Bank South, which has failed to achieve steady growth of its corporate trust business over the past 15 years, is looking to an independent company for help.
Reliance Trust Co., also based in Atlanta, has a one-year contract, with the possibility of five five-year extensions, to handle the bulk of Bank South's $350 million corporate trust assets under management.
Because of initiatives in areas like mutual funds, Bank South officials were considering whether to try to expand the business or shelve it when Reliance approached them, said J. Blake Young, executive vice president in charge of investment management and trust services.
"Because the timing was so good when they came along, it put us in a position to feel good about going forward," Mr. Young said.
Under terms of the deal, Reliance will assume the costs of doing business while sharing revenues with Bank South, Mr. Young said. He declined to elaborate further.
The main draw for the $4.6 billion-asset bank in choosing Reliance was its four principals, who were largely responsible for expanding the former C&S/Sovran Trust Co. corporate trust business to the largest in Georgia, Mr. Young said.
The team at C&S/Sovran blazed new trails in financing techniques, including the first collateralized mortgage obligation and one of the first leveraged lease financings for aircraft, according to Reliance.
The experience that Kenneth J. Phelps, James Maxwell, Anthony Guthrie, and Dan Davis have with the Georgia marketplace is invaluable in a business which is highly competitive and determined by narrow margins on bids, Mr. Young said.
Area of Expertise
Bank South was further impressed with Reliance's dedication to the corporate trust area, which will allow it to develop or purchase new systems and technology, Mr. Young said.
Reliance has $350 million in assets and is the only independent trust company in Georgia.
The new chunk of business should account for about 15% to 20% of Reliance's revenues, according to Mr. Guthrie. He expects to increase the revenues from the Bank South business by 15% to 20% a year.
Mr. Guthrie believes Bank South's tax-exempt bond transactions can be built from the estimated 15% of total state transactions to nearly 40% within 18 months.
In looking at the Southeast, Reliance, which operates in all 50 states, sees Georgia's corporate trust marketplace as one of the "most dynamic" from a growth standpoint, Mr. Guthrie said. If interest rates stay the same, business is going to continue to increase, he said.
Reliance officials said that unlike Bank South, they have top-of-the-line technology in place to handle the book of business efficiently.
Mr. Guthrie said a big plus for Reliance is that the Bank South business will give it quicker entree to become a name player in Georgia corporate trust business.
Bank South expects to save the cost of nine workers, Mr. Young said. That will allow a shift of manpower to bank initiatives like proprietary mutual funds.