Acting more like a big bank than a community bank, a $464 million-asset Kansas bank has agreed to buy an area brokerage firm.
Gold Banc Corp. of Leawood, Kan., plans to pay $4.25 million in cash and stock for Midwest Capital Management Inc., a privately held Kansas City, Mo., investment firm that assists in managing $3 billion of assets. The deal would allow Gold Banc to offer stocks, bonds, and other investment products to its customers.
"We have many high-income, high-net-worth individuals as customers," said Michael W. Gullion, Gold Banc's chief executive officer. "If we don't have securities products, they'll go somewhere else."
Though some community banks start investment services departments from scratch, Gold Banc wanted to buy an established firm. "These people have done this for 20 years," said Keith E. Bouchey, chief financial officer at Gold Banc. "There's no reason for us to reinvent the wheel."
The brokerage firm would immediately bring in more service fee income and reduce Gold Banc's reliance on interest rate income, Mr. Bouchey said.
By offering a full line of investment services, Gold Banc would also be able to keep a larger chunk of its customers' money.
Mr. Gullion said Midwest Capital Management first will cross-sell to the holding company's high-net-worth customers who live outside of Kansas City in fast-growing Johnson Count, Kan. Later, brokers will be able to offer financial services through video conferencing to people in Gold Banc's rural locations.
Midwest Capital Management might also get to play matchmaker between the acquisitive Gold Banc and the brokerage house's community bank clients. Midwest Capital manages bond portfolios for about 200 community banks in Kansas, Missouri, Oklahoma, Nebraska, and Iowa.
Mr. Gullion said Gold Banc would be willing to discuss possible acquisitions with Midwest's clients.
Bill Reid, president of the Independent Bankers Association of America's Financial Services Corp., said it is rare for community banks to buy brokerage firms, but he says the concept is catching on as banks look for ways to increase fee-based income and offer more financial services.
"This is a phenomenon that will probably pick up speed," he said. "There's no reason why a small bank can't do what the big banks are doing."
Anthony J. Polini, a bank analyst with Advest Group Inc. in New York, agreed.
"Mike Gullion isn't buying Montgomery Securities; he's buying a local money manager," Mr. Polini said. "He's taking advantage of all of the opportunities."
In addition to the Midwest Capital Management deal, Gold Banc also announced this month that it intends to buy First National Bank of Alma, Kan. Gold Banc plans to pay $3.76 million in stock and cash for the $28.4 million-asset bank.
Both deals are expected to close during the first quarter.
Gold Banc's stock rose 10.6% last week to close Friday at $23.50-in part due to the company's acquisition announcements, according to bank analysts who follow the stock.