Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q4 2022 Earnings Presentation
52 slides from Commerce Bancshares's earnings presentation, January 2023
Slide 1: Commerce Bancshares Investor Update 4th Quarter 2022
MOMENTUM: Innovation. Improvement. Growth. COMMERCE BANCSHARES, INC. INVESTOR UPDATE 4th Quarter 2022
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 $31.9 $26.2 157 YEARS IN BUSINESS BILLION TOTAL DEPOSITS BILLION 42ND LARGEST U.S. BANK BASED ON ASSET SIZE1 TOTAL $16.3 LOANS2 BILLION MARKET CAP $8.5 BILLION $10.4 COMMERCIAL CARD VOLUME BILLION 22nd LARGEST U.S. BANK BASED ON MARKET CAP1 RETURN ON TOTAL TRUST ASSE
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 and • Sophisticated payment customer service system capabilities engaged workforce • Focus on the full
Slide 5: Track Record of Long-Term Outperformance
TRACK RECORD OF LONG-TERM OUTPERFORMANCE Revenue Diversification Deposit Franchise Continued Long-Term Investments Balanced earnings profile, fee $25.6 billion in low-cost deposits2 revenue at 37%1 of total revenue, with peer-leading historical Core banking system bolstered by growing wealth and dep
Slide 6: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Return on Average Assets 2.0% 1.5% ROAA 15-yr average 1.0% CBSH: 1.30% 0.5% Peers: 0.96% 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Commerce Peer Median Large Bank Median Return on Average Common Equity 20.0% 15
Slide 7: Long-Term View: Net Income and Earnings per Share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE $600 $4.50 Earnings Per Share Earnings per Share (EPS) $550 $4.00 $500 Net Income $450 $3.50 Net Income $ in millions $400 $3.00 $350 $2.50 $300 $250 $2.00 $200 $1.50 $150 $100 $1.00 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Dividends $0.55 $
Slide 8: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of December 31, 2022 Annualized Comparison Total Shareholder Returns Indexed, 12/31/2007 = $100 Total Shareholder Returns $500 30% CBSH KBW Bank COMMERCE 20% KBW Regional S&P 500 $400 10% S&P 500 0% $300 -10% -20% KBW $200 REGIONAL -30% KBW BANK 1 Year 3 Year 5 Year 10
Slide 9: 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 formed 157 At Commerce, our core values shape the way we live and work. years ago to be a force for We have a • We make decisions today that will good in our V sustain us well into the future. region and our long-term View indus
Slide 10: Beyond Financials
BEYOND FINANCIALS Supporting each other, our customers and our communities “ As a socially responsible corporate citizen, we continuously seek opportunities to make a difference. More than 490 nonprofit ” 2022 Engagement & Enablement2 Consistently scoring above the U.S. organizations supported High
Slide 11: Environmental, Social and Governance
ENVIRONMENTAL, SOCIAL AND GOVERNANCE Robust ESG framework, including board oversight and a cross-functional ESG management committee – continued enhancements to our program and reporting. The annual ESG report assesses our impact in several key areas: • Environmental sustainability • Customer, team
Slide 12: Our Commitment to Diversity, Equity and Inclusion
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 Blue Chip initiative centered on A culture that celebrates inclusion and diversity Commerce offers a variety of internal r
Slide 13: Recent Recognition
RECENT RECOGNITION Forbes Forbes Forbes America’s Best Banks Best Banks Best Midsize in America in Each Employers 13th consecutive State: year 5th consecutive Missouri year Global Finance Forbes Human Rights Best U.S. Campaign World’s Regional Bank Best Banks in the Midwest Corporate 4th consecutive
Slide 14: Focusing on Our Customers
FOCUSING ON OUR CUSTOMERS America’s Best Banks 2022 Best Customer Service Commerce Bank named to Newsweek’s America’s Best Banks for Best Customer Service for the 2nd consecutive year. Newsweek’s ranking of financial institutions that best serve their customers' needs in today's challenging times. A
Slide 15: Core Banking System Transformation
CORE BANKING SYSTEM TRANSFORMATION REASONS FOR OUR PARTNER: TRANSFORMATION: • Core Banking Systems were at end of life • Vendor no longer selling solution • Solution inhibits delivery of new products A global leader in providing banking solutions, leads • Technology was 25+ years old and resources a
Slide 16: Well-Positioned for Current Environment
WELL-POSITIONED FOR CURRENT ENVIRONMENT 16
Slide 17: 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 • Investment securities portfolio duration of 3.7 years. Before Fed Rate End of Fed Rate Depos
