commerce bancshares, inc.€¦ · 26/10/2011 · commerce bancshares, inc. cfa society of st....

COMMERCE BANCSHARES, INC.

CFA SOCIETY OF ST. LOUIS

David W. Kemper Chairman & CEO

October 26, 2011

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 Second Quarter Report on Form 10-Q and the

Corporation’s Current Reports on Form 8-K.

CAUTIONARY STATEMENT

1

2

TODAY’S DISCUSSION

• Economic and Industry highlights

• Commerce Bank overview

– Our business model – Our performance and how we compare

3

ECONOMIC CONDITIONS CREATING A GLOOMY OUTLOOK

• Spiraling European debt crisis brought turmoil to the global financial markets

• S&P downgraded U.S. sovereign rating from AAA to AA+

• Market volatility index elevated to near early 2009 levels

• Operation Twist offers no guarantees

Market volatility

Low rate environment and declining loan portfolios

• Unemployment remains stubbornly high and consumer confidence expected to reach new lows

• Excess housing inventories still unusually large & will take years to be absorbed

Unemployment and housing

• Fed funds rate near zero since December 2008 and being held at an exceptionally low level ―at least through mid-2013‖

• GDP rose 1.0% in 2Q, below consensus expectations; governments and consumers continue the deleveraging process

• Sluggish economic recovery, regulatory uncertainty, and heightened underwriting standards have substantially lowered levels of asset origination

• Excess capital has been deployed into low yielding investment portfolios and cash as industry loan exposures are down by more than 9%(1) from peak

(1) Difference in ―cash & securities / total assets‖ between Q12007 and Q1

2011 for money center and super regional banks

4

BEARISH SENTIMENT BUILDING ACROSS ALL MARKETS

Source: Bloomberg

720

205 266

Corporate Credit Spreads: 01-01-91 through 08-31-11

High Yield Index Average 508 bps

BBB Rated Corporate Credits Average 181 bps

A Rated Corporate Credits Average 124 bps

OA

S (

Bas

is P

oin

ts)

$0

$20

$40

$60

$80

$100

$120

$140

$160

2006 2007 2008 2009 2010 2011

Energy Prices: 01-01-06 through 08-31-11

Oil – Brent WTI

Equity Indices: 01-01-06 through 08-31-11

S&P 500 Eurostoxx 50 (RHA)

Rates: 01-01-06 through 08-31-11

10yr US 10 yr German 10yr Spain

Pri

ce /

Bar

rel

5

DELEVERAGING REMAINS A THREE STEP GLOBAL PROCESS

• Largely accomplished by larger companies in the U.S., big cash positions, improving debt profile

• Still contending with an over levered banking system in Europe put at risk by peripheral credits and more recently deposit flight

Business

Consumer

Government • Just beginning to confront this in the U.S.

• Already confronting this with austerity programs in the peripheral European credits

• Well more than half way through in the U.S. with debt service coverage approaching record lows

• Spending will likely remain restrained as the ―average‖ consumer’s balance sheet still needs to heal

6

EMPLOYMENT – MAKING SOME PROGRESS FROM AN ABYSMAL BOTTOM, BUT STILL SLUGGISH

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

-1000

-800

-600

-400

-200

0

200

400

600

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mo

nth

ly C

hang

e (0

00

)

Monthly Increase (Left Axis) 3 Month Change (Right Axis)

Still down 6.793 million jobs

Total average job growth at 91k/month since January 2010, 122k/month private only

Sources: The Bureau of Labor Statistics

7

CONSUMER CONFIDENCE REMAINS WEAK

Dow Industrials Performance vs. Consumer Confidence through 8/31/2011

(S1060A)

Monthly Data 2/28/1967 - 8/31/2011 (Log Scale)

452

557

687

848

1046

1290

1592

1963

2422

2988

3686

4547

5609

6920

8536

10530

12990

16025

19769

452

557

687

848

1046

1290

1592

1963

2422

2988

3686

4547

5609

6920

8536

10530

12990

16025

19769

20

30

40

50

60

70

80

90

100

110

120

130

140

150

20

30

40

50

60

70

80

90

100

110

120

130

140

150

1970 1975 1980 1985 1990 1995 2000 2005 2010

• Consumer confidence remains extremely weak, much like in the early eighties

• On a historical basis, stocks perform well when consumers feel gloomy

Sources: Dow Jones Industrial, The Conference Board, Ned Davis Research, Inc.

