Against all odds - and the prevailing wisdom of the Internet age - some small-bank executives are still talking like Jimmy Stewart when it comes to marketing mutual funds.

"Bigger does not always mean better," said David Hickman, the executive vice president of United Bank and Trust Co. of Tecumseh, Mich. "We have the same mutual funds. We have the same stocks and bonds available that the big people have. The difference is, in larger organizations you don't know who is making the investment decisions. Here, you know."

Mr. Hickman and other community bankers face a challenge from larger companies that can use Web sites to invade their territory without establishing branches there.

"No one is limited or protected anymore by geography," said William W. Reid Jr., president and chief executive officer of ICBA Financial Services, the securities arm of the Independent Community Bankers of America.

Mr. Reid said that smaller banks should be fighting fire with fire by establishing Web ventures of their own. "Smaller banks sense the need to offer nontraditional services to fend off out-of-state rivals," he said. "But everyone is just being wary."

Mr. Hickman and others like him, however, insist that personal relationships with their customers give them an edge.

Mr. Hickman said his $442.8 million-asset bank has built its assets under management by 150% in the past five years, to $500 million, despite the explosion of Internet trading sites and technologically friendly fund families.

United Bank's trust group is outperforming its bank, despite its modest size, Mr. Hickman said, and the bank is expanding its trust services business into a neighboring county.

Mr. Hickman said the key to building a robust investment product business, whether the company is Merrill Lynch or a tiny bank in Michigan, is strong investment advisers.

"You have to have the best people if you want to succeed, and in order to maintain the best people you need to be able to pay them for the work they do," Mr. Hickman said. "That is easier for larger companies. But our service levels are higher because our investment advisers want to exceed expectations."

At Chittenden Trust Co. in Burlington, Vt., investment products have been a successful part of the bank's menu for decades. It has $2 billion of assets under management and offers mutual funds, bonds, and equities.

"We manage money for a lot of Vermont's investors and small businesses," said John Kelly, a Chittenden executive vice president. "We have taken advantage of a lot of our existing relationships, and the fact that we are really high-touch has set us apart."

Mr. Kelly said Chittenden's high level of service has let it compete with high-profile brokerage firms and mutual fund companies. Analysts agree that for small banks to be competitive, a high level of service is a must.

"I don't think the typical investor is as technologically savvy as an investor in New York or in another major metropolitan area," said W. Christopher Maxwell, a principal at Maxwell & Associates in Rock Hall, Md. "Being able to get in touch with an investment adviser is very important to the typical investor. They want to stay in touch with their money and the people managing it."

Mr. Kelly agreed. He said being smaller and high-touch is a big advantage; Chittenden has increased its assets under management 15% annually for the past five years.

"We have three small offices, and the customers can see everyone who is working there. They get a feeling that their money is being handled by someone that they know and someone that they trust," Mr. Kelly said.

Efforts to bring smaller banking companies online have met with mixed success.

ICBA Financial offered online discount brokerage service to the trade group's members in October, in partnership with New York-based U.S. Clearing, a division of Fleet Securities Inc. At the outset, 160 banks came aboard. But in January half of them dropped out after a third-party provider, Money Concept International Inc. of North Palm Beach, Fla., imposed a $145 monthly fee for site support.

"If you think about the economics of Net banking and Net securities firms, they can translate their reduced costs because of a lack of bricks into lower fees, and that is very important to the large investor," said Mr. Reid of ICBA Financial. "But they don't have the ability to look a customer in the eye, and that is important to a customer from a small town in Wyoming."

James Overholt, a senior consultant and manager of financial services for Milliman & Robertson in Chicago, said that investing with David rather than Goliath has advantages and disadvantages.

"Smaller banks know their clients better simply because there are fewer of them to know," Mr. Overholt said. "But they lack the technology, and that comes down to the bottom line. Smaller banks cannot afford the same software options and marketing strategies and value-added Web sites that larger fund companies can."

But Mr. Reid said he is not prepared to give up. Recent studies indicate that community banks are making strides toward offering Internet access to their customers. A survey published in April by Grant Thornton LLP said 17% of community banks have set up Web banking services and 30% of these offer cash management services.

The survey indicated that the number of small banks with Web banking services would grow 87% by 2003 and those offering cash management would rise by 72%.

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