Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q2 2020 Earnings Presentation
45 slides from Commerce Bancshares's earnings presentation, Jul 21, 2020
Slide 1: Embracing a Growth Mindset: Investor Update 2Q 2020
® Embracing a Growth Mindset COMMERCE BANCSHARES, INC. INVESTOR UPDATE 24 Quarter 2020 sae, 83 Commerce Bancshares, Inc.
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) 39.5 $24.5 154 YEARS IN BUSINESS BILLION IN ASSETS MEIN INI Koy e\ ip) 3 fess 1) 47tH ——— BASED ON ASSET SIZE! $ ] 6 . 4 BILLION IN MARKET CAPITALIZATION $ 9.1 161H BILLION IN COMMERCIAL CARD VOLUME as of 12/31/19 LARGEST U.S. BANK BILLION IN TOTAL LOANS? LARGEST US. BANK BASED
Slide 4: Super-Community Bank Platform
SUPER-COMMUNITY BANK PLATFORM A consistent strategy with a long-term view Super-Regional Bank High-performing teams + Sophisticated payment and engaged workforce SySteinn Gs pelsTiutes + Focus on the full client ; ; + Broad consumer relationship Long history of top quartile product offerings credit
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 At Commerce, our core values shape the way we live and work. We have a long term View We collaborate as One team We act with Integrity We are C Customer focused We strive for E Excellence + We make decisions today that will sustain us wel
Slide 6: Beyond Financials
BEYOND FINANCIALS Supporting each other, our customers and our communities As a socially responsible corporate More than 900 nonprofit organizations citizen, we continuously seek supported by Commerce team members through leadership roles by serving on boards opportunities to make a difference. 2020
Slide 7: Our Commitment to Inclusion, Diversity and Equity
OUR COMMITMENT TO INCLUSION, DIVERSITY AND EQUITY Our longstanding approach of “doing what's right” continues to guide our focus on our team members, customers and Communities Building a place to thrive and grow professionally Examples of how we continue to build awareness Observance and celebration
Slide 8: Recent Recognition
RECENT RECOGNITION Forbes | 2020 BEST BANKS IN AMERICA Commerce Bank was named among America’s Best Banks 2020 by Forbes. Ranked in the top quartile nationally and 24 Missouri-based bank. Since the first list debuted, Commerce has consistently ranked near the top among the highest- performing instit
Slide 9: Q2 Financial Results
Q2 FINANCIAL RESULTS & Commerce Bancshares, Inc. 9
Slide 10: Financial Performance vs. Prior Year
FINANCIAL PERFORMANCE VS. PRIOR YEAR Earnings per Common Net Income attributable to Return on Total Average CBI ($ in Millions) Share Assets As of June 30 $434 $421 As of June 30 $3.60 $3.58 As of June 30 176% ; ’ YE 2018 YE 2019 | YTD 2019 YTD 2020 YE 2018 YE 2019 | YTD 2019 YTD 2020 YE 2018 YE 201
Slide 11: Drivers of Quarter 2020 Earnings
DRIVERS OF 22 QUARTER 2020 EARNING NIM decreased 39 bps to 2.94% from 3.33% in the previous Net Interest quarter, driven by lower yields on commercial loans and investment Margin securities, lower average balances of consumer credit card loans, and excess liquidity from higher deposit balances. Depo
Slide 12: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Total Risk-Based Capital Ratio’ Loan to Deposit Ratio Peer Median: 12.8% Large, stable deposit base and low O7zk 15.4% “chest loan to deposit ratio CBSH 15.2% Core Deposits 6 9% Average Loan to c UBSI 14.5% 9 Deposit Ratio® $22.5 | SFNC Raa » 9 Billion? 88% Mpepo
Slide 13: Credit Posture
CREDIT POSTURE Net Loan Charge-Offs $ in millions $1.3 $10.9 21% 2Q19 1Q20 2Q20 Hl Net Loan Charge-offs. F=]Nco/Average Loans! Non-Performing Loans $ in millions 07% g $22.6 1 $10.6 | 2Q19 1Q20 2Q20 Pls [2] Non-Performing Loans to Total Loans Allowance for Credit Losses on Loans $ in millions $161.2
Slide 14: Net Interest Income: YTD June 30
NET INTEREST INCOME: YTD — June 30, 20 Quarterly Net Interest Income - Net interest income (tax equivalent) increased , $220 (Tax Equivalent) 4.0% slightly over the prior quarter. 2 $210 soe + The net yield on interest earning assets declined 39 62g ‘' basis points from the previous quarter. 3 § $20
Slide 15: NIM Protection
