When investment choices start to splinter too heavily, banks all too often take an either-or route: drop the business line altogether or move it in-house, despite the costs.

cbPort, the holding company for Cambridgeport Bank, took a different path, one that a handful of other community banks are taking. It hired its own sales team and took on a new partner, LPL Financial Services, to provide research and execute customer transactions.

The reorganization raised costs, since Port was now paying the salaries of the four customer reps it brought on, but the company spared itself the compliance and licensing expenses it would have incurred had it chosen to offer investment and brokerage on its own.

Under the new arrangement, Port’s sales representatives work with customers to develop a financial plan, using LPL, which has headquarters in Boston and San Diego, for information about investment options running the gamut from annuities to stock trades.

Once the customer’s program is done, Steve Damiani, Port’s vice president for alternative investments, reviews it and then passes it along to LPL, which as the broker-dealer executes the necessary transactions.

Bringing investment sales in-house has had a dramatic impact at Port. In 2001, its first year operating under the new plan, its wealth-management fee income rose 298%, to $816,000. That was 8% of its net income.

“The program is in the black, and it is beginning to develop into a nice service,” Ms. Lundquist said. “It really makes a difference when you have your own people working.”

Mr. Damiani said that, especially with the wealthiest customers, offering investment services “strengthens the relationship if it’s done right. It creates a stronger tie than just offering a checking account of a certificate of deposit.”

Paul Pustorino, national line-of-business leader for depository institutions at the Chicago consulting firm Grant Thornton LLP, said the hybrid setup is the only “sensible” way for community banks to offer investment services.

“If you outsource completely, there’s no ownership on the part of the branch employees, and if you do it in-house, it’s too expensive,” he said. “You need to do a huge volume to support that kind of infrastructure.”

Others using the hybrid model include $728.1 million-asset Mercantile Bank Corp. of Grand Rapids, Mich. Its Mercantile Investment Center, unveiled in December, offers investment and trust services in partnership with Raymond James Financial Services Inc. of St. Petersburg, Fla.

The model is far from universal among community banks. A recent American Bankers Association survey found that fewer than 40% of community banks sold mutual funds or brokerage services. Of those that do, many still outsource investment services. Wilton Bank in Wilton, Conn., for example, refers customers in need of investment and trust services to U.S. Bancorp.

James Norwood, vice president of LPL’s financial institution services division, said 320 financial institutions (banks and credit unions) are using LPL’s services, up from 280 at the end of 2001, making it the company’s fastest-growing component. He would not say how much revenue the financial institutions services division generates.

Jeff Nash, LPL’s assistant vice president for branch development, said it has relationships with other banks that are similar in structure to its arrangement with Port, but most of them are regional or large institutions.

Most community banks “can’t afford the structure Port put in place,” he said.

Still, Laurie Hunsicker, an analyst at Friedman, Billings, Ramsey & Co., called Port’s scheme “typical of a forward-thinking community bank.”

“The point-to-point contact is handled by a bank rep, so the customer doesn’t feel like he’s being outsourced,” Ms. Hunsicker said.

There is nothing flashy about Port, which was founded in 1853. It secures more than 95% of its $823 million-asset loan portfolio with real estate, and when it makes an investment, it tends to keep it. For example, it has held a stake in one of its neighbors, the Cambridge Trust Co., for 60 years.

The way Mr. Pustorino sees it, though, Port’s conservatism is what endears it to its customers and helps explain the success of its wealth management division in one of the most competitive brokerage markets in the country.

“Port is a trusted member of the community,” he said. “If they can invest in a mutual fund or buy a stock through Port, they’ll do it, even if it costs a little more to do it.”

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