In a first for Pennsylvania, a bank is buying an insurance agency.

Little Kishocoquillas Valley National Bank in rural Belleville is taking advantage of a new state law that grants banks the power to sell insurance. Kish Bank, as it is called, has agreed to buy Thompson-Wilson Agency Inc. for an undisclosed sum. The deal is expected to close Sept. 1.

"It always seemed to be an artificial constraint to have to send our customers down the street to buy their insurance policies," said William P. Hayes, chairman, president, and chief executive officer of the $145 million-asset bank.

Pennsylvania bankers say it's only a matter of time before other banks join Kish Bank in the insurance industry.

"Already bankers from around the state are calling to inquire how we went about this," Mr. Hayes said. He said a new insurance subsidiary will be headquartered in the bank's new financial center.

Daniel J. Reisteter, vice president of government relations for the Pennsylvania Bankers Association, said banks that don't buy their own agencies will probably create partnerships or referral systems with insurance agencies.

On Jan. 25, Gov. Tom Ridge signed a bill that lets federal and state- chartered banks be licensed to act as insurance agents and brokers. The law represented a compromise between insurance agents and bankers, who haggled over the details during this year's legislative session.

Actually, Kish Bank could have entered the insurance business before the state law was adopted, because it is a national bank. Last year, in the Barnett Banks decision, the Supreme Court affirmed the Office of the Comptroller of the Currency's authority to let national banks sell insurance from small towns with fewer than 5,000 people. Tiny Belleville meets the population requirement.

The justices ruled that the OCC could override state laws that significantly interfere with this authority. But Mr. Hayes said his bank waited because there were many unanswered questions about how its insurance subsidiary could operate and the state insurance commissioner was reluctant to issue guidelines before a state law was adopted.

Mr. Hayes said Kish Bank has been planning for five years to sell insurance. The bank has received approval from the OCC and state insurance regulators.

"It's like a door has opened and there's a refreshing new breeze blowing in," Mr. Hayes said. "We couldn't be any more enthusiastic about the future of a community bank's role in the new financial marketplace."

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