Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — U.S. Financials Conference 2010
29 slides from Commerce Bancshares's conference presentation, Feb 2, 2010
Slide 1: Investor Overview: U.S. Financials Conference 2010
INVESTOR OVERVIEW U.S. Financials Conference 2010 David Kemper February 2, 2010 Commerce Bancshares, Inc.
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 BANCSHARES • 140 years in the industry; $18 billion in assets – 5,256 employees • Super-Community Bank • Lower Midwest Footprint – over 370 banking locations • 85% of 2009 pre-tax profits from five key markets • Denver and Tulsa markets added in 2007 • Lending presence in Nashville an
Slide 4: Super-Community Bank Platform
SUPER-COMMUNITY BANK PLATFORM A More Nimble Format … With Higher Service Focus Community Bank Front End Super-Regional Back End • Flat organization – quick decisions • Sophisticated payment processing systems • Employees embrace strong culture • Broad consumer product offerings • Solid multi-dimensi
Slide 5: Superior Employee Engagement
SUPERIOR EMPLOYEE ENGAGEMENT Overall engagement score significantly surpassed both mid-cap, as well as all bank indexes Overall engagement scores have improved consistently since 2004 2009 Commerce Bank Engagement (Category)* 92% 6% 2% 2008 Commerce Bank Engagement (Category) 89% 89% 8% 8% 3% 3% 200
Slide 6: Industry-Leading Customer Satisfaction
INDUSTRY-LEADING CUSTOMER SATISFACTION 2009 J.D. Power Retail Banking Results Commerce Bank Ranked Highest Customer Satisfaction with Retail Banking in the Midwest Region Two Years in a Row* Competitors of note: National City = 728 Commerce Score = 754 BOA = 723 Midwest Bank Average = 733 Regions =
Slide 7: Diverse Revenue Sources
DIVERSE REVENUE SOURCES • Balanced mix of interest and non-interest income • Meaningful contribution from wealth management and card businesses Commerce Bank Peer Banks* 5% 9% 11% 8% 10% 11% 1% 3% 61% 4% 11% 67% Net interest income Fees & commission Wealth management Card income Service charges Othe
Slide 8: Solid Core Revenues Offset Higher Loan Loss Provisions
SOLID CORE REVENUES OFFSET HIGHER LOAN LOSS PROVISIONS *Restated for 5% stock dividend on 12/15/09 7
Slide 9: Continuing Top Line Growth
CONTINUING TOP LINE GROWTH *Non-recurring Revenue includes Securities Gains (Losses) 2008: Write-down of student loans and gain on branch sale; 2009: Reversal of write-down on student loans 8
Slide 10: Expense Management Discipline
EXPENSE MANAGEMENT DISCIPLINE *One-time expenses: 2007 – VISA litigation expense of $21 million; 2008 – Auction rate securities less partial reversal of VISA litigation expenses totaled $24 million; 2009 – Reversal of VISA litigation expense of $2 million 9
Slide 11: Changing Balance Sheet
CHANGING BALANCE SHEET Balance sheet $ Millions Earning assets Funding Growth Growth $16,231 $17,010 4.8% $15,670 $16,049 2.4% $3,780 $6,473 71.2% $8,986 $10,995 22.4% $11,644 $2,068 $10,490 (9.9 %) $1,802 (12.9%) $4,616 $3,252 (29.5%) $807 (94.2%) $47 2008 2009 2008 2009 Investment portfolio Loans
Slide 12: Investment Portfolio: High Quality, Diverse, Short Duration
INVESTMENT PORTFOLIO: HIGH QUALITY, DIVERSE, SHORT DURATION ARCs Treasury 2.7% Asset Backed 7.1% Agency 27.0% 3.4% 12/31/2009 PORTFOLIO 12/31/2009 PORTFOLIO Unrealized Gain $72 million Investment Grade 96.9% $6.5 billion Total investments Unrealized gain $104 million Corporate 2.0% 12 mo maturities
Slide 13: Strong Liquidity
STRONG LIQUIDITY Strong deposit growth and weak loan demand have led to significant liquidity Loans to Deposits* 95.00% 90.00% 85.00% 80.00% 75.00% 70.00% 65.00% 60.00% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 • Primary lines of credit offer considerable • Reliance on wholesale funding remains liquid
Slide 14: Improving Credit Spreads, but Diminished Loan Demand
IMPROVING CREDIT SPREADS, BUT DIMINISHED LOAN DEMAND Commercial loan spread and line utilizations Commercial loan spreads (left axis) Commercial line utilization (right axis) 2.4% 55.00% 2.3% 50.00% 2.2% 2.1% 45.00% 2.0% 40.00% 1.9% 35.00% 1.8% 1.7% 30.00% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 • C
Slide 15: Strong and Improving Capital Position
STRONG AND IMPROVING CAPITAL POSITION 9.71% Commerce Bancshares, Inc. TCE/TA Tangible Common Equity $103 $1,886 $ Millions $98 8.25% $105 TCE/TA $1,579 TCE/TA Peer Banks* = 7.84% TCE/TA Top 10 Banks* = 4.73% Q42008 Retained Capital raised Other Q42009 earnings comprehensive income Among bank holding
Slide 16: Diversified Loan Portfolio
