In spring 2023, three banks failed and the media was circling with speculation about potential subsequent victims. The failures had been precipitated by depositors who suddenly withdrew massive balances, mostly in excess of insurance limits. Reporters looked for other banks with substantial deposit dollars in uninsured territory. UMB Financial fell into that category and into the media’s crosshairs. J. Mariner Kemper, the bank’s chair and CEO of two decades, defended his institution with reason and logic, taking to the airwaves and print publications. His defense made a difference. Although the company’s investment ratings took a hit, the bank survived, even thrived as a year and a half later it’s on the cusp of consummating a merger that will put UMB Financial squarely in the super-regional category, serving more customers in more states than ever before.
With a touch of independent swagger, Kemper navigated the choppy media waters, won the approval of stock market investors, and organized the largest bank acquisition of the last 12 months. From his fifth-floor office in downtown Denver, the fourth-generation banker is dramatically growing a 112-year-old financial institution, retaining a family-operated ethos while turning heads in the super-regional club. Kemper, 52, is BankBeat magazine’s 2025 “Banker of the Year.”
Deal flips perception
Within weeks, the Office of the Comptroller of the Currency is expected to grant final approval around UMB’s $2 billion stock offer to purchase Heartland Financial USA Inc., the 43-year-old Denver-based franchise with $19.1 billion in assets and operations in 11 states. In early 2023, speculation suggested UMB might need a merger partner of its own, but instead of seeking the shelter of a buyer, UMB emerged as a formidable buyer, leveraging the powerful currency of its stock. The Heartland acquisition will grow UMB to $64.5 billion in assets, offices in 13 states, and increase its employee count to more than 5,000 associates.
UMB’s offer of $45.74 per share represents a premium of 28 percent over the market price of Heartland shares on April 29, 2024 when the deal was announced. UMB shares were trading at $83.17 at the time; its stock price had risen to $126.05 by Dec. 3.
Kemper called Heartland Financial a “cultural, strategic and financial fit.” Heartland, he said, “would allow us to double our retail business and it would grow our wealth business by 30 percent. Those are two strategies that we really wanted to build upon, as the commercial and institutional part of our business is hitting on all cylinders from a growth perspective. We wanted to diversify from that and build.”
The acquisition will deepen UMB’s presence in Colorado, Arizona and Kansas City, Kemper noted, while filling in market gaps like New Mexico and California.
“We would not be interested in California if it meant San Francisco or L.A., but this opportunity is really the Central Valley, between Bakersfield and Sacramento,” Kemper explained during an interview in a conference room adjacent to his office. “There are 10 million people there. It’s agrarian. Fifty percent of America’s food is grown in the Central Valley. And, there are lots of small towns in the region.”
The deal is about deposits as much as geographical growth; Heartland has $15.9 billion in deposits, with about a 73 percent loan to deposit ratio, leaving dollars to fund UMB’s loan growth. “Deposits have always been important to us; it’s the raw material of our business,” said Kemper, explaining that the company avoids wholesale funding. “I learned that from my father; you need to stay liquid and have a nice loan-to-deposit ratio so you are there for your customers.”
Independence is defense amid 2023 concerns
The business press has focused on deposits since Silicon Valley Bank, Signature Bank and First Republic failed in early 2023. While the trio of failures often was called a crisis, Kemper insists it was anything but. Analysts grew particularly concerned about banks that had a high percentage of deposits in accounts that exceeded deposit insurance limits. UMB was high on the list, but Kemper explained that a significant portion of its deposits were from municipalities, which required the funds be collateralized; there would be no reason for those funds to be suddenly withdrawn. Furthermore, he explained, several billion dollars in deposits are related to UMB’s own funds, which are not at risk.
“We are not going to pull our own money out of our bank,” he said.
While Kemper said it might make sense for the FDIC to insure at least some accounts beyond the $250,000 limit, he said he is not looking for help from the government to run his bank. “I get paid to run this company well enough that we don’t need intervention,” Kemper declared. “That’s my mandate and I am going to keep operating that way. If I run the company soundly, I should never have to worry about a run on the bank.”
Kemper noted the government doesn’t do anything for free. “Insurance costs you money,” observed Kemper. Larger banks were required to replenish the Deposit Insurance Fund in 2023 when First Republic was absorbed by JPMorgan Chase; the hit to UMB was some $60 million, Kemper said.
Some 16 years ago, the U.S. Treasury Department created the Troubled Asset Relief Program which provided banks with capital to get through the financial crisis of 2008. UMB Financial declined to participate. “One of the things I am most proud of is rejecting TARP,” Kemper said.
More than a century of experience
UMB Financial is more than a century old and Kemper draws on the company’s longevity for reassurance. Founded in 1913 in Kansas City, Mo., as City Center Bank, the Kemper line of ownership and management began in 1918 when William T. Kemper bought controlling interest. His son, Rufus Crosby Kemper, Sr., was named president and a director in 1919. The name “Crosby” honors his mother, Lottie Crosby, who had married William in 1890.
