KANSAS CITY, Mo. — On a shelf near his computer monitors, UMB Financial CEO J. Mariner Kemper keeps a small bottle of amber cologne. It smells horrible, honestly, but that doesn't matter. He rarely opens it.
The cologne was made by a customer in the 1950s, who took a substantial loan to start a line of men's scents. He quickly failed, and the bank's collateral included a warehouse full of the worthless bottles. The bank, then run by Kemper's grandfather, gave them out as Christmas presents.
The bottle is a reminder to act conservatively, Kemper says.
"My father always said you should row close to shore," says Kemper, 37. "I've taken that to mean in everything we do, we need to manage the risks. ... Never do something that could take the whole business down."
Sticking to its conservative approach earned Kansas City, Mo.-based UMB the No. 2 spot, behind Bank of Hawaii, on Forbesmagazine's rating at the end of 2009 of the 100 largest U.S. banks from best to worst.
Cross-state rival Commerce Bank, with headquarters in St. Louis and Kansas City, followed a similar strategy, landing itself at No. 3 on the Forbes list.
"There's something in the water here," he says.
It also could be the genes. Commerce's CEO is Kemper's cousin, David Kemper.
Their great-grandfather, W.T. Kemper, had stakes in several banks: Two, through various name changes, became today's UMB and Commerce.
While other banks in the past decade chased profits in subprime mortgages and financial instruments whose risks most people, including the bankers, did not understand, UMB, a regional bank with operations in seven states, and Commerce, which operates in five states, made relatively conservative loans and cautiously managed customers' money.
Now, as Congress deliberates over new regulations for financial companies, bankers such as Kemper feel they're being punished for someone else's recklessness.
Mariner Kemper and David Kemper, 59, don't sit around at Sunday dinner sharing strategy. The financial ties between the Kemper family's two banks were severed in the 1980s.
The cousins rarely see each other, except at an industry event or family weddings or funerals. And their companies' growth plans are different: UMB is expanding in financial services; Commerce is developing its retail business.
But their approaches are very similar: Both believe in conservative lending, both focus on developing strong managers, both are civic-minded and support community and arts causes.
"My father always says banking should be a boring business," says John Kemper, David Kemper's son and Commerce Bank's strategic planning director.
Boring — but sturdy
These banks "were built to withstand a recession, maybe even a depression, and still be ahead of their competitors," says Peyton Green, an analyst at Sterne Agee. "That's very different from most banks."
Nearly 215 banks have failed since January 2009, 73 this year, according to the Federal Deposit Insurance Corp. That compares with just 25 in 2008 and three in 2007.
Banks and financial institutions have $244.9 billion of the federal money spent in the recession to shore up the economy, according to non-profit website ProPublica, about 45.7% of the total spent on business bailouts.
Many banks got into trouble on mortgages, says Doug Bernstein, head of law firm Plunkett Cooney's banking, bankruptcy and creditors' rights practice group, because they started taking too much risk on the loans.
"If you want to gain market share, maybe you're going to loan 90%" of the property's assessed value, he says. "They were up to 100% or more in some cases. If something goes bad, or unemployment rises, are your delinquencies going to go up? Sure."
Bad things did happen and delinquencies still are going up: The non-current loan rate for all banks was 5.46% in the first quarter, up from 3.77% a year ago for all banks, according to the FDIC.
But delinquency rates at UMB and Commerce remain low: Just 0.015% of UMB's loans are more than 90 days past due; for Commerce, it's 0.4%.
Also, neither UMB nor Commerce took any federal aid, despite pressure from the government to participate. "They said it was the patriotic thing to do," Mariner Kemper says. "But it never made sense to us."
Past tough times
UMB and Commerce have survived tough times in the past: Bank runs were common in the 1890s in the Midwest, as crop failures hit wide swaths of the population and squeezed entire communities financially.
Commerce, opened in Wild West Kansas City in 1865 by W.T. Kemper, made it through those runs on skill and goodwill. It backed some smaller banks in trouble and saw the favors returned when it faced hard times.
During the Depression, UMB CEO R. Crosby Kemper Sr. reached out to customers after business hours, unheard of then, to quell their fear.
In March 1933, Commerce Bank CEO W.T. Kemper dealt with a run on his bank with apples: He bought them at the farmer's market and cheerily handed them out to panicked customers in line.
