Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q3 2021 Earnings Presentation
52 slides from Commerce Bancshares's earnings presentation, 2021
Slide 1: Playing Offense in a Challenging Time
Playing Offense in a Challenging Time COMMERCE BANCSHARES, INC. INVESTOR UPDATE 3rd Quarter 2021
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 $28.1 TOTAL DEPOSITS 156 YEARS IN BUSINESS TOTAL ASSETS BILLION $34.5 LARGEST U.S. BANK BILLION 42ND BASED ON ASSET SIZE $15.2 1 TOTAL LOANS2 BILLION MARKET CAP $8.1 COMMERCIAL CARD BILLION 21ST LARGEST U.S. BANK BASED ON MARKET CAP1 $8.5 VOLUME BILLION AS OF 12/31/2020 12TH LARG
Slide 4: 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 and • Sophisticated payment customer service system capabilities 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 formed 156 At Commerce, our core values shape the way we live and work. years ago to be a force for We have a • We make decisions today that will good in our V sustain us well into the future. region and our long-term View indus
Slide 6: Beyond Financials
BEYOND FINANCIALS Supporting each other, our customers and our communities “ As a socially responsible corporate citizen, we continuously ” seek opportunities to make a difference. More than 500 nonprofit 2021 Engagement & Enablement2 Consistently scoring above the U.S. organizations supported High
Slide 7: Environmental, Social and Governance
ENVIRONMENTAL, SOCIAL AND GOVERNANCE Robust ESG framework, including board oversight and a cross-functional ESG management committee – continued enhancements to our program and reporting. The inaugural ESG report assesses our impact in several key areas: • Environmental sustainability • Customer, te
Slide 8: Our Commitment to Diversity, Equity and Inclusion
OUR COMMITMENT TO DIVERSITY, EQUITY AND INCLUSION Our longstanding approach of “doing what’s right” continues to guide our focus on our team members, customers and communities Our new Diversity, Equity and Inclusion A culture that celebrates inclusion and diversity Commerce offers a variety of inter
Slide 9: Recent Recognition
RECENT RECOGNITION 1 1The Korn Ferry Hay Group – based on 2018 survey results 9
Slide 10: Financial Results 3Q2021
FINANCIAL RESULTS 3Q2021 10
Slide 11: Financial Performance vs. Prior Year
FINANCIAL PERFORMANCE VS. PRIOR YEAR Net Income Attributable to Earnings per Common Return on Total Average CBI ($ in Millions) As of Sept 30 Share As of Sept 30 Assets As of Sept 30 1.67% 1.65% $421 $416 $3.41 $3.54 $354 $2.91 1.20% 1.04% $224 $1.80 YE 2019 YE 2020 YTD 2020 YTD 2021 YE 2019 YE 2020
Slide 12: 3Q2021 Earnings Highlights
3Q2021 EARNINGS HIGHLIGHTS Highlights Well-positioned in a challenging environment PPNR1 • Net interest income increased 2.9% over Q2. $139.9 million • Net interest margin decreased 2 bps from Q2 to 2.58%. Net Income • Non-interest income totaled $137.5 million in Q3. $122.6 million – Non-interest i
Slide 13: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Balances Change vs. $ in millions 3Q21 2Q21 3Q20 Highlights • Linked quarter (LQ) reflects lower business loans, mostly driven by PPP forgiveness (-$689.2 million) and lower Commercial1 $9,588.9 $(726.1) $(1,084.3) business R/E • LQ reflects decrease in per
Slide 14: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +13% $27.7 $28.1 $24.7 -7% $11.1 $11.5 $16.4 $16.0 $9.8 $15.3 $5.7 $5.7 $5.7 3.69% 3.65% 3.74% $14.9 $16.6 $16.6 $10.7 $10.3 $9.6 .18% .07% .06% 3Q20 2Q21 3Q21 3Q20 2Q21 3Q21 Consumer Loans Loan Yield Non-In
