Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q4 2018 Earnings Presentation
33 slides from Commerce Bancshares's earnings presentation, 2019
Slide 1: Commerce Bancshares Investor Update 4th Quarter 2018
innovating for the future COMMERCE BANCSHARES, INC. INVESTOR UPDATE 4th Quarter 2018 Charles G. Kim Jeffery Aberdeen Matt Burkemper Chief Financial Officer Controller Corporate Development
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT A number of statements we will be making in our presentation and in the accompanying slides are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements of the Corporation’s plans, goals, objectives, expectations
Slide 3: About Commerce Bancshares
ABOUT COMMERCE 153 $25.5 BANCSHARES BILLION IN YEARS IN BUSINESS $20.3 ASSETS 42ND LARGEST U.S. BANK BASED ON ASSET SIZE1 BILLION IN TOTAL DEPOSITS $14.2 6 $6.3 4 5 5 1 9 2 4 1 6 3 BILLION IN TOTAL LOANS $8.8 BILLION MARKET 7 2 8 3 CAPITALIZATION 7 20TH BILLION IN COMMERCIAL LARGEST U.S. BANK BASED
Slide 4: Super-Community Bank Platform
SUPER-COMMUNITY BANK PLATFORM A consistent strategy with a long term view Community Bank Super-Regional Bank Customer relationship-based CHALLENGE ACCEPTED • Sophisticated • Award winning customer service High performing teams and payment system engaged workforce capabilities • Focus on the full cli
Slide 5: A Strong Emphasis on Culture
A STRONG EMPHASIS ON CULTURE 2018 Employee Effectiveness1 Giving to our VALUES 78% • Engaged, long-term 75% We have a 74% leadership team long term We • Focus on people and talent iew collaborate development Commerce U.S. High U.S. Financial as ne • Knowledge of customers Performance Norm Services N
Slide 6: Recent Recognition
RECENT RECOGNITION Commerce selected as one of 20 best-in-class banks by BankDirector | #3 in the Midwest • 4 regional categories: South, West, Midwest and Northeast • Top five publicly-traded retail & commercial banks with $10- 250 billion in assets selected in each region • Selection based on prof
Slide 7: Recent Recognition
RECENT RECOGNITION Commerce Bank was named a Commerce Bank Top Mid-size Employer by Forbes was named among for the second consecutive year. Forbes’ first-ever ranking of We ranked in the top 15 percent, Best Employers for Women. coming in at 68th on the list of We ranked in the Top 10 for 500 compan
Slide 8: Strong Financial Performance in 2018
STRONG FINANCIAL PERFORMANCE IN 2018 ROA ROE Growth in Revenue Earnings 37% 11% 1.76% 16.2% growth per Share Net interest Net loan Growth in margin charge- 3.53% average 2% .30% growth offs to loans 34 bps loans Long-term performance remains strong 15-year TOTAL SHAREHOLDER RETURN @ 8.4% Vs KBW B
Slide 9: Drivers of 2018 Earnings
DRIVERS OF 2018 EARNINGS Increase of $90 million, or 12%, driven by higher interest on loans (yield Net Interest up 46 bps)and securities (yield up 33 bps) and stable deposit costs (up Margin 11 bps). 9% fee income growth reflects diversity of fees and notable growth in Fee Income bank card, trust a
Slide 10: Net Interest Income: YTD December 31, 2018
NET INTEREST INCOME: YTD – December 31, 2018 Quarterly Net Interest Income Net interest income - $ in millions • Net interest income increased $4.5 million $220 (Tax Equivalent) 3.8% over the prior quarter. 2Q18 included an $210 3.6% $8.9 million equity dividend. $200 3.4% • Net interest margin incr
Slide 11: Growth in Deposit Rates
GROWTH IN DEPOSIT RATES – December 31, 2018 A key to improving NIM Beta Analysis 5% Monthly FFS Rate Loan Rate Monthly Deposit Costs Borrowings • Deposit beta measures the growth in deposit rates as 4% a % of growth in short term rates (fed funds) Cumulative deposit beta 3Q’15 – 4Q’18 of 12% 3% Vs U
