Florida's strong appetite for investment products is giving bank brokers there cause to celebrate, but hurdles remain in the form of litigation and heavy regulatory scrutiny.

The recent lifting of restrictions on banks selling annuities in the state, coupled with the bullish stock and bond markets over the past 16 months, has boosted investment sales in Florida and made it an increasingly significant outlet for companies such as SunTrust Banks Inc., NationsBank Corp., and First Union Corp.

"The environment for selling all investment products has been as good here as I've ever seen it," said G. Kennedy Thompson, president of First Union Bank of Florida, in a recent telephone interview.

To many bankers and observers, Florida is fertile ground for mutual fund and annuity sales because its population and savings base are among the fastest-growing in the country.

For example, the state accounted for $328 million in mutual fund sales in 1995, or 47% of First Union's total. That figure was up from 37% in 1994.

However, Florida regulators have historically been hostile to banks' forays into insurance and investment sales and are continuing to heavily scrutinize those activities.

Indeed, NationsBank and Barnett Banks Inc. have often been at the center of the fire storm, taking heat from both regulators and retail investors. Some customers are suing the companies, alleging improper sales practices.

But that hasn't stopped the big banks from expanding rapidly throughout the state. SunTrust, for example, increased its brokers in Florida from 65 in 1995 to more than 100 today. And NationsBank has 85 brokers in the state - the second largest concentration next to the company's Texas brokerage.

Among them, the big four - Barnett, First Union, NationsBank, and SunTrust - hold 70% of Florida deposits.

The prize for banks is the steady stream of retirees and of young professionals attracted to the state's booming private sector, experts say.

Florida is the No. 1 state for relocaters, according to the Bureau of the Census. From 1990 to 1994, 554,000 more people moved in than moved out. And as of yearend 1995, the state's deposit base had increased to $142.1 billion, a 14.2% jump since 1992. That compares to a 12.2% rise during the same period nationwide.

Moreover, Florida, the fourth-most-populous state with 13.9 million people, has some of the largest pockets of wealth in the country, according PSI Inc., a Tampa research firm.

Florida is ranked fifth among states in the number of households with $2 million or more in investable assets - that includes cash, stocks, and other more liquid assets, but not real estate, for example.

"It's a high-growth state, with a population in transition," said PSI president John DeMarco. "With so many people moving down here from other places, there tends to be more opportunity for banks here to forge new relationships as people begin to set down new roots."

First Union tries to tap such migration by offering its bank tellers incentives for referring customers that are planning to move. Once customers settle in a new town, they are contacted by the local First Union branch offering to continue the banking relationship.

And Barnett is expanding its 10-year-old Senior Partners program to attract more investment business from senior citizens that move to the state.

"Working people have the same demographics across the country, but retirees are more attractive because it's much more stable principal," said Richard H. Jones, Barnett's chief asset management executive.

Annuities have become a major focus for Florida banks. These long-term investment products garner higher margins for sellers than do individual securities or mutual funds. But until last summer, banks in the state were allowed to sell annuities only through third parties, diminishing profits.

"As a product, annuities have really blossomed for us," said Hunting F. Deutsch, chief executive of SunTrust's trust and investment services group.

SunTrust sold $77 million of annuities in 1995, and expects to sell more than $100 million this year. The company has expanded its annuities sales force from 19 people, to 95 today.

First Union expects to sell $631 million company wide in 1996, with 45% of sales coming from Florida.

Still, competition for customer assets is fierce.

Every major nonbank brokerage firm has a shingle hanging somewhere in the state, including heavyweights like Merrill Lynch & Co., which has more brokers in Florida than in any other state except California.

Take Melbourne, Fla., for instance. Located on Florida's "Space Coast" - the John F. Kennedy Space Center is in nearby Cape Canaveral - it's typical of midsize cities in the state.

A glance at Melbourne's phone book shows at least 27 securities dealers there, including brokerages owned by SunTrust and First Union.

Thomas W. Sinclair, who manages 22 brokers at a busy A.G. Edwards & Sons office in Melbourne, says banks in the area have stepped up their efforts to court his customers.

"In the past few years I've seen a lot more of (the banks)," Mr. Sinclair said. "A lot of times they try to build off trustee relationships, and then broaden that out to include brokerage."

He quickly added that he has no trouble picking off bank brokerage customers, because there is still a "perception out there that banks misrepresent investments as being guaranteed" by federal deposit insurance.

Indeed, outside Mr. Sinclair's office, an 84-year-old woman who asked to be identified only as Edna, said she had cashed in mutual fund shares she bought at a local SunTrust branch and transferred her money to an A.G. Edwards account.

Though she hadn't felt misled by SunTrust's brokers, she said, "I'm a widow, and you know, those brokers would take advantage of you."

That perception may be changing. In the eight months since July 1, 1995, Florida's banking and finance department has received only 37 securities complaints about bank brokerages. That's compared to 213 complaints the 12 months prior to that date.

Barnett was the worse offender with 12 complaints, followed by First Union with 10, and Great Western Financial Corp.'s brokerage with eight. NationsBank, which in the past has taken heat for its sales practices, had only two complaints.

Donald B. Saxon, director for Florida's division of securities, said the state is "vigorously investigating" the investors' claims, and said there were no plans to lessen the amount of scrutiny given to banks.

SunTrust's Mr. Deutsch said banks are still battling an image problem, but hastened to add that his brokers are clean.

"There has been a lot of adverse publicity in Florida, and thankfully we haven't been at the center of that, but it's bad for any bank in this business," he said, in an interview at the company's Florida headquarters in Orlando.

The subject is sensitive with some banks. NationsBank executives, bank employees, and brokers would not comment at all for this article because of pending litigation against the NationsSecurities brokerage unit. Barnett executives declined to comment about similar lawsuits against its brokerage.

Donald W. Smith, an attorney with Kirkpatrick & Lockhart, Washington, said banks in Florida are natural targets for "hungry claimants lawyers."

"To some extent, litigation goes where the money is," Mr. Smith said. "Any time that you have a heavy concentration of investors, some of whom might not be that sophisticated, that presents opportunities for securities litigation."

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