Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q1 2021 Earnings Presentation
51 slides from Commerce Bancshares's earnings presentation, 2021
Slide 1: Playing Offense in a Challenging Time
Playing Offense in a Challenging Time COMMERCE BANCSHARES, INC. INVESTOR UPDATE 1st Quarter 2021
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 $27.4 TOTAL DEPOSITS 155 YEARS IN BUSINESS TOTAL ASSETS BILLION $33.3 LARGEST U.S. BANK BILLION 42ND BASED ON ASSET SIZE $16.4 TOTAL LOANS2 1 BILLION MARKET CAP $9.0 COMMERCIAL CARD BILLION 17TH LARGEST U.S. BANK BASED ON MARKET CAP1 $8.5 VOLUME BILLION AS OF 12/31/2020 12TH LARG
Slide 4: A consistent strategy with a long-term view
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: 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 more At Commerce, our core values shape the way we live and work. than 155 years ago to be a • We make decisions today that will force for good We have a in our region V sustain us well into the future. long-term View and
Slide 6: 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. 500 2020 Engagement & Enablement 2 More than nonprofit Consistently scoring above the U.S. organizations supported High
Slide 7: 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 inaugural ESG report assesses our impact in several key areas: • Environmental sustainability • Customer, te
Slide 8: 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 Our new Diversity, Equity and Inclusion A culture that celebrates inclusion and diversity Commerce offers a variety of inter
Slide 9: Recent Recognition
RECENT RECOGNITION 1 1The Korn Ferry Hay Group – based on 2018 survey results 9
Slide 10: Financial Results 1Q2021
FINANCIAL RESULTS 1Q2021 10
Slide 11: Financial Performance vs. Prior Year
FINANCIAL PERFORMANCE VS. PRIOR YEAR Net Income Attributable to Earnings per Common Return on Total Average CBI ($ in Millions) $421 As of March 31 Share As of March 31 Assets As of March 31 $3.41 1.67% 1.63% $354 $2.91 1.20% 0.80% $131 $1.11 $52 $0.42 YE 2019 YE 2020 YTD 2020 YTD 2021 YE 2019 YE 20
Slide 12: 1Q2021 Earnings Highlights
1Q2021 EARNINGS HIGHLIGHTS Highlights Well-positioned in a challenging environment PPNR1 • Allowance for credit losses on loans to total loans decreased to 1.22% $149.2 million – Decreased to 1.34% excluding Paycheck Protection Program (“PPP”) loans. Allowance for Credit Losses on Loans2 • Net charg
Slide 13: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Average Balances Change vs. $ in millions 1Q21 4Q20 1Q20 Highlights • Linked quarter (LQ) reflects lower business loans offset by higher construction loans Commercial1 $10,647.9 $4.9 $1,376.5 • YoY reflects PPP • LQ reflects higher personal real estate partially offset by lo
Slide 14: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +31% $25.6 $26.5 +11% $20.3 $10.4 $16.4 $16.3 $10.3 $14.7 $6.6 $5.7 $5.7 $5.4 4.39% 3.69% 3.66% $15.3 $16.1 $10.7 $10.6 $13.7 $9.3 0.45% 0.12% 0.09% 1Q20 4Q20 1Q21 1Q20 4Q20 1Q21 Consumer Loans Loan Yield No
Slide 15: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Change vs. $ in millions 1Q21 4Q20 1Q20 Highlights • Linked quarter (LQ) decline due to lower earning Net Interest Income $205.7 $(4.0) $4.7 asset yields partially offset by lower deposit costs and a larger balance sheet • LQ increase in trust fees, capital market fees an
Slide 16: 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 (=) $345 $342 $325 1Q2021 Comparison vs. 1Q2020 13.9% $196 vs. 4Q2020 0.4% $210 $206 $193 $201 $194 $149 $149 $131 $124 $135 $136 1Q2020 4Q2020 1Q2021
Slide 17: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 11.8% Large, stable deposit base and low CBSH 13.7% CFR 13.5% loan to deposit ratio 62% Average SFNC 13.4% Core Deposits Loan to OZK 13.4% Deposit Ratio 3 UBSI 13.3% $25.6 Commerce 81% Average UM
Slide 18: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $12.5 $ in millions $10.9 $11.2 $306.1 $289.2 $10.0 $251.9 $8.0 $7.1 $220.8 $200.5 $171.7 1.35% 1.49% 1.41% 1.36% 1.22% .30% .28% .22% .25% 1.14% .19% 1Q20 4Q20 1Q21 1Q20 4Q20 1Q21