Slide 15: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 9/30/2021 6/30/2021 9/30/2020 QoQ YoY $ in 000s 9/30/2021 6/30/2021 9/30/2020 QoQ YoY Business $5,277,850 $5,803,760 $6,683,413 -9.1% -21.0% Business $5,437,498 $6,211,610 $6,709,200 -12.5% -19.0% Business excl. Business excl. 4,969,9
Slide 16: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Change vs. $ in millions 3Q21 2Q21 3Q20 Highlights • Linked quarter (LQ) increase due to higher income on Net Interest Income $214.0 $6.1 $(1.9) investment securities, partially offset by lower interest earned on loans and securities purchased under agreements to resell N
Slide 17: Non-Interest Income Highlights
NON-INTEREST INCOME HIGHLIGHTS Change vs. $ in millions 3Q21 2Q21 3Q20 Highlights Bank Card Transaction Fees $42.8 $0.2 $4.9 • Increase of 13.0% over prior year (PY) driven by net corporate card fees • Increase of 5.8% over linked quarter (LQ), 20.1% over Trust Fees $49.0 $2.7 $8.2 PY resulting most
Slide 18: Non-Interest Expense Highlights
NON-INTEREST EXPENSE HIGHLIGHTS Change vs. $ in millions 3Q21 2Q21 3Q20 Highlights • Increase of 1.6% over linked quarter (LQ), 4.3% over Salaries and Employee Benefits $132.8 $2.1 $5.5 prior year (PY) mostly due to higher incentive compensation Net Occupancy $12.3 $0.8 $0.3 Equipment $4.4 $(0.2) $(
Slide 19: Pre-Tax, Pre-Provision Net Revenue (PPNR)
PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) Net Interest Income (+) Non-Interest Expense (-) Non-Interest Income (+) Pre-Tax, Pre-Provision Net Revenue (=) $346 $347 $352 3Q2021 Comparison vs. 3Q2020 (9.5)% vs. 2Q2021 (6.1)% $191 $208 $198 $214 $212 $216 $155 $149 $140 $130 $139 $138 3Q2020 2Q2021 3Q2
Slide 20: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 11.9% Large, stable deposit base OZK 14.5% CFR 14.2% CBSH 14.2% Core Deposits 54% Average Loan to Deposit Ratio 3 SFNC 14.2% 13.7% $26.5 Commerce 79% Average UBSI Loan to UMPQ 12.4% Billion2 Depo
Slide 21: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) .19% $ in millions .18% $311.3 $10.6 .14% $273.4 $261.1 $236.4 $7.6 $7.0 .10% .07% 1.48% $172.4 $162.8 $3.7 1.44% .02% 1.37% 1.33% $2.5 $0.7 1.10% 1.07% 3Q20 2Q21 3Q21 3Q20 2Q21 3Q2
Slide 22: Net Interest Income: YTD September 30, 2021
NET INTEREST INCOME: YTD – September 30, 2021 Quarterly Net Interest Income • Net interest income (tax equivalent) (Tax Equivalent) increased $5.8 million over the prior $220 3.50% quarter, partly due to a $5.0 million Net interest income – $210 3.25% adjustment to premium amortization. 3.00% $ in m
Slide 23: Balance Sheet: Low-Cost Deposits
BALANCE SHEET: LOW-COST DEPOSITS – 41% of Q3 average deposits were non-interest bearing. – Cost of interest-bearing deposits declined slightly. $30 0.20% 0.18% $25 0.15% Average Balance $20 0.12% $ in billions $15 0.09% 0.10% 0.07% $10 0.06% 0.05% $5 $0 0.00% 3Q20 4Q20 1Q21 2Q21 3Q21 Non Interest-Be
Slide 24: Earning Asset Optimization
EARNING ASSET OPTIMIZATION Prudently deploying excess deposits into higher-yielding assets $20.0 9.0% $18.0 8.0% $16.5 $2.6 $15.0 7.0% $15.0 $2.7 $14.0 $1.5 $1.6 $13.1 $1.1 $0.8 $0.9 6.0% $12.2 $1.0 $0.8 Average Balance $0.8 $1.8 $ in billions $9.6 $9.7 $9.6 $9.8 5.0% $0.3 $0.2 $0.4 $10.0 $10.0 $0.3
Slide 25: A Full-Service, Diversified Operating Model
A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Revenue Source Diversification Non-Interest Income Compared to Peers1 $ in millions 2% 5% $501 $525 $506 $461 $413 $371 13% 5% 10% 5% 4% Commerce 2017 2018 2019 2020 YTD YTD 7% 4% Bank Peer
Slide 26: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $s in millions Compared to Peers1 $15,756 $15,857 5% $14,243 32% $13,946 $13,629 20% 4% $12,953 12% 38% Commerce Peers 21% Bank 2016 2017 2018 2019 2020 YTD 20213 Banks 2021 Loan Growth by Category (Average loans Sep.
