Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q4 2020 Earnings Presentation
49 slides from Commerce Bancshares's earnings presentation, Feb 9, 2021
Slide 1: Commerce Bancshares Investor Update 4th Quarter 2020
COMMERCE BANCSHARES, INC. INVESTOR UPDATE 4th Quarter 2020 Embracing a Growth Mindset
Slide 2: Cautionary Statement
2 CAUTIONARY STATEMENT 2 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, expectat
Slide 3: Commerce Bancshares at a glance
COMMERCE BANCSHARES $32.9 BILLION IN TOTAL ASSETS 42ND LARGEST U.S. BANK BASED ON ASSET SIZE1 $7.7 BILLION IN MARKET CAPITALIZATION 16TH LARGEST U.S. BANK BASED ON MARKET CAPITALIZATION1 $61.2 BILLION IN TRUST ASSETS 17TH LARGEST AMONG U.S. BANK-MANAGED TRUST COMPANIES BASED ON AUM1 155 YEARS IN BUS
Slide 4: Super-Community Bank Platform
High-performing teams and engaged workforce Long history of top quartile credit quality metrics Investment in distinctive, high-return businesses Focus on operational efficiencies Disciplined approach to acquisitions Challenge Accepted.® Customer relationship-based: • Sophisticated payment system ca
Slide 5: Our culture and core values
5 • We make decisions today that will sustain us well into the future. • We see diversity and inclusion as an imperative and seize opportunities to build teams that reflect all sides of an issue. • We value integrity, we recognize our first duty is to conduct business in ways that merit trust and co
Slide 6: Beyond Financials
More than 500 nonprofit organizations supported by Commerce team members through leadership roles by serving on boards BEYOND FINANCIALS Supporting each other, our customers and our communities 6 OUTSTANDING Community Reinvestment Act rating from the Federal Reserve for more than 20 years 2020 Engag
Slide 7: Our Commitment to Diversity, Equity and Inclusion
Connecting young professionals 550+ members 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 A culture that celebrates inclusion and diversity Commerce offers a variety of i
Slide 8: Recent Recognition
RECENT RECOGNITION 8 Commerce Bank was selected as one of 20 best-in-class banks in Bank Director’s 2019 RankingBanking study. We placed third overall in the Midwest and ranked first in the Midwest for Best Branch Network Strategy, Best Core Deposit Growth Strategy and Best Retail Strategy. Commerce
Slide 9: Financial Results
“ FINANCIAL RESULTS 4Q 6 YTD & Commerce Bancshares, Inc. 9
Slide 10: Financial Performance in 2020
Growth in deposits period end 31% ROA 1.20% Dividend growth 9% 2.99% Net interest margin 11% Growth in loans period end .22% Net loan charge- offs to loans Long-term performance remains strong 20-year TOTAL ANNUALIZED SHAREHOLDER RETURN @ 9.6% Vs KBW Bank Index of 3.1% ROE 10.6% FINANCIAL PERFORM
Slide 11: Financial Performance vs. Prior Year
$3.43 $3.41 $2.91 YE 2020YE 2018 YE 2019 Return on Total Average Assets 1.76% 1.67% 1.20% YE 2018 YE 2019 YE 2020 Earnings per Common Share Return on Average Common Equity Net Income Attributable to CBI ($ in Millions) FINANCIAL PERFORMANCE VS. PRIOR YEAR $354 YE 2018 $421 YE 2019 $434 YE 2020 YE 20
Slide 12: 4Q2020 Earnings Highlights
$1.11 EPS 12 • Allowance for credit losses on loans to total loans decreased to 1.35% – Decreased to 1.48% excluding Paycheck Protection Program (“PPP”) loans. • Net charge-offs to total loans of .19% and Non-performing assets to total loans of .16%. • Loans on deferral of .6% of total loans. • Non-
Slide 13: Balance Sheet Highlights