8

THE HEADLINES ARE TELLING OF THE KEY CHALLENGES AND CHANGES IN THE INDUSTRY

Altered financial landscape requires leaner operations for the industry

• Lending (prime driver of revenue) depressed for several years; not expected to pick up anytime soon

• Fed’s pledge to keep rates near zero into 2013 eating into profit margins and depressing investment yields

• Ever increasing regulatory challenges

• New fees for debit card customers

– Bank of America/SunTrust to charge $5/month to ―everyday checking‖ customers

– Wells Fargo plans to test $3 monthly usage fee for new debit card customers in five states

• New programs aimed at cutting operating expenses

• Big banks cutting jobs

9

THE ONLY CERTAINTY IS UNCERTAINTY

Source: Morgan Stanley

• Stubbornly high unemployment

• Limited GDP growth / double dip?

• QE3 debate / Operation Twist

• Deficit reduction

• Home prices continue to decline

• European sovereign crisis

• Ineffective Governments

• Low interest rates through at least the end of 2012

• Lack of loan demand

• Limited operating leverage

• On-going higher capital and liquidity requirements

• Pressure on fee income - Dodd Frank

• Increased regulatory burden / costs

Challenging Operating Environment Fragile Economy

• Lackluster outlook for top-line revenue growth

• Decreased profitability levels — a new normal?

• Lower returns on capital

• Capital plans / distributions must be approved by regulators

• Management teams / Boards facing decreased strategic options

Depressed Bank Valuations

10

BANKING MARKETS REMAIN CHALLENGED


Source: FactSet (9/8/2011) Source: Bloomberg (9/8/2011)

Banks Share Price Performance (3)

From 6/30/2011 to 9/8/2011

(%)

U.S. Banks (22)

Spanish Banks (25)

U.K. Banks (37)

German Banks (39)

Italian Banks (40)

French Banks (43)

Credit Default Swap (CDS) Performance (2)

By Country, YTD (Bps)

Country Banks

Country 1/1/2011 Today Change 1/1/2011 Today Change

U.S. 41 51 10 121 200 79

U.K. 76 77 1 161 289 128

Germany 58 79 21 106 185 79

France 108 171 63 154 267 113

Spain 349 391 42 321 483 162

Italy 242 433 191 209 476 267

10-Year Treasury Yields – Lowest Since Eisenhower

(%)

0

4

8

12

16

53 57 61 65 69 74 78 82 86 90 94 99 03 07 11

9/8/2011:

2.00%

10-yr. Average: 4.0%

Year

Source: Federal Reserve, U.S. Treasury

U.S. Job Losses in Post-WWII Recessions Employment Drawdown; Indexed to Start of Recession (%)

(9)

(6)

(3)

0

0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45Months

2007 – 2009 Recession Prior Recessions 2001 Recession

Source: Bureau of Labor Statistics (August 2011)

11

ECONOMIC UNCERTAINTY AND LOWER PROFITABILITY NEGATIVELY IMPACTING VALUATIONS


Price / Book Value (x)

Pre-Provision Multiples Have Contracted Significantly Earnings Multiples Have Declined Market-Cap / Pre-Provision Earnings (―PPNR‖) Price / Earnings

Source: SNL Financial (9/8/2011)

Peers CBSH

1.0x

1.6x

Peers CBSH

Peers CBSH

CBSH Peers

5-year Average

2.1 1.9

Price / Tangible Book Value (x)

0.8x

1.5x

Peers CBSH

CBSH Peers

5-year Average

2.0 1.3

(x) (x)

12

HIGHER CAPITAL REQUIREMENTS LOWERING ROEs


Tangible Common and Tier 1 Common Ratios (%)

Peers CBSH

Slow Economy, Increased Regulation and Capital Levels Lowering ROEs

Tg. Common Equity / Tg. Assets Tier 1 Common / Risk-weighted Assets

ROA

ROTCE

@ 6%

Increase TCE

to 8%

Pre-Crisis (%) 1.30 – 1.50 22 – 25 16 – 19

New World (%) 1.00 – 1.20 17 – 20 13 – 15

Average Bank Has Equity / Assets of 10%, Implying ROE of 10% – 12%

Return on Tangible Common Equity (1)

(%)

Source: SNL Financial

Street Estimates Actual

(1) Median of CBSH and peers. Street estimates assume equity rolled forward

based on Street earnings estimates and current dividend.

