The early results look good, but there's lots of work ahead. That's the word from Joseph L. Boutin, chief executive of Merchants Bancshares in Burlington, Vt. For more than a year, Mr. Boutin has been guiding the $615 million-asset bank through a wrenching restructuring following years of losses brought on by real estate loans that went bad. Merchants' effort, including plans to offer more electronic banking options to customers, was the subject of a Management Strategies cover story in December.

"We certainly turned the corner in the fourth quarter, and we now feel we have sustainable earnings," said Mr. Boutin. "We've got our costs under control, we've got asset quality under control, and there will be continuing improvements there."

While the bank posted profits in the last two quarters after annual losses in 1993, 1994, and 1995, Merchants still must find ways to produce dramatic revenue gains in a slow-growth state. "Everything we've done now has been to launch the ship," he said. "Now we have to launch it and go. We're up against some very formidable competitors."

That means grabbing market share. Toward that end, Merchants has introduced a series of new products, including a checking account with no service charges.

There is no minimum balance on the account but the bank will pay interest on balances over $1,500. The goal is to attract customers from other banks who now frequently move money from checking accounts to savings and money market accounts.

Customers are also required to either directly deposit paychecks or permit the bank to automatically debit a personal loan payment each month.

Merchants has also begun to offer customers electronic banking options, including bill payment by personal computer.

"As more of our customers start using that automated environment - PCs, telephones, ATMs - we're going to start seeing some net reduction in our cost to service them," said Mr. Boutin. "We are anticipating that."

Merchants' goal is a return on assets of 1.50% by the end of the year, but Mr. Boutin concedes "that's going to be a real challenge." But he has even more ambitious targets for 1997. By the end of next year he wants to achieve return on assets of 2.00%. "I can do if it if I drive my costs down and start building the business," he said.

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