A community bank holding company in upstate New York plans to begin marketing proprietary mutual funds to its retail customers this year even though stocks and mutual funds remain mired in what the company's chief executive called the worst slump in a quarter century.

Thomas L. Hoy said he is convinced that the stock market will rebound and that banks' deposits will decline when it does. Arrow Financial Corp. is preparing for that by offering its own line of investment products, he said.

"If we're not a part of how our customers invest their money, we're not going to make any money ourselves," Hoy said. He admitted that community banks typically only sell other companies" mutual fund products. However, he said, Arrow could make a lot more charging asset management fees on its own funds than by collecting a commission on other companies' funds.

Arrow's move into mutual fund sales sprang from its trust department. John E. Arsenault, Arrow's senior vice president and senior trust adviser, said that for years the company maintained mutual-fund-style vehicles called collective investment trusts to invest the funds of its employee benefits clients.

Arrow registered the trusts as mutual funds in March 2001 after it decided to offer shares to its retail customers, and it has been working since then to assemble a team of licensed salespeople, Arsenault said. Federal law bars individual investors from participating in collective investment trusts, he said.

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