13

WHEN WILL BANK RETURNS “NORMALIZE”?


Consensus expectations through 2013 as of August 19, 2011

Banks $100 billion – $1 trillion in assets are expected to return to 1.30% ROA by 2013

All others may struggle to reach 1.10%

Increased capital levels will hold down ROEs

9%+ tangible common ratios expected for all but the money centers in 2013

Est. Tangible Common Ratios

2011E (%) 2013E (%)

Money Center 6.8 7.7

Super Regional 7.9 9.7

Mid-Cap Regionals 8.4 9.6

Small Regionals 7.9 9.0


(1) Money Centers include: C, BAC, JPM, WFC.

(2) Super Regionals include: BBT, COF, FITB, KEY, PNC, RF, STI and USB ($1trillion to $100 billion in assets, except KEY).

(3) Mid-Cap Regionals Regionals include: ASBC, BOKF, CMA, CYN, FHN, MTB, SNV, HBAN and ZION ($100 billion to $20 billion in assets).

(4) Small Regionals include: CBSH, TCB, WBS, CFR, FULT, FMER, WTFC, VLY, SUSQ, BXS, BOH, PVTB, UMPQ, UMBF, SBNY and MBFI ($20 billion to $10 billion in assets).

(5) Capital roll-forward based on consensus income estimates and consensus dividend level.

Return on Tangible Assets Consensus Estimates (%)

Return on Tangible Common Equity (5)

Consensus Estimates (%)

0.76

1.04

0.740.850.88

1.20

0.860.970.94

1.33

1.07 1.14

0.50

0.75

1.00

1.25

1.50

Money Centers Super Regionals Mid-Cap Regionals Small Regionals

2011E 2012E 2013E

Differentiated Profitability

2011E 2012E 2013E

(4) (3) (2) (1)

(4) (3) (2) (1)

14

CONSOLIDATION SHOULD OCCUR AMONG MID-TIER BANKS


(1) Includes listed U.S. banks and thrifts; excludes trust banks.

However, Everyone Believes They Are a Buyer

19.815.1

10.2 9.3 9.2 6.1 5.3 5.2 4.5 4.4 4.2 3.2 3.2 3.1 3.1 3.1 3.0 2.9 2.4 2.4 2.4 2.2 2.2

130.7128.8

81.673.0

43.9

25.2

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

JPM

orga

n

Wells

Farg

o

Citigr

oup

Ban

k of A

meric

a

U.S

. Ban

corp

PNC

Capi

tal O

ne

BB&

T

Sun

Trust

Fifth

Third

M&T

Ban

k

Key

Cor

p

Regi

ons

New

York

Com

muni

ty

Com

erica

Peo

ple's

Unite

d

Hunt

ingt

on

Com

merc

e

BOK F

inan

cial

First R

epublic

First N

iagar

a

Zions

Huds

on City

Culle

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ost

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ock

Signa

ture

Eas

t Wes

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City

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d

Market Cap of Largest U.S. Banks (1)

($Bn)

Recently / Rumored to Participate in M&A

Foreign Landscape

Expanding Unclear Retrenchment

Market

Cap ($Bn)

Market

Cap ($Bn)

Market

Cap ($Bn)

Santander 69 BNP 54 HSBC 150

TD 69 Barclays 31 RBC 71

MUFG 60 ING 28

BBVA 39

BMO 39

Source: SNL Financial (9/8/2011)

15

DESPITE CONSOLIDATION, U.S. REMAINS OVER-BANKED RELATIVE TO PEERS

Sources: Goldman Sachs Research, FDIC, respective national central banks

• Over the past 25 years, the number of banking institutions in U.S. has been cut in half

• Yet with 7,574 banks, the U.S. still has one of the highest absolute number of financial institutions across the globe