Slide 12: Fee Income at 37% of Total Revenue
FEE INCOME AT 37% OF TOTAL REVENUE Card, Wealth & Deposit fees provide stable, growing revenue source Non-Interest Income 4% Net Interest Income $s in millions 13% Wealth Management $447 $461 $501 $410 $422 1% Deposit Service Charges 7% Commerce Fees And Commissions Bank* Card Income 12% 63% 2014 20
Slide 13: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO YTD Average Loans Business Loans as of December 31 $s in millions 6% Construction $13,629 $13,946 Business RE $12,953 17% 36% Residential RE $11,260 $11,873 Commerce Consumer/HELOCs 15% Bank* Credit Card 2014 2015 2016 2017 2018 Loans Held for Sale 6% 2018 Loan Growth
Slide 14: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS 57% of total loans are variable; 65% of commercial loans have floating rates; mostly tied to a LIBOR index Fixed Variable Business Construction Business RE Commercial Total Loans: $5.1B Total Loans: $0.9B Total Loans: $2.9B 5% 36% 43% 57% 64% 95% Personal RE Consume
Slide 15: Investment Portfolio: High Quality, Diverse, Short Duration
INVESTMENT PORTFOLIO: HIGH QUALITY, DIVERSE, SHORT DURATION Composition of AFS Portfolio AFS Portfolio as of 12/31/18 4% Total investments $8.5 billion 13% Treasury & agency 18% Unrealized loss $65 million Municipal 12 month maturities / pay-downs $1.0 billion 15% MBS Duration Other asset backed Dec
Slide 16: Strong Capital Position
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 51 consecutive years of regular common cash dividend increases* Cash Dividends & Buy Backs $300 Cash dividend 160 % to Net Income – combined Buy back 140 250 % Payout 120 200 $ in millions 100 150 80 60 100 40 50 20 0 0 2009 2010 2011 2012 20
Slide 17: Net Loan Charge-Offs: YTD December 31, 2018
NET LOAN CHARGE-OFFS: YTD – December 31, 2018 • Commercial loan net charge-offs remained low in 2018. YTD total of $1.1 million. • Loss rate on credit card loans declined in the 4th quarter of 2018 to 3.7%. • 90 day delinquencies on consumer cards increased to $10.7 million in 4Q2018; consumer loan
Slide 18: Maintaining the Balance
MAINTAINING THE BALANCE STRONG PERFORMANCE with Disciplined focus on PRIORITY ongoing refinement of the “Core BLUE CHIP investments Bank” • Claims Payment • Super-Community Bank platform • Commerce Bank Mortgage • Relationship-based banking • Accelerate Growth in Healthcare • High-touch customer ser
Slide 19: External Innovation for Consumers
EXTERNAL INNOVATION FOR CONSUMERS Transforming our branches – Aligning Consumer Digital - A new mobile Commerce Bank physical presence with customer demand. banking app launched in 2018 offers for iPhone Technology investments more functionality. Challenge Accepted ® and introduction of new Over 25
Slide 20: External Innovation for Commercial and Payments Customers
EXTERNAL INNOVATION FOR COMMERCIAL AND PAYMENTS CUSTOMERS $170 CommerceHealthcare™ Tailored, return on investment-based solutions enable healthcare providers to 45 3+ THOUSAND MILLION enhance the patient experience, improve States Served Healthcare Patient Loans cash flow , and leverage new opportun
Slide 21: Internal Innovation at Commerce
INTERNAL INNOVATION AT COMMERCE innovating for the future As innovation and Internal software Commerce’s commitment to technology rapidly drive development events to A Bank-wide project to promoting an innovative change, our customers’ rapidly build, test, and replace the existing mindset; from ever
