COMMERCE BANCSHARES, INC.

Transcription

1 COMMERCE BANCSHARES, INC. Investor Update September 2017 Charles G. Kim Chief Financial Officer Jeffery Aberdeen Controller

2 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 forwardlooking statements involve significant risks and uncertainties and are subject to change based on various factors (some of which are beyond the Corporation s control). Factors that could cause the Corporation s actual results to differ materially from such forwardlooking statements made herein or by management of the Corporation are set forth in the Corporation s nd Quarter Report on Form 10-Q and the Corporation s Current Reports on Form 8-K. 2

3 ABOUT COMMERCE BANCSHARES FOUNDED IN 1865 AND OVER 150 YEARS OF Super-Community Bank founded in th largest U.S. bank based on asset size 1 $25.1 billion in assets 3 $20.8 billion in total deposits $45.4 billion in Trust assets Branch Footprint Commercial Payment Services Extended Commercial Markets 181 branches and 375 ATMs Nine key markets St. Louis Central Missouri Tulsa Kansas City Central Illinois Oklahoma City Springfield Wichita Denver Commercial offices Cincinnati Dallas Indianapolis Nashville Des Moines Grand Rapids 240 thousand mobile customers 424 thousand active online banking customers Source: 1 SNL Financial as of 3/31/2017 Company reports and filings as of 6/30/

4 SUPER-COMMUNITY BANK PLATFORM Community Bank Responsive to customer needs and changing preferences Core values embraced by employees Award winning customer service Focus on the full client relationship A CONSISTENT STRATEGY WITH A LONG TERM VIEW Customer relationship-based We ask, listen and solve. High performing teams and engaged workforce Investment in distinctive, highreturn businesses Long history of top credit quality metrics Disciplined approach to acquisitions Focus on operational efficiencies Super-Regional Bank Sophisticated payment system capabilities Broad consumer product offerings Private Banking; Trust; Capital Markets Shareholder driven and strong financial performance Competitive on unit costs 4 4

5 A STRONG EMPHASIS ON CULTURE Giving to our VALUES We have a long term iew We collaborate as ne team We act with ntegrity We are ustomer focused We strive for xcellence Engaged, long-term leadership team Focus on people and talent development Knowledge of customers and markets Collaboration drives sales across business lines Focus on EPS growth Investing in the communities in which we operate 2017 Employee Engagement 1 78% Commerce 75% U.S. High Performance Norm 74% U.S. Financial Services Norm Provided almost $4 million in community support 2 Rated outstanding from the Federal Reserve for community reinvestment Employees heavily engaged in the communities we serve ENABLES EXECUTION OF CORPORATE STRATEGIES 1 The Korn Ferry Hay Group 2017 survey results 2 Commerce and its related foundation 5

6 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, legal firms, consultants and other key service providers operating within the private asset management industry. The award publicly recognizes Korn Ferry clients that have achieved best-in-class levels of engagement. Commerce is one of only three companies in the United States to receive this global award. 6 6

7 STRONG FINANCIAL PERFORMANCE IN 1 year TOTAL RETURN ON COMMON STOCK 45% Growth in Earnings per Share Market capitalization Revenue growth 7% $5.9B 7% Deposit growth $1.1 billion Growth in loans $983 million Net loan chargeoffs to loans 6% 8%.25% Long term performance remains strong 10 year TOTAL SHAREHOLDER 9.66% 7 7

8 FINANCIAL PERFORMANCE VS. PRIOR YEAR Net Income Attributable to CBI ($ in Millions) $264 $275 $135 $150 Earnings per Common Share $2.61 Year to date Year to date Year to date $2.43 $1.29 $1.43 Return on Total Assets 1.11% 1.12% YE 2015 YE YTD YTD % 1.21% Return on Average Common Equity Period End Loans ($ in Billions) Period End Deposits ($ In Billions) Year to date June 30 June % 11.4% 11.3% 11.4% $12,444 $13,427 $13,125 $13,649 $19,979 $21,101 $20,150 $20, As of June 30,

