After successfully selling its mutual funds through nonbank brokerages, a tiny Kentucky bank is now setting its sights on local trust companies and other banks.

Trans Financial Bank, Bowling Green, Ky., is hoping that the above- average performance of its proprietary funds will help convince its competitors to make the funds part of their product lines. Barely six months old, the Trans Adviser Funds are already sold by nine regional brokerage firms, including Hillard Lyons and J.C. Bradford, as well as bigger players like Prudential Securities.

"We want trust departments to use our family of funds for what they historically would use a Fidelity or Putnam for," said Ronald Szejner, president of Trans Financial Trust and Investment Services.

Right now, 15% of the bank's proprietary mutual fund sales comes from nonbank brokerages, Mr. Szejner said. But some observers point out that trust departments - especially those at banks - may be a harder sell.

"There's a cultural issue," said David Master, a senior consultant for Optima Group, Fairfield, Conn. "One bank in relatively close proximity may see the other bank as a competitor."

Mr. Master and other experts say that banks are increasingly turning to outside companies to boost distribution of their proprietary funds. But they add that most banks have had mixed results because of the intense competition from brand name funds.

"You have to ask yourself the question, why would someone want to buy this bank fund over Fidelity's," Mr. Master said.

At Trans Financial, which has $1.7 billion in assets, Mr. Szejner says he pushes his funds' above-average performance to skeptics.

According to CDA/Wiesenberger, a Rockville, Md.-based mutual fund tracking firm, Trans Financial's aggressive growth mutual fund had total returns of 8.94% in the first quarter of 1996, compared with an average 5.75% return for funds in that category.

And the bank's growth value portfolio returned 8.84%, compared with a 5.49% average total return for all growth funds during that period.

Trans Financial's long-term mutual fund assets grew 64% to $44.7 million at the end of March, according to CDA/Wiesenberger. The fund family's total assets have nearly quadrupled to $120 million since the funds were launched last September, most of the increase coming from money market mutual funds.

Mr. Szejner said he's trying to boost retail sales of the funds through the bank's 56 branches.

Trans Financial recently disbanded its platform program with 50 bank employees selling investments, and switched to 15 full-service brokers with Series 7 licenses.

The change, Mr. Szejner said, will allow brokers to sell a broader variety of investment products and should increase penetration of the bank's customer base.

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