When Community First National Bank executives counted 100 different stockbrokers within blocks of their offices, they knew they had to come up with a way to stem the flow of money out of the bank and into brokers' coffers.

But the Fargo, N.D.-based bank also knew its cost limitations.

Setting up a proprietary mutual fund family was not an option for the $1.6 billion-asset bank, but establishing a well-managed asset allocation product within its trust division was.

To accomplish this goal, Community First subscribed to Morningstar Inc.'s analytical mutual fund software, on CDROM. The software covers more than 5,000 funds, and is updated monthly.

Community First's investment managers use the information on the Morningstar On-Disc file to create a portfolio of noload mutual funds to fit any client's needs.

This technology enables Community First to compete against both brokerage firms and large regional banks that have set up shop in Fargo - like Norwest Corp. and First Bank System Inc.

"Our officers use On-Disc to select the individual funds depending on past performance, the tenure of the manager, the price/earnings ratios of the stocks held, fees, and other categories," said John Clower, vice president and trust officer. "We come up with a portfolio that has the right blend for the level of risk the customer is willing to take."

To determine that level of risk, Community First asks all potential investment product clients to fill out a very detailed risk assessment survey. Trust officers then use the answers to determine what sorts of funds to search for.

Morningstar On-Disc makes the actual search a matter of just a few keystrokes. For example, if a trust officer wanted to see only no-load funds with previous year returns of more than 20%, Morningstar Compiles the list in seconds.

"We use On-Disc because of its ability to gather and sort information from a very large data base of mutual funds in a very short time," said Mr. Clower. "If we didn't have that ability, we could lose customers."

Instead, Community First continues to add customers to its asset allocation service. It currently boasts about 400 customers, each holding approximately five to seven funds within a portfolio.

The typical customer, said Mr. Clower, is one whose financial situation is changing from that of a net borrower to that of a net saver.

"They're looking toward the future and attempting to accumulate wealth," he said of his asset allocation customers.

The total asset allocation portfolio is about $8.5 million.

Because Community First charges a 1% wrap fee on it, the asset allocation product alone garnered the bank $85,000 in fee income last year.

"This is an unusual strategy for a bank of that size," said Glen Casey, a consultant with Cerulli Associates Inc., Boston. "The wrap concept is usually seen only in the larger banks.

"The fact that they're using only no-load funds has appeal for their customers - who are probably more comfortable with this approach than with a heavy sales approach," he added. "It's very interesting."

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