EL DORADO, Kan. - The main drag of this windswept oil town would be any community banker's nightmare: A two-block stretch hosts branches of First Bank System Inc., Fourth Financial Corp., and Commerce Bancshares.

But for Richard Pottorff, chief executive of Mid Continent Federal Savings Bank, the recent spate of acquisitions that has left El Dorado looking like some big-city banking center is merely the latest in a series of competitive and regulatory challenges to be overcome.

During the past decade Mr. Pottorff's $232 million-asset thrift has grown, shrunk, refocused and reshaped itself to meet the demands of changing times.

"We have found that we have to do our own thing," says Mr. Pottorff. "We have set our strategies based on what we want to do and where we want to go, and we have been fairly successful."

In the process, Mid Continent has taken on the profile of a much larger institution, heading up a correspondent network that funnels mortgages its way for servicing and resale. It also recently converted itself to a stock company.

"They were one of those borderline companies that could have shut down a few years ago, and no one would have known the difference," says Wayne Bopp, a thrift analyst at Stifel, Nicolaus & Co. "Now they are one of the strongest thrifts we follow."

This evolution of 70-year-old Mid Continent began in 1987, when it acquired Reserve Savings, a failed thrift in nearby Wichita.

The Reserve purchase brought Mid Continent's assets to $270 million and came with regulators' assurances and supervisory goodwill. Mr. Pottorff was upbeat about his thrift's prospects until two years later, when the Financial Institutions Reform, Recovery, and Enforcement Act wiped out most of that goodwill.

"To survive, we had to shrink the balance sheet," Mr. Pottorff recalls. "But at the same time, we needed sufficient income to increase capital."

Mid Continent opted to go off balance sheet for the income. It solicited smalltown banks and mortgage brokers across Kansas, building a network of mortgage banking correspondents and a loan servicing operation to match.

The banks it targeted typically originate a handful of mortgages per month. Such loans are important to those banks' roles as community bankers. But they issue too few to make direct sales into the secondary markets feasible and are too small for bigger correspondent bankers.

Today, Mid Continent's 42 correspondents originate more than $6 million of mortgages a month. The thrift underwrites and buys the loans, packages and sells the fixed-rates, and keeps the adjustable-rates in its portfolio and the servicing rights on its books.

"A lot of these banks really don't want to make FHA or VA loans because they don't want to keep them on their books, ... and they don't have the expertise in-house to put together other products," Mr. Pottorff said.

"We send folks out and offer them services and products they can offer to their customers," he added. "As far as the consumer is concerned, they are dealing with that bank."

The strategy has paid off for Mid Continent, which today boasts a loan servicing portfolio of about $1 billion and an ARM portfolio of about $170 million.

Key performance ratios have rebounded, as well. Return on average assets in 1994 was 1.14%, up from a mere 0.07% after the goodwill problem in 1990. Return on average equity last year was 10.54%, compared with 1.81% four years earlier.

As recently as last year, the thrift still found itself capital-poor. Its asset total had declined to $160 million, and the big banks had begun steamrolling into town. Then a mutual company, Mid Continent decided to go public to get the money it needed to compete. In June, the thrift raised nearly $22 million in an initial public offering.

The fresh capital has enabled Mid Continent to keep an increasing share of the coveted ARMs that come its way.

The money also has allowed Mid Continent to beef up its retail and deposit bases. It has started a "totally free checking" program and bank- by-phone and debit card services.

In less than 18 months, the number of Mid Continent checking customers has jumped fourfold, to 13,000. The thrift has six branches, including two in Wichita, and plans to open another there this year. Deposits at the end of 1994 totaled $154.8 million.

The market has responded. Mid Continent's initial public offering price was $10 per share; today, the stock price is about $13.

Perhaps the biggest problem facing Mid Continent is its market.

"It's not like people are beating down the doors to get into southeast Kansas," says Mr. Bopp, the thrift analyst. He quickly added, however, that the numbers alone justify a stock price in the $18 range by yearend.

Meanwhile, Mr. Pottorff has a firm stand when talk turns to a possible acquisition of Mid Continent - which has a price-to-book ratio of only 80%: "If somebody comes along and offers $100 a share, we'll get serious with them," he says. "But we're definitely not looking to sell."

Mr. Engen is a freelance writer based in Minneapolis.

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