There's a Michigan bank that has teamed up with one of the nation's biggest telecommunications companies to be a showcase for new technologies such as home banking via computerized telephone.

The bank was also out in front in issuing laptop computers to loan officers and is a charter member of a trade group exploring options for interactive television.

Is the bank First of America? Michigan National? Comerica? NBD?

Try again. The institution accelerating up the on-ramp to the information superhighway is little Fentara Bancorp, a $205 million-asset bank based in Fenton, a small town about 15 miles south of Flint.

"I personally feel very strongly and am very committed to what we are trying to do here," said chief executive Robert L. Cole. 'There is a price to be paid for it. But we feel later on there is going to be a greater price to be paid if we're not up to speed.'"

Fentura, the holding company for the State Bank, which operates seven offices in five eastern Michigan communities, is not only up to speed, it's passing many of its bigger rivals when it comes to technology.

The bank -- a strong performer that posted a return on average assets of 1.32% last year has formed an alliance with Ameritech, the Chicago-based regional Bell company, that will allow customers to bank at home using screen phones.

Fentura is also working with Eon Inc., a technology finn that is promoting interactive television for banking and other applications.

Carolyn M. Spicer, senior vice president for retail banking administration, said, "I think the technology today makes it very viable for a community bank to accomplish some things much quicker than a large bank."

The greater Hint region, which suffered as much economic dislocation as any during the 1980s auto industry slump, is not the first place one would expect to find a bank on the leading edge of technology.

But Mark Hardie, an analyst with the Tower Group in Wellesley, Mass., noted that, increasingly, community banks like Fentura are entering into partnerships with technology and telecommunications firms to provide services to compete against bigger bank and nonbank rivals.

Mr. Hardie said that Fentura is "relatively aggressive when it comes to technology" but added that other forward-thinking community banks are moving in the same direction.

"Small banks can't afford to set up their own remote banking infrastructure;' he said. 'They can't afford the equipment and the personnel."

As a result, he said, more and more banks will turn to alliances like the one between Fentura and Ameritech.

But while Fentara may not be the only bank linking up with major technology compames, its experience does offer some surprises. For example, Fentara executives report that since a service allowing bill payment by telephone became available last year, some 20% of the bank's customers have subscribed. What's more, half of those customers are senior citizens, a fact that flies in the face of most demographic stereotypes.

"I was amazed that our older, forget-me-not people -- senior citizens is really like it," said Mr. Cole. He noted that many of their senior customers spend the winter in Florida, and the service is a convenient alternative to having their mail forwarded.

It was not always thus at Fentara. Bank executives say the bank began increasing it emphasis on technology and sales five years ago.

"If you go back five years, we said we needed to organize the data base and have it be relational by household," said Ms. Spicer.

Fenturn switched its core data processing software to a system from Information Technologies Inc. that runs on Unisys Corp. hardware.

The bank also undertook some reengineering efforts to improve efficiencies. Employees were invited to submit suggestions to improve processes. Hundreds of responses followed, motivated in part by a generous incentive program.

Staff members were rewarded with cash if a demonstrated timesaving suggestion was implemented. "We said that we'll take the yearly total of what they are saving, break it down to one month, and give them $100 an hour for the time they saved, for the equivalent of one month's time," said Ms. Spicer.

She said the bank' s proof operator, who devised a way to cut out a step that involved producing a lot of paper, received about $2,000.

"It was substantiated, it bore out, we did it, she saved the bank money -- and we gave her her share."

Ronald L. Justice, vice president for corporate administration, said the reengineering process "certainly helped create a lot more efficiencies. We redesigned a lot of work flow."

In the last three years, the number of employees at the bank has remained constant while assets have grown by about $20 million.

Still, officials admit, the reengineering efforts were not enough.

"We've had to change our whole staff level, and philosophy," said Mr. Cole.

Mr. Cole said that during 1992 and 1993 -- the years when many of the changes were implemented-- some 40% of the bank's frontline staff was replaced.

Those employees were unable to adapt to the new culture, in which they were expected to focus on selling, he said.

While some employee chose to quit, others had to be let go, he said. The hardest part was laying off workers who were trying hard but could not make the switch, said Mr. Cole.

"Those were some tough, tough times," he admitted.

Further, the bak had some trouble finding new employees with the necessary skill. People inquiring about jobs as branch managers, he said, were wary of accepting the compensation package, which was heavily weighted toward incentives.

Potential managers, according to Mr. Cole, "wanted the cold hard cash. They cannot see through what it really means" to be able supplement their income with incentive pay.

He noted that one branch manager last year made $108,000, or more than three times the income of a typical manager in the region.

So the bank looked to alternative ways to attract new employees. When Fentura opened a new branch in a supermarket four years ago, the newspaper advertisement for branch employees did not mention that the job was at a bank. Rather, it was listed under "sales," and said the job involved "cash handling."

