Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — KBW Conference 2018
34 slides from Commerce Bancshares's conference presentation, February 2018
Slide 1: Commerce Bancshares, Inc. Investor Update February 2018
COMMERCE BANCSHARES, INC. Investor Update February 2018 Charles G. Kim Chief Financial Officer Jeffery Aberdeen Controller <#>
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT This presentation may contain “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, projections, estimates and intentions. These forward- looking st
Slide 3: About Commerce Bancshares
ABOUT COMMERCE BANCSHARES FOUNDED IN 1865 AND OVER 150 YEARS OF… Super-Community Bank founded in 1865 6 9 4 5 5 1 42nd largest U.S. bank based on 2 4 1 asset size1 6 3 8 7 2 $24.8 billion in assets 3 $20.4 billion in total deposits $48.7 billion in Trust assets Branch Footprint Extended Commercial M
Slide 4: Super-Community Bank Platform
SUPER-COMMUNITY BANK PLATFORM A CONSISTENT STRATEGY WITH A LONG TERM VIEW Community Bank Customer relationship-based Super-Regional Bank We ask, listen and solve. • Responsive to • Sophisticated customer needs High performing teams and payment system and changing engaged workforce capabilities prefe
Slide 5: A Strong Emphasis on Culture
A STRONG EMPHASIS ON CULTURE Giving to our VALUES 2017 Employee Engagement1 We have a 78% • Engaged, long-term long term leadership team 75% iew 74% • Focus on people and We talent development collaborate as ne team • Knowledge of customers and markets Commerce U.S. High Performance U.S. Financial S
Slide 6: Recent Recognition
RECENT RECOGNITION Asset management and employer awards Ranked 62 out of 300 midsize employers (companies with 1,000 to 5,000 employees). Commerce ranks #2 among other banks on the list. The 2017 Private Asset Management Awards recognize and reward top investment professionals, wealth advisors, lega
Slide 7: Strong Financial Performance Continues in 2017
STRONG FINANCIAL PERFORMANCE CONTINUES IN 2017 Growth in Earnings ROA ROE Revenue growth per Share 16% 1.28% 12.5% 6% Net interest margin Net loan charge- growth – 16 bps Growth in loans offs to loans 3.20% 4% .31% Long term performance remains strong 10 year TOTAL SHAREHOLDER RETURN @ 10.1% Vs K
Slide 8: Financial Performance vs. Prior Year
FINANCIAL PERFORMANCE VS. PRIOR YEAR YE 2015 YE 2017 YE 2016 Net Income Attributable to Earnings per Common Return on Total Assets CBI Share ($ in Millions) $319 $2.89 $264 $275 $2.49 $2.32 1.28% 1.11% 1.12% 2015 2016 2017 2015 2016 2017 2015 2016 2017 Return on Average Common Period End Loans Perio
Slide 9: Net Interest Income: YTD December 31, 2017
NET INTEREST INCOME: YTD – December 31, 2017 Quarterly Net Interest Income • Net interest income grew $54 Net interest income - $ in millions $200 3.4% 3.3% million vs prior year due higher $190 3.2% rates on earning assets, growth in 3.1% average loans and stable funding $180 Net Yield 3.0% costs.
