Signs are cropping up that the investment products gold rush is coming to an end at community banks.

Many small banks are dismantling mutual fund and annuity sales programs they scurried to build just a year or two ago. While other small banks are launching sales efforts, the retreats don't bode well for small banks' presence in the business.

What's going wrong?

James A. Robinson, president of Riverside (Calif.) National Bank, puts it bluntly: "We didn't even come close to breaking even."

Mr. Robinson said his $205 million-asset bank grossly overestimated its potential when it launched a sales program in December 1993.

Instead of reaping the bounty of a projected $6 million of sales, it drummed up just $1 million. In January, the bank scrapped the program. Mr. Robinson estimates that Riverside lost about $100,000 in start-up costs.

Riverside, like other small banks, has run smack into the conundrum of selling retail investments: While many banks see such sales as strategically important, the market is crowded and extremely tough for small players to crack.

While big banks, so far, are riding through the tough times, many small bankers are throwing in the towel.

"Some banks just don't have a need for these products," said Eli Neusner, a consultant with Cerulli Associates, Boston.

Take California's City Commerce Bank. Even though the $105 million-asset institution operates in Santa Barbara, one of the state's most affluent communities, it scrapped an investment sales program in December, less than a year after launching it.

"Santa Barbara is so oversaturated that when we approached our customers, we found they were already being well served by local brokers," said City Commerce president Terry H. Downard.

The bank's "good image" wasn't enough to lure customers away from these brokers, Mr. Downard added. The result: City Commerce drew only $11,000 in net commissions - just enough revenue to break even.

Difficulty selling isn't the only problem. The retail brokerage business is riddled with litigation. And, as high-profile suits last year against NationsBank Corp. and Great Western Financial Corp. proved, banks are being drawn into court along with nonbank brokerage firms.

Many small bankers worry that the litigation game is one they can't win. And with some mutual funds reporting spectacular losses, some community bankers are concluding that the wisest course is to steer as far away from selling investments as they can.

"Even if you disclose everything right, for a community bank you can still end up on the wrong end," said William W. Phillip, president of Columbia State Bank, Tacoma, Wash.

While the $300 million-asset bank didn't lose any customers because of bad investments, Mr. Phillip said, he didn't want to take any chances. So he shut down the bank's investment sales program last summer after only nine months.

Mr. Phillip acknowledged that another reason for the retreat was that sales were slow. He blamed an unwillingness to "push products" on customers.

"In order to get the volume (of sales) to make this profitable, we would have had to put more pressure on our customers than we were willing" to, Mr. Phillip said.

Michael Corrigan, managing partner at Protective Financial and Insurance Services, Santa Barbara, Calif., said it's rare for sales reps at banks to "browbeat customers" into buying investment products.

But, he added, banks need aggressive marketing campaigns to compete in a crowded market.

"Many bankers believe that they don't have to ask customers for their business," he said. "But in this business you have to be willing to hustle."

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