Average Balances Change vs. $ in millions 4Q20 3Q20 4Q19 Highlights Commercial1 $10,643.0 $(30.2) $1,559.4 • Linked quarter (LQ) reflects lower business loans offset by higher construction and business real estate loans • YoY reflects PPP Consumer 5,718.3 25.5 358.2 • LQ reflects higher personal rea
Slide 14: Balance Sheet
$13.6 $14.9 $15.3 $6.6 $9.8 $10.3 3Q204Q19 4Q20 $20.2 $24.7 $25.6 +27% $9.1 $10.6 $10.6 $5.4 $5.7 $5.7 4Q204Q19 3Q20 $14.5 $16.3 $16.3 +13% BALANCE SHEET 14 Loans Loan YieldConsumer Loans Commercial Loans Deposits QTD Average Balances $ billions Non-Interest Bearing Interest Bearing Deposit Interest
Slide 15: Income Statement Highlights
Change vs. $ in millions 4Q20 3Q20 4Q19 Highlights Net Interest Income $209.8 $(6.2) $7.1 • LQ decline due to lower earning asset yields, partially offset by lower deposit costs and larger balance sheet. Non-Interest Income $135.1 $5.5 $(8.3) • LQ increase in bank card fees, trust fees and mortgage
Slide 16: Pre-Tax, Pre-Provision Net Revenue (PPNR)
16 PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) $143 $151 $203 $195 $346 4Q2019 $130 $155 $216 $191 3Q2020 $346 $135 $149 $210 $196 $345 4Q2020 Non-Interest Income (+) Net Interest Income (+) Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) 4Q2020 Comparison vs. 4Q2019 -1.6% vs. 3Q2020 -
Slide 17: Sound Capital and Liquidity Position
Average Loan to Deposit Ratio3 SOUND CAPITAL AND LIQUIDITY POSITION 17 Total Risk-Based Capital Ratio1 1S&P Global Market Intelligence, Information as of September 30, 2020 2Period-end balances, as of December 31, 2020 3Includes loans held for sale, for the quarter ended December 31, 2020 15.8% 15.3
Slide 18: Maintaining Strong Credit Quality
$15.2 $7.6 $8.0$8.3 $10.4 4Q19 4Q203Q20 MAINTAINING STRONG CREDIT QUALITY 18 Net Loan Charge-Offs (NCOs) $ in millions NCOs- CBSH NCOs - Peer Average NCO/Average Loans1 - CBSH $160.7 $236.4 $220.8 $143.0 $301.8 4Q19 3Q20 4Q20 Allowance for Credit Losses on Loans (ACL) $ in millions ACL - CBSH ACL -
Slide 19: Net Interest Income
19 238 240 242 244 246 248 250 252 254 256 258 260 -$4,000 -$2,000 $0 $2,000 $4,000 $6,000 $8,000 1Q 19 3Q 17 1Q 18 1Q 17 In te re st in co m e 4 Q 18 2Q 17 C PI-U 4 Q 17 2Q 18 3Q 18 3Q 20 2Q 19 3Q 19 4 Q 19 1Q 20 2Q 20 4 Q 20 • Net interest income (tax equivalent) decreased $6.1 million from the pr
Slide 20: NIM Protection
$20 $0 $10 $30 2Q204Q19 1Q20 3Q20 4Q20 0.52% 0.45% 0.25% 0.18% 0.12% 0.0% 0.2% 0.4% 0.6% $850 $850 $850 $850 $850 2.3% 3.5% 5.1% 5.3% 5.2% 0% 2% 4% 6% 8% $0 $200 $400 $600 $800 $1,000 4Q19 1Q20 2Q20 3Q20 4Q20 NIM PROTECTION Hedging structures and low deposit costs provide support to net interest mar
Slide 21: A Full-Service, Diversified Operating Model
62%12% 7% 4% 10% 5% Commerce Bank1 Net Interest Income Wealth Management Deposit Service Charges Fees and Commissions Card Income Other A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Continued focus on growing fee income through new and
Slide 22: Well-Diversified Loan Portfolio
37% 6% 17% 20% 16% 4% Commerce Bank1 Business Loans Construction Business RE Residential RE Consumer/HELOCs Credit Card 32% 8% 33% 19% 8% Peer Banks1 Business RE & construction $99 million Personal RE $63 million Consumer credit card $8 million Auto/ motorcycle/ other $11 million Business/ l
Slide 23: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE 23 Yield and Interest Income Q4 2020, $ in millions * Tax equivalent basis Loan Balance Customers Median Loan Size Total SBA Fees SBA Fees Recognized in 2020 $1.5B over7,500 $33M $41.0MM (2.7%) $21.4MM Round 1 – Key Metrics 3.01% 3.17% 2.97% Yield Busine
Slide 24: Summary of Fixed & Floating Loans