NIM PROTECTION Heage against lower interest rates by purchasing interest rate floor contracts and maintaining duration 8% oO ae Loan Yield K e NO ag 0% Floor Impact on Loan Yields Assumes Loans at LIBOR +200bps — = Unhedged Mustrative — 2.5% Floor (effective 6/1/2020) oe —— 2.25% Floor (effective 1/
Slide 16: A Full-Service, Diversified Operating Model
A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Non-Interest Income $ in millions $501 $525 As of June 30 m Wealth Management $422 $447 $461 gw Deposit Service Charges $248 $241 Commerce lm Fees and Commissions a a 4] Bank @ Card Income
Slide 17: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO mw Business Loans @ Construction 35% m Business RE co} Commerce gw Residential RE %, Bank' ™ Consumer/HELOCs @ Credit Card gw Loans Held for Sale 20% Peer Banks include: ASB, BOKF, BXS CFR, FNB FULT, HWC, IBKC, ONB, OZK, PB, PNFP, SFNC, UBSI, UMBF, UMPQ, VLY, WBS, WTF
Slide 18: Paycheck Protection Program
PAYCHECK PROTECTION PROGRAM IMPACT 7,443 - $1.5B - $206K - $34K Total SBA PPP Total SBA PPP Average SBA PPP Median SBA PPP loans approved secured funding loan size loan size Business Loan Yield QTD Avg As of June 30, 2020 APPROXIMATELY 3.03% al 154,000 4, 2.36% JOBS SAVED Business Business PPP Loan
Slide 19: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Nearly 58% of total loans are variable; 65% of commercial loans have floating rates, mostly tied to a LIBOR index | MM Fixed [Variable Business Construction Business RE ie) Total Loans: $5.6B Total Loans: $0.9B Total Loans: $2.8B (S) 4% — () € 44% E 56% fe) O 96% Pe
Slide 20: 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, 2020 Total average investments $9.7 billion Unrealized gain $281.5 million m Municipal 12 month maturities / pay-downs $1.6 billion Treasury & agency m MBS Duration December 2017 3.
Slide 21: Impact of CECL: Allocation of Allowance
IMPACT OF CECL: ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook due to COVID-19 December 31, 2019 Incurred Model Allowance for Loan $ in millions Losses Business $ 44.3 Bus R/E 25.9 Construction 21.6 Commercial total $ 918 Consumer 15.9 Consumer CC 48.0 Personal R/E 3
Slide 22: Net Loan Charge-Offs: YTD June 30, 2020
NET LOAN CHARGE-OFFS: YTD — June 30, 2020 $ in 000s YTD 2019 Business Overdraft 570 Construction (17) Business R/E (51) Personal R/E 80 Consumer 3,647 HELOC 135 Credit card 18,024 Total 23,019 $280 Non-Performing Assets to Allowance $240 @ $200 £ $160 E $120 & $80 a $40 $0 2016 2017 2018 2019 2Q2020
Slide 23: Commerce and COVID-19
COMMERCE AND COVID-19 & Commerce Bancshares, Inc. 2
Slide 24: Helping Our Customers Focus on What Matters Most: Consumer
HELPING OUR CUSTOMERS FOCUS ON WHAT MATTERS MOST Relief programs for our consumer customers Payment deferments + Opportunity to skip payments with refunded or ' , spies waived late fees Unsecured installment loan with flexible income requirements and loan terms, first payment + Permanent workout pay
Slide 25: Helping Our Customers Focus on What Matters Most: Commercial
HELPING OUR CUSTOMERS FOCUS ON WHAT MATTERS MOST Relief programs for our commercial customers Prepaid Cards + Payment deferments for + Requests can be made to * Implementation fees existing clients have overdraft fees waived for DirectCheck refunded Card solution, an alternative * Small Business Adm
Slide 26: Providing Relief to Our Customers
PROVIDING RELIEF TO OUR CUSTOMERS Payment Relief Requests' Approx. % Making loan Type Noguccs’ (ey #ctnote) "ofRequase, —Pavmentiniaat Commercial 7Al 5.6% $720MM® 46% Mortgage 192 1.6% $48MM 54% Consumer Card? 1597 6% $10MM 11% Installment 3,940 47% $76MM 74% Med/HSF3 3,427 AT% $9MM 60% General Prog
Slide 27: What Our Customers Are Saying
WHAT OUR CUSTOMERS ARE SAYING ‘| wanted to send you a quick note to “I can't thank you enough for your i hy fi 4 Branch support and for ommerces = se'youot your statis coac oes Me ability to help us and our business. : i i We aiicerel aperecere the fast Between working with Private Banking Relations
Slide 28: Loan Portfolio: Limited Exposure to Pandemic-Sensitive Industries