Slide 10: Growth in Volume and Rising Rates Driving $54 million Increase in NIM
GROWTH IN VOLUME AND RISING RATES DRIVING $54 million INCREASE IN NIM Tax Equivalent Net Interest Income: 2012 – 2017 $s in millions $766 $711 $665 $664 $646 $648 2012 2013 2014 2015 2016 2017 Change in NIM due to volume Change in NIM due to rate • Lower rates had been pushing the net interest margi
Slide 11: Fee Income at 40% of Total Revenue
FEE INCOME AT 40% OF TOTAL REVENUE Balanced mix of interest and non-interest income Net Interest Income 8% 12% Wealth Management 10% 14% 3%3% 2% Deposit Service Charges 6% Peer Commerce 7% Fees And Commissions 5% Bank* Banks* 60% 58% Card Income 11% 9% 73% Other Non-Interest Income Continued focus o
Slide 12: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO 6% 1% 19% 32% Business Loans 11% Construction 31% Commerce Business RE 18% Peer Residential RE Bank* Consumer/HELOCs Banks* 5% 17% 7% Credit Card Loans Held for Sale 34% 19% Period End Loan Growth Loan growth in 2017 $s in millions 15,000 5 Yr. Auto & $145 million 9%
Slide 13: 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% 53% 47% 65% 93% Personal RE Consumer HELOC Consumer C
Slide 14: Investment Portfolio: High Quality, Diverse, Short Duration
INVESTMENT PORTFOLIO: HIGH QUALITY, DIVERSE, SHORT DURATION Composition of AFS Portfolio AFS Portfolio as of 12/31/17 3% 14% Treasury & agency Total investments $8.8 billion Unrealized gain $54 million 24% Municipal 12 month maturities / pay-downs $1.4 billion 19% MBS Duration December 2014 2.4 year
Slide 15: Strong Capital Position
STRONG CAPITAL POSITION FLEXIBILITY IN CAPITAL PLANNING Cash Dividends & Buy Backs Cash dividend Buy back % Payout $300 160% % to Net Income - combined 140% $250 120% $200 $ in millions 100% $150 80% 60% $100 40% $50 20% $0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year-end capital ratios
Slide 16: Net Loan Charge-Offs: YTD December 31, 2017
NET LOAN CHARGE-OFFS: YTD – December 31, 2017 '17 Growth in net loan YTD YTD Actual Loss charge-offs due $ in 000s 2016 2017 $ Chge Rate mainly to increased Business $ 616 $ 1,378 $ 762 0.03 % credit card losses and lower recoveries on Overdraft 1,339 1,548 209 33.71 % Construction (3,712) (1,191) 2
Slide 17: Maintaining the Balance
MAINTAINING THE BALANCE Strong performance; Disciplined focus on ongoing refinement priority blue chip of the “Core Bank” investments • Super-Community Bank Funding Future Growth platform • Relationship-based banking Expansion Market Growth • High-touch customer service Transform the Retail Model CU
Slide 18: Consumer Banking
CONSUMER BANKING $10.3 $2.5 $1.0 BILLION BILLION BILLION Consumer Consumer Consumer Deposits Loans Auto Loans 2016 2016 Average $10.2 $2.5 FICO BILLION BILLION 750 Banking Channel Preferences Monthly Banking Sessions 2009 (in thousands) $113.5 MILLION Expense $15 Mobile Online Branch 7,000 reduction
Slide 19: Core Retail Initiatives
CORE RETAIL INITIATIVES Grow Revenue Maintain/Leverage Maintain/Leverage Optimize Cost to High Customer Employee Serve Satisfaction Engagement Core Expand Digital Transformation Capabilities Talent Efficiently Deliver Management New Products and Core Retail Programs 2018 Cost Effectively Initiatives
Slide 20: Expand Digital Capabilities
EXPAND DIGITAL CAPABILITIES 4.5 stars as of 1/17/18 Mobile Mobile App Store Loan Sales Penetration Deposit Use Rating (000s) 2016: 2017: 2016: 2017: 2016: 2017: 2016: 2017: 49.4% 54.7% 3.3% 7.6% $19,157 $25,500 Deliver Strategic Deliver Solutions to Enhance Drive Digital Differentiators the Experien
Slide 21: Commerce Trust Company wealth management
For high net worth individuals who are looking to simplify their complex financial life, The Commerce Trust Company provides a full-service approach to wealth management. $48.7 21ST $30.0 13% BILLION Largest Among BILLION Record Asset Bank-Owned Assets Under Management Total Client Trust Company2 M