9 Net interest income - $ in millions NET INTEREST INCOME: YTD June 30, 2017 Interest income 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 $200 $190 $180 $170 $160 $150 Quarterly Net Interest Income 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3.2% 3.1% 3.0% 2.9% 2.8% 2.7% 2.6% 2.5% Net Yield TIPs inflation income was $2.9 million in the current quarter, $1.9 million in the prior quarter, and $3.7 million in the same quarter last year. Net interest income last quarter included onetime interest of $2.7 million from a private equity investment; no special items in current quarter. Growth in net interest income results from increased rates on all loans, especially commercial loans which have a significant portion of variable rate loans. Deposit funding costs remained stable. Net int inc Net Yield 2017 Net int inc Net Yield w/o TIPs* Tax Equivalent YTD Last Quarter This Quarter Change Total Loans Loans for sale Fed funds LT repos Investment securities Balances at FRB Total earning assets Deposits Borrowings Int. bear. Liabilities 3.92% 6.64% 0.94% 2.12% 2.58% 0.77% 3.30% 0.21% 0.67% 0.23% 4.06% 5.75% 1.13% 2.22% 2.52% 1.04% 3.37% 0.23% 0.81% 0.29% 0.14% -0.89% 0.19% 0.10% -0.06% 0.27% 0.07% 0.02% 0.14% 0.03% $10,000 $8,000 $6,000 $4,000 $2,000 $0 -$2,000 -$4,000 -$6,000 -$8,000 TIPS Interest - $ in 000s CPI-U Net interest income 3.14% 3.19% 0.05% * Excludes inflation income on TIPs Normal int. Inflation inc. CPI-U 9

10 FEE INCOME AT 40% OF TOTAL REVENUE Balanced mix of interest and non-interest income 8% Net Interest Income 12% 14% 2% 7% 11% 9% Commerce Bank* 60% 58% Wealth Management Deposit Service Charges Fees And Commissions Card Income Other 10% 3% 3% 6% Peer 5% Banks* 73% Non-Interest Income $ - millions $ $ $ $448 $474 $ Q16 Year to date vs 2017 $240 2Q17 Peer Banks include: ASB, BKU, BOKF, CFR, FHN, FNB, FULT, HBHC, IBKC, ISBC, MBFI, PB, SNV, TCF, UMBF, UMPQ, VLY, WBS, WTFC *Source: SNL & FIS as of 6/30/2017 Continued focus on growing fee income through new and existing product and services offerings Examples: Toggle Remitconnect Supply chain finance Insurance claims payment processing Accounts Payable automation Swaps 10

11 WELL-DIVERSIFIED LOAN PORTFOLIO 5% 19% 17% Commerce Bank* 20% 33% 6% Business Loans Construction Business RE Residential RE Consumer/HELOCs Credit Card Loans Held for Sale 18% 11% 1% Peer Banks* 34% 31% 5% Period End Loan Growth $s in millions 14,000 13,000 12,000 11,000 10,000 9,000 $9, $11,469 $10, $12, $13,649 $13,427 2Q17 Peer Banks include: ASB, BKU, BOKF, CFR, FHN, FNB, FULT, HBHC, IBKC, ISBC, MBFI, PB, SNV, TCF, UMBF, UMPQ, VLY, WBS, WTFC *Source: SNL & FIS as of 6/30/2017 Loan growth was flat this quarter mostly due to lower business and credit card loans. Break-out of growth vs previous quarter by product: Business RE Construction Auto & consumer Business $56 million $34 million $36 million $79 million 11

12 INVESTMENT PORTFOLIO: HIGH QUALITY, DIVERSE, SHORT DURATION Composition of AFS Portfolio AFS Portfolio as of 6/30/17 24% 3% 40% 15% 19% Treasury & agency Municipal MBS Other asset backed Corporate Total investments Unrealized gain Duration December years December years December 2.9 years June years $9.4 billion $98 million 12 month maturities / pay-downs $1.6 billion June 30, 2017 Weighted Avg rate Weighted Life (years) Treasury & agency* 1.4% 3.7 Municipal - TE 3.7% 5.0 MBS 2.5% 3.4 Other asset-backed 1.8% 2.1 YTD TE Rate - Investments 2.6% 2.5% 2.4% 2.3% 2.2% 2.1% 2.6% 2.3% 2.3% 2.2% 2.4% 2.6% Corporate 2.5% % Q17 *Excludes inflation effect on TIPs Sources: InTrader, AFS portfolio 12

13 STRONG CAPITAL POSITION FLEXIBILITY IN CAPITAL PLANNING $ in millions % to Net Income - combined Cash Dividends & Buy Backs Cash dividend Buy back % Payout $ % $250 $ % 120% 100% $150 80% $100 $50 60% 40% 20% $ % Year-end capital ratios Tier 1 common risk-based capital 11.6% Tier 1 risk-based capital 12.4% Total risk-based capital 13.3% Leverage ratio 9.6% ASR transactions totaled $200 million in 2014 and $100 million in Market transactions totaled $39 million in included a special cash dividend of $212 million. 13

