Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q4 2021 Earnings Presentation
58 slides from Commerce Bancshares's earnings presentation, Feb 14, 2022
Slide 1: Well-Positioned and Playing Offense: Investor Update 4th Quarter 2021
Well-Positioned and Playing Offense COMMERCE BANCSHARES, INC. INVESTOR UPDATE 4th Quarter 2021
Slide 2: Cautionary Statement
2 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, expectatio
Slide 3: Commerce Bancshares: 156 Years in Business
COMMERCE BANCSHARES 156 YEARS IN BUSINESS FULL-SERVICE BANKING FOOTPRINT 152 full-service branches and 333 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: Super-Community Bank Platform
4 High-performing teams and engaged workforce Long history of top quartile credit quality metrics Investment in distinctive, high-return businesses Focus on operational efficiencies Disciplined approach to acquisitions Challenge Accepted.® Customer relationship-based: • Sophisticated payment system
Slide 5: Track Record of Long-Term Outperformance
5 TRACK RECORD OF LONG-TERM OUTPERFORMANCE Revenue Diversification Balanced earnings profile, fee revenue at 40% of total revenue in 2021, bolstered by growing wealth and national payments businesses Deposit Franchise $28.8 billion in low-cost deposits1 with peer-leading historical deposit betas Con
Slide 6: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Sources: S&P Global Market Intelligence and company reports and filings as of 12/31/2021 Peer Banks include: ASB, OZK, BOKF, CFR, FNB, FMBI, FULT, HWC, ONB, PNFP, SFNC, SSB, UMBF, UMPQ, UBSI, VLY, WBS, WTFC Large Banks include: JPM, BAC, C, WFC, US
Slide 7: Long-Term View: Net Income and Earnings Per Share
$1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $500 $350 $100 $450 $150 $200 $250 $300 $400 $550 $600 202020192012 2013 2014 20172015 20182016 2021 7 Dividends per share *Including 2012 special dividend = $1.49 All data has been restated for 5% stock dividend distributed in December 2021 Net Income
Slide 8: Steady Shareholder Returns
Source: Bloomberg; data as of 12/31/2021 Total Shareholder Returns Indexed, 12/31/2006 = $100 Consistent, positive returns to shareholders Significant outperformance relative to banks over long period 0% 10% 20% 30% 40% 50% 1 Year 3 Year 5 Year 15 Year10 Year CBSH NASDAQ Bank S&P 500 KBW Bank Annual
Slide 9: Our Strong Culture Is the Key Driver to Long-Term Success
9 • We make decisions today that will sustain us well into the future. • We see diversity and inclusion as an imperative and seize opportunities to build teams that reflect all sides of an issue. • We value integrity, we recognize our first duty is to conduct business in ways that merit trust and co
Slide 10: Beyond Financials
10 BEYOND FINANCIALS Supporting each other, our customers and our communities 79% ENGAGEMENT 79% ENABLEMENT Consistently scoring above the U.S. High Performance and U.S. Financial Services norms for engagement, enablement and effectiveness 1Federal Reserve Bank and Office of the Comptroller of the C
Slide 11: Environmental, Social and Governance
ENVIRONMENTAL, SOCIAL AND GOVERNANCE The inaugural ESG report assessed our impact in several key areas: • Environmental sustainability • Customer, team member and community engagement • Corporate governance, including information security and code of ethics • Our response to COVID-19 2020 ESG Report
Slide 12: Our Commitment to Diversity, Equity and Inclusion
12 Enhance internal talent mobility and external recruiting practices to increase the diversity of our teams and leaders Internal Connecting young professionals 619+ members OUR COMMITMENT TO DIVERSITY, EQUITY AND INCLUSION Our longstanding approach of “doing what’s right” continues to guide our foc
Slide 13: Recent Recognition
13 1The Korn Ferry Hay Group – based on 2018 survey results 1 RECENT RECOGNITION
Slide 14: Focusing on Our Customers: 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. Assessed >2,600 U.S. banks and their savings and checking account offerings
Slide 15: Core Banking System Transformation
CORE BANKING SYSTEM TRANSFORMATION • Core Banking Systems were at end of life • Vendor no longer selling solution • Solution inhibits delivery of new products • Technology was 25+ years old and resources are scarce REASONS FOR TRANSORMATION: GUIDING PRINCIPLES FOR TRANSFORMATION: • Improve business
Slide 16: Well-Positioned for a Rising Rate Environment
16 WELL-POSITIONED FOR A RISING RATE ENVIRONMENT
Slide 17: Well-Positioned for Higher Rates
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 2Q20171Q2017 3Q20184Q20163Q2015 4Q2015 1Q2016 3Q20162Q2016 3Q2017 4Q2017 1Q2018 2Q2018 4Q2018 1Q2019 2Q2019 WELL-POSITIONED FOR HIGHER RATES 17 Opportunities to enhance NII in a rising rate environment. • As of December 31, 2021, 53% of loans were variable rate, (6
Slide 18: Balance Sheet: Low-Cost Deposits
$0 $5 $10 $15 $20 $25 $30 1Q214Q20 2Q21 4Q213Q21 0.09% 0.07% 0.06% 0.05% 0.00% 0.05% 0.10% 0.15% 0.12% BALANCE SHEET: LOW-COST DEPOSITS Interest-bearing Deposits (left)Non Interest-Bearing Deposits (left) Av er ag e Ba la nc e $ in b illi on s Cost of Interest-Bearing Deposits (right) 18 – 41% of Q4
Slide 19: Earning Asset Optimization Excluding Loans
EARNING ASSET OPTIMIZATION EXCLUDING LOANS 19 Av er ag e Ba la nc e $ in b illi on s 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% $5.0 $15.0 $10.0 $0.0 $20.0 $0.3 $18.0 $0.8 $0.9 $0.7 $9.6 $13.8 2Q21 $0.7 4Q20 $8.6 1Q19 $8.7 3Q19 $0.3 $12.1 2Q19 $8.7 $10.0 4Q19 $0.4 $0.7 2Q20 $0.2 $0.8 $2.6 $8.
