NASHVILLE - Frontenac Bank, which opened for business a year and a half ago in a St. Louis suburb, has carved out a niche serving just one customer category - the affluent.

Though many small banks struggle to attract deposits with special CD offers and no-minimum-balance checking accounts, $60 million-asset Frontenac, of Earth City, Mo., boasts a $38,000 account average.

"We don't have a lot of customers, but we have very high average balances," said Rob Roberson, chief financial officer.

Of course, not all banks can expect to draw such a clientele. But most community banks will benefit by catering to a higher caliber of customer, bankers and other industry observers told the 200-plus attendees at the Illinois Bankers Association's 109th annual conference here this week.

Studies have found that the best 10% of a bank's customers account for nearly all its profits, and that the worst ones drain earnings, said Alex Sheshunoff, president of Sheshunoff Management Services Inc. in Austin, Tex.

When First National Bank of Waverly, Iowa, spotted trouble on the agricultural horizon four years ago, it took action to prevent its worst customers from dragging it down. First National, which has about a third of its portfolio in agricultural loans, sorted its farm borrowers into strong and weak players and then priced the weaker ones out of the bank.

The result: The agriculture division is First National's most profitable unit, even though the farm economy is in the midst of a three-year downturn.

"We wanted customers that we thought farmed in a fashion that would keep them in business long-term," said Jeff Plagge, president and chief executive officer of the $135 million-asset bank. "We had some young customers with lousy balance sheets that we identified as survivors. We also had some older ones that had good balance sheets that were not going to make the changes needed to survive."

Sometimes banks have little choice but to try new markets.

About a decade ago Greene County Bank in Greeneville, Tenn., worried it would "run out of steam" because of its community's chronic slow growth and high unemployment, said Stan Puckett, president and CEO.

"We wanted to do a 15% to 20% return on investment," he said. "That wasn't possible in the community we were operating in."

So the bank, which had assets of $150 million at the time, built 12 branches in faster-growing nearby cities such as Knoxville and Johnson City. It also started a consumer finance arm, a mortgage company, a title insurance subsidiary, and a trust business. Now Greene County has $736 million of assets.

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