Mellon Bank Corp. executives said the bank didn't have the branch network to compete in Maryland's mass retail market.

But a retooled system of six "financial centers" may enable Mellon's Maryland subsidiary to profitably serve small businesses and upscale consumers.

Pittsburgh-based Mellon made the strategy explicit last week when its Mellon Bank-Maryland subsidiary announced a definitive agreement to sell 10 of its 16 branches in the state to Crestar Financial Corp.

Terms were not disclosed in the sale, which involves $220 million of deposits, 17,400 customers, and a negligible amount of loans linked to checking accounts.

Mellon said it would convert three of its remaining six branches into "Mellon Financial Centers," a kind of superbranch that contains multimedia instructional and reference materials, a self-service area, investment counselors, and specialist business bankers. The three other branches have already been converted into financial centers.

Kenneth R. Dubuque, chairman, president, and chief executive of Mellon Bank-Maryland, said the six units would focus on upscale business banking, trust, mortgages, and investment sales.

"What we're doing is essentially taking the proceeds from that sale and investing them in the financial centers," Mr. Dubuque said. "The issue for us is we didn't have the branch network to provide services to the mass market. Having been unable to do an acquisition on our terms, we decided it made more sense to focus."

Mellon first entered Maryland a decade ago by purchasing a failed thrift. The company, which has $41 billion of assets, plans to open financial centers by 1997 in the other states where it operates - Pennsylvania, Delaware, and New Jersey.

For Crestar, the 10-branch purchase represents another in a series of in-market acquisitions in Maryland, where Crestar has operated since 1986. The Mellon offices are located in Montgomery and Prince George's counties in the Maryland suburbs of Washington.

Crestar last year acquired Baltimore-based Loyola Federal Savings Bank and six branches of Chase Manhattan Bank of Maryland. It now has 59 branches in Maryland, 27 of them located in the Washington suburbs.

"This is a good fill-in for them," said analyst David West at Davenport & Co. of Virginia Inc. "It's very much an effort to build market share in an area where they've seen good growth."

Crestar executive vice president C. Garland Hagen said his company would probably close half the Mellon branches it acquires. He said the transaction, which is expected to be completed in the second quarter, is too small to have any discernible impact on earnings at Crestar, which has $18.3 billion of assets.

"It's a way to grow your franchise in a low-growth economy," Mr. Hagen said.

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