Though community banks have traditionally benefited from working a niche in trust administration shunned by superregional banks-accounts less than $1 million-they too are getting finicky.

The touchstone of profitability in the trust business for community banks is to have at least $70 million of discretionary assets under management, said Mark Stenson, president of Stenson Management Consulting Inc., Marshall, Minn.

To reach that mark, trust departments in community banks have started raising the minimum initial investment to pare down the number of small accounts.

Speaking at a seminar hosted by the Independent Bankers Association of America last week in Bloomington, Minn., Mr. Stenson said managers of community bank trust departments have to focus on accounts larger than $300,000.

"I agree. We've done some pro forma and all of our numbers come to that," said Steven M. Fisher, president of Community Trust Services Co., Greenwood, S.C.

"I don't see us building this department on $60,000 accounts. That would not be profitable," he added.

Community Trust opened its doors last Wednesday, and Mr. Fisher, a former NationsBank trust officer, is shooting for $90 million of trust assets under management in three years.

The company will serve five small-town banks in South Carolina owned by $200 million-asset Community Capital Corp.

Mr. Fisher participated in the IBAA seminar, which drew about 30 community bankers. While most agreed that they cannot snap up every prospect just to get more business, some said that in practice it is hard not to.

"The last three years our department has grown fairly rapidly," said Debbie Sudnall, trust officer of Farmers Trust and Savings Bank, Spencer, Iowa, which has $12 million of assets under management.

But "our basic problem is that we have accepted almost everything," she added. "The trouble is, if you are relying on attorneys for referrals and you say, 'We don't want this,' pretty soon you won't get referrals."

To be sure, turning away customers has always gone against the grain in community banks.

"It would be wonderful to focus in on a certain dollar amount and greater," said Chris Lamoureux, First Western Bank and Trust, Minot, N.D.

"The problem is you'll have long-term customers in another part of your bank, and they are going to have less than $300,000," he said.

To limit the number of small accounts, First Western, which has $330 million of assets under administration, including $80 million of discretionary personal trust assets, is planning to raise the base of its annual trust fee above $250.

Mr. Lamoureux said the trust department was established 20 years ago as a service for current customers, and its objective was basically to break even.

But "we have to compete and become profitable," he said, "so our pricing strategy is changing."

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