Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q4 2019 Earnings Presentation
33 slides from Commerce Bancshares's earnings presentation, January 2020
Slide 1: Commerce Bancshares, Inc. Investor Update 4th Quarter 2019
innovating for the future COMMERCE BANCSHARES, INC. INVESTOR UPDATE 4th 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 at a glance
COMMERCE BANCSHARES $26.1 $20.5 154 YEARS IN BUSINESS BILLION IN ASSETS BILLION IN TOTAL DEPOSITS 47TH LARGEST U.S. BANK BASED ON ASSET SIZE1 $14.8 BILLION IN TOTAL LOANS3 $7.6 BILLION IN MARKET CAPITALIZATION $9.1 BILLION IN COMMERCIAL 18TH CARD VOLUME as of 12/31/19 LARGEST U.S. BANK BASED ON MARK
Slide 4: Super-community bank platform: 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 strong culture is the key driver to our long-term success
OUR STRONG CULTURE IS THE KEY DRIVER TO OUR LONG-TERM SUCCESS A culture At Commerce, our core values shape the way we live and work. formed 150+ years ago to • We make decisions today that will be a force for We have a long V sustain us well into the future. good in our term View region and • We see
Slide 6: Beyond financials: supporting each other, customers and communities
BEYOND FINANCIALS Supporting each other, our customers and our communities 2019 Engagement & Enablement1 500 nonprofit organizations supported by “ Consistently Commerce team members through volunteer hours As a socially scoring above the U.S. High 78% responsible and in leadership roles by serving
Slide 7: 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 8: Financial performance in 2019
FINANCIAL PERFORMANCE IN 2019 ROA ROE Fee Dividend growth 16% 1.67% 14.1% income 5% growth Net loan Net Growth in charge- interest 3.36% loans 4% offs to .35% margin period end loans Long-term performance remains strong 15-year TOTAL ANNUALIZED SHAREHOLDER RETURN @ 9.6% Vs KBW Bank Index of 3.1%
Slide 9: 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 $434 $421 $3.60 $3.58 1.76% 1.67% $319 $2.62 1.28% YE 2017 YE 2018 YE 2019 YE 2017 YE 2018 YE 2019 YE 2017 YE 2018 YE 2019 Return on Average Common Period End Loans Pe
Slide 10: Drivers of 4th quarter 2019 earnings
DRIVERS OF 4TH QUARTER 2019 EARNINGS Core NIM decreased 7 bps to 3.33% from 3.40% in Q3 2019, due to lower loan balances and yields on business real estate, Net Interest construction and consumer credit card loans combined with lower Margin yields on business loans. Higher volume in personal real es
Slide 11: Net interest income: December 31, 2019
NET INTEREST INCOME: December 31, 2019 Quarterly Net Interest Income ⦁ Net interest income (tax equivalent) declined $220 (Tax Equivalent) 4.0% slightly from the prior quarter. Net interest income – $210 3.8% ⦁ The YTD decline was mostly due to lower interest on the investment securities portfolio,
Slide 12: 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 13: Fee income at 38% of total revenue
FEE INCOME AT 38% OF TOTAL REVENUE Card, Wealth & Deposit fees provide stable, growing revenue source Non-Interest Income 7% $ in millions Net Interest Income $501 $525 $447 $461 11% Wealth Management $410 $422 1% Deposit Service Charges 7% Commerce Fees and Commissions Bank1 Card Income 12% 62% 201
Slide 14: Well-diversified loan portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Business Loans YTD Average Loans2 $s in millions 6% Construction $13,946 $14,243 $13,629 Business RE 18% 34% $12,953 Residential RE Commerce Consumer/HELOCs $11,873 Bank1 Credit Card 17% 2015 2016 2017 2018 2019 6% Loans Held for Sale 2019 Loan Growth by Category 19%
Slide 15: Summary of fixed and 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: Investment portfolio: high quality, highly liquid and diverse
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of 12/31/19 4% 12% Total investments $8.6 billion Treasury & agency 15% Unrealized gain $136.1 million Municipal 12 month maturities / pay-downs $1.3 billion 14% MBS Duration Other asset backed
Slide 17: Strong capital position: flexibility in capital planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 52 consecutive years of regular common cash dividend increases1 Capital Returned to Common Shareholders as a percentage of Net Income 2 $300 Cash dividends paid on common stock (left) 200% Common share repurchase (left) $250 Payout Ratio (%)
Slide 18: Net loan charge-offs: YTD December 31, 2019
NET LOAN CHARGE-OFFS: YTD – December 31, 2019 '19 YTD YTD Actual Loss ⦁ The YTD increase in $ in 000s 2018 2019 $ Chge Rate business loan net charge-offs was primarily Business $ 2,102 $ 4,102 $ 2,000 0.08% due to a charge-off on a Overdraft 1,621 1,523 (98) 16.55% single leasing customer in the 4th
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 Over
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 Tailored return on investment-based solutions enable healthcare providers to enhance the patient Clients in 500+ $809 Hospitals & MILLION experience, improve cash flow, and leverage new opportunities in 47 States Healthcare Systems Patient Loan Orig
Slide 23: Internal innovation at Commerce: key projects
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 $10.4 $4.2 1.1 164 Full-service BILLION BILLION MILLION branches Consumer Consumer Consumer 366 Deposits Loans* Households* ATMs Focus on Digital Commerce Digital HH Digital Loan Mobile Bank App Rating Penetration Sales (000s) Deposit Use 4.7 46% $42,755 13% 4.7 Period end
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 $57 BILLION $34 $539 MILLION Bank-Managed BILLION Total Client Assets Under Managed Trust Assets2 Management Broke
Slide 26: 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 27: 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 Growth $2,316 Growth Expansion Markets $2,200 98% 89% # of team members per market (includes open positions) $1,913 since 2015 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 $177 Payments $9.1 Card MILLION Revenue BILLION Volume Treasury $47.7 Management $6.2 Merchant MILLION BILLION Volume 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 #12 #7 #12 #12 #19 Debit #14 Commercial Purchasing1 Bank Consumer Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment product offerings He
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% 0.5% CBSH: 1.31% 0.0% Peers: 0.99% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Peers Large Banks Commerce Return on Average Common Equity 20.0% 15.0% ROACE 10-yr average 10.0% 5.0% CB
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 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Dividends $0.58 $0.59 $0.62* $0.64 $0.67 $0.71 $0.74 $0.78 $0
Slide 32: Steady shareholder returns
STEADY SHAREHOLDER RETURNS as of December 31, 2019 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 12/31/2004 = $100 Percent $400 50% CBSH NASDAQ Bank COMMERCE S&P 500 KBW Bank 350 NASDAQ 40% 300 BANK 30% KBW BANK 250 20% S&P 500 200 10% 150 0% 1 Year 3 Year 5 Year
Slide 33: 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/