Slide 18: 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 19: 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 15.4% CBSH 14.0% CFR 13.3% Core Deposits 60% Average Loan to Deposit Ratio 3 OZK 13.0% 12.4% $25.2 Commerce 80% Average UBSI Loan to BOKF 11.8% Billion2 Deposi
Slide 20: Financial Results 4Q2022
FINANCIAL RESULTS 4Q2022 20
Slide 21: Financial Performance vs. Prior Years
FINANCIAL PERFORMANCE VS. PRIOR YEARS Net Income Attributable to Earnings per Common Return on Total Average CBI ($ in Millions) $531 Share Assets $488 $4.11 $3.85 1.55% 1.45% $354 1.20% $2.64 YE 2020 YE 2021 YE 2022 YE 2020 YE 2021 YE 2022 YE 2020 YE 2021 YE 2022 Return on Average Common Period End
Slide 22: 4Q2022 Highlights
4Q2022 HIGHLIGHTS Highlights Well-positioned for current environment PPNR1 • PPNR1 reached record level of $174.7 million, up 1.6% over Q3. $174.7 million • Net interest income increased 3.4% over Q3. • Net interest margin increased 17 bps over Q3 to 3.18%. Net Income $131.6 million • Non-interest i
Slide 23: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Balances Change vs. $ in millions 4Q22 3Q22 4Q21 Highlights • Linked quarter (LQ) reflects growth in business and business real estate, partly Commercial1 $10,047.8 $183.3 $624.3 offset by a decline in construction loans Consumer 5,837.2 55.8 167.6 Total Lo
Slide 24: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions -8% +5% $28.8 $27.8 $26.6 5.03% $11.9 $10.8 $10.4 4.37% $15.1 $15.6 $15.9 $5.7 3.62% $5.8 $5.8 $16.9 $17.0 $16.2 $10.1 .21% .40% $9.4 $9.9 .05% 4Q21 3Q22 4Q22 4Q21 3Q22 4Q22 Consumer Loans Loan Yield Non-Int
Slide 25: Deposit Balance Trends
DEPOSIT BALANCE TRENDS Segment view $ in millions Commercial Consumer Wealth Average Balance Growth Average Balance Growth +9% +15% CAGR CAGR $12,839 $13,398 $12,976 $11,991 $11,941 $11,282 $10,630 $10,236 $9,938 $7,848 Average Balance Growth +15% CAGR $2,966 $2,804 $2,502 $1,832 $2,271 2019 2020 20
Slide 26: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 12/31/2022 9/30/2022 12/31/2021 QoQ YoY $ in 000s 12/31/2022 9/30/2022 12/31/2021 QoQ YoY Business $5,661,725 $5,528,895 $5,303,535 2.4% 6.8% Business $5,478,241 $5,317,696 $5,191,844 3.0% 5.5% Business excl. Business excl. 5,653,659
Slide 27: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Change vs. $ in millions 4Q22 3Q22 4Q21 Highlights • Linked quarter (LQ) increase due to higher interest earned Net Interest Income $254.6 $8.3 $47.0 on loans, partly offset by lower interest earned on investment securities and higher interest expense Non-Interest Income
Slide 28: Non-Interest Income Highlights
NON-INTEREST INCOME HIGHLIGHTS Change vs. $ in millions 4Q22 3Q22 4Q21 Highlights • Higher corporate card fees more than offset by Bank Card Transaction Fees $44.6 $(1.1) $(.2) higher rewards Trust Fees $44.7 $(.7) $(4.2) • 4Q22 reflects lower market values on assets under management compared to pri
Slide 29: Non-Interest Expense Highlights
NON-INTEREST EXPENSE HIGHLIGHTS Change vs. $ in millions 4Q22 3Q22 4Q21 Highlights • Increase of 4.4% over prior year (PY) due to higher Salaries and Employee Benefits $138.5 $1.1 $5.8 full-time salaries and higher employee benefits expense Net Occupancy $11.8 $(.8) $(.5) Equipment $5.0 — $.3 Suppli
Slide 30: 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 (=) $385 $391 $355 4Q2022 Comparison vs. 4Q2021 15.1% $213 $217 $246 $255 vs. 3Q2022 1.6% $208 $204 $172 $175 $152 $148 $139 $137 4Q2021 3Q2022 4Q2022
Slide 31: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $ in millions $5.6 $261.2 $280.9 $4.8 $4.3 $3.4 $150.0 1.22% $143.4 $150.1 $2.6 .14% 1.12% .11% .12% .99% .07% .04% .92% .90% 4Q21 3Q22 4Q22 4Q21 3Q22 4Q22 NCOs- CBSH NCO/Average Lo
Slide 32: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans September 30, 2022 December 31, 2022 $ in millions Allowance Allowance $250 1.47% 1.60% 1.44% for Credit % of for Credit % of Losses Outstanding Losses Outstanding 1.35% $ in mi
Slide 33: Net Interest Income: QTD December 31, 2022
NET INTEREST INCOME: QTD – December 31, 2022 Quarterly Net Interest Income (Fully taxable-equivalent) • Net interest income (fully taxable-equivalent) $260 3.6% increased $7.9 million over the prior quarter. Net interest income – 3.4% • The net yield on interest earning assets $240 3.2% increased 17
Slide 34: A Full-Service, Diversified Operating Model
A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Revenue Source Diversification Non-Interest Income Compared to Peers1 $ in millions $525 $560 $547 2% 4% $501 $506 8% 5% 5% 10% 4% 4% 7% Commerce 2018 2019 2020 2021 2022 Bank Peers Banks 1
Slide 35: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $s in millions Compared to Peers1 5% $15,916 $15,686 $15,570 30% 19% 4% $13,946 $14,243 12% 36% Commerce Peers 21% Bank 2018 2019 2020 2021 2022 Banks 2022 Loan Growth by Category (Average loans Dec. 2022 vs. Sep. 2022
