Trusts, wealth management build business for banks in North Bay and beyond

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Bank trust accounts largely focus on husbanding assets from one generation to the next for businesses and individuals, but banks offer different ways to achieve that end.

Trust and wealth management departments can also be essential engines to increase deposits and develop business for banks, according to experts.

“Deposits are the lifeblood of the banking industry,” said Chris Marinac, director of research at FIG partners, an investment banking and research firms specializing in community banks. “I think trust is a great business because it brings in deposits.”

Many larger banks focused on administering trust assets for high net worth and ultra-high net worth individuals Marinac said, noting that for North Bay banks without a nationwide presence, administering smaller trusts isa way to create a relationship with a client whose assets and deposits may grow over time.

“That customer who may have $2 million or $3 million may be the next $50 million customer,” Marinac said.

That strategy is one Santa Rosa-based Exchange Bank invested in last month, acquiring the San Mateo-based California Trust and Wealth Management business of Iowa-based American Trust and Savings Bank, which has roughly $85 million in assets under administration. The bank acquired another trust department in the Sacramento area last year.

The bank’s trust department administers approximately $1.185 billion in assets.

Executive Vice President and Chief Investment Officer Greg Jahn noted during a previous interview with the Business Journal that the goal was to serve families with trust assets starting around $1 million, a lower amount than many larger banks handled in the South Bay. He also noted the bank could handle assets of any size.

Novato-based Bank of Marin requires a minimum of half a million dollars to set up a trust account and, like other banks, offers different ways to manage those assets, according to Deborah Hoke Smith senior vice president and director of wealth management and trust services.

The bank’s wealth management and trust division administers approximately $300 million in assets.

Hoke Smith said the “classic” trust is one set up to transfer wealth between family generations but she added that Charitable Remainder Trusts had become more popular in her work since the passage of the 2017 Tax Cuts and Jobs Act.

The trusts shelter assets from taxes and allow the holder to profit from them on the guarantee they will be given to charity after their death. “It seems like we have in the last couple of quarters seen more inquiries about tax advantage structures.”

Hoke Smith said more clients wanted to know about the arrangements in the run up to the first tax season since the law was passed, adding clients “anticipate their tax bills being greater so they want to shelter more money for the future.”

The bank’s Chief Operating Officer, James S. Kimball, said another trend involved individual clients placing assets in trusts earlier in life, with an eye towards retirement.

“Clients are pretty accustomed to doing that sort of planning for their business but maybe the small to mid-sized business doesn’t do as much of that planning for their own personal situation,” Kimball said, noting that trend was changing.

When asked about any plans to acquire other businesses to grow the wealth management and trust team in the face of the recent Exchange Bank move, Kimball pointed to its 2017 acquisition of Bank of Napa in a stock deal valued at $51 million.

Announcing its most recent acquisition, Exchange Bank executives noted that the move was part of a plan to expand into contiguous markets with it trust practice at the fore, potentially bringing in its other services as required.

Kimball said Bank of Marin’s plan was to grow “organically,” adding “our overall bank objectives would lead our trust objectives.”

But in this business as in all others, there are always bigger fish.

Jason Foster is a Santa Rosa-based private client adviser at Bank of America Private Bank and described his trust work as focusing on wealthy individuals, refining their trust plans and in some cases administering assets.

He noted in the North Bay there had always been a significant need for these kinds of services with an older population and significant multi-generational family wealth invested in real estate.

Foster said it was common for companies administering assets to liquidate holding that were difficult to value like vacant land holdings but noted by virtue of its size his organization had experts capable of evaluating those assets.

“Most trust companies will look to liquidate those assets and manage that liquidity,” Foster said. “We have the capability of maintaining the integrity of the assets a family has built over time.”

Foster said he was not necessarily seeing more clients or potential clients interested in charitable trusts but that the passage of the tax law had shifted other priorities for wealthy clients, noting the increase in the estate and gift tax exemption to over $11 million per person.

Because the bank was always looking to integrate its different businesses of consumer banking, business banking, and wealth management, Foster said he was constantly evaluating opportunities to not just handle new clients but also administer assets of existing ones.

Echoing that, Marinac, the financial researcher, said ultimately growing a bank’s trust department and by connection its deposits was a solid way to grow, but also one built on a client’s confidence in an institution.

“It comes down to the relationship,” he said. “If you are focused on the customers it can be a way to take those customers and expand upon them.”

Staff Writer Chase DiFeliciantonio covers technology, banking, law, accounting, and the cannabis industry. Reach him at chase.d@busjrnl.com or 707-521-4257.

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