16

TODAY’S DISCUSSION

• Economic and Industry highlights

• Commerce Bank overview

– Our business model – Our performance and peer comparisons

17

Lower Midwest Footprint with over 200 branches and 4,762 employees

Performance – CAGR

2010 10yr

EPS* 28% 4%

Cash Div* 3% 9%

Stock Price 8% 4%

Total Return 10% 6%

St. Louis & Kansas City

Deposit Market Share**

2011

US Bancorp 12%

BoA 12%

Commerce 9%

UMB 6%

Others 61%

*Per share figures have been restated for 5% stock dividend distributed on 12/20/2010

**Source: FDIC 2011 Deposit Data

Seven Key Markets

1. Kansas City 2. St. Louis 3. Peoria/Bloomington 4. Springfield 5. Wichita 6. Tulsa 7. Denver

• 91% of 2010 pre-tax profit from seven key markets

• Commercial calling efforts with strong credit customers in our extended markets

• Commercial Payment Services offered in 48 states

Super-Community Bank – over 145 years in the industry – $20.6 billion in assets

ABOUT COMMERCE BANCSHARES

Branch Footprint

Extended Market Area

1 2

3

4 5

6

7

18

SUPER-COMMUNITY BANK PLATFORM

Super-Regional Back End

Sophisticated payment processing systems

Broad consumer product offerings

Private banking; trust; capital markets

Competitive on unit costs

A More Nimble Format … With Higher Service Focus

A Strategy that Builds Results for Tomorrow

• Sales across business lines

• Focus on people/talent development

• Investment in technology

• Top quartile credit quality metrics

• Disciplined approach to acquisitions

Community Bank Front End

Flat organization – quick decisions

Employees embrace strong culture

Award winning customer service

Knowledge of customers and markets reduces risk

19 U.S. High Performance and U.S. Financial Services Companies Benchmarks are from Towers Watson client studies. The Global Workforce Study is a broader survey of companies throughout the world.

92%

87%U.S. Financial Services Companies

U.S. High Performance Companies

2011 Commerce Bank 94%

Commerce Bank 2011 Engagement Scores compared to benchmarks

• Commerce Bank’s scores compare very favorably to the U.S. Financial Services Companies’ norm, as well as the U.S. High Performance Companies’ norm

• Employee engagement at Commerce reached its highest level since the survey began in 2010 and retained this same level of engagement in 2011

• Items receiving the most positive responses included employees’ understanding of how their department contributes to Commerce’s success; fully applying their skills and abilities in their work; and being personally motivated to help Commerce be successful

SUPERIOR EMPLOYEE ENGAGEMENT

Engagement Index

20

INDUSTRY RECOGNITION

America’s Best Banks by Forbes

Commerce ranked among the top ten on Forbes’ list of America's Best Banks two years in a row

Bank Directors’ Top Banks

Commerce ranked #7 on Bank Director magazine’s 2011 Top 150 Bank Performance Scorecard

21

• Balanced mix of interest and non-interest income

• Meaningful, growing contribution from wealth management and card businesses

14%

9%

8%

7%

2%

60%

Commerce Bank

4%

7%

8%

9%

3%

69%

Peer Banks*

Card income

Wealth management

Other

Service charges

Fees & commission

Net interest income

Note: Excludes Gains and Losses on Securities; Wealth management includes CTC and Brokerage

Source: Financial Information Systems; data as of 6/30/2011

* Peer Banks include: ASBC, BOKF, Central Bancompany, CYN, CFR, FMER, MBFI, PVTB, TCB, UMBF, WTFC, ZION

DIVERSE REVENUE SOURCES

22

Actual

$ in millions 2010 2011 % Incr.

Net interest income 325.8$ 325.7$ 0%

Non-interest income 194.6 197.3 1%

Total revenue 520.4 523.0 0%

Securities gains/(losses) (3.0) 3.3 -210%

Non-interest expense (311.2) (308.6) -1%

Provision for loan losses (56.5) (28.0) -50%

Pretax income 149.7 189.7 27%

Income taxes (45.8) (60.2) 31%

Net income 103.9$ 129.5$ 25%

Diluted EPS 1.18$ 1.48$ 25%

Return on avg. assets 1.16% 1.40%

Return on avg. equity 10.79% 12.54%

Efficiency ratio 59.45% 58.50%

Cash dividends 0.448$ 0.460$

Ending stock price 34.28$ 43.00$

STEADY IMPROVEMENTS THROUGH 3RD QUARTER 2011

Drivers:

