Reaching out to banks in the Midwest, securities firm Legg Mason Inc. has signed an agreement to acquire the assets of a small company that helps community banks run their brokerages.

The Baltimore-based firm plans to buy Equity Brokerage Services, Omaha, which has 10 bank clients in 12 states. Terms of the deal, which is expected to close in October, were not disclosed.

Spurred by unsolicited calls for help from Midwestern banks, the company sought an acquisition there, said John Houston, president of BFP Financial Partners Inc., a Legg Mason subsidiary that supplies brokers to 20 banks.

Mr. Houston said the company wanted a third-party marketer that was willing to sell out to Legg Mason but remain on board to manage the banking relationships. Equity's president, Ted Lange, would join BFP as a senior vice president, overseeing the company's new Midwestern division, he said.

"What we we're looking to do was find someone highly experienced in the business," said Mr. Houston. "The best way to do that was via acquisition."

Mr. Houston acknowledged that managing bank brokerages is not a major business line for Legg Mason. But, as evidenced by the Equity Brokerage deal, the firm does plan to build a formidable effort, albeit slowly.

"Legg Mason didn't form this business to know every bank brokerage, but to have a profitable little division," he said.

The Equity Brokerage acquisition would boost BFP's client roster to 30, fanning it out to Nebraska, Iowa, and Kansas. BFP already has clients up and down the East Coast from Connecticut to Florida, as well as in Texas, Mr. Houston said.

The company's largest client is Hudson United Bank, Mahwah, N.J., a unit of Hubco Inc., Union City, N.J.

Many third-party marketers have seen their business dry up as large banks bring their brokerages in-house. That has sent many of these marketers scrambling to sign up community banks, which generate much lower revenues than their larger brethren.

But some observers said there is still plenty of business to be had. Only one-third of the banking industry offers investment advice, pointed out Richard Ayotte, chief executive of American Brokerage Consultants, St. Petersburg, Fla.

"There will come a day when 12,000 banks are in this business, so if you want to be a player, it behooves you to build market share," he said.

That's why some say BFP will have to move more quickly on the acquisition trail if it is to survive. Larger companies, such as Liberty Financial Cos., Boston, have boasted that they too are on the prowl for third-party marketing firms. Some have already swallowed a couple of the biggest players.

But Mr. Houston said he still believes that slow and steady will win the race.

"I know all the rumors about the third-party marketing business dying," he said. "We've got a business plan we intend to follow. We think we are well-positioned for the future of this business."

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