Slide 20: Summary of Fixed and Floating Loans
Over 50% of total loans are variable; 62% of commercial loans have floating rates SUMMARY OF FIXED & FLOATING LOANS 42% 58% Business Total Loans: $5.3B Fixed Variable C om m er ci al 73% 27% Personal RE Total Loans: $2.8B C on su m er 96% 4% Construction Total Loans: $1.1B 99% 1% HELOC Total Loans:
Slide 21: Sound Capital and Liquidity Position
Average Loan to Deposit Ratio3 SOUND CAPITAL AND LIQUIDITY POSITION 21 Tier 1 Risk-Based Capital Ratio1 1S&P Global Market Intelligence, Information as of September 30, 2021 2Period-end balances, as of December 31, 2021 3Includes loans held for sale, for the quarter ended December 31, 2021 14.6% 14.
Slide 22: Financial Results 4Q & YTD 2021
22 FINANCIAL RESULTS 4Q & YTD 2021
Slide 23: Financial Performance in 2021
Long-term performance remains strong 20-year TOTAL ANNUALIZED SHAREHOLDER RETURN @ 10.4% vs KBW Bank Index of 4.9% FINANCIAL PERFORMANCE IN 2021 23 11% Growth in deposits period end .5% Growth in loans period end, excl. PPP 1.55% ROA .12% Net charge- offs to average loans 11% Growth in non-intere
Slide 24: Financial Performance vs. Prior Years
$3.25 $2.77 $4.31 YE 2021YE 2019 YE 2020 Return on Total Average Assets 1.67% 1.20% 1.55% YE 2019 YE 2020 YE 2021 Earnings per Common Share Return on Average Common Equity Net Income Attributable to CBI ($ in Millions) FINANCIAL PERFORMANCE VS. PRIOR YEARS $531 $421 YE 2021YE 2019 $354 YE 2020 15.4%
Slide 25: 4Q2021 Earnings Highlights
$0.94 EPS 25 • Net interest income decreased 3.0% from Q3. • Net interest margin decreased 15 bps from Q3 to 2.43%. • Non-interest income increased 7.4% over Q3. – Non-interest income to total revenue of 41.6%. • Wealth management client assets increased 3.8% over Q3 to $69.3 billion at December 31,
Slide 26: Balance Sheet Highlights
Quarterly Average Balances Change vs. $ in millions 4Q21 3Q21 4Q20 Highlights Commercial1 $9,423.5 $(165.4) $(1,219.5) • Linked quarter (LQ) reflects lower PPP loans (-356MM) offset by higher core business, construction and business real estate Consumer 5,669.6 (0.5) (48.7) • LQ reflects slightly hi
Slide 27: Balance Sheet: Loans and Deposits
$15.3 $16.6 $16.9 $10.3 $11.5 $11.9 4Q20 3Q21 4Q21 $25.6 $28.1 $28.8 +13% $10.6 $9.6 $9.4 $5.7 $5.7 $5.7 $15.3 $15.1 3Q214Q20 4Q21 $16.4 -8% BALANCE SHEET 27 Loans Loan YieldConsumer Loans Commercial Loans Deposits QTD Average Balances $ billions Non-Interest Bearing Interest Bearing Deposit Interes
Slide 28: Loan Portfolio
LOAN PORTFOLIO 28 $ in 000s 12/31/2021 9/30/2021 12/31/2020 QoQ YoY Business $5,303,535 $5,277,850 $6,546,087 .5% -19.0% Business excl. PPP 5,174,372 4,969,914 5,185,913 4.1% -.2% Construction 1,118,266 1,257,836 1,021,595 -11.1% 9.5% Business Real Estate 3,058,837 2,937,852 3,026,117 4.1% 1.1% Pers
Slide 29: Income Statement Highlights
Change vs. $ in millions 4Q21 3Q21 4Q20 Highlights Net Interest Income $207.7 $(6.4) $(2.1) • Linked quarter (LQ) decrease due to lower interest earned on loans and securities purchased under agreements to resell, partially offset by higher income earned on investment securities Non-Interest Income
Slide 30: Non-Interest Income Highlights
Change vs. $ in millions 4Q21 3Q21 4Q20 Highlights Bank Card Transaction Fees $44.8 $2.0 $4.8 • Increase of 12.0% over prior year (PY) driven by growth in net corporate card and net debit card fees Trust Fees $48.9 – $6.9 • Increase of 16.5% over PY resulting mostly from higher private client fee in
Slide 31: Non-Interest Expense Highlights
