Two for the money: a micromanaging tandem of chief executives is taking non-performing assets to new lows.

Customers of 1st Business Bank are not bashful about telling why they love the bank and Robert Kummer Jr., its chief executive officer, and Joseph Sanford, its president.

"It's six o'clock on a Friday night and I get a call from Bob in his office -- I was in mine," says Peter Mullin, president and chief executive of Management & Compensation Group of Los Angeles Inc. "First, it's highly unusual for a chief executive of a bank to be in the office at that hour. Bob says, 'Peter, I've been looking at your deposits and I don't know if you know it, but you made a significant deposit that isn't going to earn interest.'"

Kummer went ahead after hours to set up a repurchase agreement, an instrument which allowed Mullin's deposit to earn money over the weekend. "It's the most incredible example of service I've seen by a bank. There's not a bank in the country that would have done that."

A mid-sized company pretty well knows it's made it when 1st Business Bank Chairman Kummer and President Sanford agree to be their bankers.

The downtown Los Angeles-based bank is known as the premier bank for such middle-market companies and one which views industry giants like Security Pacific and Wells Fargo, and not other smaller middle-market specialists, as its primary competition.

Kummer and Sanford examine the financials, strategies and business plans of potential new customers with a fine-tooth comb before taking them on as new business.

Once aboard, however, customers receive a level of service and security that analysts and customers gush over. "They are one of the best business banks -- if not the best business bank in the state," says Kathleen Smythe de Urquieta, a corporate finance executive at Montgomery Securities in San Francisco. "They are very aware of what's going on in the economy. They are very thoughtful people and they have run the bank very conservatively. I can't think of any weaknesses."

While most other banks are sucking in their guts and riding increases in non-performing assets, $609 million (assets) 1st Business is increasing its net income each quarter while maintaining a level of non-performing assets so low it makes analysts' jaws drop.

The key, they say, is knowing their customers, knowing their bank and -- perhaps most importantly -- knowing each other.

"We function as true co-chief executive officers," says Sanford. "We've worked so closely for so many years and we know each other's thinking so well that we can make any decision if the other isn't there."

Any decision. They say that at their $609 million (assets) bank there is no division of labor between them.

"We are both on the same wavelength," says Sanford. "The various departments report to both of us and we share all administrative responsibilities."

The difference in titles, they joke, was a result of a coin toss.

That is not to say the pair are twins. Kummer speaks in the soft tones of an undertaker and projects a modest and dignified, though friendly, demeanor. Sanford comes off more easy-going and boisterous, an impression furthered by his boyish looks.

Yet, when both men left banking giant Union Bank a decade ago to start their own bank, they shared a common vision of their bank's niche which has not changed: lending to healthy, established middle-market companies with revenues between $5 million and $100 million.

The two insist, however, that the bank's true core is not their dynamic duo act, but rather a fearsome foursome which also includes executive vice presidents W. Peter Bohn, who's in charge of operations administration, and Thomas Savage, in charge of loan administration, themselves equal in power and also alumni of Union Bank. The four are known to their employees as "the partners."

The team, its plan and the execution of that plan have yielded such good results for the bank that Forbes magazine earlier this year termed the bank "possibly the best unknown bank in the country."

But probably the highest compliment was paid to the men and the bank they built when financial scion John Anderson -- as in the John E. Anderson Graduate School of Management of UCLA -- bought the bank for $86 million in 1989. That represented three times book value and the highest price relative to assets ever paid for a California bank.

"We paid a dear price," said Anderson. "But what they say is that long after the price is forgotten, the quality remains. All four (of them) are happy campers now. We've entered into employment contracts for 10 years with a strong participation in the profits."

Anderson says that Kummer is particularly strong in written communications and marketing," while Sanford "is comfortable in difficult situations."

And the state's banking environment is nothing if not difficult, with many smaller banks merging and focusing on the same middle-market customers and newly merging superbanks that promise large economies of scale.

Asked whether the juggernaut of a combined Security Pacific Corp. and Bank-America Corp. will crimp the pair's style, Kummer just smiles.

"That merger is the best thing that ever happened to us," he says. "It will impact on (the quality of service for) their customers and workers looking for jobs."

And quality employees are a key. Walking amid the elegant splendor of their art deco-styled, landmark headquarters in downtown L.A.'s One Bunker Hill Building -- once the headquarters of Southern California Edison -- Kummer points out the employees he has wooed from Bank of America, Security Pacific, Wells Fargo and smaller top-notch middle-market lenders.

"We think we have the greatest team of young bankers in the country," he says. "They were all trained at major banks for three to five years and we train them in our culture for another year or two."

Kummer also delights in showing a visitor the bank's different operations, such as an investment department and international department -- services you just don't find at most banks the size of 1st Business.

At a time when many banks are "out-servicing" -- that is, contracting with out-siders for key services to save money -- "We're in-serving," says Kummer. "We're concerned about the quality of service."

The objective is to equal the range of services that big banks provide to middle-market customers while exceeding the level of service.

While both men worked together for 19 years at Union Bank, they were not friends, but friendly rivals. In their last jobs at the bank, Kummer was a senior vice president in charge of the Los Angeles headquarters of Union, while Sanford was regional vice president for the downtown region of the bank.

"We were at the crossroads, in our early 40s," says Kummer. "It was either start our own bank or spend the rest of our careers there -- we were about to be promoted into upper management."

The pair had little desire to do so after Union chief executive and mentor Harry Volk announced he would leave the bank. Also, the bank was sold to a British-based banking company, Standard Charter.

What followed was nine challenging months of organizing 1st Business. "We had nine kids between us and no salary for four or five months," says Sanford, adding that the pair worked at two desks in 8-by-10-foot cubicles.

"All we had was what was up here," says Sanford, pointing to his head.

The experience, they say, helps them understand what their customers -- most of whom are entrepreneurs or family-business owners -- are going through.

"Our customers are entrepreneurs who don't like to be pigeonholed," says Kummer. "You have to believe in the American dream. You have to have respect for what small businesses have done for this country. Some bankers just hobnob with Fortune 500 people -- our customers are down in Vernon and the City of Industry."

The pair said they had little difficulty in attracting customers.

"We didn't take the business so much as it followed us. We ran an ad and had $60 million in deposits in our first 60 days," says Kummer.

The men sold $8.5 million of their new company's stock themselves -- not through investment bankers -- and had the offering oversubscribed by $4 million.

The bank reported net earnings of $3.0 million in second quarter 1991, up from $2.9 million a year earlier.

The pair have an aggressive growth plan for the bank, planning to expand it to $1 billion in assets by 1995. The path to that goal is simple, Kummer says.

Every month some 10 to 12 new companies become customers of the bank, usually because they heard good things about the bank's service or because they got tired of dealing with bigger banks that didn't understand their needs.

In addition to its headquarters, the bank has branches in Encino, Torrance and Irvine and plans to open a branch in Century City in early 1992.

Yet, throughout the bank's substantial growth it has maintained exceptional credit quality. Second quarter non-performing assets were 0.02 percent of total assets. Smythe of Montgomery Securities said that the average of non-performers at the blue chip banks she follows is 2.61 percent.

As for what they do with their free time . . . they take work home with them.

"It's our life," says Sanford.

SNAPSHOT

Robert W. Kummer Jr.

Native of: Pittsburgh

Current residence: Glendale

Age: 55

Education: B.A. in economics, Oberlind College; graduate work in business administration at the University of California, Berkeley.

Joseph P. Sanford

Native of: Los Angeles

Current residence: Palos Verdes

Age: 54

Education: B.A. in economics, Loyola University; MBA with a finance specialty at the University of Southern California.