Slide 27: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE Total Loan Originations1: Total SBA Fees: $1.9 Billion $60.4 Million Forgiven 84% 16% Remaining Recognized 85% 15% Remaining Yield and Interest Income2 Q3 2021, $ in millions 7.73% $47.0 $35.8 3.43% $11.2 2.92% Yield Interest Income Business Loans PPP Yi
Slide 28: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE Loan Portfolio Impact QTD Average Balances, $ in millions $6,761 $6,709 $6,580 $6,533 $6,211 $5,494 $1,244 $1,506 $1,476 $1,374 $5,437 $1,264 $575 $5,494 $5,517 $5,203 $5,104 $5,159 $4,947 $4,863 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 Business Loans (excl PP
Slide 29: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Nearly 50% of total loans are variable; 49% of commercial loans have floating rates Fixed Variable Business Construction Business RE Commercial Total Loans: $6.5B Total Loans: $1.0B Total Loans: $3.0B 3% 47% 45% 53% 55% 97% Personal RE Consumer HELOC Consumer Card T
Slide 30: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of September 30, 2021 Total average investments3 $13.8 billion 5% 6% Treasury & agency Unrealized gain3 $230.1 million 15% Municipal 12 month maturities / pay-downs $2.8 billion 22% MBS Duratio
Slide 31: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans June 30, 2021 September 30, 2021 $ in millions $250 1.60% Allowance Allowance for Credit % of for Credit % of 1.47% 1.44% Losses Outstanding Losses Outstanding $ in millions (AC
Slide 32: Strong Capital Position – Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 53 consecutive years of regular common cash dividend increases1 Capital Returned to Common Shareholders as a percentage of Net Income2 Cash dividends paid on common stock (left) $300 200% Common share repurchase (left) Payout Ratio (%) $250 %
Slide 33: Strategic Position
STRATEGIC POSITION 33
Slide 34: 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” • Diversity, Equity and • Super-Community Bank platform Inclusion • Relationship-based banking • Enterprise Digital Strategy • High-touch custo
Slide 35: CBI Blue Chip: Enterprise Digital Strategy
CBI BLUE CHIP: ENTERPRISE DIGITAL STRATEGY • Creates a single Digital Strategy expanding OUR VISION across all segments of the bank Transform the digital experience by staying • Committed to delivering customer digital current on digital trends and creating solutions more rapidly seamless digital ec
Slide 36: Playing Offense: Consumer Banking
PLAYING OFFENSE: CONSUMER BANKING Enhancing the Customer Experience Engaging with customers through the channels they prefer. • Technology investments • New engagement programs CommercePremier • Enhanced product offerings • Improved operating model Consumer Digital Evolving digital experiences to me
Slide 37: Playing Offense: Consumer Banking – Mobile App and Mortgage
PLAYING OFFENSE: CONSUMER BANKING Commerce Bank CONNECT® Mobile App Personalized experience allowing customers to engage with a banker they choose, right from their smartphone • First in the region to introducing this innovation, enabling high-touch service through a digital channel • Secure platfor
Slide 38: Playing Offense: Internal Innovation at Commerce
PLAYING OFFENSE: INTERNAL INNOVATION AT COMMERCE 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 everyday inc
Slide 39: Playing Offense: Consumer Banking