• Flat revenue growth

• Good expense control

• 50% decline in provision

Industry faces margin and fee income challenges in

Q4 and 2012

Net Income YTD – September 30

Sept YTD Sept YTD Actual


Net interest income 485.3$ 484.3$ 0%

Non-interest income 294.7 298.9 1%

Total revenue 780.0 783.2 0%

Securities gains/(losses) (3.0) 5.9 -297%

Non-interest expense (467.0) (463.0) -1%

Provision for loan losses (78.4) (39.4) -50%

Pretax income 231.6 286.7 24%

Income taxes (71.8) (91.9) 28%

Net income 159.8$ 194.8$ 22%

Diluted EPS 1.82$ 2.24$ 23%

Return on avg. assets 1.17% 1.37%

Return on avg. equity 10.85% 12.41%

Efficiency ratio 59.49% 58.57%

Cash dividends 0.671$ 0.690

Ending stock price 35.80$ 34.75

23

CARD AND TRUST REVENUES CONTINUE TO SHOW SOLID GROWTH



Bankcard fees 107.9$ 120.9$ 12%

Trust fees 59.8 66.2 11%

Deposit account fees 71.1 62.0 -13%

Bond trading 15.5 15.3 -1%

Consumer brokerage 6.9 7.9 14%

Loan fees & sales 11.1 5.9 -47%

Other income 22.4 20.7 -8%

Total non-int. income 294.7$ 298.9$ 1%

24

CONTINUED FOCUS ON EXPENSE MANAGEMENT



Salaries & benefits 260.0$ 257.3$ -1%

Occupancy 35.7 34.8 -3%

Equipment 17.5 16.7 -5%

Supplies & comm. 20.9 16.9 -19%

Data processing 50.9 50.2 -1%

Deposit insurance 14.4 10.4 -28%

Marketing 14.8 13.3 -10%

Other 52.8 63.4 20%

Total 467.0$ 463.0$ -1%

25

INVESTMENT PORTFOLIO: HIGH QUALITY, DIVERSE, SHORT DURATION

12/31/2009 PORTFOLIO

Unrealized Gain $72 million

Investment Grade 96.9%

Duration

2007 2.07 yrs

2008 2.39 yrs

2009 2.09 yrs

9/30/2011 PORTFOLIO

Total investments $9.4 billion

Unrealized gain $212 million

12 mo maturities $1.5 billion

Duration

Sept 2011 2.20 yrs

Dec 2010 2.08 yrs

Dec 2009 2.09 yrs

Dec 2008 2.39 yrs

4%

Other

4%

Asset Backed 27%

Corporate 2%

Municipal

13%

Non-Agency MBS

Agency MBS

44%

Agency

3%

Treasury

3%

Source: InTrader

26

June YTD 2011

0% 1% 12%

17%

39%

31%

Commerce Bank Peer Banks

21% 20%17%

26% 26%27%

8%7%7%

Construction/Business RE

Business

Sept YTD 2011

$9,312

1%

15%

32%

2010

$10,057

3%

15%

29%

2009

$11,027

4% Loans held for sale

Credit Card

Consumer/HELOCs

Residential RE 14%

28%

Less Real Estate concentration; higher Card/Consumer exposure

$ in Millions

% Consumer 46% 46% 41% 29%

% Commercial 54% 54% 59% 71%

CBI average YTD September 2011 and Peer average YTD June 2011

Source: Financial Information Systems

* Peer Banks include: ASBC, BOKF, Central Bancompany, CYN, CFR, FMER, MBFI, PVTB, TCB, UMBF, WTFC, ZION

DIVERSIFIED LOAN PORTFOLIO, BUT LOSS OF STUDENT LOAN PORTFOLIO IN 2010 LOWERS CONSUMER PORTION

27

BUSINESS LOANS DOWN SLIGHTLY WHILE LINE UTILIZATION REMAINS LOW

Loan trends $ in millions

Qu

art

erly B

usin

ess L

oa

n B

ala

nce

s

Utiliz

atio

n R

ate

3Q2011 2Q2011 1Q2011 4Q2010 3Q2010 2Q2010

10

5

0

40%

35

30

25

20

15

$3,500

3,000

2,500

2,000

1,500

1,000

500

0 3Q2009 4Q2009 1Q2010

Business Loans Utilization %

28

*Peer Banks include: ASBC, BOKF, Central Bancompany, CYN, CFR, FMER, MBFI, PVTB, TCB, UMBF, WTFC, ZION