Slide 22: Key Priorities
Key Priorities: Enhanced Private Client Model Asset Management Sales Growth Institutional Trust Asset Management Sales Growth Implement Marketing Strategies Enhanced Sales Partnerships from Commercial and Retail Channels 22 22
Slide 23: A Full Spectrum of Planning Solutions
A Full Spectrum of Planning Solutions Core Private Client Family Office New Private Client Financial Advisory Family Wealth Delivery Model Services Stewardship Scenario Plans Comprehensive & Family Mission Modular Solutions Continuous Financial Statement Topical tools and Planning Wealth
Slide 24: Trends in Trust Revenue and Sales
Trends In Trust Revenue and Sales Asset Management Revenues Asset Management Sales (In Millions) (In Millions) 160 $143 14 $13 140 $129 12 $11 $122 $11 120 $115 $10 10 100 8 80 6 60 40 4 20 2 0 0 2014 2015 2016 2017 2014 2015 2016 2017 Solid growth in fee continues; profit margins reach 43% in 201
Slide 25: Commercial – Revenue Growth Opportunities
COMMERCIAL – REVENUE GROWTH OPPORTUNITIES $8.9 BILLION $7.9 BILLION $523 MILLION Commercial Commercial Commercial Loans Deposits Revenue 5 Yr. 5 Yr. 5 Yr. CAGR CAGR CAGR +8.7% +3.4% +2.1% Commercial Loans Commercial Deposits Commercial Revenue $ in billions $ in billions $ in millions $8.9 $522.9 $5
Slide 26: Adding Value Through Specialized Products & Services
ADDING VALUE THROUGH SPECIALIZED PRODUCTS & SERVICES Build out Embrace Execute deposit Key capabilities in Refine Healthcare innovation in the retention Priorities: Expansion Markets Banking strategy Payments Systems strategies PRODUCTHealthcare Suite INDUSTRY Healthcare Tax-Exempt Finance Senior Li
Slide 27: 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 27 27
Slide 28: Growth in the Commercial Footprint
GROWTH IN THE COMMERCIAL FOOTPRINT Branch Footprint 2007 Extended Footprint Commercial Payment Services 8 5 1 2 4 1 6 3 7 2 2017 6 4 8 5 5 1 Significant Markets Commercial Offices 1 2 1. St. Louis 1. Cincinnati 6 34 2. Kansas City 2. Nashville 7 2 3. Springfield 3. Dallas 9 4. Central Missouri 4. De
Slide 29: Commercial Banking – Expansion Markets
COMMERCIAL BANKING – EXPANSION MARKETS Nashville Cincinnati Oklahoma Denver Dallas Expansion Market Loan Growth $s in millions Expansion $2,000 $1,793 Market $1,542 Growth 195% $1,500 $1,338 $1,091 $962 $1,000 $608 $500 since 2012 $0 2012 2013 2014 2015 2016 2017 Personnel Overview for Expansion Mar
Slide 30: Loan Growth Remains Strong in Expansion Markets
LOAN GROWTH REMAINS STRONG IN EXPANSION MARKETS $s in millions • Strongest loan growth $3,500 +2% 2016 2017 experienced in Dallas, Denver, Wichita and Cincinnati. +4% $3,000 • Expansion markets of Dallas, $2,500 Cincinnati and Denver showing some of the fastest growth. $2,000 $1,500 $1,000 -3% -1% -
Slide 31: 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 #12 #7 #11 #14 #20 #16 Commercial Purchasing Bank Consumer Debit Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment product offerings Sup
Slide 32: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Commerce Bank Peer Banks Large Banks Return on Assets ROA 10-yr average CBSH: 1.18% Peers: 0.63% 1.5% 1.0% 0.5% 0.0% -0.5% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Return on Equity ROE 10-yr average 15.0% CBSH: 11.57% Peers: 5.58% 10.0% 5.
Slide 33: 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 $ 000s 200 2.00 150 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 share
Slide 34: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS (as of December 31, 2017) Total Shareholder Returns Annualized Comparison Indexed, 12/31/2007 = 100 Total Shareholder Returns 300 Percent 25% COMMERCE KBW BANK CBSH NASDAQ Banks BANK INDEX S&P 500 KBW Bank Index 250 20% NASDAQ S&P BANK INDEX 200 15% 150 10% 5% 100 0% 50 1