Slide 22: Consumer Banking
CONSUMER BANKING $10.2 $4.1 1.1 169 Full-service BILLION BILLION MILLION branches Consumer Consumer Consumer Loans* Households* and 151 Deposits stand alone ATMs Banking Channel Preferences Monthly Banking Sessions (in thousands) 8,000 Mobile Online Branch 6,000 Mobile Digital Loan Mobile Penetratio
Slide 23: Commerce Trust Company Wealth Management
For high net worth individuals who are looking to simplify their complex financial life, Commerce Trust Company provides a full-service approach to wealth management. 18TH $50 $30 $447 Largest Among BILLION BILLION MILLION Bank-Owned Managed Assets Under Trust Company2 Total Client Brokerage Managem
Slide 24: Trends in Trust Revenue and Profit Margin
Trends In Trust Revenue and Profit Margin Asset Management Revenues Asset Management Profit Margin (In Millions) $200 50% 46% $156 45% $150 $142 42% 43% $122 $129 40% $115 40% 39% $100 35% $50 30% $0 25% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 ▪ Solid growth in fee continues with total rev
Slide 25: Commercial Banking: Revenue Growth Opportunities
COMMERCIAL BANKING Revenue growth opportunities Financing solutions – options for all sizes and types of businesses • Working Capital Lines of Credit • International Financing • Government Lending Programs • Term Financing • Employee Stock & Ownership Financing • Interest Rate Swaps • Construction &
Slide 26: Commercial Banking and Payments
COMMERCIAL BANKING AND PAYMENTS Innovative payments solutions to manage payables and receivables to manage cash flow $194 Payments $7.9 Commercial MILLION Revenue BILLION Card Volume Treasury $5.9 Merchant $38.5 Management BILLION Volume MILLION Revenue INDUSTRY EXPERTISE – Specialists in a multitud
Slide 27: Expansion Markets in the News
EXPANSION MARKETS IN THE NEWS 27 27
Slide 28: Commercial Banking: Expansion Markets
COMMERCIAL BANKING – EXPANSION MARKETS OFFERING GROWTH OPPORTUNITIES Expansion Fee Income Personnel Overview for Market Loan Expansion Market Loan Growth Growth Growth Expansion Markets $s in millions 64% 92% #of employees per market* (includes open positions) since 2015 $2,200 since 2015 2012 201
Slide 29: Card Products: A Leader Amongst Top U.S. Banks
CARD PRODUCTS – A LEADER AMONGST TOP 50 U.S. BANKS Consistently ranked among the top issuers in the Nilson Report #11 #7 #11 #14 #20 Debit #13 Commercial Purchasing Bank Consumer Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment product offerings Hea
Slide 30: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Return on Average Assets 2.0% 1.5% ROAA 10-yr average 1.0% CBSH: 1.2% 0.5% Peers: 0.8% 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Peers Large Banks Commerce Return on Average Common Equity 20.0% 15.0% ROACE 10-yr average 10.0% CBSH: 12.
Slide 31: Long-Term View: Net Income and Earnings Per Share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE 450 $4.00 400 Earnings Per Share Net Income 3.50 Earnings per Share 350 Net Income 3.00 300 $ 000s 250 2.50 200 2.00 150 1.50 100 50 1.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Dividends $0.59 $0.61 $0.62 $0.65* $0.67 $0.71 $0.74 $0.78 $0.
Slide 32: Long-Term Shareholder Returns
LONG-TERM SHAREHOLDER RETURNS as of December 31, 2018 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 12/31/2003 = $100 Percent CBSH NASDAQ Bank 350 30 COMMERCE S&P KBW Bank 300 S&P 20 250 10 0 200 NASDAQ -10 150 BANK KBW BANK -20 100 1 Year 3 Year 5 Year 10 Year 1
Slide 33: Innovating for the Future
© innovating for the future as, é%) Commerce Bancshares, Inc.