Ohio Co., which has operated independent brokerage offices for decades, is carving out a new niche by selling mutual funds and annuities through banks.

The Columbus-based company recently signed up two more institutions to a growing program that targets midwest banks, especially those with under $400 million of assets.

First State Bank in East Point, Mich., and Citizens Bank in Martins Ferry, Ohio, will begin offering mutual funds and annuities through Ohio Co. later this month.

Nine Banks Signed Up

With the additions, Ohio Co. has signed up nine banks since beginning the bank program in 1990.

It sets up its own offices inside the banks and hires its own brokers to run the programs.

The arrangement gives bank customers the opportunity to buy stocks, annuities and mutual funds, including some from Ohio Co.'s own family of Cardinal Funds.

It is also a way for the banks to increase fee income. Under a lease agreement, banks typically receive 25% of commissions from product sales.

Ohio Co. takes a highly selective approach when targeting banks for its brokerage services, said James Rowlette, vice president and director of marketing.

"We look for a smaller, highly independent bank in trade-center communities."

Shared Philosophy Sought

Ohio Co. wants banks that "share our philosophy of providing highly personalized brokerage services," Mr. Rowlette said.

Each bank brokerage is staffed by a broker with a track record and existing client base.

Brokers at the latest two offices joined Ohio Co. from Prudential Bache and Legg Mason, Mr. Rowlette said.

Experienced brokers give banks and Ohio Co. "a leg up," Mr. Rowlette said. "We don't want to have to train our brokers."

Incentives Bring Business

Also helping brokers are bank employees who receive financial incentives for directing business their way.

"We basically write two checks each month," Mr. Rowlette said. "One for our rent and one to the personnel manager as part of our referral program."

Although the Ohio Co. bank program is growing, getting a foot in the door isn't always easy.

One of the obstacles that turnkey providers like Ohio Co. encounter are banking executives who worry that brokerage services will drain their deposit base.

Study Undertaken

That's one reason why Ohio Co. undertook a study last year to track bank brokerage office sales.

It showed the firm's monthly gross revenues from the bank channel was $866,852.

Of that amount, only $62,000 came from within the bank, Mr. Rowlette said. The rest came from sources that include other banks, brokerages, and new customers.

"It tells us that we aren't the fox in the henhouse," Mr. Rowlette said. "We're really here to solidify and expand the bank's customer base."

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