Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — KBW conference February 2015
28 slides from Commerce Bancshares's conference presentation, February 2015
Slide 1: Commerce Bancshares, Inc. Investor Update February 2015
COMMERCE BANCSHARES, INC. INVESTOR UPDATE FEBRUARY 2015 Charles Kim Chief Financial Officer Jeffery Aberdeen Controller
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: About Commerce Bancshares
ABOUT COMMERCE BANCSHARES Super-Community Bank – 150 years strong – $24.0 billion in assets • 37th largest U.S. bank based on asset size1 • Growth opportunities in expansion markets • Investment in distinctive, high-return businesses • Commercial Payment Services coupled with top quartile credit met
Slide 4: Super-Community Bank Platform
SUPER-COMMUNITY BANK PLATFORM A CONSISTENT STRATEGY WITH A LONG TERM VIEW Community Bank Customer relationship-based Front End We ask, listen and solve. Super-Regional Back End • Responsive to High performing teams and customer needs • Sophisticated engaged workforce payment system and changing pref
Slide 5: About Our Markets
ABOUT OUR MARKETS St. Louis Kansas City Community Markets1 Population: 2.8 million Population: 2.1 million Population: 1.8 million 5-yr population growth: 0.6% 5-yr population growth: 2.7% 5-yr population growth: 2.4% Median HH income: $53M Median HH income: $56M Median HH income: $51M Unemployment
Slide 6: Strong Industry Recognition and Innovation
STRONG INDUSTRY RECOGNITION AND INNOVATION Bank Directors’ Top Banks America’s Best Banks by Forbes Commerce ranked #12 on Commerce ranked among the top Bank Director magazine’s ten on Forbes’ list of America's 2014 Bank Performance Best Banks six years in a row Scorecard ($5 - $50 billion As report
Slide 7: A Strong Emphasis on Culture
A STRONG EMPHASIS ON CULTURE ENABLES EXECUTION OF CORPORATE STRATEGIES Core Values • 4,744 employees • Engaged, long-term leadership We have a team • Continuously strong long term employee View • Focus on people/talent engagement scores We development collaborate 2014 Employee Engagement as One team
Slide 8: Financial Performance vs. Prior Year
FINANCIAL PERFORMANCE VS. PRIOR YEAR Net Income Attributable CBI EPS Return on Assets $ millions $270 $2.65 1.3% $261 $262 $2.61 $2.59 1.2% $260 $2.60 1.2% 1.2% $250 $2.55 1.1% $240 $2.50 1.0% $230 $2.45 0.9% $220 $2.40 0.8% 2013 2014 2013 2014 2013 2014 Return on Common Equity Period End Loans Peri
Slide 9: Net Interest Income YTD December 31, 2014
NET INTEREST INCOME YTD – December 31, 2014 $180.0 3.40% 3.20% $170.0 3.00% Net interest income $160.0 Net Yield 2.80% $ millions $150.0 2.60% 2.40% $140.0 2.20% $130.0 2.00% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 2013 Net int. inc. 2014 Net int. inc. Net Yield Net Yield w/o TIPS Tax equivalent – Q
Slide 10: Treasury Inflation-Protected Securities (TIPS)
TREASURY INFLATION-PROTECTED SECURITIES (TIPS) TIPS Interest – in $000’s 2013 2014 $Change $10,000 240 Avg. TIPS O/S 401,162 497,271 $8,000 238 236 $6,000 Interest income $5,133 $5,825 $692 234 $4,000 Inflation income 3,642 7,925 4,283 232 $2,000 Total interest income $8,775 $13,750 $4,975 230 $0 22
Slide 11: Diverse Revenue Relative to Peers
DIVERSE REVENUE RELATIVE TO PEERS BALANCED MIX OF INTEREST AND NON-INTEREST INCOME Commerce Bank Peer Banks Net interest income 13% Fees & commission 7% 3% Deposit service charges 10% 9% 71% Other 57% 7% Wealth management 10% 4% Card income 7% 2% $440 Non-Interest Income $436 $ millions $418 420 $40
Slide 12: Summary of Trust and Commercial Card Revenues
SUMMARY OF TRUST AND COMMERCIAL CARD REVENUES Focus on high return businesses added significantly to revenues Asset Management Revenues $ millions $120 $113 +9% 110 $103 • Asset management 100 $95 $88 and commercial 90 $81 card businesses 80 offer strong growth 70 and good margins 60 2010 2011 2012
Slide 13: Well-Diversified Loan Portfolio Grew 9% in 2014
WELL-DIVERSIFIED LOAN PORTFOLIO GREW 9% IN 2014 Commerce Commerce Commercial: 59% Peer Peer Banks Banks Consumer: 41% 7% Commercial: 69% Consumer: 31% Bus, Lease & tax free 0% Construction 18% 13% Business RE 35% 35% Personal RE 16% Consumer & HELOC Consumer Card 16% 5% 31% 4% 20% Average Loan Growt
Slide 14: Investment Portfolio: High Quality, Diverse, Short Duration
INVESTMENT PORTFOLIO: HIGH QUALITY, DIVERSE, SHORT DURATION Composition of AFS Portfolio AFS Portfolio: Dec. 31, 2014 1% Total investments $9.4 billion 16% 33% Unrealized gain $137 million 19% 12 mo. maturities/ pay-downs $1.8 billion Duration (years) 31% June 2013 2.7 Dec 2013 2.9 June 2014 2.7 Tre
