Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q2 2019 Earnings Presentation
34 slides from Commerce Bancshares's earnings presentation, 2019
Slide 1: Commerce Bancshares, Inc. Investor Update 2nd Quarter 2019
innovating for the future COMMERCE BANCSHARES, INC. INVESTOR UPDATE 2nd Quarter 2019
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: Commerce Bancshares
COMMERCE BANCSHARES $25.8 $19.8 154 YEARS IN BUSINESS BILLION IN ASSETS BILLION IN TOTAL DEPOSITS 44TH LARGEST U.S. BANK BASED ON ASSET SIZE1 $14.3 BILLION IN TOTAL LOANS2 $6.6 BILLION MARKET CAPITALIZATION $8.8 BILLION IN COMMERCIAL 22ND CARD VOLUME as of 12/31/18 LARGEST U.S. BANK BASED ON MARKET
Slide 4: Super-Community Bank Platform
SUPER-COMMUNITY BANK PLATFORM A consistent strategy with a long-term view Customer relationship-based: Community Bank Challenge Accepted.® Super-Regional Bank • Award-winning High-performing teams • Sophisticated payment customer service system capabilities and engaged workforce • Focus on the full
Slide 5: Our Culture Is Our Competitive Advantage
OUR CULTURE IS OUR COMPETITIVE ADVANTAGE We help you focus on what matters most. Our purpose is the foundation of our culture. It We are engaged, enabled and effective. shapes our daily interactions 2019 Employee Effectiveness1 and guides our strategy. Consistently scoring above 63% the U.S. High Pe
Slide 6: Recent Recognition
RECENT RECOGNITION • Named among • Selected as one of 20 • Received Highly • Named a Top Midsize • Named among America’s Best Banks best-in-class banks in Commended status Employer by Forbes Forbes’ first-ever 2019 by Forbes Bank Director’s 2019 for Best Private Wealth for the third ranking of Best
Slide 7: Strong Financial Performance in 2018
STRONG FINANCIAL PERFORMANCE IN 2018 ROA ROE Growth in Revenue Earnings 37% 11% 1.76% 16.2% growth per Share Net interest Net loan Growth in margin charge- 3.53% average 2% .30% growth offs to loans 34 bps loans Long-term performance remains strong 15-year TOTAL SHAREHOLDER RETURN @ 8.4% Vs KBW B
Slide 8: Financial Performance vs. Prior Year
FINANCIAL PERFORMANCE VS. PRIOR YEAR Net Income Attributable to Earnings per Common Return on Total Assets CBI ($ in Millions) Share As of June 30 $434 As of June 30 $3.79 As of June 30 1.76% 1.73% 1.66% $319 $2.77 1.28% $211 $205 $1.84 $1.81 YE 2017 YE 2018 YTD 2018 YTD 2019 YE 2017 YE 2018 YTD 201
Slide 9: Drivers of 2nd Quarter 2019 Earnings
DRIVERS OF 2nd QUARTER 2019 EARNINGS Core NIM decreased 5 bps to 3.50% from 3.55% in Q1 2019, as yields Net Interest on commercial loans contracted slightly, offsetting yield growth on Margin personal banking loans. Deposit costs increased only 4 bps over the previous quarter. 1.9% fee income growth
Slide 10: Net Interest Income: YTD June 30, 2019
NET INTEREST INCOME: YTD – June 30, 2019 Quarterly Net Interest Income • Net interest income (tax equivalent) $230 (Tax Equivalent) 5.0% increased $8.1 million over the prior quarter. Net interest income – $220 4.5% $210 • The growth was mostly due to an $8.5 million $ in millions 4.0% increase in i
Slide 11: NIM Protection
NIM PROTECTION Hedge against lower interest rates by purchasing interest rate floor contracts and extending duration Floor Impact on Loan Yields Extending Duration Assumes Loans at LIBOR +200bps 8% In addition to the interest Unhedged Illustrative rate floors, Commerce has 2.5% Floor (effective 6/1/
Slide 12: Growth in Deposit Rates
GROWTH IN DEPOSIT RATES – June 30, 2019 Beta Analysis • Deposit beta 6% Monthly FFS Rate Loan Rate measures the growth Monthly Deposit Costs Borrowings in deposit rates as a % 5% of growth in short term rates (fed funds) 4% • Over the last 18 months, deposit rates Deposit beta = 25% have grown 32 ba
Slide 13: 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 $ in millions 7% Net Interest Income $447 $461 $501 $410 $422 11% Wealth Management 1% Deposit Service Charges $245 $248 7% Commerce Fees and Commissions Bank1 Card Income 11% 63
Slide 14: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Business Loans YTD Average Loans2 $s in millions 6% Construction $13,629 $13,946 $14,098 Business RE 18% 33% $12,953 Residential RE Commerce Consumer/HELOCs $11,873 $11,260 Bank1 Credit Card 17% Loans Held for Sale 2014 2015 2016 2017 2018 2Q2019 6% 2019 Loan Growth b
Slide 15: 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 16: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of 6/30/19 4% 12% Total investments $8.7 billion Treasury & agency 16% Unrealized gain $42 million Municipal 12 month maturities / pay-downs $1.2 billion 14% MBS Duration Other asset backed Dec