Change vs. $ in millions 4Q21 3Q21 4Q20 Highlights Salaries and Employee Benefits $132.6 $(.2) $2.7 • Increase of 2.0% over prior year (PY) mostly due to higher full-time salaries and incentive compensation Net Occupancy $12.3 — $.7 Equipment $4.7 $.3 $.1 Supplies $4.4 $(.1) $.2 Data Processing and
Slide 32: Pre-Tax, Pre-Provision Net Revenue (PPNR)
32 PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) $135 $149 $210 $196 4Q2020 $345 $138 $140 $214 $212 3Q2021 $352 $148 $152 $208 $204 4Q2021 $355 Non-Interest Income (+) Net Interest Income (+) Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) 4Q2021 Comparison vs. 4Q2020 2.2% vs. 3Q2021 8.
Slide 33: Maintaining Strong Credit Quality
$8.0 $3.7 $4.3 $11.2 $2.5 $2.6 4Q20 3Q21 4Q21 MAINTAINING STRONG CREDIT QUALITY 33 Net Loan Charge-Offs (NCOs) $ in millions NCOs - Peer Average NCOs- CBSH NCO/Average Loans1 - CBSH $220.8 $162.8 $150.0 $306.1 $261.1 $265.7 3Q214Q20 4Q21 Allowance for Credit Losses on Loans (ACL) $ in millions ACL -
Slide 34: Net Interest Income
235 240 245 250 255 260 265 270 275 280 -$4,000 -$2,000 $0 $2,000 $4,000 $6,000 $8,000 1Q 19 2Q 18 In te re st in co m e 3Q 18 C PI-U 1Q 18 4Q 18 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 3Q 20 4Q 20 1Q 21 2Q 21 3Q 21 4Q 21 • Net interest income (tax equivalent) decreased $6.4 million from the prior quarter, pa
Slide 35: A Full-Service, Diversified Operating Model
72% 4% 4% 12% 2% 6% 35 A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Continued focus on growing fee income through new and existing product and service offerings 1Source: S&P Global Market Intelligence as of September 30, 2021 Peer Ban
Slide 36: Well-Diversified Loan Portfolio
20% 31% 9% 35% 5% 36 36% 8% 18% 22% 12% 4% Consumer / HELOCsBusiness Loans Construction Business RE Credit CardResidential RE Peers Banks Loan Portfolio Diversification Compared to Peers1 Commerce Bank Business RE & construction $80 million Personal RE $9 million Auto/ motorcycle/ other $2 mil
Slide 37: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE 37 Yield and Interest Income2 Q4 2021, $ in millions 3.16% 10.80% 2.83% Yield Business Loans PPP Yield and Fee Recognition Business Loans (ex PPP) $41.4 $6.0 $35.4 Interest Income Total Loan Originations1: $1.9 Billion Total SBA Fees: $60.4 Million 1Incl
Slide 38: PPP Impact: Loan Portfolio and Interest Income
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE 38 Loan Portfolio Impact QTD Average Balances, $ in millions $5,494 $5,517 $5,203 $5,104 $5,159 $4,947 $4,863 $4,973 $1,244 $1,506 $1,476 $1,374 $1,264 3Q214Q201Q20 2Q20 3Q20 1Q21 2Q21 $219 4Q21 $5,494 $6,761 $6,709 $6,580 $6,533 $6,211 $5,437 $5,192 $57
Slide 39: High Quality, Highly Liquid Investment Portfolio
7% 15% 50% 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; 3QTD averages Duration December 2018 3.2 years December 2019 3.0 years D
Slide 40: Allocation of Allowance
ALLOCATION OF ALLOWANCE 40 CECL allowances reflect the economic and market outlook September 30, 2021 December 31, 2021 $ in millions Allowance for Credit Losses (ACL) % of Outstanding Loans Allowance for Credit Losses (ACL) % of Outstanding Loans Business $ 41.0 .78% $ 43.9 .83% Bus R/E 32.3 1.10%
Slide 41: Strong Capital Position – Flexibility in Capital Planning
0% 50% 100% 150% 200% $0 $50 $100 $150 $200 $250 $300 20192017201520132012 2014 20182016 2020 2021 • 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 acceler
Slide 42: Strategic Position
STRATEGIC POSITION P & commerce Bancshares, Inc.