**Large banks include: JP Morgan, Citigroup, BoA, Wells Fargo, US Bancorp, Regions, Fifth Third, PNC, State Street Source: SNL Financial

1.40%

1.22%

0.96%

0.57%

0.86%0.76%

0.42%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

June YTD

2011

2010

0.70%

2009

0.71%

Large Banks** Peer Banks* Commerce Bank

12.54%

11.15%

9.76%

6.83%

7.98%8.10%

4.11%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

June YTD

2011

2010

7.13%

2009

6.59%

Return on Assets Return on Equity

Financial Returns

EARNINGS PERFORMANCE SIGNIFICANTLY ABOVE PEERS AND LARGE BANKS

CBSH

3Q2011

ROA

1.32%

CBSH

3Q2011

ROE

12.2%

29 *Moody’s as of 6/27/2011; Tied with two other banks Source: SNL Financial; data as of 6/30/2011

Among bank holding companies over $10 billion, CBSH

is Moody’s highest rated (B+) for financial strength*

10.5%

11.5%11.5%

15.1%

3.6%

3.1%

1.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

TCB

11.8%

RF

12.6%

8.0%

1.0%

FITB

11.9%

9.2%

0.9%

2.3%

0.4%

ZION

15.8%

9.4%

12.7% 1.0%

2.3%

HBAN

12.1%

9.9%

0.4%

1.4%

0.8%

CMA KEY

13.9%

UMBF FMER ASBC

16.0%

12.6%

1.5%

BOKF

13.3%

13.1%

0.2%

CFR

14.4%

CBSH

1.1%

13.3%

11.1%

2.4%

Tier 1 Common TARP Preferred TruPS Other

Tie

r 1

Ca

pit

al / R

isk A

dju

ste

d A

sse

ts R

ati

o

STRONG AND QUALITY CAPITAL POSITION

30

RESERVES REMAIN STRONG; WHILE OVERALL NPA LEVELS ARE MUCH LOWER VS INDUSTRY RESULTS

• Total NPAs at 9/30/2011 represent only 1.1% of total loans

• Allowance for loan losses represent 2.5 times our non-performing loans

Reserve coverage among industry's best

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

$0

$40

$80

$120

$160

$200

$240

'05 '06 '07 '08 '09 '10 1Q11 2Q11 3Q11

NP

A's

to

Lo

an

s

$ in M

illio

ns

$ Allow for Loan Loss $ Non-Perform Assets % NPA to Total Loans

31

CHARGE-OFFS CONSISTENTLY BETTER THAN INDUSTRY

Source: Federal Reserve Statistical Release, not seasonally adjusted

Largest 100 CBI Net Charge-Off Rates for CBI vs. Other Banks

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

Sep-10 Jun-10 Jun-11 Mar-11 Dec-10 0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