Slide 17: Strong Capital Position – Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 51 consecutive years of regular common cash dividend increases1 Cash Dividends & Buy Backs % to Net Income – combined $300 Cash dividend 200% $250 Buy back ASR Buy back2 % Payout 150% $ in millions $200 $150 100% $100 50% $50 $0 0% 2009 2010
Slide 18: Net Loan Charge-Offs: YTD June 30, 2019
NET LOAN CHARGE-OFFS: YTD – June 30, 2019 '19 YTD YTD Actual Loss • No significant commercial $ in 000s 2018 2019 $ Chge Rate loan net charge-offs in the Business $ 22 $ 731 $ 709 0.03 % 2nd quarter. Overdraft 770 570 (200) 25.27 % • Loss rate on credit card Construction (333) (117) 216 (0.03)% loan
Slide 19: Strategic Posture: Maintaining the Balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE STRONG PERFORMANCE with Disciplined focus on PRIORITY ongoing refinement of the BLUE CHIP investments “Core Bank” • Develop Claims Payment • Super-Community Bank platform • Commerce Bank Mortgage • Relationship-based banking • Accelerate Growth in Healthcar
Slide 20: External Innovation: Consumer Banking
EXTERNAL INNOVATION: CONSUMER BANKING Transforming our Branches – Aligning Consumer Digital – A new mobile Commerce Bank physical presence with customer demand. banking app launched in 2018 offers for iPhone Challenge Accepted ® more functionality. Technology investments … and introduction of new Ov
Slide 21: Blending technology, community and relationships
Blending technology, community and relationships Four main goals: • Grow relationships. • Enhance engagements. • Strengthen brand awareness. • Drive innovation through research and development. 21
Slide 22: External Innovation: Commercial Payments Customers
EXTERNAL INNOVATION: COMMERCIAL PAYMENTS CUSTOMERS CommerceHealthcare™ 370+ $569 Tailored return on investment- based solutions enable healthcare Clients in Hospitals & MILLION providers to enhance the patient experience, improve cash flow, and 45 States Healthcare Systems Patient Loan Originations*
Slide 23: Internal Innovation at Commerce
INTERNAL INNOVATION AT COMMERCE innovating for the future TOOLS Internal software development Commerce’s commitment to As innovation and technology rapidly events to rapidly build, test, and promoting an innovative mindset, drive change, our customers’ needs promote new products or services from eve
Slide 24: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT $10.2 $4.1 1.1 169 Full-service BILLION BILLION MILLION branches Consumer Consumer Consumer 151 stand alone Deposits Loans* Households* ATMs Banking Channel Preferences Mobile Mobile Monthly Banking Sessions (in thousands) Penetration Deposit Use 8,000 Mobile Online Branch
Slide 25: 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 Largest Among $50 BILLION $30 BILLION $447 MILLION Bank-Owned Managed Total Client Assets Under Trust Assets2 Management Brokera
Slide 26: Commercial Banking
COMMERCIAL BANKING Revenue growth opportunities Financing solutions – options for all sizes and types of businesses • Equipment Financing • Working Capital Lines of Credit • Government Lending Programs • International Financing • Term Financing • Interest Rate Swaps • Employee Stock & Ownership Fina
Slide 27: Commercial Banking – Expansion
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Expansion Market Loan Growth Expansion $ in millions Market Loan Fee Income Team Overview for $2,200 Growth Growth Expansion Markets $1,913 64% 92% # of team members per market (includes open positions) since 2015 $1,619 since 2015
Slide 28: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow Commercial $179 Payments $8.8 Card MILLION Revenue BILLION Volume Treasury $5.9 Merchant $38.5 Management BILLION Volume MILLION Revenue Information as of Decemb
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 Commercial #7 #11 #14 Consumer #20 Debit #13 Prepaid Purchasing Bank 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: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of June 30, 2019 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 06/30/2004 = $100 Percent $400 30% CBSH NASDAQ Bank COMMERCE KBW BANK S&P 500 KBW Bank 350 NASDAQ S&P 500 20 300 BANK 10 250 0 200 -10 150 1 Year 3 Year 5 Year 10 Year 15
Slide 33: Investor Relations
INVESTOR RELATIONS Contact Information: Matthew Burkemper Senior Vice President, Commerce Bank Manager of Corporate Development 314.746.7485 Matthew.Burkemper@commercebank.com Commerce Bancshares, Inc. Investor Relations website: http://investor.commercebank.com/ 33
Slide 34: Innovating for the future
© innovating for the future iss) Ses’ Commerce Bancshares, Inc.