Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q2 2021 Earnings Presentation
49 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 2nd 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 $27.5 TOTAL DEPOSITS 156 YEARS IN BUSINESS TOTAL ASSETS BILLION $33.9 LARGEST U.S. BANK BILLION 41ST BASED ON ASSET SIZE $15.7 1 TOTAL LOANS2 BILLION MARKET CAP $8.7 COMMERCIAL CARD BILLION LARGEST U.S. BANK 22ND 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. More than 500 nonprofit 2021 Engagement & Enablement2 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 2Q2021
FINANCIAL RESULTS 2Q2021 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 June 30 Share As of June 30 Assets As of June 30 $3.41 1.78% $354 1.67% $2.91 $293 $2.49 1.20% 0.66% $92 $0.74 YE 2019 YE 2020 YTD 2020 YTD 2021 YE 2019 YE 2020
Slide 12: 2Q2021 Earnings Highlights
2Q2021 EARNINGS HIGHLIGHTS Highlights Well-positioned in a challenging environment PPNR1 • Provision for credit losses was a net benefit due to: $149.0 million – $28.1 million decrease in the ACL on loans and an $18.2 million Provision for Credit Losses2 decrease in the liability for unfunded lendin
Slide 13: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Balances Change vs. $ in millions 2Q21 1Q21 2Q20 Highlights • Linked quarter (LQ) reflects lower business loans, partially driven by PPP Commercial1 $10,315.0 $(332.9) $(303.6) forgiveness (-$109.8 million) • Increase over prior year (PY) driven by higher m
Slide 14: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +19% $27.7 $26.5 $23.3 -1% $10.4 $11.1 $16.2 $16.3 $16.0 $8.8 $5.5 $5.7 $5.7 3.80% $16.1 $16.6 3.66% 3.65% $14.5 $10.6 $10.6 $10.3 0.25% 0.09% 0.07% 2Q20 1Q21 2Q21 2Q20 1Q21 2Q21 Consumer Loans Loan Yield No
Slide 15: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 6/30/2021 3/31/2021 6/30/2020 QoQ YoY $ in 000s 6/30/2021 3/31/2021 6/30/2020 QoQ YoY Business $5,803,760 $6,624,209 $6,858,217 -12.4% -15.4% Business $6,211,610 $6,532,921 $6,760,827 -4.9% -8.1% Construction 1,103,661 1,073,036 932,0
Slide 16: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Change vs. $ in millions 2Q21 1Q21 2Q20 Highlights Net Interest Income $208.0 $2.2 $4.9 • Linked quarter (LQ) increase due to larger balance sheet, partially offset by NIM compression • LQ increase in bank card fees, trust fees, consumer brokerage services fees and deposi
Slide 17: 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 (=) $342 $347 $321 2Q2021 Comparison vs. 2Q2020 12.0% vs. 1Q2021 (0.1)% $193 $208 $198 $206 $203 $188 $149 $149 $133 $136 $139 $118 2Q2020 1Q2021 2Q20
Slide 18: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 12.1% Large, stable deposit base and low SFNC 14.1% CFR 14.1% loan to deposit ratio OZK 13.9% CBSH 13.8% Core Deposits 58% Average Loan to Deposit Ratio 3 UBSI 12.6% 13.4% $25.7 Commerce 81% Aver
Slide 19: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $28.5 $ in millions .53% $301.6 $289.2 $273.4 $240.7 .25% $200.5 .21% .13% .14% $172.4 $8.4 $10.0 1.47% 1.43% $7.1 .02% $7.0 1.22% 1.41% 1.37% 1.10% $0.7 2Q20 1Q21 2Q21 2Q20 1Q21 2Q
Slide 20: Net Interest Income: YTD June 30, 2021
NET INTEREST INCOME: YTD – June 30, 2021 Quarterly Net Interest Income • Net interest income (tax equivalent) $220 (Tax Equivalent) 3.6% increased $2.3 million over the prior quarter, 3.4% Net interest income – $210 which included $5.3 million in additional 3.2% TIPs inflation income. $200 3.0% $ in
Slide 21: NIM Protection
NIM PROTECTION Hedging structures and low deposit costs provide support to net interest margin in low-rate environment Runoff Schedule of Asset Repo Agreements with Floor Spreads $1,000 8% • Interest rate floors with a $850 $850 $850 $800 5.3% $775 6% combined notional value of 5.1% 5.0% 5.2% 5.1% $
Slide 22: 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 15% 5% $241 $275 10% 6% 4% Commerce 2017 2018 2019 2020 YTD YTD 7% Peers 2020 2
Slide 23: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $s in millions Compared to Peers1 $15,916 $16,190 8% 31% $14,243 $13,946 3% $13,629 $12,953 19% 15% 37% Commerce Peers 2016 2017 2018 2019 2020 YTD 20213 21% Bank Banks 2021 Loan Growth by Category (Average loans Jun.
Slide 24: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE Total Loan Originations1: Total SBA Fees: $1.9 Billion $60.2 Million Remaining 33% 45% Remaining Forgiven 55% 67% Recognized Yield and Interest Income Q2 2021, $ in millions 3.77% $48.8 $36.9 3.15% 3.00% $11.9 Yield Interest Income Business Loans2 PPP Yi
Slide 25: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE Loan Portfolio Impact QTD Average Balances, $ in millions $6,761 $6,709 $6,580 $6,533 $6,211 $5,494 $1,244 $1,506 $1,476 $1,374 $1,264 $5,494 $5,517 $5,203 $5,104 $5,159 $4,947 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 Business Loans (excl PPP) PPP Loans Interest In
Slide 26: 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 27: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of June 30, 2021 Total average investments3 $12.9 billion 5% 6% Treasury & agency Unrealized gain3 $197.1 million 21% 15% Municipal 12 month maturities / pay-downs $2.6 billion MBS Duration Dec
Slide 28: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook March 31, 2021 June 30, 2021 Allowance for Credit Losses (ACL) on Loans CECL Model CECL Model $ in millions $250 1.6% Allowance Allowance for Credit % of for Credit % of 1.47% Losses Outstanding Losses Outstanding 1.44%
Slide 29: 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 30: Strategic Position
STRATEGIC POSITION 30
Slide 31: 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 32: 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 33: 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 34: 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 35: 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 36: 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 37: 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 38: 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 39: 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 40: 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 41: 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 42: 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 43: 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 44: 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: 1.29% 0.5% Peers: 0.93% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Commerce Peer Median Large Bank Median Return on Average Common Equity 20.0% 15
Slide 45: 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 $100 $1.50 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dividends $0.57 $0.59* $0.61 $0.64 $0.67 $0.71 $0.7
Slide 46: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of June 30, 2021 Annualized Comparison Total Shareholder Returns Indexed, 6/30/2006 = $100 Total Shareholder Returns Percent $500 CBSH KBW Bank S&P 500 80 NASDAQ Bank S&P 500 COMMERCE 70 $400 40 30 $300 20 10 NASDAQ $200 BANK 0 1 Year 3 Year 5 Year 10 Year 15 Year KBW B
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Jun. 30, 2021 Mar. 31, 2021 Jun. 30, 2020 A Net Interest Income $ 207,982 $ 205,748 $ 203,057 B Non-Interest Income $ 139,143 $ 136,045 $ 117,515 C Non-Interest Expense $ 198,126 $ 192,573 $
Slide 48: 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/ 48
Slide 49: Playing Offense in a Challenging Time
Playing Offense in a Challenging Time