Downey Savings and Loan Association recently began referring customers seeking trust services to its Southern California neighbor First American Trust Co.

First American, a subsidiary of First American Financial Corp., Santa Ana, held a seminar this month for 40 customers in Downey Savings' Rancho Bernardo office. The $5.8 billion-asset thrift is the lead subsidiary of Downey Financial Corp., Newport Beach.

Downey does not have a trust department, but it has affluent customers who want institutional trustees for their personal assets, said Paul G. Woollatt, executive vice president and director of retail banking. And they had trouble finding a trustee that would take care of smaller accounts, he said.

"It's really for the everyday customers that don't have huge investments, and the big banks won't touch that," he said. "So there's a real need."

Downey trust customers have assets in the low six-figure range, Mr. Woollatt said. Top-tier bank trust departments typically set $1 million minimums.

Downey and First American agreed to set up the program in July, and the seminar was one of the first steps.

Downey is the largest institution allied with First American, which administers about $1.6 billion of trust assets. The trust company manages more than half of those assets in personal trusts and retirement plans.

While First American administers many trusts with more than $1 million, the average account size ($500,000) shows the trust company is open to a broader-and growing-market of smaller accounts.

Its other alliances are with Peninsula Bank of San Diego and several real estate sales companies. Its parent's lead subsidiary, First American Title Insurance Co., is the country's largest title company.

The banks are establishing such trust ties to retain customers who could turn to a larger institution for all their needs.

"We can stem the tide by providing trust services to keep the customers in their house," said G. Andrew Bailard, senior vice president at First American Trust.

Downey, which has offices in many affluent communities such as Desert Springs, is expanding through supermarket chains rather than building more stand-alone branches. One-third of its 91 branches are in Ralph's or Food 4 Less groceries, and the thrift signed a third chain, Albertson's, last week for 30 more. About $350 million of Downey's $5.2 billion of deposits came from supermarket branches in the past two years.

Downey is not alone in turning to an experienced trustee. Even large banking companies have hooked up with trustees in the business.

Comerica Inc. in Detroit administers trusts for clients of PaineWebber Inc. in a program that has been expanded to several states in the past three years.

Mellon Bank Corp. offers private-label personal trust administration for clients of other brokerages.

Financial aspects of these arrangements, which usually involve sharing fees, have yet to be disclosed.

In some instances, such as the PaineWebber-Comerica arrangement, the investments are handled by brokers. In others, such as Downey's, when the referring institution has no such operation, the trustee manages the investments as well as administers the trusts.

Another California banking company, Silicon Valley Bancshares, Santa Clara, is making headway with two alliances.

For its West Coast clientele, the bank refers clients to Van Kasper Advisers, the investment management arm of Van Kasper & Co., a San Francisco investment bank.

For clients back east, where the bank has a foothold in Wellesley, Mass., lending to technology companies, State Street Corp. of Boston is the trust and investment management ally.

"We don't have to produce all of those services ourselves. We don't feel we can be an expert in all those things," said Jean Whitney Blomberg, Silicon Valley senior vice president and manager of its executive banking division.

"Our approach has never been to be a one-stop, full-service organization because we don't have a lot of retail locations," she said. "But our philosophy has been to be a one-stop solution for our customers."

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