Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q1 2023 Earnings Presentation
27 slides from Commerce Bancshares's earnings presentation, Apr 18, 2023
Slide 1: Commerce Bancshares Earnings Highlights 1st Quarter 2023
COMMERCE BANCSHARES, INC. EARNINGS HIGHLIGHTS 1st Quarter 2023 MOMENTUM: Innovation. Improvement. Growth.
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: Footprint and Key Facts
COMMERCE BANCSHARES 158 YEARS IN BUSINESS FULL-SERVICE BANKING FOOTPRINT 148 full-service branches and 293 ATMs St. Louis Kansas City Springfield Central Missouri Central Illinois Wichita Tulsa Oklahoma City Denver COMMERCIAL OFFICES Cincinnati Nashville Dallas Des Moines Indiana
Slide 4: Track Record of Long-Term Outperformance
4 TRACK RECORD OF LONG-TERM OUTPERFORMANCE Revenue Diversification Balanced earnings profile, fee revenue at 35%1 of total revenue, bolstered by growing wealth and national payments businesses Deposit Franchise $23.6 billion in low-cost, diverse deposits2 with peer-leading historical deposit betas C
Slide 5: 1Q2023 Highlights
$0.95 EPS 5 • PPNR1 was up 22.4% year over year but down 5.5% from Q4. • Net interest income decreased 1.2% from Q4. • Net interest margin increased 81 bps year over year and 8 bps over Q4 to 3.26%. • Non-interest income increased 0.6% over Q4 (35.4% of total revenue). • Wealth management client ass
Slide 6: Balance Sheet Highlights
Quarterly Average Balances Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights Commercial1 $10,545.3 $497.5 $991.2 • Linked quarter (LQ) and prior year (PY) reflects growth in business, business real estate, and construction loans Consumer 5,858.6 21.4 189.5 Total Loans $16,403.9 $518.9 $1,180.7 Inve
Slide 7: Balance Sheet: Loans and Deposits Average Balances
$17.8 $16.2 $16.1 $11.5 $10.4 $9.1 1Q22 4Q22 1Q23 $29.3 $26.6 $25.2 -14% $9.5 $10.1 $10.5 $5.7 $5.8 $5.9 $16.4 4Q221Q22 1Q23 $15.2 $15.9 BALANCE SHEET 7 Loans Consumer Loans Commercial Loans Loan Yield Deposits QTD Average Balances $ billions Non-Interest Bearing Interest Bearing Deposit Interest Be
Slide 8: Loan Portfolio
LOAN PORTFOLIO 8 $ 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% Construction 1,437,419 1,361,095 1,144,411 5.6% 25.6% Business Real Estate 3,486,543 3,406,981 3,109,668 2.3% 12.1% Personal Real Estate 2,952,042 2,918,078 2,820,076 1.2% 4.7% Consu
Slide 9: Income Statement Highlights
Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights Net Interest Income $251.6 $(3.0) $42.8 • Linked quarter (LQ) decrease due to higher interest expense and lower investment securities balances, partly offset by higher interest earned on loans Non-Interest Income $137.6 $.8 $5.8 • See page 10 Non-In
Slide 10: Non-Interest Income Highlights
Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights Bank Card Transaction Fees $46.7 $2.1 $4.6 • Prior year (PY) increase mainly due to higher corporate card fees Trust Fees $45.3 $.6 $(2.5) • 1Q23 reflects lower market values on assets under management compared to prior year (PY) Deposit Account Cha
Slide 11: Non-Interest Expense Highlights
Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights Salaries and Employee Benefits $144.4 $5.9 $8.4 • Increase over prior year (PY) mostly due to higher full-time salaries expense of $7.6 million and higher benefits expense of $1.4 million Net Occupancy $12.8 $1.0 $.5 Equipment $4.8 $(.2) $.3 Supplie
Slide 12: Pre-Tax, Pre-Provision Net Revenue (PPNR)
12 PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) $132 $135 $209 $206 1Q2022 $341 $137 $175 $255 $217 4Q2022 $391 $137 $165 $252 $224 $389 1Q2023 Non-Interest Income (+) Net Interest Income (+) Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) 1Q2023 Comparison vs. 1Q2022 22.4% vs. 4Q2022 (
Slide 13: Liquidity and Capital
LIQUIDITY AND CAPITAL & commerce Bancshares, Inc.
