For 11 years, Magnolia Federal Bank for Savings, based in Hattiesburg, Miss., used a mainframe-based branch system.

But the $1.2 billion-asset thrift, convinced that PC-based systems could improve efficiency and reduce costs, is moving to a client/server computer environment in its retail offices.

Magnolia is completing negotiations with Olivetti North America, Spokane, Wash., to buy a branch automation system for its 65 offices in Mississippi and southwestern Alabama.

The new system, which should be up and running by early 1996, is expected to reduce the thrift's reliance on paper forms and to streamline the process of opening accounts and making loans, according to Helen Soldinie, vice president and operations manager.

All forms will be stored as digital information on the computers' hard drives. Customers will only have to give personal information to a bank employee when they open their first account.

After that, the new system will automatically transfer the client's information to the appropriate application. The proper forms are laser printed from computer memory, already filled out.

Executives of the thrift said the elimination of paperwork is one of the most attractive features of the new system.

It will let the thrift use laser-printer-produced documents instead of "going through 50 documents and looking in bins," in Ms. Soldinie's words.

But the technology, which is expected to cost the thrift about $3.5 million, will do more than save paperwork.

The branch computers will be tied in to Deluxe Corp. so that checks can be ordered at the stroke of a key, instead of requiring a mailed application form or a phone call.

In addition, the thrift hopes to foil check fraud through an electronic link with Check System Inc., which maintains files on account holders who have a history of bouncing checks.

The computer system is expected to provide real time data on the services a customer is currently using, which paves the way for cross- selling. Magnolia plans to base a sales incentive program on the system.

The system is based on Olivetti's Mosaic OA software, which runs on workstations and servers equipped with Microsoft's Windows NT operating system.

Though the system is client/server-based, Magnolia's network will tie in to its in-house Unisys mainframe, which will track balance information.

Though Magnolia is essentially a checking-account institution, Mosaic OA permits custom installations that allow banks to track almost any financial service, including mutual funds and annuities, according to Leonard Selvaggio, a spokesman for Olivetti.

Mosaic OA uses an open systems approach, based on standard operating systems such as Unix and Windows NT.

In addition, Olivetti has been testing the software with Windows 95, the Microsoft operating system released last month. A Windows 95 version of Mosaic OA should be available within 90 days of the Aug. 24 release date, according to Olivetti.

All of this is aimed at ensuring that a bank's computers are compatible with a range of standard software packages for word processing and spreadsheets. That way, workstation PCs can do more than banking transactions.

Olivetti, which can provide the PCs at market value or install the software and set up the network on another manufacturer's PCs, customizes Mosaic OA to handle the transactions required at a particular bank.

In the case of Magnolia, this will include certificates of deposit, deposits, withdrawals, check ordering, and other basic retail transactions. Olivetti offers a separate kiosk that can be used to buy equities.

Olivetti says it has invested $20 million in research in 1994, most of it to develop Mosaic OA.

To set up the system, Olivetti charges about $3,250 per site license, plus customizing fees and labor, which are set according to contracts with individual banks.

Magnolia will use Pentium-based servers and workstations with '486' processors. Teller stations will be equipped with nine-inch color monitors, and platform stations will get 14-inch color monitors.

Olivetti can also supply and integrate receipt printers, passbook printers, and other banking peripherals. Other Olivetti clients include Standard Federal Bank, Troy, Mich., and Citibank in New York, according to Mr. Selvaggio.

"Branch automation has been a hot topic in back-office operations for the past six years," said John L. Hall, a spokesman for the American Bankers Association. "Originally, only the large banks could make the technological investments in automation."

"Today, the technology has been refined and proven," he said, "and also the cost has gone down dramatically so it's more affordable for community banks."

With the advent of home banking technology and automated teller machines, the role of the branch has changed dramatically, according to a study by the ABA.

To make the most of customers' visits to the branch, many branch automation systems, including Mosaic OA, are aimed at turning branches into sales rather than service centers.

The system's ability to track sales and offer incentives is considered an important part of the software, according to Magnolia executives.

In addition, the Olivetti system expedites services once a sale is made, since data can be transferred automatically to check printers or to the production of an ATM card.

Magnolia is not alone in its push to upgrade branch technology. U.S. banks invested $16 billion in technology during 1994, according to the ABA, and branch automation got a large percentage.

"Technology hasn't traditionally been where community banks want to spend money because they pride themselves on a close-to-the-customer approach," said Mr. Hall. "They are high-touch, not high-tech."

Despite PCs' falling prices, Mr. Hall warned, "it can be costly, so it can be an economic risk for the institution." However, he supported the movement toward PC-based branch automation as offering "faster service and more accurate information for the customers."

He also stressed the importance of properly training tellers to use the new products.

A 1995 ABA study and automation survey found that automation is expected to increase the productivity of branch employees.

The study concluded that branch automation is worth the initial cost for the return it garners in customer satisfaction. In addition, most banks contacted in the survey said they view linking PCs in local area networks, as Olivetti's software does, as a way to improve branch operations.

Magnolia Federal is a federally chartered, stock savings bank. Originally chartered in 1934, it is the fifth-largest depository institution headquartered in Mississippi. The thrift has 125,000 checking accounts, Ms. Soldinie estimated.

Mr. Rudick is a freelance writer based in New York.

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