Slide 43: Strategic Posture: Maintaining the Balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE Disciplined focus on PRIORITY BLUE CHIP investments • Diversity, Equity and Inclusion • Enterprise Digital Strategy • Maximize Value of Key Retail Clients • Grow the Private Bank Through a New Transformative Model • Accelerate Expansion Market Growth • Deve
Slide 44: CBI Blue Chip: Enterprise Digital Strategy
anywhere, any time. 44 CBI BLUE CHIP: ENTERPRISE DIGITAL STRATEGY Transform the digital experience by staying current on digital trends and creating seamless digital ecosystems that place Commerce Bank at the nexus of meeting customers’ financial needs. OUR VISION • Our current and potential custome
Slide 45: Playing Offense: Consumer Banking
Enhancing the Customer Experience Engaging with customers through the channels they prefer. • Technology investments • New engagement programs • Enhanced product offerings • Improved operating model PLAYING OFFENSE: CONSUMER BANKING CommercePremier 33 releases 2021 21 releases 2020 Consumer Digital
Slide 46: Commerce Bank CONNECT Mobile App and Mortgage
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 customers to message directly
Slide 47: Playing Offense: Internal Innovation at Commerce
47 Commerce’s commitment to promoting an innovative mindset, from everyday incremental improvement to transformative changes in the way we do business. As innovation and technology rapidly drive change, our customers’ needs and expectations continue to evolve. AGILE enables our organization to meet
Slide 48: Playing Offense: Consumer Banking Metrics
Period end balances. All information as of December 31, 2021 1Only includes primary households, excludes Wealth segment 2Excludes loans from our Wealth segment and $1.9 billion of personal real estate loans B I L L ION $1.9 Consumer Loans2 B I L L ION $13.4 Consumer Deposits1 Consumer Households1 81
Slide 49: Commerce Trust Company Wealth Management
49 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. 1S&P Global Market Intelligence ranking as of 9/30/2021, based on assets under management 2Assets under administration Largest Amo
Slide 50: Key Growth Initiatives: Strengthening Our Wealth Brands
TM 50 Key Growth Initiatives • Implement new Private Banking Lending System • Accelerate growth of Mass Affluent households • Implement enhanced sales process with new Client Relationship Management system • Expand the CTC brand • Enhance the digital client experience • Invest in team training and o
Slide 51: Commercial Banking
Commercial Revenue $ in millions COMMERCIAL BANKING $9.6 $10.9 $9.7 20202019 2021 Commercial Loans $ in billions $8.1 $11.3 $13.0 20212019 2020 Commercial Deposits $ in billions $547 $609 $665 2019 20212020 51Commercial segment as of December 31, 2021 Financing solutions – options for all sizes and
Slide 52: Commercial Banking – Expansion Markets Offer Growth Opportunities
Team Overview for Expansion Markets # of team members per market (includes open positions) COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Period end balances as of December 31, 2021 20172016 20202018 2019 2021 $1,619 $1,912 $2,200 $2,317 $2,466 $2,615 Oklahoma Nashville Texas Cinc
Slide 53: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Information as of December 31, 2021 53 Payments Revenue Commercial Card Volume Merchant Volume Treasury Management Revenue Innovative payments solutions to manage payables and receivables to streamline cash flow Tailored return on investment-based so
Slide 54: Commerce Healthcare
COMMERCE HEALTHCARE 54 Expanding our solutions portfolio 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
Slide 55: Card Products – A Leader Among Top 50 U.S. Banks
1Includes fleet cards Source: Nilson Reports (Debit: April 2021; Consumer Card: February 2021; Prepaid: September 2021; Merchant: March 2021; Purchasing: May 2021; Commercial Card: May 2021), based on the top 50 U.S. banks ranked by total assets as of 12/31/2020, S&P Global Market Intelligence CARD
Slide 56: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 56 For The Three Months Ended (DOLLARS IN THOUSANDS) Dec. 31, 2021 Sept. 30, 2021 Dec. 31, 2020 A Net Interest Income $ 207,657 $ 214,037 $ 209,763 B Non-Interest Income $ 147,699 $ 137,506 $ 135,117 C Non-Interest Expense $ 203,582 $ 211,620 $ 196,310 Pre-Provision Net Reve
Slide 57: Contact Information
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/ 57
Slide 58: Well-Positioned and Playing Offense
Well-Positioned and Playing Offense