14 $ in millions NET LOAN CHARGE-OFFS: YTD June 30, 2017 '17 YTD YTD Actual Loss $ in 000s 2017 $ Chge Rate Business $ 398 $ 415 $ % Overdraft NM Construction (518) (742) (224) (0.18)% Business R/E (1,272) (49) 1,223 (0.00)% Personal R/E 110 (112) (222) (0.01)% Consumer 4,380 4, % HELOC (52) 0.06 % Credit card 12,568 14,898 2, % Total $ 16,355 $ 19,986 $ 3, % Higher credit card loss rates this year reflect growing delinquencies which have started to stabilize in the last several months. Consumer losses up $358 thousand but overall loss rates remain low. Commercial Loan Charge-offs & Recoveries $12,000 Loan C/O Recovery $10,000 $8,000 $6,000 $4,000 $2,000 $ in 000s 2017 Non-accrual loans $24,524 $13,362 Foreclosed assets 1, $26,133 $13,877 $ Q'

15 MAINTAINING THE BALANCE Strong performance; ongoing refinement of the Core Bank Super-Community Bank platform Relationship-based banking High-touch customer service Full suite of product and service offerings Disciplined attention to risk return Divest in businesses & activities that no longer provide acceptable returns A highly engaged workforce Focus on profitability and shareholder return CUSTOMER FOCUSED Disciplined focus on priority blue chip investments Funding Future Growth Expansion Market Growth Transform the Retail Model Enhance Private Client Model Health Services Financing Claims Payments Commerce Bank Mortgage Enterprise CRM Succession Planning emphasis on culture, collaboration & core values 15

16 TRANSFORMING THE RETAIL MODEL Branch Locations Total of branches reduced by 28 since Total Branch FTEs 1,800 1,634 1,600 1,400 1,200 1,262 Branch staff reduced by 372 FTE since , Branches closed New Branches Branch expense $s in millions $96.0 $94.0 $95.4 $93.4 Expense reduction efforts continue $92.0 $90.0 $88.0 $90.8 $87.8 Nearly $17 million in savings since $

17 Monthly Banking Sessions TRANSFORMING THE RETAIL MODEL Banking channel preferences #s in thousands Mobile Online Banking Branch 5,000 4,000 3,000 2,000 1, Customer channel preference shifting to mobile Key retail objectives Grow priority segments Invest in digital channels / Improve digital sales & client experience Develop new fee income programs Develop innovative product offerings and marketing approaches Grow Revenue Optimize Cost Retain Customer and Employee Engagement 17

18 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. $45.4 billion in total client assets 1 $27.5 billion in assets under management 21 st largest bank-owned Trust Company in the United States 2 Record sales in Asset Management up 7% over prior year Trust Assets $s billions $50 $45 $40 $35 $30 $25 $20 $30 $35 $39 $38 $43 $ YTD 2017 Key Priorities Enhanced Private Client model Asset Management sales growth Institutional Trust Asset Management sales growth Implement Marketing strategies Enhanced sales partnerships from Commercial & Retail channels 1 Assets under Administration 2 SNL Ranking as of 3/31/

19 A Full Spectrum of Planning Solutions Core Private Client Commerce Family Office New Private Client Delivery Model Scenario Plans Modular Solutions Topical tools and information Financial Advisory Services Comprehensive & Continuous Financial Planning Family Wealth Stewardship Family Mission Statement Wealth Education Philanthropic Planning Client RM FAS Planner CFO Team 19 19

20 TRENDS IN TRUST REVENUE AND SALES Asset Management Revenues $s in millions $ $96 $ % $115 $122 $ Solid growth in fee continues; profit margins reach 40% in. Attrition rates remain below industry results. Asset Management Sales - $ 000's $12.0 $10.0 $9.1 $8.1 $8.2 $8.3 $8.0 $7.1 $6.1 $6.0 $4.0 $8.6 $9.8 $10.5 $11.2 Demand continues for asset management services. Record sales of $11.2 million achieved in. $2.0 $

21 COMMERCIAL REVENUE GROWTH OPPORTUNITIES Commercial Banking - Total Loans and Deposits $s in billions Loans Deposits $8.9 $9.0 $8.4 $8.4 $8.4 $8.1 $8.0 $7.4 $7.6 $7.5 $7.0 $6.8 $6.5 $6.8 $6.0 $5.7 $5.0 $ Q17 $600 $500 $400 $300 $200 $100 $0 Commercial Banking Revenue $s in millions $478 $491 $511 $471 $ $258 2Q17 Key Priorities: EMBRACING INNOVATION + $157MM IN THE PAYMENTS SYSTEMS Our full suite of products and services brings real value to client relationships Build out capabilities in Expansion Markets Refine Healthcare Banking strategy Embrace innovation in the Payments Systems + $96MM 21

