COMMERCE BANCSHARES, INC.

Transcription

1 COMMERCE BANCSHARES, INC. ANNUAL SHAREHOLDERS MEETING April 18, 2018 David Kemper Chairman and Chief Executive Officer

2 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, projections, estimates and intentions. These forward-looking 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 forward-looking statements made herein or by management of the Corporation are set forth in the Corporation s 2017 Report on Form 10-K and the Corporation s Current Reports on Form 8-K. 2 2

3 ABOUT COMMERCE BANCSHARES branches and 376 ATMs in our footprint Extended Commercial Market Area 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 3 Source: 1 S&P Global Market Intelligence as of 12/31/2017; Company reports and filings as of 12/31/ Commercial Payments Services offered in 48 states 2 $24.8 BILLION IN ASSETS 46 TH LARGEST U.S. BANK BASED ON ASSET SIZE 1 $6.0 BILLION MARKET CAPITALIZATION 34 TH LARGEST U.S. BANK BASED ON MARKET CAPITALIZATION 1 $48.7 BILLION IN TRUST ASSETS 20 TH LARGEST AMONG U.S. BANK- OWNED TRUST COMPANIES BASED ON AUM YEARS IN BUSINESS $20.4 BILLION IN TOTAL DEPOSITS $14.0 BILLION IN TOTAL LOANS $7.9 BILLION IN COMMERCIAL CARD VOLUME 12.46% RETURN ON AVERAGE COMMON EQUITY 5 TH ROACE FOR THE TOP 50 U.S. BANKS BASED ON ASSET SIZE 1 3

4 SUPER-COMMUNITY BANK PLATFORM A consistent strategy with a long term view Community Bank Quickly adapt to customer needs and changing preferences Core values embraced by employees Award winning customer service Focus on the full client relationship Customer relationship-based CHALLENGE ACCEPTED High performing teams and engaged workforce Investment in distinctive, highreturn businesses Long history of top quartile 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 act with ntegrity We strive for xcellence We collaborate as ne team We are ustomer focused 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 78% Commerce 2017 Employee Engagement 1 75% U.S. High Performance Norm 74% U.S. Financial Services Norm Contributed $32 million to Commerce Bancshares Foundation to enable expanded community support 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 5

6 RECENT RECOGNITION Commerce Bank was recognized with eight Greenwich Excellence Awards in the following categories: 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. Middle Market Banking ($10-500MM) Cash Management - Overall Satisfaction Cash Management - Overall Satisfaction - Midwest Likelihood to Recommend / Net Promoter Score Likelihood to Recommend / Net Promoter Score - Midwest Overall Satisfaction Overall Satisfaction - Midwest Proactively Provides Advice Midwest Small Business Banking ($1-10MM) Likelihood to Recommend / Net Promoter Score - Midwest 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 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 ECONOMIC THEMES We expect growth to accelerate even further in It would not surprise us if growth approaches or even surpasses 3% this year. The key drivers to this growth are: Increasing levels of employment Growth in business and consumer confidence that is translating to increasing retail sales and a deepening of the capital stock with investment in infrastructure and capital equipment A continued recovery in the housing market A positive tailwind from the global economy Record stock prices A boost from the Trump tax plan U.S. Real GDP Employment 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% 10-year Average -3.0% "Sustainable" Trend Growth -4.0% Y-O-Y (left axis) -5.0% , Month Change (right axis) Monthly Increase (left axis) % 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% Source: Commerce Trust Company, U.S. Bureau of Economic Analysis, Bloomberg 7

8 THEMES IN THE BANKING INDUSTRY The traditional brick and mortar retail branch network remains relevant but with evolution of format and emphasis on strategic location Tech enhancements to the digital experience will continue to meet the customers changing needs; organic growth as a result Maintaining a balance between deposit retention and rate adjustments Fraud and cyber crimes continue to be a big threat driving big investments to improve security Fintechs are no longer viewed strictly as a competitive threat but also as potential partnership opportunities Increased investments in innovation and an ongoing emphasis on reducing operating costs Introduction of new technologies, automated processes and the need to replace aging core systems Regulation is still a strong influence in the industry but pace of new regulation is slowing; leadership changes at government agencies will continue to play a role 8