Still, Mr. Cole noted, some employees have risen to the challenge. "If you can get one to three people who love to work the phone, it's dynamite."

Ms. Spicer, for example, attributed the success of the telephone bill-payment service to the efforts of one employee. "She has made that her mission," said Ms. Spicer. "She calls people, tells them about it, and helps them sign up."

She said that nearly half of the customers who pay bills by phone are senior citizens.

Fentura also attempts to educate older customers to use their debit cards by organizing shopping trips. "We take them out just to acclimate them to technology, to get them to use the POS" card, said Mr. Justice.

The new culture also involved the addition of two loan officers --one for real estate lending and another for commercial -- who work almost exclusively on the road. Both work from the bank's supermarket location in Clarkston, a growing suburb north of Detroit.

The branch, which opened four years ago, is the only State Bank office in the area.

"That's why we really wanted to have the mobile banker concept involved. We had the opportunity to go into a supermarket out of our market area, and elected not to because we didn't have a presence there," said Mr. Cole. "And we felt it would be a disadvantage to the store owner as well as to us. But once we got this mobile banker concept, we said, let's give it a whirl."

Ms. Spicer said that "It has proved in a new market to be an effective strategy to become known for something," adding that "it takes a little seeding" to reap the benefits.

"We certainly don't have all the answers and we are going to make mistakes, but at least we are on the track," said Mr. Cole.

Mr. Spicer added that "I think you'll see 1995 is the year we'll be able to see the benefit" of the culturai and technological changes.

Indeed, the bank's experience with these technologies and the refocusing on sales gave managers some confidence to pursue other efforts.

"Our agreement with Ameritech, that blew my mind that they would be interested in a bank our size," said Mr. Cole.

David Petro, market manager for Ameritech's Enhanced Business Services unit, said, "I have to give them the credit for finding us.

"They have a U:emendous marketing program. They have a very good vision," he said. "Even though they are small, they are an industry leader because of their innovation."

Fentura has the distinction of being Ameritech's "showcase" bank. The bank

will be testing the screen phones later this year. In addition, Fentura wants to offer stored-value, or prepaid, telephone cards that can be marketed through schools so that children can use them to buy lunches or books. The companies also expect to test video banking at the Clarkston branch in 1994. The setup, similar to videoconferencing, will allow customers to interact with bank representatives.

Fentura is also a charter member of the Interactive Television Association, a trade group formed last year.

Ms. Spicer said the bank wants to pursue delivery channels whether it is by phone, computer, or television -- through either cable or satellite.

"I think there are going to be three main delivery channels before it's over," she said. "Different applications may become more predominant on different channels. But I don't think there is a point any more to try to figure out which channel is going to win. I think they are all going to win.

"We want to foster our image as a community bank in that we want to sponsor community businesses on the interactive commerce," Ms. Spicer continued. "It would be in the syndication process where we would work with the licensee and develop the syndication, and provide the payment system."

Ms. Spicer foresees being involved with both wireless satellite and cable delivery. The bank has teamed up with Eon to develop those applications.

"So far we have invested a lot of time and research," said Ms. Spicer. "We haven't invested much in terms of capital. I guess the major thing that we had proprietary need to do... was get the software. We worked very closely with ITI, and that is done ."

Fentura executives also say they are confident that the change to new delivery channels fits in with the community bank mission to provide superior customer service.

"My definition of a community bank is that a customer can walk in here and talk to any officer, including myself, at any time," said Mr. Cole.

The bank also has deep roots in Fenton, tracing its origins to 1898.

Mr. Cole himself has been chief executive s'mce 1987 and has been a banker in Fenton for 29 years.

He relishes the community bank approach and Fentura runs a number of programs with homey, small-town touches. Each week, for example, the bank enlists senior citizens to teach youngsters about banking in the local school. Children are allowed to open low-balance accounts without fees that would deplete the savings.

Mr. Cole recalled that when the bank began to lower the interest rates on savings accounts, it spared the students. "All of a sudden, we started to see this inflow of money coming into the children's accounts," he said, laughing. "We had some rather large deposits."

Mr. Cole also sounds like a community banker: "The whole bank is not driven by the bottom line. Granted, every business is in business to make a profit. We certainly are too, and we want to take care of our shareholders. But we are not going to do so at the expense of our customer base," he said.

"We let our interest margin get a little tighter here in the last half of 1993 and, starting in 1994, we didn't lower our passbook [rates] as much as we should have," Mr. Cole continued. "But we still had a good return and we still will in 1994."

Last year, the bank posted a strong return on assets of 1.32%, up slightly from 1.31 .% a year earlier.

Mr. Cole also said that Fentura will be around for a long time. "We could probably make a 1.5 ROA and just mn this bank, and then put it up for sale."

But that's not on the drawing board, he said. "Someone asked me what I see in banking 15 years from now. I said, 'retirement.'"

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