The pioneer spirit still rules at First National Bank of Bryan, Tex.

The $170 million-asset bank, which is still run by descendants of the Lone Star State settlers who founded it in 1862, is blazing trails in investment product sales.

While most community banks stick to gathering deposits and making loans, First National has branched into sales of mutual funds and annuities.

Now, the bank is preparing to expand its slate of conservative offerings to include "something with a little more risk," said Timothy Bryan, vice chairman and chief operating officer. The additions are expected by yearend.

Mr. Bryan said a wider range of investment options is needed because customers are demanding higher yields than most bond and income funds can provide.

The array of equity funds, which have been strong sellers for the bank, will be expanded to include more aggressive portfolios and possibly even some international stock funds, said Foster Ullmann, the bank's head investment counselor.

The strategy does have its downside, said Richard Ayotte, president of American Brokerage Consultants, Tampa, Fla.

The bank "could be attracting more customers by offering products with a higher yield, but it could lose some, too, because of the risk involved," Mr. Ayotte said.

But depositors' appetite for higher-yielding - and thus riskier - investments is just what prompted First National to begin offering mutual funds and annuities two years ago.

"We saw a lot of folks walking out the door of the bank and going down the street to the local brokerage," said Mr. Bryan.

In August 1992, the bank selected NAP-Aragon, an Austin-based investment marketer, to help run its mutual funds and annuities program. The company had been endorsed by the Texas Bankers Association.

In its first full year of operation, First National's investment sales program raked in $3.6 million in mutual fund and annuity sales, Mr. Bryan said. "It was great guns all the way through the end of '93."

Sales Down from 1993

So far this year, sales are running at about half that level, in part because investors have been spooked by volatility in the stock and bond markets, Mr. Bryan said.

Also, rising interest rates have made insured deposits more attractive to many bank customers. Mr. Bryan said many customers have been parking their money in short-term certificates of deposit as they plan their next move.

Mr. Bryan said he isn't troubled by the sales slump and fully expects customers to shift back to mutual funds once the markets level out.

What's more, he said, sales were bound to decline after such a banner year. "I think it's pretty typical to slow down in your second year. There was a lot of pent-up demand in the first year that was taken care of."

Mr. Bryan emphasized that First National's sales effort remains low-key. New products are being introduced precisely because customers are demanding them.

"We provide the menu. They choose whether to order," he said.

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