Slide 19: Net Interest Income: YTD March 31, 2021
NET INTEREST INCOME: YTD – March 31, 2021 Quarterly Net Interest Income $220 (Tax Equivalent) 4.0% • Net interest income (tax equivalent) decreased $4.2 million from the prior Net interest income – $210 3.8% quarter, which included a decline of 3.6% $200 $426 thousand in TIPs inflation income. $ in
Slide 20: NIM Protection
NIM PROTECTION Hedging structures and low deposit costs provide support to net interest margin in low-rate environment Asset Repo Agreements • Interest rate floors with a $1,000 8% combined notional value of $850 $850 $850 $850 $850 $800 $1.5B to hedge the against Average Balance 6% declining intere
Slide 21: 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 2% 5% $501 $525 $506 $461 14% 5% 10% $124 $136 4% 4% 7% Commerce 2017 2018 2019 2020 YTD YTD Bank Peers 2
Slide 22: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $s in millions Compared to Peers1 $16,369 8% $15,916 30% $14,243 $13,946 4% $13,629 $12,953 20% 15% 37% Commerce Peers 2016 2017 2018 2019 2020 YTD 20213 Bank Banks 21% 2021 Loan Growth by Category (Average loans Mar.
Slide 23: Paycheck Protection Program Impact
PAYCHECK PROTECTION PROGRAM IMPACT KEY METRICS Loan Median Total SBA Fees Customers Balances Loan Size SBA Fees Recognized Round 1 Round 1 Round 1 2020 Round 1 Round 1 $1.5 Over $33K Round 2 $41.0 $21.4 YTD Billion1 Round 2 7,500 Round 2 Million $41.0 Million 2021 $331.4 Over 3,200 $21K $9.3 Million
Slide 24: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Nearly 50% of total loans are variable; 49% of commercial loans have floating rates Fixed Variable Business Construction Business RE Commercial Total Loans: $6.5B Total Loans: $1.0B Total Loans: $3.0B 3% 47% 45% 53% 55% 97% Personal RE Consumer HELOC Consumer Card T
Slide 25: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of March 31, 2021 Total average investments3 $12.7 billion 5% 6% Treasury & agency Unrealized gain3 $283.5 million 17% 16% Municipal 12 month maturities / pay-downs $2.3 billion MBS Duration De
Slide 26: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook December 31, 2020 March 31, 2021 Allowance for Credit Losses (ACL) on Loans CECL Model CECL Model $ in millions $250 1.47% 1.5% Allowance Allowance 1.44% for Credit % of for Credit % of Losses Outstanding Losses Outstand
Slide 27: Consumer Credit Card Delinquencies and Monthly Net Charge-off Trends
CONSUMER CREDIT CARD DELINQUENCIES AND MONTHLY NET CHARGE-OFF TRENDS $15 Skip Pay program effectively $6 “paused” delinquency and • Skip Pay was charge-offs in 2020 $5 enacted for May $12 and June 2020 payments to 100% 90-Day Delinquencies $4 of the portfolio Net Charge-offs $9 $ in millions $ in mi
Slide 28: Commerce and COVID-19
COMMERCE AND COVID-19 28
Slide 29: Providing Relief to Our Customers
PROVIDING RELIEF TO OUR CUSTOMERS Active deferral exposure reduced as pandemic continues Payment Relief Requests Active deferrals1 Active deferrals1 as of December 31, 2020 as of March 31, 2021 Number Total Number Total % of Portfolio % of Portfolio Loan Type of Amount of of Amount of (by $ amount)
Slide 30: Limited Exposure to Pandemic-Sensitive Industries
LOAN PORTFOLIO: LIMITED EXPOSURE TO PANDEMIC-SENSITIVE INDUSTRIES Loan Portfolio Outstandings % of $ in $ in Loan Highest Impacted millions millions Portfolio Industries 12/31 3/31 3/31 Highest CRE Retail 387 388 2.6% Impacted Hotels 303 309 2.1% 9% Industries Senior Living 311 307 2.0% Energy 173 1
Slide 31: Strong Capital Position – Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 53 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) $300 200% Common share repurchase (left) Payout Ratio (%) $250 %
Slide 32: Strategic Position
STRATEGIC POSITION 32
Slide 33: 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 • Enterprise Digital Strategy • High-touch custo
Slide 34: 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 more rapidly seamless digital ec
