Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q2 2020 Earnings Presentation
45 slides from Commerce Bancshares's earnings presentation, 2020
Slide 1: Embracing a Growth Mindset: Investor Update 2nd Quarter 2020
Embracing a Growth Mindset COMMERCE BANCSHARES, INC. INVESTOR UPDATE 2nd Quarter 2020
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: 154 Years in Business
COMMERCE BANCSHARES $30.5 $24.5 154 YEARS IN BUSINESS BILLION IN ASSETS BILLION IN TOTAL DEPOSITS 47TH LARGEST U.S. BANK BASED ON ASSET SIZE1 $16.4 BILLION IN TOTAL LOANS2 $6.6 BILLION IN MARKET CAPITALIZATION $9.1 BILLION IN COMMERCIAL 16TH CARD VOLUME as of 12/31/19 LARGEST U.S. BANK BASED ON MARK
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 • Sophisticated payment customer service system capabilities and engaged workforce • Focus on the full
Slide 5: Our Long-Term Success: Strong Culture
OUR STRONG CULTURE IS THE KEY DRIVER TO OUR LONG-TERM SUCCESS A culture At Commerce, our core values shape the way we live and work. formed 150+ years ago to • We make decisions today that will be a force for We have a long V sustain us well into the future. good in our term View region and • We see
Slide 6: Beyond Financials
BEYOND FINANCIALS Supporting each other, our customers and our communities “ As a socially responsible corporate More than 500 nonprofit organizations citizen, we continuously seek ” opportunities to make a difference. supported by Commerce team members through leadership roles by serving on boards
Slide 7: Our Commitment to Inclusion, Diversity and Equity
OUR COMMITMENT TO INCLUSION, DIVERSITY AND EQUITY Our longstanding approach of “doing what’s right” continues to guide our focus on our team members, customers and communities Building a place to thrive and grow A culture that celebrates inclusion and diversity Commerce offers a variety of internal
Slide 8: Recent Recognition
RECENT RECOGNITION 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 B
Slide 9: Q2 Financial Results
Q2 FINANCIAL RESULTS (aN & Commerce Bancshares, Inc.
Slide 10: 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 June 30 Share As of June 30 Assets As of June 30 $434 $421 $3.60 $3.58 1.76% 1.67% 1.66% $1.72 $205 .66% $.78 $92 YE 2018 YE 2019 YTD 2019 YTD 2020 YE 2018 YE 2019 YT
Slide 11: Drivers of 2nd Quarter 2020 Earnings
DRIVERS OF 2ND QUARTER 2020 EARNINGS NIM decreased 39 bps to 2.94% from 3.33% in the previous Net Interest quarter, driven by lower yields on commercial loans and investment securities, lower average balances of consumer credit card loans, and Margin excess liquidity from higher deposit balances. De
Slide 12: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Total Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 12.8% Large, stable deposit base and low OZK 15.4% CBSH 15.2% loan to deposit ratio 14.5% 69% UBSI Core Deposits Average Loan to SFNC 14.1% Deposit Ratio3 CFR 14.0% $22.5 Commerce 13.8% 88% BXS Av
Slide 13: Credit Posture
CREDIT POSTURE Net Loan Charge-Offs Allowance for Credit $ in millions Losses on Loans $ in millions $11.3 $10.9 $240.7 $8.4 $171.7 $161.2 1.47% .32% .30% 1.13% 1.14% .21% 2Q19 1Q20 2Q20 2Q19 1Q20 2Q20 Net Loan Charge-offs NCO/Average Loans1 Allowance for Credit Losses on Loans Allowance for Credit
Slide 14: Net Interest Income: YTD June 30, 2020
NET INTEREST INCOME: YTD – June 30, 2020 Quarterly Net Interest Income • Net interest income (tax equivalent) increased $220 (Tax Equivalent) 4.0% slightly over the prior quarter. Net interest income – $210 3.8% • The net yield on interest earning assets declined 39 3.6% basis points from the previo
Slide 15: NIM Protection
NIM PROTECTION Hedge against lower interest rates by purchasing interest rate floor contracts and maintaining duration Floor Impact on Loan Yields Maintaining Duration Assumes Loans at LIBOR +200bps 8% In addition to the interest rate Unhedged Illustrative floors, Commerce has been 2.5% Floor (effec
Slide 16: A Full-Service, Diversified Operating Model
