When Yardville National Bank of Hamilton, N.J., was shopping for a third-party provider of investment services, its goal was to find a time-tested brokerage house with high name recognition.

“Our experience led us to believe we needed a big-name brokerage firm — a firm everyone would recognize and know exactly who they’re dealing with,” said Jay G. Destribats, chairman of the $1.4 billion-asset company. “When we found that Salomon Smith Barney was doing this, we sought them out.”

Yardville is one of dozens of community banks to have given lobby space to Salomon, hoping its cachet will keep customers from straying. The Citigroup Inc. unit has signed nine agreements with community banks, including Yardville, in the past nine weeks; it now has such partnerships with 48 banks in 26 states.

Community banks stand to gain fee income — a percentage of gross revenue generated — and help with keeping their customers in the fold.

“It gives the bank the opportunity to deepen and broaden its relationship with customers,” said Jeff Champlin, the director of the three-year-old Salomon Smith Barney Bank Investment Centers program. “In many ways it’s a defensive measure,” Mr. Champlin said; the idea is that “the customer won’t be running off to a larger bank to buy mutual funds.”

The alliance also gives the bank income without the capital commitment, risk, and responsibility of setting up its own brokerage or financial planning unit. “We provide the sign so that it’s clear to customers they are no longer in bank territory — that they’re entering a brokerage firm,” Mr. Champlin said.

Bankers say it is the prestige of the Salomon name that appeals to them and, they hope, will attract customers.

Before Los Alamos National Bank in New Mexico signed on with the brokerage house in 1998, it had contracted with PrimeVest Financial Services in St. Cloud, Minn., for two years.

“We didn’t think it was as optimal,” said the bank’s president, Steve W. Wells, who was not impressed with PrimeVest’s product offering, services, and delivery time. “We thought Salomon Smith Barney had much more name recognition and a better brand.”

In the investment center, which is typically an office adjacent to the lobby and staffed with one Salomon financial consultant, customers can buy a full range of investment products — stocks, bonds, mutual funds, unit trusts, insurance products — and obtain asset management and financial planning services.

The importance of an investment center for $646 million-asset Los Alamos had less to do with revenue and more to do with customer retention. “It’s not a great producer of income but there’s going to be customers leaving the bank if we don’t offer the products,” Mr. Wells said.

But Salomon is not looking to partner with just any bank. Among the requirements are enough customers to justify a brokerage offering, no regulatory problems, and supportive senior management.

There is also an asset-size test: $100 million to $8 billion. The newest partners — which include First State Bank of Temple, Tex.; First Century Bank of Bluefield, W.Va.; Union Bank of Plantation, Fla.; and Cache Bank of Greeley, Colo. — range from $100 million to $1.4 billion.

Though most of its bank-lobby investment centers are in areas where the brokerage firm has no presence, about one-third are near Salomon offices, which target the wealthy and middle class alike.

Fear of disintermediation may be keeping some banks from such third-party arrangements. That is why only 25% of community banks become partners with an outside investment firm, said consultant Kenneth Kehrer, president of Kenneth Kehrer Associates in Princeton, N.J.

“This disintermediation issue is the key reason why most community banks don’t sell investments yet,” he said.

Richard D. Weiss, an analyst at Janney Montgomery Scott LLC in Philadelphia, said agreements with the providers can benefit community banks, but he stopped short of endorsing the alliances.

“One of the pitfalls is about letting the wolf in the door,” he said. “Why should I have money in CDs when the guy at Salomon Smith Barney is saying I should invest in stock? You end up losing as many customers as you end up getting.”

But Scott Yandell, the president and chief executive of Bank of the Lakes in Owasso, Okla., said he is not worried about deposits being cannibalized.

“The bottom line is these customers have brokerage accounts elsewhere,” said Mr. Yandell, whose bank began its partnership with Salomon on Nov. 1. “What we’re looking for is people to move their existing brokerage assets to us.”

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