Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q3 2018 Earnings Presentation
34 slides from Commerce Bancshares's earnings presentation, 2018
Slide 1: Commerce Bancshares, Inc. Investor Update 3rd Quarter 2018
innovating for the future COMMERCE BANCSHARES, INC. INVESTOR UPDATE 3rd Quarter 2018 Charles G. Kim Jeffery Aberdeen Paul Steiner Chief Financial Officer Controller Assistant Controller
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 $25.1 153 BANCSHARES BILLION IN YEARS IN BUSINESS $20.1 ASSETS 47TH 6 LARGEST U.S. BANK BASED ON ASSET SIZE1 BILLION IN TOTAL DEPOSITS $14.0 4 5 51 $7.0 9 24 1 6 3 8 7 2 BILLION IN TOTAL LOANS $7.9 BILLION MARKET 3 CAPITALIZATION 26TH 7 BILLION IN COMMERCIAL LARGEST U.S. BANK BASED ON
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 Engagement1 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 Norm
Slide 6: Recent Recognition
RECENT RECOGNITION Commerce Bank was named a Commerce Bank Top Midsize 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 compani
Slide 7: Recent Recognition
RECENT RECOGNITION Patty Kellerhals Paula Petersen Stacy Regnier Executive Vice President Executive Vice President Vice President Director of Retail Banking Director of Strategy, Marketing and Finance Business Transformation American Banker named The Kansas City Business BAI has selected Stacy Patty
Slide 8: Strong Financial Performance in 2018
STRONG FINANCIAL PERFORMANCE IN 2018 Growth in ROA ROE Revenue Earnings growth 46% 11% per Share 1.76% 16.3% Net interest Net loan margin Growth charge- growth 3.52% in loans 2% .29% offs to 16 bps loans Long-term performance remains strong 10-year TOTAL SHAREHOLDER RETURN @ 11.5% Vs KBW Bank Ind
Slide 9: Drivers of YTD Earnings
DRIVERS OF YTD EARNINGS Net Interest Growth in net interest income of $68 million this year was Margin driven by increased loan yields (up 50 bps) and stable deposit costs (up 13 bps). Fee Income Fee income grew 8% vs prior year on strength in bankcard, trust and deposit fees. Non-Interest 3% growth
Slide 10: Net Interest Income: YTD September 30, 2018
NET INTEREST INCOME: YTD – September 30, 2018 • Net interest income declined $3.2 Net interest income - $ in millions Quarterly Net Interest Income $220 (Tax Equivalent) 3.8% million from the prior quarter but the $210 3.6% prior quarter included an $8.9 million $200 3.4% equity dividend. • On a cor
Slide 11: Growth in Deposit Rates
GROWTH IN DEPOSIT RATES – September 30, 2018 A key to improving NIM • Deposit beta measures the growth in deposit rates as a % Beta Analysis of growth in ST rates (fed 5% funds) Monthly FFS Rate Loan Rate Monthly Deposit Costs Borrowings • Over the last 15 months, deposit rates have grown 13 basis 4
Slide 12: Fee Income at 39% of Total Revenue
FEE INCOME AT 39% OF TOTAL REVENUE Card, Wealth & Deposit fees provide stable, growing revenue source Net Interest Income Non-Interest Income 8% $s in millions $474 $487 $448 12% Wealth Management $418 $436 $368 $342 1% Deposit Service Charges 7% Commerce Fees And Commissions Bank* Card Income 61% 2
Slide 13: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO YTD Average Loans Business Loans as of September 30 $s in millions 6% Construction $13,629 $13,924 Business RE $12,953 18% 32% $11,873 Residential RE $11,260 Commerce Consumer/HELOCs Bank* Credit Card 17% Loans Held for Sale 2014 2015 2016 2017 2018 7% Loan growth YTD
Slide 14: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS 56% of total loans are variable; 52% of floating rate commercial loans are tied to LIBOR Fixed Variable Business Construction Business RE Commercial Total Loans: $5.0B Total Loans: $1.0B Total Loans: $2.7B 7% 35% 47% 53% 65% 93% Personal RE Consumer HELOC Consumer C
Slide 15: Investment Portfolio: High Quality, Diverse, Short Duration
INVESTMENT PORTFOLIO: HIGH QUALITY, DIVERSE, SHORT DURATION Composition of AFS Portfolio AFS Portfolio as of 9/30/18 4% Total investments $8.7 billion 13% Treasury & agency 17% Unrealized loss $157 million Municipal 12 month maturities / pay-downs $1.1 billion 16% MBS Duration Other asset backed Dec
Slide 16: Strong Capital Position
STRONG CAPITAL POSITION FLEXIBILITY IN CAPITAL PLANNING Cash Dividends & Buy Backs $300 Cash dividend Buy back % Payout 160% % to Net Income - combined 140% $250 120% $ in millions $200 100% $150 80% 60% $100 40% $50 20% $0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Capital ratios – Sept.