9 MAINTAINING THE BALANCE STRONG PERFORMANCE with 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 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 9

10 CONSUMER BANKING $10.3 BILLION Consumer Deposits $10.2 BILLION $2.5 BILLION Consumer Loans $1.0 BILLION Consumer Auto Loans Average FICO $2.5 BILLION $113.5 MILLION $15 MILLION Branch Expense Reduction since 2009 Banking Channel Preferences Monthly Banking Sessions (in thousands) Mobile Online Branch 7,000 6,000 5,000 4,000 3,000 2,000 1, Period end balances, Information as of December 31, Continue Expanding Digital Capabilities : 49.4% Mobile Penetration 2017: 54.7% App Store Rating : 2017: as of 1/17/18 : 3.3% : $19,157 Mobile Deposit Use 2017: 7.6% Digital Loan Sales(000s) 2017: $25,

11 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 BILLION Total Client Assets 1 20TH Largest Among Bank-Owned Trust Company 2 $30.0 BILLION Assets Under Management 13% Record Asset Management Sales Total Client Assets $ in billions $38.4 $43.1 $48.7 Assets Under Management $ in billions Asset Management Sales Growth 13% $22.6 $25.4 $30.0 6% 7% Period end balances, Information as of December 31, Assets under Administration 2 S&P Global Market Intelligence ranking as of 12/31/2017, based on assets under management

12 COMMERCIAL BANKING Revenue growth opportunities $8.9 BILLION Commercial Loans Commercial Loans $ in billions $7.5 $8.4 5 Yr. CAGR +9.3% $8.9 $7.9 BILLION Commercial Deposits 5 Yr. CAGR +3.0% Commercial Deposits $ in billions $8.1 $8.5 $7.9 $523 MILLION Commercial Revenue 5 Yr. CAGR +2.1% Commercial Revenue $ in millions $491.0 $511.0 $ Period end balances, Information as of December 31,

13 COMMERCIAL BANKING EXPANSION MARKETS OFFERING GROWTH OPPORTUNITIES Nashville Expansion Market Loan Growth $s in millions $2,000 $1,500 $1,000 $500 $0 $ Cincinnati $ Oklahoma $1, $1, Personnel Overview for Expansion Markets #of commercial bankers per market* (includes open positions) Denver $1,542 Dallas $1, Expansion Market Loan Growth 195% since 2012 Loan Growth 2017 vs 16.2% % Total Company Expansion Markets Cincinnati Denver Oklahoma * As of August 2017 Period end balances, Information as of December 31, 2017 Nashville Dallas 13 13

14 COMMERCIAL PAYMENTS $194 MILLION Payments Revenue $7.9 BILLION Commercial Card Volume $145 MILLION Health Services Financing Loans $42 MILLION Treasury Services Revenue EMBRACING INNOVATION IN THE PAYMENTS SYSTEMS Our full suite of products and services brings real value to client relationships Invoice Capture and Workflow Approval $ Payments Hub Supply Chain Finance Remit Connect Health Services Financing Claims Payments Period end balances, Information as of December 31,

15 FEE INCOME AT 40% OF TOTAL REVENUE Balanced mix of interest and non-interest income 1% 7% 13% 11% 8% Commerce Bank * 60% 10% 3% 3% 6% Peer 5% Banks * 73% Net Interest Income Wealth Management Deposit Service Charges Fees And Commissions Card Income Other Non-Interest Income $ millions $ $ $437 $448 $474 $ 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 Peer Banks include: ASB, BKU, BOKF, CFR, FHN, FNB, FULT, HBHC, IBKC, ISBC, MBFI, PB, SNV, TCF, UMBF, UMPQ, VLY, WBS, WTFC *Source: S&P Global Market Intelligence & FIS as of 12/31/