Slide 14: Liquidity and Capital Highlights
LIQUIDITY AND CAPITAL HIGHLIGHTS 14 • $1.3B of cash at Federal Reserve Bank (FRB) at Q1. • $1.5B in Federal Home Loan Bank (FHLB) advances at Q1. • No borrowings from Federal Reserve lending facilities during Q1. • Increased borrowing capacity in Q1 from $8.0B at Q4 to $9.2B. • AFS debt securities p
Slide 15: Deposit Trends – YTD 2023
$20,000 $22,000 $24,000 $26,000 $28,000 $30,000 1/7 2/1 3/1 4/1 -3% 7-Day Moving Average $ in millions DEPOSIT TRENDS – YTD 2023 January 1, 2023 – April 10, 2023 Z0% 3/8 Seasonal runoff early in the first quarter was in line with expectations. 15 Deposit balances declined slightly after March 8, but
Slide 16: Deposit Balance Trends: Segment View
$3.0 2019 2020 2021 $1.8 2022 1Q23 $2.3 $2.8 $2.5 1Q23 $2.4 1Q23 $9.5 DEPOSIT BALANCE TRENDS Segment view $ in billions 16 $12.0 2019 2020 $7.8 2021 1Q232022 $9.9 $11.9 $10.3 20222020 $12.8 2019 2021 1Q23 $11.3 $10.2 $13.4 $12.5 Commercial Consumer Wealth Average Balance Period End 1Q23 $12.7 Period
Slide 17: Deposit Portfolio Characteristics
DEPOSIT PORTFOLIO CHARACTERISTICS 17 1Finance and Insurance Sector includes affiliate deposits. 2Excludes affiliate and collateralized deposits Top 10 Commercial Sectors (NAICS Sector / Industry) % of Commercial Segment Deposits % of Total Deposits Finance and Insurance 13.3% 5.1%1 Construction 10.0
Slide 18: Well-Positioned for Multiple Rate Environments
Hedging actions: Entered into three floor contracts (indexed to 1 Month SOFR) to hedge the risk of declining interest rates on floating rate commercial loans. The contracts have a term of 6 years. • 3Q2022: One 2.5% floor contract with a notional value of $500 million. The contract begins 1/2024. •
Slide 19: High Quality, Highly Liquid and Diverse Investment Portfolio
9% 14% 49% 24% 4% 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 QTD – March 31, 2023 Avg Rate Duration (yrs) Treasury & agency1 1.32% 2.2
Slide 20: Sound Capital and Liquidity Position
Average Loan to Deposit Ratio3 SOUND CAPITAL AND LIQUIDITY POSITION 20 Tier 1 Risk-Based Capital Ratio1 1S&P Global Market Intelligence, Information as of December 31, 2022 2Period-end balances, as of March 31, 2023 3Includes loans held for sale, for the quarter ended March 31, 2023 15.9% 14.1% 13.4
Slide 21: Summary of Fixed & Floating Loans
Over 55% of total loans are variable; 64% of commercial loans have floating rates SUMMARY OF FIXED & FLOATING LOANS 40% 60% Business Total Loans: $5.7B Fixed Variable C om m er ci al 67% 33% Personal RE Total Loans: $2.9B C on su m er 95% 5% Construction Total Loans: $1.4B 99% 1% HELOC Total Loans:
Slide 22: Commercial Real Estate Breakdown
Real Estate Business Loans % of Total Loans Owner – Occupied 7.0% Office 3.1% Industrial 2.9% Retail 2.0% Multi-family 1.9% Hotels 1.4% Farm 1.2% Senior living .8% Other .6% Total 20.9% COMMERCIAL REAL ESTATE BREAKDOWN 22 33.3% 14.6% 14.0% 9.5% 9.0% 6.8% 5.8% Owner-occupied Industrial Senior living
Slide 23: Maintaining Strong Credit Quality
$4.6 $5.6 $6.8 $3.3 $6.9 1Q234Q221Q22 MAINTAINING STRONG CREDIT QUALITY 23 Net Loan Charge-Offs (NCOs) $ in millions NCOs- CBSH NCOs - Peer Average NCO/Average Loans1 - CBSH $134.7 $150.1 $159.3 $265.7 $289.9 1Q22 4Q22 1Q23 Allowance for Credit Losses on Loans (ACL) $ in millions ACL - CBSH ACL - Pe
Slide 24: Allocation of Allowance
ALLOCATION OF ALLOWANCE 24 CECL allowances reflect the economic and market outlook December 31, 2022 March 31, 2023 $ in millions Allowance for Credit Losses (ACL) % of Outstanding Loans Allowance for Credit Losses (ACL) % of Outstanding Loans Business $ 46.3 .82% $ 49.5 .87% Bus R/E 28.2 .83% 27.7
Slide 25: Strong Capital Position – Flexibility in Capital Planning
• 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 accelerated share repurchase. • 2019 included a $150 million accelerated share repurchase. • In 2020, all
Slide 26: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 26 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 $ 205,648 Pre-Provision Net Reven
Slide 27: Commerce Bancshares, Inc.
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