Crosby Kemper, Jr., started working at the bank in 1950, becoming president and a board member in 1956 at the age of 31. He changed the name of the company in 1971 to Missouri Bancshares, Inc, adding the word “United” at the front of the moniker shortly thereafter. In 1994, the company became UMB Financial Corp., in recognition of its business footprint, which by then included Illinois and Colorado in addition to Kansas and Missouri.
Crosby Kemper, Jr., retired in the mid-1990s, and sons R. Crosby Kemper III and Alexander C. “Sandy” Kemper took turns at the CEO position until the third son, J. Mariner Kemper, became chair and CEO at age 31 in 2004.
Time and again, the company proved innovative, becoming a leader in auto loans in the 1920s, creating an “automobile deposit window” in 1931 and putting a driveup lane inside a parking garage in 1947. The press called the bank at that point: “America’s most up-to-date bank.”
The bank had early on offered correspondent services to community banks and by its 50th anniversary in 1963, the bank counted more than 1,000 correspondent customers. By 1972, the bank topped $1 billion in assets and in 1993 one reputable research company called UMB Bank “America’s strongest bank.”
Mariner Kemper easily ticks off a list of major events that have impacted the banking industry since the bank’s founding: The 1918-20 pandemic, World War I, the Depression, the Iraq and Middle East conflicts, the Great Recession, the second pandemic and, what he called “the fake Moody’s crisis of 2023.”
“The point of bringing all that up is being a fourth-generation banker and the fifth CEO is we have the benefit of institutionalizing all that knowledge,” Kemper said. “What we’ve learned through all those different crises has made UMB stronger, bolder, smarter and faster. We’ve made our company stronger by going through all of that.”
The company went public in 1978, raising capital to grow through acquisition. But the 1980s brought economic stress which depressed asset prices. “We were able to grow without spending much money,” Kemper commented. “We ultimately didn’t need the capital for growth. Fast forward to where we are today and we’re public. It is what it is.”
The company’s stock has proved to be valuable currency. The company’s current offer to Heartland comes a decade after it purchased the $1.3 billion Marquette Financial Companies from the Pohlad family of Minneapolis. Marquette consisted of banks in Phoenix and Texas.
Going public hasn’t diminished the Kemper influence on the company. “I would call us a closely-held public company,” he said, noting that he likes the discipline imposed by the bank’s shareholders. Interaction with the analyst community has been beneficial, as he said he learns from analysts and investors, and from the leaders of other banks. “I get to see them in action and see who I respect and who I don’t,” he said.
Regardless of the ownership of the company, Kemper said, “you’ve got to run a great company. I mean, you just have to get it right; if you don’t, then your shareholders revolt. We’ve been lucky enough to have a great team that’s paying attention to the right things, including quality and growth.”
Describing his approach to business, Kemper talks about “rowing close to shore.”
He said he learned the phrase from his father. “We are in the risk-taking business and when we step off the shore to take risks every day,” Kemper said they know what they are doing. “We know if there’s water in the boat. We know how far we are from shore. We know what our ability to swim is. We know we’ve got extra provisions. So the point is, we’re rowing close to shore. I use this throughout daily life at UMB, which is: don’t ever row out if you don’t know whether you can get back. We always know how we are going to get back. No risk should ever be taken that could sink the ship.”
Conservative or successful, or both?
The approach is more prudent than conservative. Emphasizing that “when we make a loan we expect to get paid back,” Kemper said his track record doesn’t necessarily communicate conservative. “We have excellent credit metrics. In the last 20 years, we have grown two times our peer group, and we have had double-digit loan growth every year. And we’ve had less than 27 basis points of charge-offs the entire time. That’s our average for 21 years. So I don’t know if it’s conservative to grow faster than everybody else, but that’s true.”
Kemper points to more than a century of collective institutional knowledge about how to underwrite credit, but said UMB’s success is actually the result of more than that. “Just as important or more important than underwriting,” he said, “is the monitoring process. In our business you cannot be late. You have to be early. Early warning signs are more important than recognizing trouble. You want to avoid trouble by seeing early warning signs. And we are very, very good at identifying potential trouble and managing it before it moves from ‘watch’ to ‘doubtful.’ The migration at UMB in our loan portfolio from watch to doubtful is near zero.”
UMB’s loan committee is headed by Kemper and Kemper’s right-hand guy, President James D. Rine, who has been with the company for 30 years. His Chief Credit Officer, Thomas Terry, has been with the company for 38 years. The average tenure of those on the loan committee is 24 years. “We have worked together side-by-side our entire careers,” Kemper said. “We finish each others’ sentences.”
Another entry in UMB’s phraseology: “What goes up must come down.” Kemper said loan committee members are in agreement on that one. Prices, over time, tend to revert to the mean.
