D&N Financial Corp. says lending has really taken off since it began awarding free airline miles to its home-equity borrowers.

"I've approved more loans than I have at any other time," said John R. Clemmer, a 35-year banking veteran and president of D&N Bank, Flint, one of the company's 14 community banks in Michigan. "We've got a winner with this."

D&N's program, which rewards customers with up to 12,000 miles for taking out home-equity lines and drawing on them, began this month. Northwest Airlines is operating it-supplying the mileage awards, communicating with customers, and so on.

The program will help D&N Financial boost home-equity originations beyond the $16 million booked last year, said Mary Jo Kristapovich, the company's investors relations chief.

The strategy demonstrates the extent to which lenders are going to make their home-loan programs stand out from stiff competition, industry experts said.

Indeed last year large companies like Great Western Financial Corp. and HomeSide Lending signed on with American Airlines for mortgage programs that grant one mile for every dollar of interest paid.

D&N Financial is one of the first lenders to craft a frequent-flier effort with home-equity loans. And with $1.2 billion of assets, it is among the smallest banking companies, if not the smallest, going this route.

Executives with the Troy, Mich., company decline to discuss the program's cost-but they do say the expense is worth it.

"This is a tough business environment," said Mr. Clemmer, who goes head to head with giants like NBD Bancorp. "We need something special to stand out."

He said the company's 14 bank presidents and advertising agency went with air mileage after considering proposals involving telephone time and gasoline.

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