A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Net Interest Income Non-Interest Income 4% $ in millions $501 $525 As of June 30 11% Wealth Management $422 $447 $461 2% Deposit Service Charges $248 $241 7% Commerce Fees and Commissions B
Slide 17: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Business Loans YTD Average Loans2 $s in millions 4% Construction $15,435 17% Business RE $13,927 $14,098 35% $13,542 Residential RE $12,756 Commerce Consumer/HELOCs 18% Bank1 Credit Card 2016 2017 2018 2019 2020 6% Loans Held for Sale 2020 Loan Growth by Category 20%
Slide 18: Paycheck Protection Program Impact
PAYCHECK PROTECTION PROGRAM IMPACT 7,443 Total SBA PPP $1.5B Total SBA PPP $206K Average SBA PPP $34K Median SBA PPP loans approved secured funding loan size loan size Business Loan Yield QTD Avg As of June 30, 2020 APPROXIMATELY 154,000 3.03% 2.91% 2.36% JOBS SAVED Business Business PPP Loan Yield
Slide 19: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Nearly 58% of total loans are variable; 65% of commercial loans have floating rates; mostly tied to a LIBOR index Fixed Variable Business Construction Business RE Commercial Total Loans: $5.6B Total Loans: $0.9B Total Loans: $2.8B 4% 35% 44% 56% 65% 96% Personal RE
Slide 20: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of June 30, 2020 Total average investments $9.7 billion 4% 10% Treasury & agency 14% Unrealized gain $281.5 million Municipal 14% 12 month maturities / pay-downs $1.6 billion MBS Duration Other
Slide 21: Impact of CECL: Allocation of Allowance
IMPACT OF CECL: ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook due to COVID-19 December 31, 2019 March 31, 2020 June 30, 2020 Methodology and Incurred Model CECL Model CECL Model Variables Allowance Allowance Allowance % of for Credit % of for Credit % of • CECL mode
Slide 22: Net Loan Charge-Offs: YTD June 30, 2020
NET LOAN CHARGE-OFFS: YTD – June 30, 2020 2020 YTD YTD Actual Loss • Loss rate on credit $ in 000s 2019 2020 $ Chge Rate card loans decreased from 5.06% in the prior Business $ 731 $ 2,876 $ 2,145 0.09% quarter to 2.17% this Overdraft 570 742 172 42.90% quarter. Construction (117) — 117 0.00% Busine
Slide 23: Commerce and COVID-19
COMMERCE AND COVID-19 P ro] Commerce Bancshares, Inc. 23
Slide 24: Helping Our Customers Focus on What Matters Most: Consumer
HELPING OUR CUSTOMERS FOCUS ON WHAT MATTERS MOST Relief programs for our consumer customers Loans Credit Cards • Payment deferments • Opportunity to skip payments with refunded or waived late fees • Unsecured installment loan with flexible income requirements and loan terms, first payment • Permanen
Slide 25: Helping Our Customers Focus on What Matters Most: Commercial
HELPING OUR CUSTOMERS FOCUS ON WHAT MATTERS MOST Relief programs for our commercial customers Loans Deposit Accounts Prepaid Cards • Payment deferments for • Requests can be made to • Implementation fees existing clients have overdraft fees waived for DirectCheck refunded Card solution, an alternati
Slide 26: Providing Relief to Our Customers
PROVIDING RELIEF TO OUR CUSTOMERS Payment Relief Requests1 Approx. % Making Number of % of Portfolio Total Amount Loan Type Payment in Last Requests (by # of notes) of Requests 60 Days4 Commercial 741 5.6% $720MM5 46% Mortgage 192 1.6% $48MM 54% Consumer Card2 1,597 .6% $10MM 71% Installment 3,940 4
Slide 27: What Our Customers Are Saying
WHAT OUR CUSTOMERS ARE SAYING “I wanted to send you a quick note to “I can’t thank you enough for your Branch support and for Commerce’s tell you that your staff is doing a great job during these challenging times. Customer ability to help us and our business. Relationship We sincerely appreciate th
Slide 28: Loan Portfolio: Limited Exposure to Pandemic-Sensitive Industries
LOAN PORTFOLIO: LIMITED EXPOSURE TO PANDEMIC-SENSITIVE INDUSTRIES While we expect nearly every industry to be impacted to some degree by Coronavirus-related disruptions, we have identified nine industries that will be most impacted. % of Loan Portfolio $ in $ in Loan Outstandings Highest Impacted mi
