr. Carr said the foundation wanted to charter a trust company for itself so it would not have to hire an outside trustee.
"We don't have stockholders or commercial organizations' pay scales and bonus levels," Mr. Carr said. "We are doing it for a fraction of the best deal we could negotiate from a for-profit institution."
In the past, the foundation acted as its own trustee without a charter from a regulatory agency. But in the wake of abuses by charities, the government has become more concerned about how tax-exempt organizations manage their money.
"It impacts the way state and federal regulators and legislators look at the billions of dollars that are in the hands of nonprofits," Mr. Carr said.
The Baptist's $1.6 billion foundation set up a wholly owned subsidiary, the Concord Trust Co., after receiving requests from people and unaffiliated charities for trust administration services, said Ellen Dorn, the unit's president. Though the foundation was able to manage assets for Baptist organizations in Texas, including churches, hospitals, universities, and a children's home, it could not help outsiders.
"Concord would be able to say 'yes,' where the foundation would have to say 'no,'" Ms. Dorn said.
Concord Trust is managing about $25 million of assets for the foundation and about $20 million for people and unaffiliated charities. More assets from the foundation itself are coming into the trust company in phases that are scheduled to end next January.