Slide 15: Deposit Growth Continues but at a Slower Pace
DEPOSIT GROWTH CONTINUES BUT AT A SLOWER PACE Period End Deposits $20.0 $19.5 0.70% $19.0 Period End Deposits Average Rate Paid $18.3 0.60 18.0 0.50 $16.8 $ billions 0.40 16.0 $15.1 0.30 14.0 0.20 0.10 12.0 0.00 2010 2011 2012 2013 2014 Avg Rate Paid Deposits • After strong growth in $ in billions 2
Slide 16: Strong Capital Position – Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING Cash Dividends and Buy Back $250 140% % to Net Income – combined Cash dividend 120 200 Buy back 100 $ millions 150 % Payout 80 100 60 40 50 20 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Capital Ratios – 12/31/2014 • Repurchased tre
Slide 17: 2014 Net Loan Charge-Offs Reflect Lower Recoveries
2014 NET LOAN CHARGE-OFFS REFLECT LOWER RECOVERIES $ in 000's YTD 2013 YTD 2014 $ Change 2014 Loss Rate • Charge-offs on commercial type loans remain low – lower level of recoveries on Business $ (867) 465 1,332 0.01% construction loans suggests slowing Leases - - - 0.00% going forward Overdraft 1,0
Slide 18: Maintaining the Balance
MAINTAINING THE BALANCE Disciplined focus on priority blue chip investments Continued strong performance of Deepen relationships and Invest in distinctive, the core bank profitability in traditional CBI Blue high return markets & lines of businesses Chips business Execute on Supply Chain disciplin
Slide 19: 2015 Business Plan: Overview of Our Strategic Position
2015 BUSINESS PLAN: OVERVIEW OF OUR STRATEGIC POSITION • Solid performance in 2014 • Excellent credit metrics • Continuing margin erosion • Avenues for new loan growth • Regulatory and compliance Challenges Strengths (mortgage, indirect, leasing, healthcare) distractions/costs • Industry leading pay
Slide 20: Transforming the Retail Model
TRANSFORMING THE RETAIL MODEL Opportunities: Blue Chips and Key Priorities: New and refreshed product and Continue transformation of branch service offerings model Attracting new households Re-engineer sales models to align Evolution of distribution strategy with changing customer expectat
Slide 21: Commerce Trust Company – Growing Wealth Sector
COMMERCE TRUST COMPANY – GROWING WEALTH SECTOR • $39 billion in total client assets Trust Assets • Ranked #25 nationally based on assets $ billions $39 $40 $35 under management1 $30 • Bond Fund achieved 5-star rating by 30 $25 $27 Morningstar 20 • #2 Fastest Growing Family Office (Bloomberg) • Fixed
Slide 22: Commercial – Revenue Growth Opportunities
COMMERCIAL – REVENUE GROWTH OPPORTUNITIES Loan Growth YOY 2013-2014 35.0% 29.1% 30.0% 30.0% 25.0% 20.0% 18.3% 12.0% 15.0% 11.1% PRODUCT INDUSTRY 10.0% Healthcare Suite Clayton Holdings Energy 5.0% Agribusiness Treasury Services Food Processing + $642MM + $157MM + $96MM + $60MM + $36MM Corporate Card
Slide 23: Commercial Banking – Expansion Markets
COMMERCIAL BANKING – EXPANSION MARKETS $1,200 Expansion Market Loan Growth $ millions $1,091 1,000 $962 800 $608 600 $507 $438 400 200 0 2010 2011 2012 2013 2014 Dallas Nashville Cincinnati Denver Oklahoma 15% Loan Growth 13.5% 2014 vs. 2013 10 4.7% 5 0 Total Company Expansion Markets EXPANSION MARK
Slide 24: Card Products – A Leader in the Payments Industry
CARD PRODUCTS – A LEADER IN THE PAYMENTS INDUSTRY Consistently ranked among the top issuers in the Nilson Report #7 Purchasing Card Issuer Key Products: Commercial Card • AP Automation #17 Commercial Card Issuer • Health Services Financing Debit Card #35 Debit Card Issuer • Claims Payments • Private
Slide 25: Commerce Bank Has Been a Solid Performer Over Time
COMMERCE BANK HAS BEEN A SOLID PERFORMER OVER TIME ROA 10-yr average Return on Assets CBSH: 1.3% 2.0% Peers: 0.8% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Commerce Bank Peer Banks Large Banks Return on Equity ROE 10-yr average CBSH: 12.7% 20.0% Peers: 8.4% 15
Slide 26: Long Term View: Net Income and Earnings Per Share
LONG TERM VIEW: NET INCOME AND EARNINGS PER SHARE $300 $2.80 Earnings Per Share Net Income 2.60 250 2.40 Earnings per Share 2.20 Net Income 200 $ 000s 2.00 1.80 150 1.60 100 1.40 1.20 50 1.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Dividends per share $0.59 $0.63 $0.68 $0.71 $0.72 $0.74 $0
Slide 27: Steady Shareholder Returns in a Highly Volatile Market
STEADY SHAREHOLDER RETURNS IN A HIGHLY VOLATILE MARKET Total Shareholder Returns* Indexed, 12/31/2004 = 100 Annualized Total Shareholder Returns* 220 S&P 500 Percent 200 COMMERCE BANK 1 yr 3 yr 5 yr 10 yr 180 160 CBSH 3.7% 13.5% 10.7% 6.2% 140 S&P 15.2% 20.4% 15.4% 7.7% 120 500 NASDAQ BANKS 100 KBW
Slide 28: Appendix
APPENDIX Recent Fixed Income Award 27