Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q1 2024 Earnings Presentation
50 slides from Commerce Bancshares's earnings presentation, 2024
Slide 1: Resilient in Challenging Times: Investor Update 1st Quarter 2024
RESILIENT IN CHALLENGING TIMES COMMERCE BANCSHARES, INC. INVESTOR UPDATE 1st Quarter 2024
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 TOTAL ASSETS $30.4 159 YEARS IN BUSINESS BILLION TOTAL DEPOSITS $24.4 BILLION 41st LARGEST U.S. BANK BASED ON ASSET SIZE2 MARKET CAP TOTAL $17.3 LOANS3 BILLION $6.9 BILLION $9.9 COMMERCIAL CARD VOLUME 22nd BILLION AS OF DECEMBER 31, 2023 LARGEST U.S. BANK BASED ON MARKET CAP2 TOT
Slide 4: Super-Community Bank Platform
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: Track Record of Long-Term Outperformance
TRACK RECORD OF LONG-TERM OUTPERFORMANCE Revenue Diversification Deposit Franchise Balanced earnings profile, fee revenue $23.0 billion in low-cost, diverse at 37%1 of total revenue, bolstered by deposits2 with peer-leading growing wealth and national payments historical deposit betas businesses Cre
Slide 6: 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 $600 $ in millions $560 $573 $547 2% 5% $506 $500 6% $400 3% 5% $300 3% 11% $200 $138 $149 3% $100 6% Commerce 2020 202
Slide 7: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $ in millions Compared to Peers1 5% 30% $16,783 $17,080 $15,916 $15,686 $15,570 21% 4% 11% $14,243 36% 21% Commerce Peers Bank 2019 2020 2021 2022 2023 2024 YTD Banks 2024 Loan Growth by Category (Average loans Mar. 20
Slide 8: A Strong Culture Is the Foundation of Our Success
A STRONG CULTURE IS THE FOUNDATION OF OUR SUCCESS At Commerce, our core values shape the way we live and work: We have a We collaborate We act with We are We strive for long-term as one team integrity customer- excellence view focused How we put our culture into practice: What defines us, ultimately
Slide 9: Commerce's Focus Extends Beyond Banking
COMMERCE’S FOCUS EXTENDS BEYOND BANKING We seek opportunities to help make our communities and our company a better place to live and work 2023 Engagement MORE THAN and Enablement2 500 Sense of Consistently scoring above the U.S. High Performance and U.S. Belonging2 Financial Services norms for 84%
Slide 10: Recent Recognition
RECENT RECOGNITION 2024 2023 2023 BEST 2023 2023 90 Newsweek Forbes S&P Global Market U.S. News & Forbes Newsweek Human Rights Intelligence World Report Campaign America’s Best World’s Best America’s America’s Regional Banks1 Banks2 Top 50 Best Companies Best Midsize Greatest Corporate Public Banks3
Slide 11: 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: 1.32% 0.5% Peers: 1.00% 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Commerce Peer Median Large Bank Median Return on Average Common Equity 20.0% 15
Slide 12: Long-Term View: Net Income and Earnings Per Share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE $600 $4.00 Earnings Per Share Earnings per Share (EPS) $500 Net Income $3.50 $3.00 Net Income $400 $ 000s $2.50 $300 $2.00 $200 $1.50 $100 $1.00 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Dividends $0.55 $0.58 $0.61 $0.64 $0.70 $0.82 $0.89 $0.