Slide 35: Playing Offense: Consumer Banking
PLAYING OFFENSE: CONSUMER BANKING 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 36: Commerce Bank CONNECT Mobile App and Mortgage
PLAYING OFFENSE: CONSUMER BANKING 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 introducing this innovation, enabling high-touch service through a digital channel • Secure platfor
Slide 37: Playing Offense: Internal Innovation at Commerce
PLAYING OFFENSE: 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 inc
Slide 38: Playing Offense: Consumer Banking – Focus on Digital
PLAYING OFFENSE: CONSUMER BANKING 157 Full-service 354 $12.2 $2.0 1.1 branches ATMs BILLION BILLION MILLION 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 65.9% $47,165 24% 4.7
Slide 39: Commerce Trust Company wealth management
TM 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. 17TH $61 $38 $611 Largest Among Bank-Managed BILLION BILLION MILLION Trust Total Client Assets Under Managed Companies1 Assets2 Ma
Slide 40: Key Growth Initiatives Strengthening our wealth brands
TM Key Growth Initiatives Strengthening our wealth brands • Implement new Private TM Banking Lending System • Accelerate growth of Mass Affluent households • Implement enhanced sales process with new Client Relationship Management system TM • Expand the CTC brand • Enhance the digital client experie
Slide 41: 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 42: Commercial Banking Expansion: Markets Offer Growth Opportunities
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Fee Income Expansion Market Loan Growth Growth Team Overview for 106% $ in millions Expansion Market Loan $2,466 Growth Expansion Markets $2,316 since 2015 # of team members per market $2,200 110% (includes open positions) $1,913 si
Slide 43: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow Key Verticals $174 Payments MILLION Revenue Tailored return on investment-based solutions Treasury $52.3 Management enables healthcare providers to enhance the p
Slide 44: Commerce Healthcare
COMMERCE HEALTHCARE Specialty Healthcare Division We build and implement innovative banking technologies to improve the patient payment experience, reduce cost and accelerate cash Well-positioned to deliver our payment automation technologies as healthcare organizations re-design their supply chain
Slide 45: Card Products – A Leader Among Top U.S. Banks
CARD PRODUCTS – A LEADER AMONG TOP 50 U.S. BANKS Consistently ranked among the top issuers in the Nilson Report Commercial Consumer #12 Commercial #7 Purchasing 1 #9 Bank #12 Consumer #20 #11 Debit Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment pr
Slide 46: 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: 0.96% 0.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Commerce Peer Median Large Bank Median Return on Average Common Equity 20.0% 15.0% ROACE 10-yr average 1
Slide 47: Long-Term View: Net Income and Earnings Per Share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE $450 $4.00 Earnings Per Share Net Income Earnings per Share (EPS) $400 $3.50 $350 Net Income $3.00 $300 $ 000s $250 $2.50 $200 $2.00 $150 $1.50 $100 $50 $1.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dividends $0.57 $0.59* $0.61 $0.64 $0.67
Slide 48: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of March 31, 2021 Annualized Comparison Total Shareholder Returns Indexed, 3/31/2006 = $100 Total Shareholder Returns Percent $450 CBSH KBW Bank COMMERCE 100 400 90 NASDAQ Bank S&P 500 S&P 500 80 350 70 300 60 250 NASDAQ 200 BANK 10 150 KBW BANK 0 1 Year 3 Year 5 Year 1
Slide 49: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Mar. 31, 2021 Dec. 31, 2020 Mar. 31, 2020 A Net Interest Income $ 205,748 $ 209,763 $ 201,065 B Non-Interest Income $ 136,045 $ 135,117 $ 123,663 C Non-Interest Expense $ 192,573 $ 196,310 $
Slide 50: 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/ 50
Slide 51: Playing Offense in a Challenging Time
Playing Offense in a Challenging Time