“It behooves us to be students of history. My dad was a history major; I was a political science major which is essentially the study of history, which at the end of the day is the study of economics,” Kemper said. “What you learn is that stuff repeats and that things don’t always just go up and up and up. They come down. There is always a cycle. Every 10 years or so there is a cycle. If you believe you are doing something different and better, you are kidding yourself. If you think you have figured out the mousetrap that is going to keep you from losing money, that ‘this time it’s different’, you are kidding yourself.”
Kemper is positive about the interest rate environment, noting that in the context of history, the current rates are pretty good. Looking out several months, Kemper says “we’re going to have a bumpy soft landing.” While some volatility is possible, he said he expects the yield curve will “steepen and normalize.” He adds that while he expects inflation to recede, he doesn’t think it will come down as far as many are expecting. “I think the world’s going to be comfortable with a higher level of inflation,” he commented.
For the first time in company history, there is not another Kemper prepared to step into the CEO role upon retirement of the current company leader. Mariner Kemper’s sister, Heather Miller, was chief marketing officer for 21 years until she retired in May of 2023. Sandy Kemper concluded his service on the board of directors about a year ago. Kemper said, however, that he considers the company’s employee base of some approximately 3,600 people to be his “family.” The average tenure of a UMB employee across the company is nine years.
“Tom Terry’s father used to run our trust department. Tom met his wife at UMB, and his daughter now works in our credit department. We have stories like that all over the company,” Kemper said. “UMB blue blood runs deep through the company. It’s definitely a family.”
The sense of family may help UMB retain a community bank feel as it grows into a $64.5 billion organization. Kemper said it is part of the bank’s strategy of focusing on relationships. “We think of ourselves as a super community bank. We are a community bank, but a larger version,” Kemper said. “I’d like to think that when we are a $250 billion organization we still feel like a community bank.”
A flat organizational structure is key. “We are intentional about not having layers,” Kemper said, adding that leadership pushes decision-making and accountability out to staff across the company.
And Kemper plays up his people-focus. “Everyone has access to me and those around me. We go out of our way to know the people we work with,” he said. The same goes for customers. “I am a customer guy and I personally know all of our major customers across our footprint,” he said.
Foxhole over ivory tower
Kemper likes to think of himself shoulder-to-shoulder with his customers. “We are not ivory tower people; we are foxhole people,” said Kemper. Describing a scene from one of his favorite movies, “Band of Brothers,” he lauds a nameless soldier who jumps into a foxhole to tend to the wounded while a pristine officer gives orders from above, oblivious to the plight of the people doing the work. “That soldier gave heart to the situation. A company’s got to have a heartbeat,” he said. “I focus on doing whatever I can to bring that heartbeat.”
Military analogies apply to the work they are doing at UMB, Kemper said. “Also, I think I am pretty good at removing cancer. I don’t put up with people who don’t buy in,” he said. “You gotta believe. The only way we are successful is together.”
Constant improvement is essential to success; an organization needs to be getting better in order to stay even in the competitive landscape. “We are always trying to get better, always trying to improve turnaround times, removing steps, thinking about why we do things. We are challenging, we are critical thinkers, empowering people,” Kemper said. “We empower people to make changes, to make recommendations. You don’t want to leave people with the impression that decisions are reserved for the ivory tower guys, because they never know what’s actually going on in the field. We’re actually in the foxhole. I’m on the front line, in the foxhole, in the trenches. I’m a gut and feel and relationship guy. I am driven by interactions” with customers and colleagues.
Among those relationships is the one Kemper formed with Bruce Lee, CEO of Heartland Financial; the two got to know each other over years attending the same popular industry conference in Florida. Kemper reached out to Lee about a possible merger with a phone call in December 2021. The two met a month later to discuss the possibility. By March 2022, the two parties had signed nondisclosure agreements but talks stalled when disagreement broke out on the Heartland board about whether UMB was the best suitor. Over the next year, Heartland shopped the market, and then the industry became preoccupied with the failures of Silicon Valley Bank, Signature Bank and First Republic Bank.
It wasn’t until the end of 2023 that market angst over the trio of bank failures dissipated and Lee and Kemper restarted talks about a merger. During that time, Heartland had moved its headquarters from Dubuque, Iowa, to Denver, the same city where Kemper is based. They came to terms quickly and a merger deal was announced.
Heartland stockholders will represent 31 percent of the combined company, and five members of the Heartland board will join the UMB board, which is expanding to 16 members. Heartland operates Upper Midwest banks Minnesota Bank & Trust, Wisconsin Bank & Trust, Dubuque Bank & Trust, and Illinois Bank & Trust, among others.
“This is a historic and exciting milestone for our company,” Kemper said. “While we have maintained an outstanding pace of organic growth during the past decade, this compelling combination with HTLF marks a truly momentous expansion of all our core services in both existing and new markets. This synergy, along with a like-minded culture and customer approach, is an ideal fit for our business model, our credit and risk profiles, and our associates, customers and communities.”