16 WHERE DO WE RANK AGAINST PEERS? (YTD RESULTS DECEMBER 2017) ROA 4Q2017 BankUnited 2.13% MB Financial 1.55% Commerce 1.28% TCF 1.26% Prosperity 1.22% Cullen/Frost 1.17% BOK 1.02% Umpqua 0.98% Wintrust 0.98% Webster Fin 0.97% UMB 0.90% Synovus 0.89% Fulton 0.88% Hancock 0.82% Associated 0.78% Valley 0.69% FNB 0.68% First Horizon 0.59% IBERIABANK 0.58% Investors 0.52% CBSH 1Q18 ROA: 1.66% ROACE 4Q2017 BankUnited 23.36% Commerce 12.46% UMB 11.88% Cullen/Frost 11.48% MB Financial 11.41% TCF BOK 10.69% 9.81% Webster Fin 9.76% Synovus 9.27% Wintrust 9.07% Fulton 7.83% Hancock 7.68% Prosperity 7.26% Associated 7.23% Valley 6.55% Umpqua 6.20% First Horizon 6.19% FNB 4.89% IBERIABANK 4.06% Investors 4.00% CBSH 1Q18 ROACE: 15.58% Source: S&P Global Market Intelligence 16

17 2017 YEAR END EARNINGS $ in millions A 2017A Actual % Incr. Net interest income $ 680 $ 734 8% Non-interest income % Total revenue 1,127 1,195 6% Securities gains/(losses) (0) 25 NM Non-interest expense (689) (744) 8% Provision for loan losses (36) (45) 25% Pretax income % Income taxes (124) (111) -11% Net income % Non-controlling int. exp. (1) (1) NM Net inc attrib. to Commerce % Less preferred stock div. (9) (9) 0% Net inc avail. to common stock % Diluted EPS $ 2.49 $ % ROA : 1.12% 2017: 1.28% ROACE : 11.33% 2017: 12.46% Efficiency Ratio : 61.04% 2017: 62.18% Cash Dividends : $ : $0.857 Ending Stock Price : $ : $

18 FINANCIAL HIGHLIGHTS QTD MARCH 31, 2018 $ millions (except EPS) 1Q2017 1Q2018 % change Net Income attrib to Commerce $72 $ % Return on Average Assets 1.15% 1.66% 44.3% Return on Average Common Equity 11.74% 15.58% 32.7% Efficiency Ratio 62.19% 58.21% -6.4% Average Loans $13,537 $13, % Average Deposits $21,023 $20, % Diluted EPS* $0.65 $ % *Per shares figures have been restated for 5% stock dividend distributed in December

19 COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Commerce Bank Peer Banks Large Banks Return on Assets 1.5% 1.0% 0.5% 0.0% ROA 10-yr average CBSH: 1.18% Peers: 0.63% -0.5% Return on Average Common Equity 15.0% ROACE 10-yr average CBSH: 11.57% Peers: 5.53% 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: S&P Global Market Intelligence; data as of 12/31/2017; CBI numbers via internal reporting 19

20 Net Income $ 000s Earnings per Share LONG TERM VIEW: NET INCOME AND EARNINGS PER SHARE $350 Earnings Per Share Net Income $ $ $ $ $1.00 Dividends per share $0.61 $0.62 $0.64 $0.65 $0.69* $0.71 $0.74 $0.78 $0.82 $0.86 EPS REMAINS STRONG 49 TH CONSECUTIVE YEAR OF DIVIDEND GROWTH *Including 2012 special dividend = $1.806 All data has been restated for 5% stock dividend distributed in December 2017 Net Income in the chart represents Net Income Available to Common Shareholders Source: Corporate Finance 20

21 STEADY SHAREHOLDER RETURNS as of December 31, 2017 Total Shareholder Returns Indexed, 12/31/2007 = $100 $300 $250 $200 COMMERCE BANK NASDAQ BANK INDEX KBW BANK INDEX S&P Annualized Comparison Total Shareholder Returns Percent 25% 20% 15% 10% CBSH S&P 500 NASDAQ Banks KBW Bank Index $150 $100 $50 $ Consistent, positive returns to shareholders Significant outperformance relative to banks over long period 5% 0% 1 Year 3 Year 5 Year 10 Year 3.03% 16.19% 17.43% 10.06% 21.82% 11.39% 15.77% 8.49% 5.46% 16.53% 18.66% 6.48% 18.59% 15.24% 18.18% 4.13% Source: Corporate Finance, Bloomberg; data as of 12/31/

22 NOTICE: Due to technical difficulties, the recorded audio file for the Annual Shareholder meeting is of low quality. However, if you are interested in listening to the recorded message, you can access the recording by clicking on the link provided below Shareholder Meeting Webcast Audio