Slide 29: Strong Capital Position - Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 52 consecutive years of regular common cash dividend increases1 Capital Returned to Common Shareholders as a percentage of Net Income2 $300 Cash dividends paid on common stock (left) 200% $250 Common share repurchase (left) Payout Ratio (%) %
Slide 30: Strategic Position
STRATEGIC POSITION & Commerce Bancshares, Inc. 30
Slide 31: 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” • Develop Claims Payment • Super-Community Bank platform • Commerce Bank Mortgage • Relationship-based banking • Accelerate Growth in Healthcar
Slide 32: Growth Mindset: Consumer Banking
GROWTH MINDSET: CONSUMER BANKING Enhancing the Customer Experience Engaging with customers through the channels they prefer. CommercePremier Branch Design Advanced ATMs • Technology investments • New engagement programs • Enhanced product offerings • Improved operating model Video Advisors Explorati
Slide 33: Growth Mindset: Internal Innovation at Commerce
GROWTH MINDSET: 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 incr
Slide 34: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT $10.4 $4.2 1.1 164 Full-service BILLION BILLION MILLION branches Consumer Consumer Consumer 366 Deposits Loans* Households* ATMs Focus on Digital Commerce Digital HH Digital Loan Mobile Bank App Rating Penetration Sales (000s) Deposit Use 4.7 46% $42,755 13% 4.7 Period end
Slide 35: 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. Key Growth Initiatives 20TH $57 $34 $539 • Implement new Private Banking Lending Program Largest Among Bank-Managed BILLION BILLION M
Slide 36: 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 37: Commercial Banking - Expansion Markets
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Expansion Market Loan Growth Expansion $ in millions Market Loan Fee Income Team Overview for Growth $2,316 Growth Expansion Markets $2,200 98% 89% # of team members per market (includes open positions) $1,913 since 2015 since 2015
Slide 38: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow Key Verticals $177 Payments MILLION Revenue Tailored return on investment-based solutions Treasury $47.7 Management enable healthcare providers to enhance the pa
Slide 39: Card Products - A Leader Amongst Top U.S. Banks
CARD PRODUCTS – A LEADER AMONGST TOP 50 U.S. BANKS Consistently ranked among the top issuers in the Nilson Report Commercial Consumer #12 Commercial #7 Purchasing 1 #12Bank #12 Consumer #19 Debit #14 Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment
Slide 40: Capital for Business
CAPITAL FOR BUSINESS® A middle-market private equity firm focused on the success of industrial growth companies Quick Facts: Investment Criteria • Manufacturing, distribution and certain service • Small Business Investment Company companies (SBIC) founded in 1959 • Cash flow positive • Good manageme
Slide 41: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Return on Average Assets 2.0% 1.5% ROAA 10-yr average 1.0% CBSH: 1.31% 0.5% Peers: 1.00% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Commerce Peer Banks Large Banks Return on Average Common Equity 20.0% 15.0% ROACE 10-yr average 10.0% CB
Slide 42: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of June 30, 2020 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 03/31/2005 = $100 Percent 400 CBSH NASDAQ Bank COMMERCE 20% S&P 500 KBW Bank 350 NASDAQ 10% 300 BANK 0% KBW BANK 250 -10% S&P 500 200 -20% 150 -30% 1 Year 3 Year 5 Year 1
Slide 43: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) June 30, 2020 March 31, 2020 June 30, 2019 A Net Interest Income $ 203,057 $ 201,065 $ 211,634 B Non-Interest Income $ 117,515 $ 123,663 $ 127,259 C Non-Interest Expense $ 187,512 $ 193,698
Slide 44: 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 45: Embracing a Growth Mindset
(® Embracing a Growth Mindset i \X ie Commerce Bancshares, Inc.