While the companies became Kansas City institutions, the family (and its money) got involved in everything from politics to the 19,500-seat Kemper Arena to the Kemper Museum of Contemporary Art downtown.
Caution was out of favor
While holding fast to loan-ratio guidelines and credit-score standards now appears to have served them well, it earned criticism in the past decade because it made them appear to be underperforming.
In 2004, UMB was trudging along with its conventional strategy of investing most of its deposits in government Treasuries.
Historically low interest rates crushed rates of return and the bank's earnings fell 27% from 2003. As a result, share prices stayed nearly flat at about $24.
Mariner Kemper took over the bank that spring from older brother R. Crosby Kemper III, who now heads Kansas City's library system. One of his first moves, however, was anything but conservative: He asked his father to step down as chairman of the board.
"I didn't want to 'job-shadow' for the rest of my life," he says, referring to the practice of having a new hire follow a veteran around to learn the ropes.
He has since moved to create profit centers for the bank so it is less dependent on interest rates and loans for revenue. The company expanded into financial services, including adding a small insurance company, health care card processing and back-office work for fund managers.
Commerce Bank under CEO David Kemper has a different strategy: It is focused on retail banking, lending money in the community and supporting local businesses.
David Kemper says he wants Commerce to be a "super community bank" — large enough to meet the needs of businesses and individuals, but retaining the feel, ties and service of a small-town bank.
"We want to do business with people we know in places we know," he says. "We've got the resources, but we're small enough to really know what's going on in the community."
Commerce Bank shifted its headquarters from Kansas City, where it still has a significant presence, to St. Louis, where David Kemper decided to raise his family 25 years ago. Kemper has pushed his executives to become part of St. Louis: The top 10 each sit on one or two charity or business boards; the bank sponsors arts and education programs.
"We only do as well as the community," David Kemper says. "It's the right thing to do, and it's good for business."
Branching out
While Kemper family members remain in top jobs at both companies, the executive ranks are broadening.
Mariner Kemper is CEO of UMB Financial Holdings, but Peter deSilva now is the CEO of UMB Bank, the first non-Kemper over the wholly owned subsidiary.
David Kemper and his brother, Jonathan Kemper, are the only family members on Commerce Bank's 12-member board. And the CEOs at both companies also say family members aren't given priority over qualified outsiders.
But there is something to be said for lifelong grooming. Mariner Kemper grew up unavoidably steeped in the family business and had his first job at UMB as a teenager, verifying employment claims on credit applications.
However, he also studied political science, as well as ceramics, at the University of Puget Sound in Tacoma, Wash.
As a child, he says, he resented the bank.
"I grew up in a family where every conversation was about the bank," he says. "Most people don't like having things shoved down their throats."
But he realized as a young adult, he says, "that it would have been unfortunate for me not to recognize the opportunity in front of me."
He asked for a job in Colorado, where his then-girlfriend, now-wife, Megan, lived. He began building a commercial loans business in Colorado and quickly grew that portfolio to $1 billion.
Mariner Kemper took over the bank at age 31, young for an otherwise conservative company — but about the same age his father was when he began running it.
He still lives in Denver and has an office there, while spending a few days each week in his Kansas City office.
He says the job is satisfying, but wearing.
"I love what I do, but I have been consumed by it," he says.
Different paths
The four children of Mariner Kemper's older cousin, Commerce Bank CEO David Kemper, are closer to his age but have taken different paths, even if headed into the family business.
A day at the office is a day at NBC's The Office for David Kemper's two daughters: Carrie writes for the TV comedy, and Ellie appears in the show as receptionist Erin.
Son Billy is studying history at Stanford. John, 32, the Commerce director of strategic planning, also went to Stanford, then worked for management consultants McKinsey & Co. before taking a job at the bank. His father says that outside experience gives his son perspective.
His insight will be needed as Commerce, like UMB, looks to expand while other banks are faltering. But the bank plans to expand with, you guessed it, a conservative approach.
The cost of such caution is some missed opportunities, David Kemper says, but it pays off in the long term.
"We've definitively missed buying some banks," he says. "But we'd rather hit singles and doubles and have a very high batting average than hitting some home runs."