DIVERSIFIED LOAN PORTFOLIO Less Real Estate concentration; higher Card/Consumer exposure $ in Millions Commerce Bank Peer Banks $10,511 $11,283 $11,027 Business 30% 31% 28% 30% Construction/Business RE 27% 26% 26% 42% Residential RE 14% 13% 14% Consumer/HELOCs 19% 19% 21% 16% Credit Card 1% Loans he
Slide 17: Composition of Construction and Business RE Loans
COMPOSITION OF CONSTRUCTION AND BUSINESS RE LOANS Diversity among loan types; no large concentrations $ in Millions Construction and Land Development 100% = $11,027 % of 2009 % of sub-total total loans Residential $291 44% 3% 28% Commercial 374 56 4 Sub-total $665 100% 7% Construction/ Business RE B
Slide 18: Stabilizing Non-Performing Assets; Solid Provision Coverage
STABILIZING NON-PERFORMING ASSETS; SOLID PROVISION COVERAGE • NPAs decreased by 10%, or $12.6 million, in 4Q09 • Reserve coverage of 167% of NPAs in 4Q09 17
Slide 19: Peer Comparison: Asset Quality
PEER COMPARISON: ASSET QUALITY 3.0% 8.0% 6.0% 2.0% 1.3% Median 4.0% Median = 1.39% = 3.28% 1.0% 2.0% 1.2% 0.0% 0.0% Net Charge-offs/Avg Loans Non Performing Assets/Total Loans CBSH Peer banks 250% 3.5% 200% 3.0% 167% 150% 2.5% 100% 2.0% 1.9% Median Median = 1.95% 50% = 58.58% 1.5% 0% 1.0% Reserves/N
Slide 20: Charge-Offs Consistently Better Than Industry
CHARGE-OFFS CONSISTENTLY BETTER THAN INDUSTRY Net Charge Off Rates for CBI vs. Other Banks CBI Largest 100 Business C&I Net C/Os Commercial R/E Net C/Os 3.50% 3.50% 3.00% 3.00% 2.75% 2.61% 2.45% 2.50% 2.36% 2.50% 2.32% 2.00% 1.83% 2.00% 1.58% 1.50% 1.50% 1.44% 1.28% 0.96% 1.00% 0.74% 1.00% 0.80% 0.5
Slide 21: Strategic Priorities for 2010
STRATEGIC PRIORITIES FOR 2010 Capitalize on our position of strength • Target high credit quality customers for loan growth • Leverage and grow our payment systems capabilities • Further penetrate the wealth customer segment • Develop existing expansion markets • Grow core deposit account base and e
Slide 22: Core Commercial
CORE COMMERCIAL 2009 Actual 2010 Challenges (in millions) • Generate loan growth in a deleveraging NIM $223 market Non-interest income 53 • Navigate evolving regulatory environment Charge-offs 47 Operating expense 132 • Weakened economy impacting credit quality Pre-tax income 98 Loans (avg) $5,753 •
Slide 23: Core Retail
CORE RETAIL 2009 Actual 2010 Challenges (in millions) • Recent regulatory rulings require swift NIM $221 assessment and response for compliance Non-interest income 130 Charge-offs 6 • Replacing NSF/OD revenue stream a priority Operating expense 253 Pre-tax income 92 • Core checking model under asses
Slide 24: Money Management
MONEY MANAGEMENT 2009 Actual 2010 Challenges (in millions) NIM $42 • Asset mgmt. fee income growth constrained by reductions in cash management fees Non-interest income 115 Charge-offs 1 • Further declines in Private Banking loans Operating expense 107 • Lower deposit growth rates as clients seek Pr
Slide 25: Bank Card
BANK CARD 2009 Actual 2010 Challenges (in millions) NIM $91 • Consumer Card regulatory changes and required compliance Non-interest income 72 Charge-offs 54 • Continued focus on credit quality Operating expense 68 • Reduced consumer spending Pre-tax income 42 Loans (avg) $892 Deposits (avg) $5 2009
Slide 26: M&A Posture
M&A POSTURE • We are strategic buyers • Focus on opportunities to round out our existing core footprint • Augment expansion markets if strategic fits become available • Consider opportunistic buys of distressed/FDIC banks CAPITALIZING ON OUR POSITION OF STRENGTH: ORGANIC GROWTH IS PRIORITY ONE 25
Slide 27: Top Line Growth in a Challenging Earnings Environment
TOP LINE GROWTH IN A CHALLENGING EARNINGS ENVIRONMENT Revenue Per Share Earnings Per Share $13.00 $3.00 $12.00 Earnings Per Share Revenue Per Share $2.60 $11.00 $10.00 $2.20 $9.00 $1.80 $8.00 $1.40 $7.00 $6.00 $1.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Dividends $0.38 $0.41 $0.44 $0.55
Slide 28: Our Position in 2010
OUR POSITION IN 2010 • Core strategy of relationship business, leading with payment systems solutions translates into high customer satisfaction ratings – Our strong value proposition and conservative risk posture continues to attract new prospects • Reduced economic activity and higher unemployment
Slide 29: Continuing Commitment to Shareholder Return
CONTINUING COMMITMENT TO SHAREHOLDER RETURN Total shareholder returns* Indexed, 1/1/2000 = 100 250 CBSH 200 150 KBW Regional Banks 100 S&P 500 KBW Large Banks 50 2000 2002 2004 2006 2008 2010 * Assumes reinvested dividends Source: Bloomberg 28
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