Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q3 2019 Earnings Presentation
32 slides from Commerce Bancshares's earnings presentation, 2019
Slide 1: Commerce Bancshares, Inc. Investor Update 3rd Quarter 2019
innovating for the future COMMERCE BANCSHARES, INC. INVESTOR UPDATE 3rd 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: 154 Years in Business
COMMERCE BANCSHARES $25.9 $20.3 154 YEARS IN BUSINESS BILLION IN ASSETS BILLION IN TOTAL DEPOSITS 44TH LARGEST U.S. BANK BASED ON ASSET SIZE1 $14.5 BILLION IN TOTAL LOANS2 $6.5 BILLION MARKET CAPITALIZATION $8.8 BILLION IN COMMERCIAL 22ND CARD VOLUME as of 12/31/18 LARGEST U.S. BANK BASED ON MARKET
Slide 4: A consistent strategy with a long-term view
SUPER-COMMUNITY BANK PLATFORM A consistent strategy with a long-term view Customer relationship-based: Community Bank Challenge Accepted.® Super-Regional Bank • Award-winning High-performing teams • Sophisticated payment customer service system capabilities and engaged workforce • Focus on the full
Slide 5: Our culture is our competitive advantage
OUR CULTURE IS OUR COMPETITIVE ADVANTAGE We help you focus on what matters most. Our purpose is the foundation of our culture. It We are engaged, enabled and effective. shapes our daily interactions 2019 Employee Effectiveness1 and guides our strategy. Consistently scoring above 63% the U.S. High Pe
Slide 6: Recent Recognition
RECENT RECOGNITION Commerce Bank was named The award publicly among America’s Best Banks 2019 recognizes by Forbes. We were a top-ranked employers that Missouri-based bank and ranked have achieved 17th in the nation overall. Since the best-in-class first list debuted, Commerce has levels of consiste
Slide 7: Strong Financial Performance in 2018
STRONG FINANCIAL PERFORMANCE IN 2018 ROA ROE Growth in Revenue Earnings 37% 11% 1.76% 16.2% growth per Share Net interest Net loan Growth in margin charge- 3.53% average 2% .30% growth offs to loans 34 bps loans Long-term performance remains strong 15-year TOTAL SHAREHOLDER RETURN @ 8.4% Vs KBW B
Slide 8: Financial Performance vs. Prior Year
FINANCIAL PERFORMANCE VS. PRIOR YEAR Net Income Attributable to Earnings per Common Return on Total Assets CBI ($ in Millions) Share As of Sept. 30 $434 As of Sept. 30 $3.79 As of Sept. 30 1.76% 1.76% 1.68% $319 $324 $314 $2.77 $2.82 $2.79 1.28% YE 2017 YE 2018 YTD 2018 YTD 2019 YE 2017 YE 2018 YTD
Slide 9: Drivers of 3rd Quarter 2019 Earnings
DRIVERS OF 3RD QUARTER 2019 EARNINGS Core NIM decreased 10 bps to 3.40% from 3.50% in Q2 2019, as Net Interest yields on commercial loans contracted, more than offsetting yield Margin growth on personal banking loans. Deposit costs increased only 3 bps over the previous quarter. 7.3% fee income grow
Slide 10: Net Interest Income: YTD September 30, 2019
NET INTEREST INCOME: YTD – September 30, 2019 Quarterly Net Interest Income • Net interest income (tax equivalent) $230 (Tax Equivalent) 5.0% decreased $8.2 million from the prior quarter. Net interest income – $220 4.5% $210 • The decline was mostly due to a $4.8 million 4.0% $ in millions decrease
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 rate Unhedged Illustrative floors, Commerce has been 2.5% Floor (effective
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 7% $ in millions Net Interest Income $461 $501 $447 $410 $422 11% Wealth Management $368 $381 1% Deposit Service Charges 7% Commerce Fees and Commissions Bank1 Card Income 11% 63
Slide 13: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Business Loans YTD Average Loans2 $s in millions 6% Construction $13,946 $14,170 $13,629 Business RE 18% 33% $12,953 Residential RE $11,873 Commerce Consumer/HELOCs $11,260 Credit Card Bank1 17% Loans Held for Sale 6% 2014 2015 2016 2017 2018 3Q2019 2019 Loan Growth b
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: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of 9/30/19 4% 12% Total investments $8.7 billion Treasury & agency 15% Unrealized gain $163.4 million Municipal 12 month maturities / pay-downs $1.3 billion 14% MBS Duration Other asset backed
Slide 16: 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 % Payout 200% $250 Buy back ASR Buy back2 150% $ in millions $200 $150 100% $100 50% $50 $0 0% 2009 2010
Slide 17: Net Loan Charge-offs: YTD September 30, 2019
NET LOAN CHARGE-OFFS: YTD – September 30, 2019 '19 ⦁ No significant commercial YTD YTD Actual Loss loan net charge-offs in the $ in 000s 2018 2019 $ Chge Rate 3rd quarter of 2019. Business $ 354 $ 1,066 $ 712 0.03% ⦁ Loss rate on credit card Overdraft 1,121 1,016 (105) 22.16% loans improved in the 3
Slide 18: 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 19: 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 Over
Slide 20: 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. 20
Slide 21: External Innovation: Commercial Payments Customers
EXTERNAL INNOVATION: COMMERCIAL PAYMENTS CUSTOMERS CommerceHealthcare™ Tailored return on investment-based solutions enable healthcare Clients in 370+ $569 Hospitals & MILLION 45 providers to enhance the patient Patient Loan Healthcare experience, improve cash flow, and Systems Originations* leverag
Slide 22: 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 23: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT $10.2 $4.1 1.1 169 Full-service BILLION BILLION MILLION branches Consumer Consumer Consumer 151 Deposits Loans* Households* stand alone ATMs Banking Channel Preferences Mobile Mobile Monthly Banking Sessions (in thousands) Penetration Deposit Use 8,000 Mobile Online Branch
Slide 24: 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 $447 MILLION Bank-Owned BILLION Total Client Assets Under Managed Trust Assets2 Management Brokera
Slide 25: Commercial Banking: Revenue growth opportunities
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 26: Commercial Banking – Expansion Markets Offer Growth Opportunities
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 27: 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 $38.5 Management $5.9 Merchant MILLION BILLION Volume Revenue Information as of Decemb
Slide 28: 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 29: 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 30: 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 31: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of September 30, 2019 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 09/30/2004 = $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 Ye
Slide 32: Contact Information
Contact Information: Matthew Burkemper Senior Vice President, Commerce Bank Corporate Development and Investor Relations 314.746.7485 Matthew.Burkemper@commercebank.com Commerce Bancshares, Inc. Investor Relations website: http://investor.commercebank.com/