22 COMMERCIAL BANKING EXPANSION MARKETS Nashville Cincinnati Oklahoma Denver Dallas Expansion Market Loan Growth $s in billions $2,000 $1,500 $1,000 $500 $608 $962 $1,091 $1,338 $1,542 $1,626 Personnel Overview for Expansion Markets #of commercial bankers per market (includes open positions) $ Q17 Loan Growth vs % 7.8% 8 8 Cincinnati Denver Oklahoma Nashville Dallas Total Company Expansion Markets EXPANSION MARKETS OFFERING GROWTH OPPORTUNITIES Period end balances 22

23 LOAN GROWTH REMAINS STRONG IN MOST MARKETS $s in millions $3,500 $3,000 $2, % +14% 2015 Experienced solid loan growth in most markets; especially in Kansas City and St. Louis. Expansion markets of Dallas, Cincinnati, Nashville, Denver and Oklahoma showing some of the fastest growth. $2,000 $1,500 $1,000 $500 0% +8% +5% -2% +7% +14% -3% +34% +18% +19% $0 Kansas City St. Louis Springfield Oklahoma Tier 3, 4* Illinois Central MO Denver Wichita Dallas Cincinnati Nashville *Includes MOKAN, Garden City, SEMO, Manhattan and Hays 23

24 CARD PRODUCTS A LEADER AMONGST TOP 50 U.S. BANKS CONSISTENTLY RANKED AMONG THE TOP ISSUERS IN THE NILSON REPORT Commercial Card Issuer Purchasing Card Issuer Bank Acquirer Consumer Card Debit Card Prepaid Card #12 #7 #11 #14 #20 #16 A FULL SUITE OF INNOVATIVE CARD AND PAYMENT PRODUCT OFFERINGS Supply Chain Finance Health Services Financing Claims Payments Multi Account Chip Co-Brand toggle Prepaid Expense Source: Nilson Reports (Debit: April 2017; Consumer Card: February 2017; Prepaid: July 2017; Merchant: March 2017; Purchasing: June 2017; Commercial Card June 2017), based on the top 50 U.S. banks ranked by total assets as of 12/31/, SNL Financial 24

25 COMMERCE BANK MAINTAINS SOLID PERFORMANCE Peer Banks Large Banks OVER TIME Commerce Bank Return on Assets 1.5% 1.0% 0.5% 0.0% ROA 10-yr average CBSH: 1.19% Peers: 0.64% Return on Equity 15.0% ROE 10-yr average CBSH: 11.73% Peers: 5.66% 10.0% 5.0% 0.0% -5.0% Peer Banks include: ASB, BKU, BOKF, CFR, FHN, FNB, FULT, HBHC, IBKC, ISBC, MBFI, PB, SNV, TCF, UMBF, UMPQ, VLY, WBS, WTFC; Large Banks include: JPM, BAC, C, WFC USB, PNC, FITH, RF Source: SNL Financial; data as of 12/31/; CBI 2015 & numbers via internal reporting 25

26 Net Income $ 000s LONG TERM VIEW: NET INCOME AND EARNINGS PER SHARE Earnings per Share $350 Earnings Per Share Net Income Dividends per share $0.61 $0.65 $0.65 $0.67 $0.69 $0.72* $0.74 $0.78 $0.82 $ MARKS THE 49 TH CONSECUTIVE YEAR OF DIVIDEND GROWTH *Including 2012 special dividend = $1.90 All data has been restated for 5% stock dividend distributed in December Source: Corporate Finance 26

27 STEADY SHAREHOLDER RETURNS (as of June 30, 2017) Total Shareholder Returns Indexed, 06/30/2007 = COMMERCE BANK NASDAQ BANK INDEX KBW BANK INDEX S&P Annualized Comparison Total Shareholder Returns Percent 60% 50% 40% 30% 20% CBSH S&P 500 NASDAQ Banks KBW Bank Index % 0% 1 Year 3 Year 5 Year 10 Year 26.63% 14.37% 17.06% 10.26% 17.89% 9.60% 14.62% 7.18% 40.02% 15.29% 18.51% 4.15% 50.47% 12.63% 18.30% 0.64% Consistent, positive returns to shareholders Significant outperformance relative to banks over long period Source: Bloomberg; data as of 06/30/