Until about a year ago First National Bank of Portland, Ind., could've been called "the bank that time forgot."

Since its founding in 1904, First National was run like any other Midwestern, small-town, family-owned bank - nothing jazzy, just getting the job done.

Unlike bigger competitors that plunked their offices next to fast-food restaurants on bustling Meridian Street near the state road bypass, First National kept to its roots on the town's sleepy Main Street. It grew slowly, roughly matching the rate of inflation in a good year.

But you wouldn't recognize it today, nor what its senior executives are talking about - everything from funding low-income housing projects to Claymation. Yes, Claymation.

What First National has done in the past year is to invent a future for itself and, in the process, perhaps it invented one for its hometown on the eastern edge of Indiana. The First National of the future is one that will surely be the creation of Barry Hudson, the 52-year-old chief executive and owner, but also that of a small army of advertising executives from Indianapolis commanded by an adventuresome former college professor and self-styled business philosopher, Robert L. Montgomery.

"When he came here, it was like when the student is ready," Mr. Hudson said of Mr. Montgomery, head of an Indianapolis marketing firm whose work is most associated with Fortune 500 companies, not backwater banks. "When the student is ready to be taught, then you find the teacher."

What Mr. Hudson learned is that rural banks - with their interstate competitors and cost structures that make them look like harvest hogs compared with the big boys - can find saviors in unlikely places, even in an advertising guru who preached little about advertising and lots about a bank's role in rural America.

Spurred on by Mr. Montgomery, Mr. Hudson and the staff at $90 million- asset First National are growing the bank fast by historical standards. Portland, spurred on by First National, is in the midst of economic expansion for the first time since the 1950s.

A economic development tax approved in the late '80s is paying off. A new taco shell plant is in town, Wal-Mart just moved in (First National installed an ATM there), and First National is financing housing developments for low- and middle-income families. Businesses downtown are expanding, as is First National. Instead of moving out to Meridian, it's adding to its space on Main Street.

The bank has a plan to grow to $100 million in assets by the end of the year. The bank's 46 employees signed a mission statement that is tacked on to Mr. Hudson's office wall.

And on such little victories, small-town banking succeeds.

"Five years ago, I don't know that we even thought about the future," Mr. Hudson said. "Now, we're thinking past 2004."

First National was never a problem bank, it just never grew a whole lot. It shrank in 1992, but grew an average of 5% a year since then. In 1995, it had the first growth in ROA and ROE in three years. Its loan-to-deposit ratio is about 75% for the first time ever. Not bad for a town whose per capita personal income dropped 20% in the 1980s.

"We're interested in doing deals now," Mr. Hudson said.

"The county's economy was well back on track before the bank's consulting firm came to town," said Jack Ronald, publisher of the Portland Commercial-Review, referring to Mr. Montgomery's firm. "But their advice to the bank has been excellent. Suddenly, everybody knows First National is the local bank. And First National has begun to focus intently on their own backyard. In a town like this, if the locally owned bank is a dinosaur, it's a problem."

Mr. Montgomery himself is sparse when he describes his work for First National, which is odd, because every one at First National is talking about him all the time, according to Mr. Hudson.

"I got them thinking about the future," Mr. Montgomery said, sounding like one of his books. "Businesses that fail don't just go out of business, they run out of possibilities."

He said that while he was paid by First National, he considered himself to be working for Portland.

"Portland's fortunes are dependent on the bank," he said. "And Portland is more fortunate than a lot of rural communities - which have suffered greatly - in that it has a local bank."

The first thing was to get the bank's staff - from the tellers on up - worked up about generating ideas. They read Mr. Montgomery's book, The Future Machine, a kind of self-help manual for small businesses. They listened to his tapes. Brain-storming sessions were agonized over and every weird idea was duly recorded, including one that involved making a play for Hollywood based on the virtues of Jay County's clay.

"The thinking went: 'We produce a lot of clay, we're like a clay city, so maybe claymation would want to come here.' A lot of it was crazy stuff."

But some of it wasn't so crazy, such as need for low- and moderate- income housing and the kind of infrastructure and economic development that come so hard to strapped rural communities. The bank has already financed two such projects, and seeks to become the clearing house for others seeking information on development projects that could use federal and state money.

"This county doesn't have much in the way of resources to go after these projects," Mr. Hudson said. "We're the local bank. If we don't do it, there are no other institutions that could."

Mr. Hudson is confident his bank will grow and stay independent. Why? Because he owns the place, and he likes it that way.

"I don't think we'll get bought. I own most of the stock, and no one would ever hire me. So, I guess've got to own it until I die."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.