24 Nearly 50% of total loans are variable; 49% of commercial loans have floating rates SUMMARY OF FIXED & FLOATING LOANS 53%47% Business Total Loans: $6.5B Fixed Variable C o m m er ci a l 73% 27% Personal RE Total Loans: $2.8B C o n su m er 97% 3% Construction Total Loans: $1.0B 99% 1% HELOC Total
Slide 25: High Quality, Highly Liquid Investment Portfolio
25 7% 16% 57% 15% 5% Composition of AFS Portfolio Treasury & agency Municipal MBS Other asset backed Corporate HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO 1Excludes inflation effect on TIPs; 2Tax equivalent yield; 3QTD averages; 4Information as of YTD December 31 Duration December 2
Slide 26: Impact of CECL: Allocation of Allowance
IMPACT OF CECL: ALLOCATION OF ALLOWANCE 26 Methodology and Variables • CECL model utilizes 3rd party baseline forecast • Key variables include: GDP, disposable income, unemployment rate, various interest rates, CPI inflation rate, HPI, CREPI and market volatility CECL allowances reflect the economic
Slide 27: Net Loan Charge-Offs
2020 YTD YTD Actual Loss $ in 000s 2019 2020 $ Chge Rate Business $ 4,102 $ 3,665 $ (437) 0.06% Overdraft 1,523 1,277 (246) 38.11% Construction (117) (3) 114 0.00% Business R/E (60) (47) 13 0.00% Personal R/E 56 (291) (347) (0.01)% Consumer 8,554 4,444 (4,110) 0.23% HELOC 209 (166) (375) (0.05)% Cre
Slide 28: Commerce and COVID-19
“ COMMERCE AND COVID-19 & Commerce Bancshares, Ince.
Slide 29: Providing Relief to Our Customers
PROVIDING RELIEF TO OUR CUSTOMERS Active deferral exposure reduced as pandemic continues 29 Payment Relief Requests 1Deferrals are defined as modifications, payment deferrals, forbearance agreements, or change in terms, % of Portfolio calculated on Total Loans (excluding PPP loans); 2 No direct cons
Slide 30: Limited Exposure to Pandemic-Sensitive Industries
LOAN PORTFOLIO: LIMITED EXPOSURE TO PANDEMIC-SENSITIVE INDUSTRIES 30 While we expect nearly every industry to be impacted to some degree by Coronavirus-related disruptions, we have identified eight industries that will be most impacted. Highest Impacted Industries $ in millions 9/30 $ in millions 12
Slide 31: Strong Capital Position
31 0% 50% 100% 150% 200% $0 $50 $100 $150 $200 $250 $300 20182011 2012 2013 20162014 2015 2017 2019 2020 • Special cash dividend paid in 2012 totaled $131 million. • 2014 included $200 million accelerated share repurchase in conjunction with preferred stock issuance. • 2015 included a $100 million a
Slide 32: Strategic Position
“ STRATEGIC POSITION & Commerce Bancshares, Inc. 32
Slide 33: Strategic Posture: 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 acc
Slide 34: CBI Blue Chip: Enterprise Digital Strategy
CBI BLUE CHIP: ENTERPRISE DIGITAL STRATEGY 34 The Enterprise Digital Strategy leverages the success of the consumer digital strategy, expands it across the bank, and has been elevated to an executive role. Transform the digital experience by staying current on digital trends & creating seamless digi
Slide 35: Growth Mindset: Consumer Banking
Enhancing the Customer Experience Engaging with customers through the channels they prefer. • Technology investments • New engagement programs • Enhanced product offerings • Improved operating model 35 Commerce Bank Mortgage An end-to-end, fully coordinated solution that allows the consumer to trans
Slide 36: Commerce Bank CONNECT Mobile App
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 platform for customers to message directl
Slide 37: Growth Mindset: Internal Innovation at Commerce
