A savings bank in Troy, N.Y., is aiming to become the first thrift authorized to make equity investments in small businesses.

Troy Savings Bank has applied to the Small Business Administration for a license to start a small-business investment company, which would enable it to own up to 49% of the stock of another business. The thrift hopes its application will be approved in early 1998.

Troy Savings' interest in making venture capital investments is symbolic of the efforts thrifts have been making to diversify their portfolios. Many thrift executives worry that mortgages are too large a percentage of their holdings.

Daniel J. Hogarty, president and chief executive officer of Troy Savings, says real estate loans make up 75% of his loan portfolio. But the $667 million-asset thrift also has $50 million outstanding in commercial loans, he said.

"We've had to get into other businesses to remain competitive and to satisfy as many customers as we can," Mr. Hogarty said.

If its license application is approved, Mr. Hogarty said, Troy Savings would make equity investments in start-up companies, particularly ones that do business in computer software, biotechnology, and environmental sciences.

Mr. Hogarty said the new venture unit could benefit not just the bank, but also the local economy.

"We really need to help start new businesses here," Mr. Hogarty said. "It's difficult to attract businesses and keep the existing large businesses that we have."

Under the Bank Holding Company Act, banks and thrifts cannot own more than 5% of any unrelated business unless they do so through a small- business investment company. These corporate subsidiaries, which function as venture arms, are meant to shield the institution and its depositors from riskier investments.

Though several banks have opened small-business investment companies, no thrift has yet done so, according to Don Christensen, assistant director for investments at the Small Business Administration.

Mr. Chistensen said interest in venture capital units is growing throughout the industry. In the 1997 fiscal year nine banks-including Wachovia Corp., Centura Banks Inc., and Norwest Corp.-formed small-business investment companies with a combined total of $163 million in capital.

In the 1998 fiscal year, which began Oct. 1, eight banks have filed applications to form investment companies, which would have an aggregate of $100 million in capital.

Mr. Hogarty said Troy Savings' investment company, which would be called TS Capital Corp., would manage a $3 million fund and make investments between $50,000 and $250,000. James M. Trainor, who previously worked for First Empire State Corp.'s small-business investment company, would run Troy Saving' venture capital unit.

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