Slide 17: Net Loan Charge-Offs: YTD September 30, 2018
NET LOAN CHARGE-OFFS: YTD – September 30, 2018 '18 YTD YTD Actual Loss • Recorded net recoveries of $385k on 2017 2018 $ Chge Rate $ in 000s commercial loans YTD. No major loan Business $ 610 $ 354 $ (256) 0.01 % charge-offs this year. Overdraft 1,172 1,121 (51) 32.51 % • Loss rate on credit card lo
Slide 18: Maintaining the Balance
MAINTAINING THE BALANCE STRONG PERFORMANCE with Disciplined focus on PRIORITY ongoing refinement of the “Core BLUE CHIP investments Bank” • Super-Community Bank platform • Funding Future Growth • Relationship-based banking • Expansion Market Growth • High-touch customer service • Transform the Retai
Slide 19: External Innovation for Consumers
EXTERNAL INNOVATION FOR CONSUMERS The Retail Bank remodeled physical branch locations to include technology enhancements and staff that can handle a variety of customer needs. Branch Lobby Exploration Center Video Advisor Advanced ATM Consumer Digital had 20+ releases in 2018. New features include a
Slide 20: External Innovation for Commercial
EXTERNAL INNOVATION FOR COMMERCIAL Commercial Digital is utilizing the voice of the customer to drive digital solutions. Customer support, focus groups and user studies have proven to be effective ways to gain insight. Online Feedback User Forums 217 COMMENTS 173 TOTAL IDEAS Commercial Payments adde
Slide 21: Internal Innovation at Commerce
INTERNAL INNOVATION AT COMMERCE innovating for the future TRUST CRM FUNDING OUR FUTURE GROWTH CARA Artificial Intelligence 21
Slide 22: Consumer Banking
CONSUMER BANKING 2009 $10.2 $2.4 $919 $113.5 MILLION BILLION BILLION MILLION $16 MILLION Consumer Consumer Consumer Branch Deposits Loans Auto Loans Expense 2017 2017 Average Reduction $10.3 $2.5 FICO since 2009 BILLION BILLION 753 Banking Channel Preferences Continue Expanding Digital Capabilities
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. $51.5 19TH $30.7 13% BILLION Largest Among Bank-Owned BILLION Record Asset Assets Under Management Total Client Trust Company2 Manag
Slide 24: Trends in Trust Revenue and Sales
Trends In Trust Revenue and Sales Asset Management Revenues Asset Management Profit Margin (In Millions) $200 45% 45% 43% 42% $143 40% $150 40% 39% $122 $129 $115 $116 $105 $100 35% $50 30% $0 25% 2014 2015 2016 2017 YTD 2017 YTD 2018 2014 2015 2016 2017 YTD 2018 ▪ Solid growth in fee continues; pro
Slide 25: Commercial Banking: Revenue Growth Opportunities
COMMERCIAL BANKING Revenue growth opportunities $8.9 $7.9 BILLION $523 MILLION BILLION Commercial Commercial Commercial Loans Deposits 5 Yr. Revenue 5 Yr. 5 Yr. CAGR CAGR CAGR +9.3% +3.0% +2.1% Commercial Loans Commercial Deposits Commercial Revenue $ in billions $ in billions $ in millions $523.0 $
Slide 26: Growth in the Commercial Footprint
GROWTH IN THE COMMERCIAL FOOTPRINT 2007 Branch Footprint Extended Footprint 8 5 1 Commercial Payment Services 2 4 1 6 3 7 2 2018 6 4 8 5 5 1 Significant Markets Commercial Offices 2 4 1 6 1. St. Louis 1. Cincinnati 3 2 7 2. Kansas City 2. Nashville 9 3. Springfield 3. Dallas 4. Central Missouri 4. D
Slide 27: Expansion Markets in the News
EXPANSION MARKETS IN THE NEWS 27 27
Slide 28: Markets Offering Growth Opportunities
COMMERCIAL BANKING – EXPANSION MARKETS OFFERING GROWTH OPPORTUNITIES Nashville Cincinnati Oklahoma Denver Dallas Expansion Market Loan Growth $2,006 $s in millions $1,793 $1,542 $1,338 $962 $1,091 Expansion Market Loan Growth 2013 2014 2015 2016 2017 YTD 2018 230% since 2012 Personnel Overview for E
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 Sup
Slide 30: Commercial Payments
COMMERCIAL PAYMENTS $194 MILLION $7.9 BILLION $145 MILLION Payments Commercial Health Services Revenue Card Volume Financing Loans EMBRACING INNOVATION IN THE PAYMENTS SYSTEMS Our full suite of products and services brings real value to client relationships Information as of December 31, 2017 30
Slide 31: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Commerce Bank Peer Banks Large Banks Return on Average Assets 2.0% 1.5% ROAA 10-yr average 1.0% CBSH: 1.18% 0.5% Peers: 0.75% 0.0% -0.5% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 Return on Average Common Equity 20.0% 15.0% ROACE 10-
Slide 32: Long Term View: Net Income and Earnings Per Share
LONG TERM VIEW: NET INCOME AND EARNINGS PER SHARE Earnings Per Share Net Income $350 $3.00 300 Earnings per Share $2.50 250 Net Income 200 $2.00 $ 000s 150 $1.50 100 50 $1.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Dividends $0.61 $0.62 $0.64 $0.65 $0.69* $0.71 $0.74 $0.78 $0.82 $0.86 per
Slide 33: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of September 30, 2018 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 09/30/2008 = $100 Percent CBSH NASDAQ Banks $350 25% S&P 500 KBW Bank Index COMMERCE KBW BANK 300 BANK INDEX 20 NASDAQ S&P 250 15 BANK INDEX 200 10 150 5 100 0 1 Yea
Slide 34: Innovating for the Future
© innovating for the future iss) <se’ Commerce Bancshares, Inc.