Robert A. Sullivan and John S. Szuch enjoy breaking the rules and beating the averages.

While many bankers spent the last few years scrambling for survival or changing careers, in August 1989 this pair of midwesterners raised $13.3 million to open a bank. To hear them tell it, the creation of Capital Holdings Inc. was a move they will never regret.

Assets at Capital Bank, the main bank subsidiary of their Toledo, Ohio-based company, swelled from $45 million at the end of 1989 to $215 million at the end of August.

Loans, 60% of which are for business purposes and 33% for mortgages, grew from $15 million at the end of 1989 to $127 million today.

Adhered to Original Plan

More important, they say, Capital Bank has no loans on nonaccrual status, and its loan-loss reserve stands at a relatively strong 1.6% of total loans.

Mr. Sullivan and Mr. Szuch, who won their banking spurs at Trustcorp Bank in Toledo, attributed their success to niche marketing.

"We started with a large enough capital investment, and we have adhered to our original narrow focus -- serving the small business and high net-worth customer" Mr. Sullivan said.

The company lost $250,000 in 1989, its start-up year, but rebounded with profits of $206,000 in 1990 and $909,000 in 1991. Through the first eight months of this year, the bank had $1.7 million of pretax profits.

"Our referral business is just phenomenal," said Mr. Sullivan, the company's president. He said the bank has 600 small-business accounts.

Learning from Experience

Mr. Sullivan, 38, and Mr. Szuch, 44, said their strategy derives from their experiences at Trustcorp.

"As the bank got larger, I noticed we were more involved with administration and less with the customer," Mr. Sullivan said. "The bank as a whole was getting more involved in ancillary products, such as discount brokerage, financial planning, and travel services."

Adds Mr. Szuch, the bank's chairman: "The doctor with $300,000 on deposit sometimes would need identification at the teller window."

The two spied opportunity in serving professional and businesses with revenues below $30 million.

Connection

"We don't offer international finance or trust services," says Mr. Sullivan. "We just concentrate on gathering deposits and making loans."

The executives say their large start-up nut -- the $13.3 million raised in a private placement was the largest capital-raising effort for a new bank in Ohio -- helped them gather an unusually experience staff of computer experts and bankers. Today, they have 37 full-time employees.

Capital Bank sees Wall Street as its main competition.

"We are looking for the doctor making $400,000 a year who has a [cash management] account with a big brokerage firm," Mr. Szuch said. "Those people do business by mail."

Personal Attention

To get their attention, Capital Bank has couriers pick up deposits daily. About 160 customers use the service, the executives say.

Loan officers with laptop computers also meet most customers at their offices. Mr. Sullivan estimates that 65% to 70% of the bank's accounts were opened long distance. He recalls delivering loan documents to one doctor who was "in his scrub clothes and ready to go into surgery."

Ms. Adkins is a freelance business reporter based in Chicago.

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