SAN FRANCISCO -- Despite ranking 14th among credit card lenders and first in profitability, First Deposit Corp. doesn't have the name recognition of Citicorp or Chase, AT&T Universal, or Household International.

That's no problem for First Deposit and its chief executive officer, Shailesh J. Mehta. That's their personality.

But it's hard to hide with numbers like they are producing, and Mr. Mehta has begun raising his public profile. He recently gained recognition from his peers - many of whom didn't know him before - by becoming active on the American Bankers Association's bank card committee.

Insurance Marketing Role

And he gained their admiration early this years when he stared down consumer advocates who criticized the way First Deposit priced one of its products.

Capital Holding Corp., the Louisville-based insurance and financial services company that owns First Deposit, has rewarded Mr. Mehta with an additional responsibility: the direct response group, a powerful force in insurance marketing where he will look for synergies with what he has accomplished at First Deposit.

"This is one of the very smartest guys in our business," Alex W. Hart, president of MasterCard International, said in a recent interview. "He is doing some very interesting things."

H. Robert Heller, the recently departed president of Visa U.S.A., used almost exactly the same words in a separate conversation about card industry innovators.

Mr. Mehta, 44, who knows neither man well and simply does not seek outside attention or accolades, conceded recently that a more public presence had become "a necessity."

He is, like it or not, an industry leader.

Happy as an Outsider

San Francisco-based First Deposit has issued more than 1.5 million cards, has almost $4 billion of loans in the portfolio, and makes money hand over fist. It plays the market segmentation game differently, and arguably better, than other companies which accounts for Mr. Mehta's comfort outside the limelight.

He would just as soon not be considered a part of the industry elite, if that means joining a club whose members he sees as moving too much it lockstep.

"Mass marketing is passe, and people are getting very smart about segmentation," Mr. Mehta said. "This will-become a baseline strategy to survive."

Scrambling for Niches

On that point he would get no arguments from competitors, who likewise see their future in an ever-increasing search for niches, or micromarketing to the nth degree.

But in his view, the competitors rely too heavily on "commodity products" from companies like Fair Isaac and MDS, providers of sophisticated information on consumer credit markets.

"If you subcontract everything, you lower the barriers to entry by competitors," Mr. Mehta said. Therefore, First Deposit has an in-house Fair Isaac-type operation to identify its targets and develop products accordingly, hopefully at least a step ahead of others."

Knowledge Is Power

"Where does a bank add value? In its knowledge of credit," Mr. Mehta said. "Fair Isaac is valuable to those who have not developed a high level of internal competency in that area."

While Mr. Mehta does subscribe to reports from credit bureaus like TRW and Trans Union, he wanted the marketing data base to be one of First Deposit's core strengths alongside product development, direct mail, telemarketing, and risk management. One can't argue with the results.

The company's credit card issuer, First Deposit National Bank of Tilton, N.H., earned a stratospheric 50.70% on equity last year, a category in which it has led the industry every year since the late 1980s.

The bank also had a 1992 return on assets of 4.4%. Its worst in the last four calendar years was 2.36% in 1990, the only year it failed to top the chart of banks with $1 billion to $5 billion in assets. First National Bank of Anchorage, Alaska, was 5 basis points better.

"Our record has been to improve earnings and returns every year," said Mr. Mehta. That happened even in the 1991-92 recession that was hard on some other card issuers.

First Deposit is a stick-to-the-knitting consumer lender, especially in cards and home quality.

"We want to be the lead lender to the most desirable segments," Mr. Mehta said. "We don't care if some others are picked up by the competition."

He boasted that First Deposit started doing "behavioral segmentation" from 1985 to 1987. The sophisticated market models, Mr. Mehta said, have resulted in "one of the highest balances per customer of anybody in the business, and also one of the highest ROAs in the business."

Beyond Demographics

The key to identifying and serving markets, he explained, is "looking at what the consumers buy, not what they say. You have to understand that the variable is not demographics."

This accounts for the fact that consumers say they are cutting back on debt, yet continue to borrow, to the great delight of credit card lenders nationwide. It accounts for First Deposit's ability to profit by targeting untapped "behavioral" segments for cards - only profit-generating borrowers need apply - and by accommodating those who want to consolidate their debts in relatively low-rate cards or home equity loans.

"Segments that meet our hurdle rate, we go after," Mr. Mehta said. "Some segments return up to 50% on capital, others 22%."

The financial beneficiary of all this is Capital Holding, which owns several insurance and investment companies along with First Deposit Corp.

Big Contributor

In the first six months this year, First Deposit increased earnings by 24%, to $56.5 million. All of Capital Holding had operating earnings of $172.1 million, up 13%, on revenue of $1.45 billion.

Mr. Mehta, once an operations executive at the defunct Ameritrust Corp. in Cleveland, joined First Deposit in 1986 and became CEO in 1988.

His banking group has 1,200 employees and is "in a growth mode." The profitability notwithstanding, Mr. Mehta seems most proud of his ability to expand the corporate family, which in turn has engendered a lot of employee loyalty.

"Since 1986, First Deposit has created almost one job per business day," Mr. Mehta said. "You hear more these days about restructuring and cost management, but ultimately we have to create growth, and that in turn creates jobs. In the next 12 months, I am confident we will add another 200.

"The pressure is on recruitment, not on consultants to downsize. . . Some of our markets require a lot of people to absorb the volume of applications."

Added Duties

And now the pressure is on Mr. Mehta to handle his added responsibilities as executive vice president of Capital Holding, the title he got in August, along with the direct response group post. The group does an international business from a base in Valley Forge, Pa., and has 2,300 employees.

Together, the banking and direct response groups put about one-third of Capital Holding's work force in Mr. Mehta's empire. And he has clearly gained the confidence of Capital Holding chairman, president, and CEO Irving W. Bailey 2d.

"Our banking group has demonstrated an ability to develop and use proprietary data bases to grow rapidly in a highly competitive and saturated market," Mr. Bailey said in explaining Mr. Mehta's broader responsibilities.

"Short product development and testing cycles have also been strengths.

"The direct response group has been focused on changing from a mass-marketing business to a target-marketing business. By sharing and transferring specific skills between these groups, we see an opportunity to accelerate the continued growth and profitability of the corporation," Mr. Bailey added.

Bought from Parker Pen

Mr. Bailey was executive vice president of Capital Holding in 1985 when, seeking a consumer credit and deposit vehicle, it acquired First Deposit. The bank was previously owned by Parker Pen Corp., but failed to fulfill that company's financial services ambitions.

Mr. Mehta said that before his change of status, he had been discussing with Mr. Bailey and others at Capital Holding ways that the banking group might share its "cutting-edge ideas" and "leverage competencies" with the insurance direct response group.

He also said it might have happened sooner, but change was happening too fast at First Deposit, and he had to make sure management was strong enough that he could devote much of his time to the direct marketing area.

First Deposit has also entered the market for secured cards, which appeal to people with no credit history.

And last week, First Deposit announced a test early next year of a cobranded MasterCard with Fingerhut Corp., which has a long history in direct marketing.

The partnership makes strategic sense, since Fingerhut has launched a project to create "the largest and most sophisticated proprietary consumer data base marketing system in the world." [TABULAR DATA OMITTED]

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