Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q1 2023 Earnings Presentation
27 slides from Commerce Bancshares's earnings presentation, Mar 31, 2023
Slide 1: Commerce Bancshares, Inc. Earnings Highlights 1st Quarter 2023
MOMENTUM: Innovation. Improvement. Growth. COMMERCE BANCSHARES, INC. EARNINGS HIGHLIGHTS 1st Quarter 2023
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 $32.0 158 YEARS IN BUSINESS BILLION TOTAL DEPOSITS $24.7 BILLION 43RD LARGEST U.S. BANK BASED ON ASSET SIZE1 MARKET CAP TOTAL $16.5 LOANS2 BILLION $7.3 BILLION $10.4 COMMERCIAL CARD VOLUME 21ST BILLION AS OF DECEMBER 31, 2022 LARGEST U.S. BANK BASED ON MARKET CAP1 TO
Slide 4: Track Record of Long-Term Outperformance
TRACK RECORD OF LONG-TERM OUTPERFORMANCE Revenue Diversification Deposit Franchise Continued Long-Term Investments Balanced earnings profile, fee $23.6 billion in low-cost, diverse revenue at 35%1 of total revenue, deposits2 with peer-leading Core banking system bolstered by growing wealth and histo
Slide 5: 1Q2023 Highlights
1Q2023 HIGHLIGHTS Highlights Well-positioned for current environment PPNR1 • PPNR1 was up 22.4% year over year but down 5.5% from Q4. $165.1 million • Net interest income decreased 1.2% from Q4. Net Income • Net interest margin increased 81 bps year over year and 8 bps over Q4 to $119.5 million 3.26
Slide 6: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Balances Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights • Linked quarter (LQ) and prior year (PY) reflects growth in business, business real Commercial1 $10,545.3 $497.5 $991.2 estate, and construction loans Consumer 5,858.6 21.4 189.5 Total Loans $16,4
Slide 7: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions -14% +8% $29.3 $26.6 5.56% $25.2 $11.5 5.03% $10.4 $9.1 $15.9 $16.4 $15.2 $5.7 $5.8 $5.9 3.54% $17.8 $16.2 $16.1 .71% .40% $9.5 $10.1 $10.5 .05% 1Q22 4Q22 1Q23 1Q22 4Q22 1Q23 Consumer Loans Loan Yield Non-In
Slide 8: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 3/31/2023 12/31/2022 3/31/2022 QoQ YoY $ in 000s 3/31/2023 12/31/2022 3/31/2022 QoQ YoY Business $5,704,467 $5,661,725 $5,508,508 0.8% 3.6% Business $5,656,104 $5,478,241 $5,324,172 3.2% 6.2% Construction 1,437,419 1,361,095 1,144,411
Slide 9: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights • Linked quarter (LQ) decrease due to higher interest Net Interest Income $251.6 $(3.0) $42.8 expense and lower investment securities balances, partly offset by higher interest earned on loans Non-Interest Income $137.6 $
Slide 10: Non-Interest Income Highlights
NON-INTEREST INCOME HIGHLIGHTS Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights • Prior year (PY) increase mainly due to higher Bank Card Transaction Fees $46.7 $2.1 $4.6 corporate card fees Trust Fees $45.3 $.6 $(2.5) • 1Q23 reflects lower market values on assets under management compared to prio
Slide 11: Non-Interest Expense Highlights
NON-INTEREST EXPENSE HIGHLIGHTS Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights • Increase over prior year (PY) mostly due to higher Salaries and Employee Benefits $144.4 $5.9 $8.4 full-time salaries expense of $7.6 million and higher benefits expense of $1.4 million Net Occupancy $12.8 $1.0 $.5
Slide 12: 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 (=) $391 $389 1Q2023 Comparison $341 vs. 1Q2022 22.4% $217 vs. 4Q2022 (5.5)% $224 $255 $252 $209 $206 $175 $165 $135 $132 $137 $137 1Q2022 4Q2022 1Q20
Slide 13: Liquidity and Capital
LIQUIDITY AND CAPITAL 13
Slide 14: Liquidity and Capital Highlights
LIQUIDITY AND CAPITAL HIGHLIGHTS Liquidity / Borrowing Deposits • $1.3B of cash at Federal Reserve Bank (FRB) at Q1. • Average loan to deposit ratio of 65%. • $1.5B in Federal Home Loan Bank (FHLB) • Seasonal deposit runoff in January occurred in line advances at Q1. with expectations. • No borrowin
