NationsBank of Texas is selling off a slew of small trust accounts, which total $160 million in mostly funeral and court settlement funds, to a local trust company that specializes in their management.
Funeral trusts, or escrow accounts set up to pay for burial costs, coffins, cemetery plots, and their ongoing care, are the bread-and-butter of Houston-based Southwest Guaranty Trust Co. Its chairman, William E. Mercer, is a former chief financial officer of Service Corp. International, the country's largest funeral home operator. In 1989, Mr. Mercer bought the funeral trust business from his former employer.
The 1,200 accounts came to NationsBank Corp.'s Dallas unit as part of its acquisition of Houston-based Charter Bancshares in May. Terms of the deal with Southwest Guaranty were undisclosed. The acquisition, expected to close by Dec. 31., will raise assets under management at Southwest Guaranty to about $1 billion.
NationsBank's trust business, part of its private client group, typically handles accounts with at least $1 million in investable assets. However, the majority of the Charter accounts hold less than $1 million and are court settlement trusts held and managed for minors or funeral trusts.
"Cemetery trusts are something most organizations don't like. They are a lot of work for not a lot of money," said James D. Kemp, an investment management and trust consultant in Dallas.
"If you only have one or two of them, it's a thorn in your side. But Southwest Guaranty has scale, and they seem to be doing well," he added.
The former Charter Bank trust and asset management division has nine employees and reported more than $1 million in revenues at the end of 1995.
A NationsBank spokeswoman said that court settlement and funeral trusts are "very specialized" and do not "fit into our strategy for the private client group, which focuses on the high net-worth market."
On the other hand, traditional personal asset management only makes up 30% of Southwest Guaranty's business.
"For us, it's perfect. It fits right into our product line," said Willard B. "Bill" Wagner, its executive vice president. "The big banks are chasing the top line of the business, and everybody is ignoring a huge business that's out there."
