Taking advantage of a change in federal tax law, Patriot Bank Corp. is seeking to become the first Pennsylvania thrift to convert to a state- chartered commercial bank.

Officials with Patriot hope that the bank charter will help the $500 million-asset thrift purchase community banks that might otherwise rebuff a thrift's overtures.

"Some banks don't want to be acquired by a thrift," said Richard A. Elko, chief financial officer for Patriot Bank. "We think one of the intangible benefits of doing the charter flip is we'll be a commercial bank and maybe we can get in the door of other commercial banks."

Patriot's decision to seek a bank charter follows a move by Congress to eliminate most taxes on bad debt reserves, which previously were assessed against thrifts that converted to a commercial bank charter.

Mr. Elko said the tax changes have finally allowed the thrift to pursue a commercial bank charter. It had been the thrift's goal since it converted from a mutual thrift to a stock-based institution in December 1995.

"Since then, we've been operating as a community bank," Mr. Elko said. The charter conversion would remove lending limitations on commercial nonreal estate lending.

The Pottstown thrift's board of directors voted in favor of the conversion this week. The matter now awaits the approval of federal and state regulators.

Patriot decided to seek a state charter because it was more costly to become a national bank and directors felt more comfortable with Pennsylvania regulators, Mr. Elko said.

Ellen Lamb, vice president and director of public affairs for the Conference of State Bank Supervisors, said that besides costs, most thrifts are community-based organizations so a state charter affords them local regulation. She said that it generally costs about a third or as much as 50% less to adopt a state charter.

A spokesman for the Office of the Comptroller of the Currency said it costs about $17,400 for a standard filing with the agency and about $10,200 for what's considered a streamlined filing.

Michael Wishnow, a spokesman for the Pennsylvania Department of Banking, said that other possible conversions might depend on Patriot Bank's success.

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