American Banker  |  Friday, December 5, 2008

By Robert Barba

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Mariner Kemper was careful when careful was not considered smart.

"For years it wasn't in vogue to have sound operating principles," says the chairman and chief executive of UMB Financial Corp. in Kansas City, Mo. When the market was soaring and rivals were chasing real estate credits, UMB stuck with its strategy "to lend to borrowers we have met … understand the loans we are making, and not make them through intermediaries."

The strategy sounds so easy, but today so many other banking companies are sitting on a pile of weak loans.

"It's basic blocking and tackling, in my opinion, and it has paid off for us," Mr. Kemper said in an interview.

Not only is its loan portfolio still clean, but under Mr. Kemper UMB has continued to diversify its revenue sources. American Banker has chosen him as one of its three Community Bankers of the Year for 2008 not only because his company is thriving in a tough environment, but also because he is an innovative leader focused on making UMB a good place to work and bank.

Mr. Kemper took over in May 2004 at the age of 31, becoming the sixth Kemper to run UMB in its 95-year history.

Under his leadership its assets have grown by about a third, to $9.3 billion. It has 136 branches in seven states, from Arizona to southern Illinois, along with a fund services group based in Milwaukee.

In 2004, real estate construction loans made up 0.95% of the company's loan portfolio; today that figure sits at around 2.15%. Mr. Kemper said this is an area where UMB feels comfortable dealding with customers it knows.

The disinterest in high-risk construction loans, along with its traditionally high capital levels, may have garnered UMB a reputation as being too conservative.

"If conservative means responsible or prudent, we are conservative," he said. "If conservative means we don't make loans, then that is a fallacy and couldn't be further from the truth. … You can't complain about our growth."

Since June 2004, UMB's loans have grown 40%, versus an average of 37.4% for other companies of similar size across the country, according to data from the Federal Deposit Insurance Corp. In the third quarter UMB's net loans rose 6.8% from a year earlier, to $4.2 billion.

But try this comparison. UMB's nonperforming loan ratio was 0.2% of total loans in the second quarter, while the average for similarly sized companies in the Midwest was 1.17%, according to the latest data available from SNL Financial LLC. In the third quarter UMB's ratio dropped 4 basis points, to 0.16%.

Over the last couple of years Mr. Kemper has tweaked its portfolio to de-emphasize certain types of consumer lending (they dropped 30% in the third quarter, to $605 million) while beefing up the small-business side. He began to run off indirect auto lending last year, and the company is in the second year of a push to attract more small-business customers.

The efforts have paid off. UMB set an earnings record in the first quarter, and its stock value has increased nearly 85% during Mr. Kemper's tenure, to around $45 a share.

He said he never would have allowed the company to take the risks other institutions took over the last several years, but he concedes that it was able to resist in part because it is not overly reliant on interest income. Fee income makes up 56% of its revenue stream and is driven by asset management, card, and corporate trust services, along with health care spending accounts and mutual funds.

"We are not as dependent on top-line growth" as others, Mr. Kemper said. "So we do not succumb to the pressure."

He is certainly proud of the financial success UMB has experienced under his direction, but his passion for the company comes most to life when he talks the things that cannot measured: the culture and the legacy of his family business.

"The energy of this organization is unmatched. … There is a sense of pride and an energy about who we are and where we are going," Mr. Kemper said. "And that is something I am most proud of."

It is also a culture he is constantly focused on preserving and enhancing, according to those who work alongside him.

"He is certainly not being kept awake worrying about the quality of our company," said Pete deSilva, UMB's president and chief operating officer. "But he is a dreamer, so he is always dreaming about the next big thing we need to focus on."

Mr. Kemper said his passion for banking was cultivated at the dinner table, where his father, R. Crosby Kemper Jr., who worked at UMB for more than 55 years, taught young Mariner the importance of "doing what's right, not what's popular" — a phrase that appears to be a cornerstone of his leadership and a major component in his company's success.

He has been working at UMB since high school, when he verified employment for credit card applications. Following his graduation from the University of Puget Sound in Tacoma 13 years ago, Mr. Kemper joined UMB full time as a commercial business developer in Denver.