Slide 13: Steady Long-Term Shareholder Returns
STEADY LONG-TERM SHAREHOLDER RETURNS as of March 31, 2024 Annualized Comparison Total Shareholder Returns Indexed, 3/31/2009 = $100 Total Shareholder Returns $900 40% CBSH KBW Regional KBW Bank S&P 500 S&P 500 $800 30% $700 20% $600 10% KBW BANK 0% $500 COMMERCE $400 -10% KBW 1 Year 3 Year 5 Year 10
Slide 14: Strategic Position
STRATEGIC POSITION 14
Slide 15: Strategic Posture: Maintaining the Balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE STRONG PERFORMANCE with Disciplined focus on ongoing refinement of the PRIORITY BLUE CHIP “Core Bank” investments • Super-Community Bank • Enhancing our platform People Leadership • Relationship-based banking • Workplace Optimization • High-touch customer s
Slide 16: Digital Technology: Application Modernization
DIGITAL TECHNOLOGY: APPLICATION MODERNIZATION Application Modernization is the focused effort to re-platform, replace, or significantly improve application platforms for the express purpose of modernizing features and capabilities, improving total cost of ownership, and/or reducing operating risk. P
Slide 17: Meeting Our Customers Where They Are: Enterprise Digital Strategy
MEETING OUR CUSTOMERS WHERE THEY ARE: ENTERPRISE DIGITAL STRATEGY Our Vision Why it’s Important Transform the digital experience by staying • Our current and potential customers’ current on digital trends and creating behaviors have changed, and they expect seamless digital ecosystems that place mor
Slide 18: We're Built for You: Commercial Banking
WE’RE BUILT FOR YOU: COMMERCIAL BANKING Revenue Revenuegrowth growthopportunities opportunities Financing solutions and deposit capabilities customized for your business • Working Capital Line of Credit • Commercial Real Estate • Full suite of cash management solutions • Term Loans • ESOP Loans • Ro
Slide 19: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables that enhance cash flow, streamline processing and increase efficiencies Treasury Commercial Payments Merchant Management Card Revenue Volume Revenue Volume $212 $65 $9.9 $8.3 MILLION MI
Slide 20: We don't just serve the healthcare industry. It's our specialty.
We don’t just serve the healthcare industry. It’s our specialty. 500+ hospitals in all 48 contiguous states 100+ entities and over 75 million patient transactions annually Patient Engagement Receivables Accounts Payable Traditional Banking Solutions Management Solutions Solutions Services • Treasury
Slide 21: Expansion Markets Offer Growth Opportunities
EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Expansion Markets Fee Income Team Overview 2023 Expansion Market Loan Growth Growth # of team members per market 66% (includes open positions) $ in millions Expansion 42 Oklahoma $3,547 Market Loan since 2018 $3,280 Growth 61% $2,200 $2,317 $2,466 $2,61
Slide 22: Commerce Trust Company wealth management
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. 20TH $69 $41 Largest Among Bank-Managed BILLION BILLION Trust Total Client Assets Under Companies1 Assets2 Management Total Client As
Slide 23: Wealth Key Growth Initiatives
Wealth Key Growth Initiatives Strengthening our Wealth Brands • Utilize new private banking loan and deposit system to offer specialized products, services and automation • Continued expansion into new concentrated wealth markets through de novo and acquisition efforts • Expand our integrated referr
Slide 24: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT 141 Branches 272 ATMs $12.4 $3.9 810 BILLION BILLION THOUSAND Consumer Consumer Consumer Deposits1 Loans1 Households2 Focus on Digital 4.7 4.6 68.2% $77,251 27.7% Commerce Bank Digital HH Digital Loan Mobile App Rating Penetration Sales (000s) Deposit Use Period end balance
