An "Adventure" in Trust

By Calsin, John B., Jr. | Independent Banker, November 1994 | Go to article overview

An "Adventure" in Trust

Calsin, John B., Jr., Independent Banker

Looking back at what has made his bank's trust department so successful, Charles E. Swope can point to many things. There's the talented staff, the comprehensive strategizing and planning, and the aggressive marketing. But it's a commitment from the top that has propelled the profitability of First National Bank of West Chester's trust department.

"You've got to get the board of directors 100 percent behind you," says Charles E. Swope, chairman, president and senior trust officer of the southeastern Pennsylvania bank. "They've got to realize this is going to be a new adventure."

A new adventure that can pay big results.

First National's senior vice president and trust investment officer Kevin C. Quinn can testify to that: "The importance a trust department can play in a small, independent bank is very significant," he says.

Both of these men know what they are talking about. Their bank's trust department has grown to what Swope calls "the extraordinary position of $250 million" in relationship to the $350 million-asset bank.


There were not many banks in West Chester back in 1960 when Swope joined First National. It was a quiet, rural, county-seat community. "I'd completed law school and had been with two firms. Trusts were becoming extremely popular," Swope says. People were becoming more cognizant about preserving their financial assets.

"I saw the opportunity here because of the courthouse and all the lawyers. So I said, 'This is where it all is, right here with the local bank.' And it just proved 100 percent right," Swope says.

With increasing regulations in the banking business and expanding competition, bank profit margins are being squeezed. Swope and Quinn believe that banks must give a closer look to non-interest income opportunities such as trust services.

As a CEO, Swope understands the possible reluctance to tinker with a good thing. "But, your objective is always more profitability. Here is a source of substantial profitability to any bank, regardless of size," he says.

Quinn adds that if a bank is not providing the trust service for its banking clients, someone else will. "The financial services industry is changing so rapidly. Everyone is probably going to be offering the same services."

Today, 50 percent of First National's trust department revenue is generated from non-trust accounts, such as the employee benefits and investment management.

In 1985, First National had net income of $104,000 from its trust department. By 1989, net income had grown to $258,000. Last year, the bank experienced more than $688,000 in net income from trust services, based on revenues of $1.6 million and expenses of $994,000.

Many trust departments rely upon estate revenue. In 1985, estate revenue for First National represented 33 percent of the overall trust revenue. In 1993, however, it represented just 11 1/2 percent.

Quinn says: "The year 1985 was a very good year, but we could have a down year if estates dried up. And, obviously, we have no control over when someone is going to die."

Over the years, the bank's management philosophy changed. "We didn't want to reduce our estate revenue," Quinn says. "We wanted to reduce the dependence upon estate revenue for our growth. So there was a concentrated effort to sell our trust and investment management services."

Quinn acknowledges that geographical competitiveness and local economic conditions may affect fees that the bank charges for trust services. But he says, "I think one mistake that trust departments make is they underprice their services. [In general], I think we give our services away."

Speaking specifically about First National's fees for trust services, Quinn says: "On the first $400 thousand of assets under management, we're charging 1 1/4 percent. And we're still bringing in new business."


Swope and Quinn both point to the importance of a comprehensive strategic plan for the bank's trust services. …

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