Slide 36: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of December 31, 2022 Total average investments3 $12.4 billion 4% 8% Treasury & agency Unrealized loss3 $1.6 billion 14% Municipal 12 month maturities / pay-downs $2.4 billion 27% MBS Duration D
Slide 37: 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 38: Strategic Position
STRATEGIC POSITION 38
Slide 39: Strategic Posture: Maintaining the Balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE Disciplined focus on PRIORITY STRONG PERFORMANCE with BLUE CHIP investments ongoing refinement of the “Core Bank” • Diversity, Equity and Inclusion • Super-Community Bank platform • Enhancing our People • Relationship-based banking Leadership • High-touch c
Slide 40: CBI Blue Chip: Enterprise Digital Strategy
CBI BLUE CHIP: ENTERPRISE DIGITAL STRATEGY • Creates a single Digital Strategy expanding OUR VISION across all segments of the bank Transform the digital experience by staying • Committed to delivering customer digital current on digital trends and creating solutions rapidly seamless digital ecosyst
Slide 41: Upgrading the Customer Experience
UPGRADING THE CUSTOMER EXPERIENCE Enhancing the Customer Experience Engaging with customers through the channels they prefer. • Technology investments • New engagement programs CommercePremier • Enhanced product offerings • Improved operating model Consumer Digital Evolving digital experiences to me
Slide 42: Distinctive Digital Offerings
DISTINCTIVE DIGITAL OFFERINGS 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 introduce this innovation, enabling high-touch service through a digital channel • Secure platform for
Slide 43: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT 148 Full-service 293 $13.0 $1.9 812 branches ATMs BILLION BILLION THOUSAND Consumer Consumer Consumer Deposits1 Loans2 Households1 Focus on Digital Commerce Digital HH Digital Loan Mobile Bank App Rating Penetration Sales (000s) Deposit Use 4.7 68.6% $73,345 28.2% 4.7 Perio
Slide 44: 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. 18TH $60 $37 $618 Largest Among Bank-Managed BILLION BILLION MILLION Trust Total Client Assets Under Managed Companies1 Assets2 Manag
Slide 45: Key Growth Initiatives Strengthening our Wealth Brands
Key Growth Initiatives Strengthening our Wealth Brands • Onboard a new, industry-leading private banking loan and deposit system • Evaluate new wealth markets and acquisition targets • Execute our integrated strategy to expand reach with affluent households • Invest in our team with additional devel
Slide 46: Commercial Banking: Revenue Growth Opportunities
COMMERCIAL BANKING Revenue growth opportunities Financing solutions and deposit capabilities customized for your business • Working Capital Line of Credit • Commercial Real Estate • Full suite of cash management solutions • Term Loans • ESOP Loans • Robust Card and Merchant acceptance • Equipment Fi
Slide 47: Commercial Banking – Expansion Markets Offer Growth Opportunities
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Fee Income Team Overview for Expansion Market Loan Growth Growth Expansion Markets 102% $ in millions Expansion Market Loan # of team members per market $3,280 Growth (includes open positions) since 2017 $2,615 72% 2022 $2,466 since
Slide 48: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow $200 $63 $10.4 $7.7 MILLION MILLION BILLION BILLION Payments Treasury Commercial Merchant Revenue Management Card Volume Revenue Volume Information as of Decembe
Slide 49: Healthcare Specialty Banking
We don’t just serve the healthcare industry. It’s our specialty. Partner to 3,000+ healthcare providers and 500+ hospitals in 47 states 100+ entities and over 42 million in patient transactions annually Patient Engagement Receivables Accounts Payable Traditional Banking Solutions Management Solution
Slide 50: A Full Suite of Innovative Card and Payment Product Offerings
A FULL SUITE OF INNOVATIVE CARD AND PAYMENT PRODUCT OFFERINGS • Health Services Financing • Claims Payments • Multi Account Chip • Co-Brand • Prepaid Expense • Credit Card Installment opportunity during purchase • Contactless Visa® Debit Card Early adopter 50
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Dec. 31, 2022 Sep. 30, 2022 Dec. 31, 2021 A Net Interest Income $ 254,641 $ 246,373 $ 207,657 B Non-Interest Income $ 136,825 $ 138,514 $ 147,699 C Non-Interest Expense $ 216,740 $ 212,884 $
Slide 52: Momentum: Innovation. Improvement. Growth.
MOMENTUM: Innovation. Improvement. Growth. Contact Information: Matt 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/