Slide 25: Liquidity and Capital
LIQUIDITY AND CAPITAL 25
Slide 26: Visa Stock Gain & Securities Portfolio Repositioning
VISA STOCK GAIN & SECURITIES PORTFOLIO REPOSITIONING Total available for sale securities Period-end balance: $9.1 billion, at fair value • Tendered 823,447 Visa B-1 shares on April 8; Visa As of March 31, 2024 accepted tender offer. • Recorded mark-to-market gain of $175.5 million on Visa Class C co
Slide 27: Liquidity and Capital Highlights
LIQUIDITY AND CAPITAL HIGHLIGHTS Liquidity Balance Sheet / Deposits • $1.6B in cash at Federal Reserve Bank (FRB) • QTD Average loan to deposit ratio of 70%. at Q1. • Optimizing sources and uses of funding, allowing high • AFS debt securities portfolio duration of cost CDs to mature. 4.2 years. • To
Slide 28: Deposit Balance Trends
DEPOSIT BALANCE TRENDS Segment view $ in billions Commercial Consumer Wealth $13.4 $12.8 $12.6 $12.0 $11.9 $12.1 $12.1 $12.2 $12.3 $12.4 $11.3 $10.5 $10.6 $10.4 $9.9 $9.9 $10.0 $9.3 $3.0 $2.8 $2.3 $2.3 $2.3 $2.4 $2.3 $2.5 $2.4 2020 2021 2022 3Q23 4Q23 1Q24 3Q23 4Q23 1Q24 2020 2021 2022 3Q23 4Q23 1Q2
Slide 29: Well-Positioned for Multiple Rate Environments
WELL-POSITIONED FOR MULTIPLE RATE ENVIRONMENTS Opportunities to enhance and protect NII. Cost of Total Deposits & Deposit Beta: Prior & Current Fed Cycle • Net yield on interest earning assets increased 16 bps Cost of Total Deposits over Q4 to 3.33%. Before Fed Rate End of Fed Rate Deposit • Loan yi
Slide 30: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio As of March 31, 2024 Total available for sale securities Average balance: $9.5 billion, at fair value Duration QTD – March 31, 2024 Avg Rate (yrs) Treasury & agency Treasury & agency1 1.61% 2.5 5% 9% Municipal
Slide 31: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 11.7% Large, stable deposit base PB 15.5% 15.3% 70% Average Loan to CBSH Core Deposits CFR 13.7% Deposit Ratio3 UBSI 13.1% $22.0 Commerce 84% UCBI 12.6% Average Loan to HWC 12.3% Billion2 Deposit
Slide 32: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Over 57% of total loans are variable; 65% of commercial loans have floating rates Fixed Variable Business Construction Business RE Commercial Total Loans: $6.0B Total Loans: $1.4B Total Loans: $3.7B 3% 40% 41% 60% 59% 97% Personal RE Consumer HELOC Consumer Card Tot
Slide 33: Commercial Real Estate Breakdown
COMMERCIAL REAL ESTATE BREAKDOWN Real Estate - Business Loans: Office Outstanding Balances by Geography1 Other Real Estate - Business Loans Midwest Other States States Real Estate - % of Total Business Loans Loans $3.7 billion CO OH 7.5% 0.8% IL 5.1% Owner – Occupied 6.9% Owner- OK 2.5% 32.1% occupi
Slide 34: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $ in millions $10.1 $280.5 $312.1 $8.0 $8.9 $6.8 $6.1 $159.3 1.17% $162.4 1.24% $160.5 .19% .21% .17% .10% .16% .96% .94% .93% 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 NCOs- CBSH NCO/Average L
Slide 35: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans Dec. 31, 2023 March 31, 2024 $ in millions $225 1.40% Allowance for % of Allowance for % of Credit Losses Outstanding Credit Losses Outstanding $ in millions (ACL) Loans (ACL) L
Slide 36: Strong Capital Position – Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 56 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) Total Payout - % (right) Total Payout Ratio (%) $300 200% Common
Slide 37: Financial Results 1Q2024
FINANCIAL RESULTS 1Q2024 37
Slide 38: Financial Performance vs. Prior Years
