Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q3 2020 Earnings Presentation
42 slides from Commerce Bancshares's earnings presentation, Oct 20, 2020
Slide 1: Embracing a Growth Mindset – Investor Update 3rd Quarter 2020
Embracing a Growth Mindset COMMERCE BANCSHARES, INC. INVESTOR UPDATE 3rd 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
COMMERCE BANCSHARES $31.5 $25.7 155 YEARS IN BUSINESS BILLION IN ASSETS BILLION IN TOTAL DEPOSITS 43RD LARGEST U.S. BANK BASED ON ASSET SIZE1 $16.5 BILLION IN TOTAL LOANS2 $6.3 BILLION IN MARKET CAPITALIZATION $9.1 TH BILLION IN COMMERCIAL 16 CARD VOLUME as of 12/31/19 LARGEST U.S. BANK BASED ON MAR
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 and engaged workforce system capabilities • • Focus on the ful
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 At Commerce, our core values shape the way we live and work. formed 150+ years ago to • We have a long We make decisions today that will be a force for 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 supported by Commerce team members opportunities to make a difference. through leadership roles by serving on boards 2020
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 was named to Commerce Bank was selected as Newsweek’s America’s Best Banks list one of 20 best-in-class banks in for Best Customer Service. The Bank Director’s 2019 award recognizes banks with the RankingBanking study. We placed fewest problems reported to the third overa
Slide 9: Q3 Financial Results
“ Q3 FINANCIAL RESULTS & Commerce Bancshares, Inc. i)
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) Share As of Sept 30 As of Sept 30 As of Sept 30 Assets $434 $421 $3.60 $3.58 1.76% 1.67% 1.68% $314 $2.65 1.04% $1.89 $224 YE 2018 YE 2019 YTD 2019 YTD 2020 YE 2018 YE 2019
Slide 11: Drivers of 3rd Quarter 2020 Earnings
DRIVERS OF 3RD QUARTER 2020 EARNINGS NIM increased 3 bps to 2.97% from 2.94% in the previous quarter, Net Interest driven by higher average balances of investment securities and loans, Margin partially offset by lower loan yields. Interest-bearing deposit costs decreased 7 bps from the previous quar
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 (=) $346 $336 $321 3Q2020 Comparison $191 $203 $191 $216 vs. 3Q2019 +6.5% $203 $188 vs. 2Q2020 +16.2% $155 $145 $133 $133 $118 $130 3Q2019 2Q2020 3Q20
Slide 13: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Total Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 13.6% CBSH 15.2% Large, stable deposit base and low OZK 15.2% loan to deposit ratio SFNC 14.9% UBSI Core Deposits Average Loan to 14.8% Deposit Ratio3 UMPQ 14.5% 66%Commerce CFR 14.4% $23.72 Avera
Slide 14: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $28.9 $ in millions $294.9 $240.7 $236.4 $160.7 $11.5 .53% $144.3 $7.9 $8.4 $7.6 1.47% 1.44% .32% .21% 1.38% .18% .17% 1.11% .76% 3Q2019 2Q20 3Q20 3Q19 2Q20 3Q20 NCOs- CBSH NCO/Aver
Slide 15: Net Interest Income: YTD – September 30, 2020
NET INTEREST INCOME: YTD – September 30, 2020 Quarterly Net Interest Income $220 4.0% • Net interest income (tax equivalent) increased $12.9 (Tax Equivalent) million over the prior quarter, which included growth $210 3.8% of $6.3 million in TIPs inflation income. 3.6% NetYield $200 3.4% • The net yi
Slide 16: NIM Protection
NIM PROTECTION Hedge against lower interest rates by purchasing interest rate floor contracts Floor Impact on Loan Yields Assumes Loans at LIBOR +200bps 8% Unhedged Illustrative 2.5% Floor (effective 6/1/2020, monetized 7/2020) Entered into three interest rate floors with a combined notional 2.25% F
Slide 17: A Full-Service, Diversified Operating Model
A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Non-Interest Income Net Interest Income $ in millions As of Sept 30 3% $525 $461 $501 10% Wealth Management $422 $447 2% $381 $371 7% Deposit Service Charges Commerce Fees and Commissions 1
Slide 18: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Business Loans YTD Average Loans2 $s in millions 3% Construction $15,756 17% Business RE $14,243 $13,629 $13,946 38% Residential RE $12,953 Commerce Consumer/HELOCs 18% Bank1 Credit Card 2016 2017 20182019 2020 Loans Held for Sale 6% 2020 Loan Growth by Category 18% 8