Mar-11 Dec-10 Sep-10 Jun-10 Jun-11

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

2.20%

Jun-11 Mar-11 Dec-10 Sep-10 Jun-10

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

12.00%

Jun-10 Jun-11 Mar-11 Dec-10 Sep-10

Business C&I Net C/Os

Credit Card Net C/Os

0.11%

2.18%

6.55%

1.78% 1.65% 2.72% 2.80%

0.44%

1.27%

1.90% 10.98%

8.53%

Commercial R/E Net C/Os

Consumer Net C/Os Credit Card Net C/Os

0.39%

0.23%

1.50%

6.70%

0.30%

1.33%

0.55%

2.68%

1.72%

2.00%

4.97%

7.72%

1.08%

0.28%

1.63%

0.48%

1.28%

1.83%

6.99%

4.73%

0.74%

0.20% 0.23%

1.52%

0.78%

1.37%

4.57%

5.60%

32

• Add high quality loans across lending categories, at

appropriate spreads

Description

Maintain our

distinctive

advantages

Enhance operating

productivity

• Continuously improve cost discipline

• Emphasize sales force effectiveness

Reinvigorate fee

income

• Replace lost fee income from changes in regulation and

customer behavior

• Align fees with value to customers

Build new

customer

relationships

Grow quality loans

Build relationship

deposits

• Acquire and retain deposits that are truly relationship-

based

Invest in

high return

business

Expand payments

systems business

• Continue emphasis on commercial card, merchant, and treasury businesses

• Develop and pilot new products

Grow money

management

• Capitalize on market disruption to acquire new customers

• Deepen relationships with existing CTC and bank

customers

Manage and develop

talent

• Invest in developing talent

• Manage productivity

OUR AREAS OF FOCUS REFLECT THE CHALLENGES AND OPPORTUNITIES THAT WE SEE IN THE MARKETPLACE

33

• $25.8 billion in assets under administration

• Ranked #27 based on assets under management*

• A team of 500 and the average officer has 23 years of experience

• 100+ years in the business

As one of the largest trust companies in the US, The Commerce Trust Company

excels at providing objective financial advice, exceptional personal service and

comprehensive wealth management solutions.

COMMERCE TRUST COMPANY – OVERVIEW

*Source: FDIC - Fiduciary related assets as of Sept 30, 2010

Trust Company Lipper Award Bloomberg’s Top 50 Family Offices

Commerce ranks #18 in Bloomberg Markets’ September 2011 ranking of the world’s Top 50 Family Offices by assets

Commerce Short-Term

Government Fund

received Lipper Award

for being best fund

over three years in

category of Short U.S.

Government Funds Reported in The Wall Street

Journal, March 23, 2011

34

CARD PRODUCTS – A LEADER IN THE PAYMENTS INDUSTRY

Consistently ranked among the top issuers in the Nilson Report

Debit / Prepaid

Card

Consumer Card

Merchant

Services

Commercial

Card #10 Purchasing Card Issuer

#12 Bank Acquirer*

#23 Consumer Card Issuer

#35 Debit Card Issuer

* Excludes non-bank acquirers

Commerce Bank acknowledged by VISA for consistent, superior performance &

continued service quality improvement, receiving over 50 awards since 1992.

VISA Service Quality Performance Award Winner

35

CAPITALIZING ON OUR POSITION OF STRENGTH:

ORGANIC GROWTH IS PRIORITY ONE

M&A POSTURE

• We are strategic buyers

• Focus on opportunities to round out our existing core footprint

• Augment expansion markets if strategic fits become available

• FDIC deals increasingly less attractive

• Healthy bank sales may present opportunities in future

• Targeted loan purchases; management lift-outs; payments / wealth opportunities could be attractive

36

$1.00

$1.40

$1.80

$2.20

$2.60

$3.00

$6.00

$7.00

$8.00

$9.00

$10.00

$11.00

$12.00

$13.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Earn

ing

s P

er

Sh

are

Reven

ue P

er

Sh

are

Revenue Per Share Earnings Per Share

*Restated for 5% stock dividend distributed in December 2010

**Reflects Top 50 banks total dividends paid in 2007 compared to 2010


Dividends per share*

$0.39 $0.42 $0.53 $0.65 $0.72 $0.77 $0.82 $0.86 $0.87 $0.90

EARNINGS RECOVERED IN 2010 AND DIVIDENDS REMAIN STRONG

Commerce Bank dividend increased for the 42nd consecutive year

and paid its 17th consecutive 5% stock dividend

More than three-fourths of large banks cut or eliminated their dividend since 2007**

37

CONTINUING COMMITMENT TO SHAREHOLDER RETURN

*Assumes reinvested dividends, multi-year returns are annualized

Source: Bloomberg

Total shareholder returns*

Indexed, 12/31/2000 = 100

40

60

80

100

120

140

160

180

200

2000 2002 2004 2006 2008 2010

S&P 500

INDEX

NASDAQ

BANKS

COMMERCE

BANK Total Shareholder Returns*

Percent

3 yr 5 yr 10 yr

CBSH 3.3% 1.7% 6.4%

S&P 500 (2.9%) 2.3% 1.4%

NASDAQ

Banks (10.3%) (8.5%) 0.2%

commerce bancshares, inc.€¦ · 26/10/2011 · commerce bancshares, inc. cfa society of st....

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