Big brokerages and insurance companies are not the only new competitors in the trust business: Community banks that had not offered trust services are now getting in on the act.

These community banks want to offer trust services to stay in good stead with small-business owners, typically their most affluent customers.

Joseph W. Major, the president and chief executive officer of Patriot Bank Corp. of Pottstown, Pa., said trust is a good long-term proposition. Patriot began marketing the business in recent weeks after obtaining powers in January.

Patriot, a $1.1 billion-asset banking company, has remodeled itself as a commercial bank, with 18 offices and 64 ATMs. Before converting to a state- chartered bank in 1997, Patriot was a "sleepy little thrift company," Mr. Major said.

Adding business services like commercial lending and leasing has allowed Patriot to redirect its focus from consumer and mortgage loans. It is offering trust services to forge stronger relationships with new business customers gleaned through its expansion.

"We are reaching a whole new group of small-business owners and entrepreneurs," Mr. Major said. "These people made lots of money. We reinvest in them and their companies."

Some smaller banks refer affluent customers to neighboring trustees rather than go to the expense of creating a trust department.

"The problem with a straight referral is, it's not your customer anymore," Mr. Major said. "Everyone out there is drilling our customer base every day. They're selling a credit card and pretty soon sending an application for a home equity loan."

Patriot joins a number of community banks or thrifts new to trust, either proprietary or through alliances, including Downey Financial Corp. of Newport Beach, Calif.; Enterprise Bank of Clayton, Mo.; and First National Bank of Central California in Monterey.

Community banks typically serve accounts that would be too small to interest large institutional trustees, which target multimillion-dollar trusts.

However, if a community bank amasses at least $80 million of personal trust assets, it can be worthwhile, according to a trust veteran, Bruce W. Salome, executive vice president of S&T Bancorp. of Indiana, Pa.

S&T's long-standing trust department manages $700 million of assets. Mr. Salome said about $100,000 of fee revenue could cover costs of turnkey systems for accounting, taxes, and investment research.

"You figure, the first two to three years, you are going to lose money, but the bank doesn't have any capital invested with you," Mr. Salome said.

Patriot contracted with SEI Corp. of Oaks, Pa., to be its back office, providing custody and accounting. SEI's asset-allocation models and mutual funds are Patriot's primary source of managed investments, said Kerry McLaughlin, senior team leader of the bank's investment management and trust services division. Equity research from Northern Trust Corp. of Chicago is subscribed to for decisions on stock holdings.

The trust division could take from 18 to 36 months to break even, Mr. Major said.

"However, if you look at it from a return-on-equity standpoint, asset management and trust business doesn't require a lot of capital," he said. "A lot of small companies say, 'Gee, it's going to cost a nickel a share next year.' We think, long term, our shareholders are going to be better off."

The heavy competition from brokerages, insurance companies, and bigger trust organizations should not dissuade community banks, Mr. Salome said, because plenty of viable prospects exist. His clients-small-business owners or sellers, working or retired physicians, attorneys, accountants, and, yes, inheritors-are loyal to S&T for both investment management and banking because they are the center of the bank's attention.

"We have people who walk in here, chitchat, sit down, and have coffee. It makes their day. Ours too," he said. "We charge fees for those high- level services."

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