PLAYING OFFENSE: CONSUMER BANKING 157 Full-service 354 $12.2 $2.0 1.1 branches ATMs BILLION BILLION MILLION Consumer Consumer Consumer Deposits1 Loans2 Households1 Focus on Digital Commerce Digital HH Digital Loan Mobile Bank App Rating Penetration Sales (000s) Deposit Use 4.7 65.9% $47,165 24% 4.7
Slide 40: Commerce Trust Company wealth management
TM 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. 17TH $61 $38 $611 Largest Among Bank-Managed BILLION BILLION MILLION Trust Total Client Assets Under Managed Companies1 Assets2 Ma
Slide 41: Key Growth Initiatives Strengthening our wealth brands
TM Key Growth Initiatives Strengthening our wealth brands • Implement new Private TM Banking Lending System • Accelerate growth of Mass Affluent households • Implement enhanced sales process with new Client Relationship Management system TM • Expand the CTC brand • Enhance the digital client experie
Slide 42: 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 43: Commercial Banking – Expansion Markets Offer Growth Opportunities
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Fee Income Expansion Market Loan Growth Growth Team Overview for 106% $ in millions Expansion Market Loan $2,466 Growth Expansion Markets $2,316 since 2015 # of team members per market $2,200 110% (includes open positions) $1,913 si
Slide 44: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow Key Verticals $174 Payments MILLION Revenue Tailored return on investment-based solutions Treasury $52.3 Management enables healthcare providers to enhance the p
Slide 45: Commerce Healthcare
COMMERCE HEALTHCARE Specialty Healthcare Division We build and implement innovative banking technologies to improve the patient payment experience, reduce cost and accelerate cash Well-positioned to deliver our payment automation technologies as healthcare organizations re-design their supply chain
Slide 46: Card Products – A Leader Among Top U.S. Banks
CARD PRODUCTS – A LEADER AMONG TOP 50 U.S. BANKS Consistently ranked among the top issuers in the Nilson Report Commercial Consumer #12 Commercial #7 Purchasing 1 #9 Bank #12 Consumer #20 #11 Debit Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment pr
Slide 47: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Return on Average Assets 2.0% 1.5% ROAA 15-yr average 1.0% CBSH: 1.29% 0.5% Peers: 0.93% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Commerce Peer Median Large Bank Median Return on Average Common Equity 20.0% 15
Slide 48: Long-Term View: Net Income and Earnings Per Share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE $450 $4.00 Earnings Per Share Net Income Earnings per Share (EPS) $400 $3.50 $350 Net Income $3.00 $300 $ 000s $250 $2.50 $200 $2.00 $150 $100 $1.50 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dividends $0.57 $0.59* $0.61 $0.64 $0.67 $0.71 $0.7
Slide 49: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of September 30, 2021 Annualized Comparison Total Shareholder Returns Indexed, 9/30/2006 = $100 Total Shareholder Returns Percent $450 CBSH KBW Bank S&P 500 100 NASDAQ Bank S&P 500 400 COMMERCE 90 350 30 300 20 250 NASDAQ 10 200 BANK 0 150 KBW BANK 1 Year 3 Year 5 Year
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Sept. 30, 2021 Jun. 31, 2021 Sept. 30, 2020 A Net Interest Income $ 214,037 $ 207,982 $ 215,962 B Non-Interest Income $ 137,506 $ 139,143 $ 129,572 C Non-Interest Expense $ 211,620 $ 198,126
Slide 51: 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/ 51
Slide 52: Playing Offense in a Challenging Time
Playing Offense in a Challenging Time