Slide 19: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE 7,618 Total SBA PPP $1.5BTotal SBA PPP $206KAverage SBA PPP $34KMedian SBA PPP loans approved secured funding loan size loan size Business Loan Yield QTD Avg As of September 30, 2020 AS OF SEPTEMBER 30 3.02% • Total PPP loan balance: 2.95% $1.5 billion 2
Slide 20: 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 Total Loans: $5.6B Total Loans: $0.9B Total Loans: $2.8B 4% 35% 44% 56% 65% Commercial 96% Personal RE
Slide 21: 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, 2020 Total average investments3 $11.5 billion 4% 9% Treasury & agency 14% Unrealized gain3 $368.2 million 15% Municipal 12 month maturities / pay-downs $1.7 billion MBS Duratio
Slide 22: 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 June 30, 2020 September 30, 2020 Incurred Model CECL Model CECL Model Methodology and Allowance Allowance Variables Allowance % of for Credit % of for Credit % of • for L
Slide 23: Net Loan Charge-Offs: YTD – September 30, 2020
NET LOAN CHARGE-OFFS: YTD – September 30, 2020 2020 YTD YTD Actual Loss • Loss rate on credit card $ in 000s 2019 2020 $ Chge Rate loans increased from Business $ 1,066 $ 3,084 $ 2,018 0.07% 2.17% in the prior quarter Overdraft 1,016 942 (74) 39.16% to 4.47% this quarter. Construction (117) (1) 116
Slide 24: Commerce and COVID-19
“ COMMERCE AND COVID-19 & Commerce Bancshares, Inc. 24
Slide 25: Providing Relief to Our Customers
PROVIDING RELIEF TO OUR CUSTOMERS Active deferral exposure reduced as pandemic continues Payment Relief Requests Active deferrals1 Cumulative deferrals1 through July 16, 2020 as of September 30, 2020 Number Total Number Total % of Portfolio2 % of Portfolio Loan Type of Amount of of Amount of (by $ a
Slide 26: 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 eight industries that will be most impacted. % of Loan Portfolio $ in $ in Loan Outstandings Highest Impacted m
Slide 27: 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 (right) 1
Slide 28: Strategic Position
“ STRATEGIC POSITION & Commerce Bancshares, Inc. 28
Slide 29: 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 Develop Claims Payment • • Accelerate Growth i
Slide 30: 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 31: Growth Mindset: Internal Innovation at Commerce
GROWTH MINDSET: INTERNAL INNOVATION AT COMMERCE 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 TOOLS promote new products or services from everyday incr
Slide 32: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT 164 $10.4 $4.2 1.1 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 33: 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 TH • Implement new Private 20Largest Among $57 $34 $539 Banking Lending Program Bank-Managed BILLION BILLION M
Slide 34: Commercial Banking
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 35: Commercial Banking – Expansion Markets Offer Growth Opportunities
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Expansion Market Loan Growth Expansion Fee Income $ in millions Market Loan Team Overview for Growth $2,316 Growth Expansion Markets $2,200 # of team members per market 89% (includes open positions) $1,913 98% since 2015 since 201
Slide 36: 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 enable healthcare providers to enhance the $47.7 Management pa
Slide 37: 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 Commercial#12 Purchasing#7 1 #12Bank Consumer#12 #19Debit #14Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment produ
Slide 38: 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% 20102011 2012 2013 2014 2015 2016 20172018 2019 Commerce Peer Banks Large Banks Return on Average Common Equity 20.0% 15.0% ROACE 10-yr average 10.0% CBSH
Slide 39: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of September 30, 2020 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 09/30/2005 = $100 Percent CBSH NASDAQ Bank 400 S&P 500 KBW Bank COMMERCE 20% 350 NASDAQ 10% BANK 300 0% KBW BANK 250 S&P 500 -10% 200 -20% 150 -30% 1 Year 3 Year5 Ye
Slide 40: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Sept. 30, 2020 June 30, 2020 Sept. 30, 2019 A Net Interest Income $ 215,962 $ 203,057 $ 203,512 B Non-Interest Income $ 129,572 $ 117,515 $ 132,743 C Non-Interest Expense $ 190,858 $ 187,512
Slide 41: 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 42: Embracing a Growth Mindset
mbracing a Growth Mindset as, &3 Commerce Bancshares, Inc.