ST. LOUIS - Commerce Bancshares is a tortoise and proud of it.

As other banks rushed into highly leveraged deals that later soured, and made Third World loans not even a Marine could collect on, Missouri-based Commerce stuck to its steady-but-sure strategy of lending close to home.

Just like he proverbial. race between the hare and the tortoise, go-go bankers are now lagging behind, while Commerce left the 1980s with a consistently clean balance sheet that twice earned it honors as the best-run, soundest bank in the nation.

"Some people could accuse Commerce of being too slow," said Joseph Stieven, senior bank analyst at Stifel, Nicolaus & Co. in St. Louis. "But that's not a bad criticism to face."

Stock a Favorite

Commerce chairman David Kemper, who represents the fifth generation to run the $7.5 billion-asset bank, admits that being deliberate may have cost short-term profits, but he does not apologize for a conservative strategy that makes the bank's stock a favorite.

The bank is hardly standing still. Commerce is quietly growing an investment products business, has begun expanding into Kansas and Illinois, and runs a growing venture capital subsidiary that belies an otherwise buttoned-down image.

While Mr. Kemper and his younger brother, Jonathan, who is vice chairman at the Kansas City bank, earned their credentials at Morgan Guaranty and Citicorp, respectively, in the 1970s, analysts say the duo is decidedly risk averse and shareholder sensitive.

In Good Hands

"David doesn't do a lot of flashy things, but he has always increased profits," said Mr. Stieven. "It's very safe to say Commerce is in very good hands."

Others say a history of strength - 25 years of consecutive dividend growth - choosy lending practices, and an impeccable balance sheet put Commerce in elite company.

"They are the Wachovia of the Midwest," said Kay Lister, bank analyst at Keefe, Bruyette & Woods in New York.

Adds James H. Weber, bank analyst at A.G. Edwards & Sons in St. Louis, "They didn't go for a lot of fads and fashions. They have missed some opportunities, but they have also missed some pitfalls."

Impressive Numbers

The result has been a 1.13% return on assets that changes at glacial speed while asset quality is strong. Through the third quarter, the bank reported net loan chargeoffs of only $4.3 million, or 0.15% of average loans, and $37.7 million in nonperforming assets, or an anemic 0.96% of total loans.

"I don't think you have to a genius to be a bank lender," said James Kemper Jr., the recently retired chairman of Commerce. "You just have to pay attention."

Being a choosy lender has generated single-digit growth with a loan-to-deposit ratio of 59%. That conservative philosophy looks prudent in bad times and tightfisted in good, but it has made Commerce a bank to count on.

In the early part of the century, Commerce rescued many of its correspondents from certain failure by providing cash to stop a run by depositors. As the story goes, Commerce bankers kept suitcases of cash - wrapped like sandwiches to fool would-be robbers - ready to deliver on short notice.

"All they had to do was stack the money on the counters for people to see, and it would stop the run," recalled Mr. Kemper, the family patriarch who led the bank for three decades.

Frontier Origins

Commerce opened in 1865 as the Kansas City Savings Association in what was then a sparsely populated frontier city.

In the early days, the fledgling bank shared quarters with the more popular Magnolia Saloon, but it soon grew and attracted the interest of Dr. W.S. Woods, the first generation of the Kemper family.

As Kansas City grew, the bank survived boom and bust. Just like today, conservative practices and tight cost controls were its guiding principles.

That much was noted by a young bank clerk, Harry Truman, who later reminisced in his presidential biography that Dr. Woods was tough to get a raise from.

Today the bank has few senior officers, with David Kemper holding titles ranging from chairman to chief financial officer.

There is little turnover among vice presidents or higher, which has resulted in a stable corporate culture. Insiders own fully one-third of the bank's stock. The Kemper family controls some 12%.

Because of that ownership stake, many analysts place Commerce at the bottom of a list of Missouri banks that may be acquired once the state's tough restrictions on interstate expansion are lifted. Even then, some say, the Kempers will control when - or if - the bank is sold.

"If anyone wants to buy that company, it's going to be on friendly terms and through the front door," said Stifel's Mr. Stieven.

The Kempers are running the bank as if the next generation will take over someday, with a goal of building a $10 billion-asset company.

Commerce has acquired nearly a dozen banks in an east-west expansion since 1991. Since Kansas dropped its limits on Out-of-state ownership last year, the bank has announced seven deals that have largely built on Commerce's presence in suburban Kansas City.

"Our job is not done yet," said Jon Kemper, who oversees the expansion from Kansas City. He estimates that Commerce could seek a fourfold increase in deposits from the $100 million it currently has in key suburban counties.

More recently, the Kempers have started to build a bank in Illinois. Rather than acquire in the suburbs east of St. Louis, Commerce went north to Peoria. Though it is Illinois' second-largest city, the blue-collar center is heavily banked now and considered economically stagnant.

Industry and Agriculture

Still, David Kemper believes there is money to be made from the region, which is known as much for its industry as its dark, rich farmland. "Our markets don't stop at the state line." Mr. Kemper said.

However, few would bicker with the price Commerce paid for family-owned First Poeria Corp. The $65 million cash and stock deal was a relative bargain at 1.39 times book value, even though known bidders included Banc One Corp. "Those people liked our style," he said.

The bank is working to grow fee income even as it expands geographically. "We're really in the information business," David Kemper added. "We've got the knowledge about our customers that you can't get anywhere else."

To capitalize on that information, Commerce has focused on investment product sales, which generated about $90 million in revenues, with a 4% profit, in 1992. Mr. Kemper says that area has the potential to grow four times larger.

At the same time, the bank maintains a $350 million credit card portfolio that officials expect to grow 10% a year. "I think it's a key to the consumer. We would never give up our credit card franchise," he said.

Perhaps most uncharacteristic for stodgy Commerce is its venture capital subsidiary, Capital for Business Inc. The bank launched a $30 million limited partnership fund in the first quarter, with 49% outside participation. The funds are lent to some businesses the bank would not put in its own portfolio.

Even though the bank takes its time getting into new, areas, James Kemper believes Commerce is ready for the future.

"I think our basic principles have not changed," he said. "You need youth and vigor, but you also need a healthy skepticism. We have that."

After all, slow and steady wins the race.

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