37 Commerce’s commitment to promoting an innovative mindset, from everyday incremental improvement to transformative changes in the way we do business. As innovation and technology rapidly drive change, our customers’ needs and expectations continue to evolve. AGILE enables our organization to meet
Slide 38: Consumer Banking Snapshot
38 CONSUMER BANKING SNAPSHOT Period end balances, information as of December 31, 2020; App store rating as of 12/31/2020 1Excludes Wealth segment 2Excludes loans from our Wealth segment and $1.9 billion of personal real estate loans B I L L ION $2.0 Consumer Loans2 B I L L ION $12.2 Consumer Deposit
Slide 39: Wealth Management: Commerce Trust Company
39 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. 1S&P Global Market Intelligence ranking as of 09/30/2020, based on assets under management 2Assets under administration Largest Am
Slide 40: Commercial Banking
Commercial Revenue $ in millions COMMERCIAL BANKING $9.6 $10.9 2018 2019 2020 $9.1 Commercial Loans $ in billions $8.1 $11.3 2018 2019 $8.0 2020 Commercial Deposits $ in billions $547 $609 20202018 2019 $548 40Commercial segment as of December 31, 2020 Financing solutions – options for all sizes and
Slide 41: Commercial Banking – Expansion Markets
Team Overview for Expansion Markets # of team members per market (includes open positions) COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Period end balances as of December 31, 2020 $2,316 $1,619 2015 201920172016 2018 $1,913 $1,338 $2,200 2020 $2,466 Oklahoma Nashville Cincinnati
Slide 42: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Information as of December 31, 2020 42 Payments Revenue Commercial Card Volume Merchant Volume Treasury Management Revenue Innovative payments solutions to manage payables and receivables to streamline cash flow Tailored return on investment-based so
Slide 43: Card Products – A Leader Among Top 50 U.S. Banks
1Includes fleet cards Source: Nilson Reports (Debit: April 2020; Consumer Card: February 2020; Prepaid: September 2020; Merchant: March 2020; Purchasing: May 2020; Commercial Card: May 2020), based on the top 50 U.S. banks ranked by total assets as of 12/31/2019, S&P Global Market Intelligence CARD
Slide 44: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Sources: S&P Global Market Intelligence and company reports and filings as of 12/31/2020 Peer Banks include ASB, BOKF, BXS, CFR, FCNC.A, FNB, FULT, HWC, ONB, OZK, PB, PNFP, SFNC, UBSI, UMBF, UMPQ, VLY, WBS, WTFC Large Banks include: JPM, BAC, C, WF
Slide 45: Long-Term View: Net Income and Earnings Per Share
Dividends per share *Including 2012 special dividend = $1.56 All data has been restated for 5% stock dividend distributed in December 2020 Net Income represents Net Income Available to Common Shareholders Source: Corporate Finance LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE N et In co m e $ 0
Slide 46: Steady Shareholder Returns
Source: Bloomberg; data as of 12/31/2020 Total Shareholder Returns Indexed, 12/31/2005 = $100 Consistent, positive returns to shareholders Significant outperformance relative to banks over long period -20% -10% 0% 10% 20% 3 Year1 Year 15 Year10 Year5 Year S&P 500 CBSH NASDAQ Bank KBW Bank Annualized
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 47 For The Three Months Ended (DOLLARS IN THOUSANDS) Dec. 31, 2020 Sept. 30, 2020 Dec. 31, 2019 A Net Interest Income $ 209,763 $ 215,962 $ 202,659 B Non-Interest Income $ 135,117 $ 129,572 $ 143,461 C Non-Interest Expense $ 196,310 $ 190,858 $ 195,174 Pre-Provision Net Reve
Slide 48: 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/
Slide 49: Embracing a Growth Mindset
8) Embracing a Growth Mindset