Ent gaining trust/ The state's largest credit union expands services

The last major difference between Ent Federal Credit Union and local banks is disappearing as Ent expands into the trust business, putting it in direct competition for banks' most affluent customers.

As the state's largest credit union with more than 140,000 members and $1.4 billion in assets, Ent now offers virtually every service available at banks. It began offering investment services and business loans in 2000 and now has nearly $20 million in investment accounts and $18 million in business loans.

Ent can serve anyone who lives, works, worships or attends school in El Paso or Teller counties. Its recent merger with an Aurora credit union, in effect, gives Ent access to about 85,000 potential members affiliated with Buckley Air Force Base.

Once dominated by banks, trust services traditionally have been offered to wealthy, elderly clients who wanted to limit or avoid federal estate taxes. But this month, Ent began marketing the service to the middle class for investment management, retirement planning and other needs.

"There really isn't any remaining difference between the large credit unions and banks, other than the fact that credit unions don't pay income taxes," said Ed Sauer, president of The Bank at Broadmoor, which is considering whether to enter the trust business.

Federal laws allow banks and credit unions to offer similar financial services. The only difference is banks are for-profit businesses and must pay income taxes, but credit unions are exempt from income taxes as member-owned cooperatives. That allows credit unions to pay higher rates on deposits and charge less for loans and other services.

Ent has invested $500,000 in Members Trust Co. of Colorado, a consortium formed by Ent and five large Denver-area credit unions, to offer trust services. Efforts to form the consortium began in 1995, and the Colorado Banking Board granted the consortium trust powers in August. Based in Greenwood Village, members operate offices at an Ent branch in downtown Colorado Springs and in Boulder.

"Our approach is aimed at smaller accounts that larger institutions turn away," said Tim Kenczewicz, president of Members Trust. "Middle America is not looked at as trust customers now, but in coming years they will inherit a lot of money and could use our services."

Members Trust is targeting customers with as little as $150,000 in assets, or less than one-third the size of the typical bank trust account. The company now manages $5 million in eight accounts and hopes to reach $20 million by year-end and be profitable in five years.

Paula Pollet, manager of Members Trust in the Springs, is just the kind of customer Members Trust is targeting. A single mother, Pollet set up a trust with Members for her 16-year-old son that would pay his living and educational expenses after her death.

"Odds are that my assets would go to my children when I die, but at this point in his life my son isn't really ready to handle that much money," Pollet said.

"You can also set up trusts for disabled children or the recipient of a personal injury settlement."

Trust operations typically manage assets ranging from stocks, bonds and mutual funds to insurance policies, real estate and small businesses. Depending on the type of trust, they handle bookkeeping, distribute funds and even pay bills for beneficiaries.

Members Trust charges fees averaging about 0.9 percent of the assets in the trust account. That compares with trust fees ranging from 0.5 percent to 1.25 percent charged by Vectra Bank Colorado, depending on the size of the account.

Few bankers are surprised Ent and the state's largest credit unions have moved into the trust business and said they don't fear additional competition. However, some doubt Members Trust will find an untapped market for middle-income trust customers.

"This business is by no means easy. It requires a lot of expertise, has thin profit margins, and it is difficult to attract good people," said Don Sall, who heads the Colorado Springs operations of Wells Fargo Bank, which manages $500 million in local trust assets.

Small trust accounts aren't cost-effective for many banks because the accounts don't generate enough fees to be profitable, Sall said.

Credit unions can afford to charge lower fees because they don't pay federal income taxes, he said.

John Jackson, who heads Vectra Bank Colorado's operations in southern Colorado, said trust services aren't really necessary unless a customer has assets of $700,000 to $1 million, since federal estate taxes are not levied on estates below that level.

"There are a lot of foundations and high net-worth individuals in Colorado Springs, but that business has gone away as the large regional banks moved their trust operations to Denver," Jackson said. "It would be difficult to get that business back."

But the market for trust services in Colorado Springs is growing, as shown by the success of Western National Bank's trust department.

Western President Dennis Nathan said the department was profitable in three years and now manages more than $160 million.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.