Slide 15: Deposit Trends – YTD 2023
DEPOSIT TRENDS – YTD 2023 January 1, 2023 – April 10, 2023 7-Day Moving Average $ in millions 3/8 $30,000 Seasonal runoff early in the first quarter was in line with expectations. $28,000 -3% $26,000 0% Z $24,000 Deposit balances declined slightly after March 8, but $22,000 have been rebounding in A
Slide 16: Deposit Balance Trends
DEPOSIT BALANCE TRENDS Segment view $ in billions Commercial Consumer Wealth $13.4 $12.8 $12.5 $12.7 $12.0 $11.9 $11.3 $9.9 $10.3 $10.2 $9.5 $7.8 $3.0 $2.8 $2.3 $2.5 $2.4 $1.8 2019 2020 2021 2022 1Q23 1Q23 2019 2020 2021 2022 1Q23 1Q23 2019 2020 2021 2022 1Q23 1Q23 Average Balance Period End Average
Slide 17: Deposit Portfolio Characteristics
DEPOSIT PORTFOLIO CHARACTERISTICS Percent of accounts Percent of deposits Average balance of Average balance of under $250,000 ($) uninsured2 accounts accounts <$250,000 99% 32% $25,294 $13,922 Top 10 Commercial Sectors % of Commercial % of Total Uninsured Deposit Analysis 3/31/2023 (NAICS Sector /
Slide 18: Well-Positioned for Multiple Rate Environments
WELL-POSITIONED FOR MULTIPLE RATE ENVIRONMENTS Opportunities to enhance and protect NII in a Cost of Total Deposits & Deposit Beta: Prior & Current Fed Cycle rising rate environment. Cost of Total Deposits • Net yield on interest earning assets increased 8 bps Before Fed Rate End of Fed Rate Deposit
Slide 19: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio As of March 31, 2023 Total available for sale securities Average balance: $11.8 billion, at fair value Duration QTD – March 31, 2023 Avg Rate (yrs) Treasury & agency Treasury & agency1 1.32% 2.2 4% 9% Municipal
Slide 20: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 10.9% Large, stable deposit base PB 15.9% CBSH 14.1% CFR 13.4% Core Deposits 65% Average Loan to Deposit Ratio 3 UMPQ 12.9% 12.6% $23.1 Commerce 83% Average OZK Loan to UBSI 12.3% Billion2 Deposi
Slide 21: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Over 55% of total loans are variable; 64% of commercial loans have floating rates Fixed Variable Business Construction Business RE Commercial Total Loans: $5.7B Total Loans: $1.4B Total Loans: $3.4B 5% 40% 43% 60% 57% 95% Personal RE Consumer HELOC Consumer Card Tot
Slide 22: Commercial Real Estate Breakdown
COMMERCIAL REAL ESTATE BREAKDOWN Over 30% of CRE loans are owner-occupied real estate properties, which present lower risk profiles Business Real Estate Loans - $3.4 billion Real Estate Business Loans % of Total Loans Senior living Other Owner – Occupied 7.0% Farm 3.9% Office 3.1% 5.8% 3.1% Hotels O
Slide 23: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $ in millions $6.9 $6.8 $265.7 $289.9 $5.6 $4.6 $150.1 $159.3 $3.3 $134.7 1.18% .17% 1.12% .12% .14% .06% .09% .92% .96% .87% 1Q22 4Q22 1Q23 1Q22 4Q22 1Q23 NCOs- CBSH NCO/Average Lo
Slide 24: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans December 31, 2022 March 31, 2023 $ in millions Allowance Allowance $250 1.47% 1.60% 1.44% for Credit % of for Credit % of Losses Outstanding Losses Outstanding 1.35% $ in millio
Slide 25: Strong Capital Position – Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 55 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 Common shar
Slide 26: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Mar. 31, 2023 Dec. 31, 2022 Mar. 31, 2022 A Net Interest Income $ 251,623 $ 254,641 $ 208,786 B Non-Interest Income $ 137,612 $ 136,825 $ 131,769 C Non-Interest Expense $ 224,107 $ 216,740 $
Slide 27: Commerce Bancshares, Inc.
] Commerce Bancshares, Inc.