A Florida community bank has been invited to sell stocks and mutual funds in the branches of a rival thrift.
Starting in June a trust department employee of $88 million-asset First National Bank of Mount Dora will travel from branch to branch of $400 million-asset First Federal Savings Bank, Leesburg.
First Federal will take an undisclosed cut of the fees from each sale. The two institutions are based 16 miles apart in Lake County, which is just north of Orlando.
"We have been looking for someone to offer competitive trust services," said Stephen T. Kurtz, president and chief executive officer of $400 million-asset First Federal. "We choose First National because we felt most comfortable with their people."
It is common for community banks to sell products supplied by other banks. But typically, the products come from large institutions, not other community banks.
Mr. Kurtz said his thrift will now be able to sell trust services without increasing staff or costs. And the bank's president, Jack Pease, said the agreement "presents us with an opportunity to expand further in our market area."
First Federal Savings conducted an 18-month search to find a company to contract with, looking at six trust providers. Mr. Kurtz said he chose First National Bank because he was not comfortable with the operations of some of the larger vendors.
"They were too aggressive," he said. "The people at First National understand our customers."
Nationwide, community banks with established trust departments are looking to sell their wares to neighboring institutions. But very few have been successful in convincing local banks they will not sell loans and certificates of deposit along with investment products.
"We are still trying to get over the question of 'when you get our customers, what will you do with them?'" said Mark J. Wenick, CEO of MainStreet Trust Co., Martinsville, Va.
Mr. Wenick said his company, a subsidiary of $2 billion-asset MainStreet BankGroup, has spoken to a number of small Virginia banks without trust departments but has reached no agreements.
In Florida, Mr. Kurtz of First Federal Savings said he is not worried that it will lose desposits or loans to First National Bank.
"We have some built-in protection in our contract," he said. "I am comfortable that their trust department will not leak customer information to their bank side."