By 1997 he was the president of UMB Bank Colorado, and three years later he became the unit's chairman and CEO.

He took charge of the parent company in 2004, when his brother, R. Crosby Kemper 3rd resigned after four years at the helm. Mariner said his brother decided to "pursue something he was more passionate about" — R. Crosby is now executive director of the Kansas City Public Library system.

Four members of the Kemper family sit on UMB's 16-person board, but Mariner and his sister, Heather Miller, the executive vice president of marketing communications, are the only two of seven siblings active in the company's day-to-day operations.

Mr. Kemper can be found in Kansas City several days a week, but he still makes his home in Denver along with his wife, Megan, and their two children, Emma, 8, and Brady, 5.

One of the first things Mr. Kemper did as the CEO was overhaul the pay structure to provide incentives for employees to excel.

Peyton Green, an analyst with First Horizon National Corp.'s FTN Midwest Securities Corp., who has covered UMB for more than a decade, said the overhaul helped it attract top talent.

"It was essential to get the company growing," Mr. Green said. Before it was "kind of asleep on the vine, but that allowed them to control their own destiny."

Next Mr. Kemper turned his attention toward energizing the 3,321 employees around a singular notion: that "everyone feels like what they do is important and they have an effect on the company."

Mr. deSilva says Mr. Kemper can relate to people at all levels. "You immediately understand that he is not your typical CEO. This man has a sense of caring, compassion, and love that you can't duplicate. … I have never seen anyone with his ability to interact with people at all different levels. It's very powerful."

Mike Hagerdorn, UMB's chief financial officer, said Mr. Kemper understands how a motivated and engaged staff contributes to a company's ultimate performance.

"A higher level of engagement will pay dividends for years to come," Mr. Hagerdorn said.

Last year, borrowing a page from Starbucks Corp., Mr. Kemper enlisted employees to draft a handbook, "The Unparalleled Customer Experience," that spells out UMB's mission, vision, and values.

Employees are expected to have the book with them or nearby at all times, so that the principles "are fresh on your mind and next to your heart," he said.

The handbook also goes a long way toward maintaining continuity within a growing organization, Mr. Kemper said. "The bigger you get, the harder it is to feel small, and we want to feel like a small community bank in the way we go to business."

The book reminds employees, among other things, that "you have the ability to make a difference in someone's life with every smile, every transaction, every offering and in every solution," he said. "In our industry, I think we spend too much time talking about meeting customer expectations. I think the expectations of our consumers are too low. By meeting those expectations, I don't think we are gaining anything as an organization or as an industry."

Robin Wise, the president and CEO of Junior Achievement Rocky Mountain Inc., says Mr. Kemper "really walks his talk."

UMB has sponsored the annual Colorado Business Hall of Fame dinner for the last seven years, and Mr. Kemper is a trustee for the Denver Art Museum and is a board member of the Arts Council of Metropolitan Kansas City.

"Mariner is among the key community leaders in Denver and has been involved since the minute he got to town," Ms. Wise said.

Mr. Kemper said he sees community involvement as "another opportunity to make a difference." That might sound corny, but when he says it, it does not.

As a self-proclaimed student of history, he does not apologize for cribbing from other great companies. "Why go naked when there is so much great, rich experience to be learned from?" (Ironic phrasing from a man known for his dapper appearance.)

One business leader he admires is Sam Walton, and Mr. Kemper says he visits UMB branches in the same way the retailing pioneer did with his Wal-Mart stores in the seminal years "keep the pulse of the business."

Mr. Kemper said environmental sustainability became important to him after he read "Mid-Course Correction: Toward a Sustainable Enterprise," a 1999 book by Ray Anderson, the CEO of Interface Inc., the world's largest carpet maker.

This year UMB launched the industry's first credit card that pays double points for purchases of products certified as energy efficient. Last year it opened a "green" branch in the redevelopment of the former Stapleton International Airport in Denver.

"I want us to be one of those good-to-great companies," Mr. Kemper said. "That's what I am thinking about while I am laying in bed at night. What does it take to get us to the next level? How do we get our entire team believing in where the company is going?"

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