FINANCIAL PERFORMANCE VS. PRIOR YEARS Net Income Earnings Return on Total Attributable to CBI ($ in Millions) per Common Share Average Assets $488 $477 As of March 31 $3.67 $3.64 As of March 31 As of March 31 1.45% 1.49% 1.54% 1.48% $0.91 $0.86 $119 $113 YE 2022 YE 2023 YTD 2023 YTD 2024 YE 2022 YE
Slide 39: 1Q2024 Highlights
1Q2024 HIGHLIGHTS Highlights Well-positioned for current environment PPNR1 • Net interest income up slightly over Q4 at $249MM. $152.2 million • Net interest margin increased 16 bps over Q4 to 3.33%. Net Income • Total cost of deposits increased 4 bps to 1.38%, compared to $112.7 million an increase
Slide 40: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Loans: Flat compared to Balances 1Q24 vs. 4Q23 1Q24 vs. 1Q23 the prior quarter, 1% growth annualized $ in millions 1Q24 $ Change % Change $ Change % Change Investment securities: Net maturities and Commercial $11,073.7 $44.2 0% $528.4 5% paydowns providing
Slide 41: Balance Sheet: Loans and Deposits
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +4% 6.27% 6.15% -3% $25.2 $25.2 $24.4 5.56% $9.1 $7.7 $7.3 $16.4 $17.1 $17.1 1.93% 1.97% $5.9 $6.1 $6.0 $16.1 .71% $17.5 $17.1 $10.5 $11.0 $11.1 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 Consumer Loans Loan Yield Non-In
Slide 42: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 3/31/2024 12/31/2023 3/31/2023 QoQ YoY $ in 000s 3/31/2024 12/31/2023 3/31/2023 QoQ YoY Business $5,994,974 $6,019,036 $5,704,467 -.4% 5.1% Business $5,873,525 $5,861,229 $5,656,104 .2% 3.8% Construction 1,497,647 1,446,764 1,437,419
Slide 43: Income Statement Highlights: PPNR
INCOME STATEMENT HIGHLIGHTS Pre-Tax, Pre-Provision Net Revenue (PPNR) $ in millions Net Interest Income (+) 1Q24 Comparison PPNR, excluding FDIC Non-Interest Income (+) special assessments and a vs. 1Q23 (7.9)% Non-Interest Expense (-) one-time litigation vs. 4Q23 7.1% settlement accrual, was Pre-Ta
Slide 44: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS 1Q24 vs. 4Q23 1Q24 vs. 1Q23 $ in millions 1Q24 $ Change % Change $ Change % Change Net Interest Income $249.0 $.6 0% $(2.6 ) (1)% Non-Interest Income $148.8 $4.0 3% $11.2 8% Non-Interest Expense $245.7 $(5.6) (2)% $21.6 10% Pre-Tax, Pre-Provision Net Revenue1 $152.2 $10.1
Slide 45: Non-Interest Income Highlights
NON-INTEREST INCOME HIGHLIGHTS 1Q24 vs. 4Q23 1Q24 vs. 1Q23 $ in millions 1Q24 $ Change % Change $ Change % Change Bank Card Transaction Fees $46.9 $(.9) (2)% $.3 1% Bank Card Fees: Decrease from Q4 was Trust Fees 51.1 2.0 4% 5.8 13% driven by seasonality. Deposit Account Charges Trust Fees: 24.2 .6
Slide 46: Non-Interest Expense Highlights
NON-INTEREST EXPENSE HIGHLIGHTS 1Q24 vs. 4Q23 1Q24 vs. 1Q23 Total non-interest expense: Increase of 3% over prior year $ in millions 1Q24 $ Change % Change $ Change % Change excluding FDIC and litigation Salaries and Employee settlement accruals1 Benefits $151.8 $4.3 3% $7.4 5% Data Processing and S
Slide 47: Net Interest Income: QTD March 31, 2024
NET INTEREST INCOME: QTD – March 31, 2024 Quarterly Net Interest Income (Fully taxable-equivalent) • Net interest income (fully taxable-equivalent) $275 3.6% increased $765 thousand over the prior quarter. 3.4% Net interest income – • The net yield on interest earning assets $250 3.2% increased 16 b
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Mar. 31, 2024 Dec. 31, 2023 Mar. 31, 2023 A Net Interest Income $ 248,999 $ 248,421 $ 251,623 B Non-Interest Income $ 148,848 $ 144,879 $ 137,612 C Non-Interest Expense $ 245,697 $ 251,254 $
Slide 49: Contact Information
Contact Information: Matt 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/ 49
Slide 50: Resilient in Challenging Times
RESILIENT IN CHALLENGING TIMES