LOAN PORTFOLIO: LIMITED EXPOSURE TO PANDEMIC~-SENSITIVE INDUSTRIES While we expect nearly every industry to be impacted to some degree by Coronavirus-related disruptions, we have identified nine industries that will be most impacted. Loan Portfolio Outstandings Highest Impacted Highest [sates Impact
Slide 29: Strong Capital Position - Flexibility in Capital Planning
STRONG CAPITAL POSITION — FLEXIBILITY IN CAPITAL PLANNING 52 consecutive years of regular common cash dividend increases! Capital Returned to Common Shareholders as a percentage of Net Income? $300 J Cash dividends paid on common stock (left) 200% $250 Common share repurchase (left) E seo0 |= % Payo
Slide 30: Strategic Position
STRATEGIC POSITION & Commerce Bancshares, Inc. 30
Slide 31: Strong Performance with Ongoing Refinement of the Core Bank
STRONG PERFORMANCE with ongoing refinement of the “Core Bank” + Super-Community Bank platform + Relationship-based banking * High-touch customer service + Full suite of product and service offerings + Disciplined attention to risk return + Divest in businesses & activities that no longer provide acc
Slide 32: Growth Mindset: Consumer Banking
(GROWTH MINDSET: 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 Consumer Digital Business Evolving our digital experiences to meet
Slide 33: Growth Mindset: Internal Innovation at Commerce
}GROWTH MINDSET: INTERNAL INNOVATION AT COMMERCE <HOCKOTHON/> innovation G AGILE n internal software development ommerce's commitment to s innovation and technology rapi ro) Internal software development c : itment t As it ti d technology rapidly ro) events to rapidly build, test, and promoting an i
Slide 34: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT Focus on Digital Le Commerce re | Digital HH °® Digital Loan 1, Mobile Bank App Rating Penetration 8 Sales (000s) Deposit Use 4.7 kth 46% $42,755 13% DB 7 kkk Period end balances, information as of December 3, 2019; App store rating as of 1/15/2020 & Commerce Bancshares, In
Slide 35: Wealth | Investments | Planning
Wealth | Investments | Planning 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. $57 $34 $539 MILLION Managed Brok Largest Among BILLION Bank-Managed Trust Companies! BILLION Total C
Slide 36: Commercial Banking
COMMERCIAL BANKING Revenue growth opportunities Financing solutions — options for all sizes and types of businesses + Equipment Financing + International Financing + Employee Stock & Ownership Financing + Tax-exempt Financing $9.6 $8.1 BILLION BILLION * Working Capital Lines of Credit * Term Financi
Slide 37: Commercial Banking - Expansion Markets
COMMERCIAL BANKING — EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Expansion Market Loan Growth $ in millions Team Overview for $2,316 Growth Expansion Markets $ 2,200 9 # of team members per market $1,913 498% (includes open positions) sis $1,338 Oklahoma 31 52 Texas 3 23 a Denver 447 Cincinnati/ In
Slide 38: Industry-Leading Commercial Payments Capabilities
™ PAYMENTS CAPABILITIES INDUSTRY-LEADING COMMERCIAL Innovative payments solutions to manage payables and receivables to streamline cash flow AYABLES. AUTOMATION. $177 aida UT COMMERCE |S RM ORE THAN A BANK. $47.7 Treasury é Management ® & co MM Revenue ye ga Pt bcc — — - Leh Commercial PR £ EiilleNE
Slide 39: Card Products - A Leader Amongst Top U.S. Banks
CARD PRODUCTS — A LEADER AMONGST TOP 50 U.S. BANKS Consistently ranked among the top issuers in the Nilson Report #12 #7 #12 F al Purcha Bank Consumer Debit Prepaid suer Card Iss Acquirer Card Card Card A full suite of innovative card and payment product offerings * Health Services Financing @} comm
Slide 40: Capital for Business
CAPITAL FOR BUSINESS* A middle-market private equity firm focused on the success of industrial growth companies Quick Facts: * Small Business Investment Company (SBIC) founded in 1959 * Nationwide footprint with Greater Midwest Focus * 31 Portfolio Companies Representing * $500MM in Revenue + 1,900
Slide 41: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Return on Average Assets 2.0% 1.5% 1.0% * phil 0.0% 2010 2011 2012 2013 «2014)«=. 2015 2016 = 2017_— 2018 <@ Commerce [MM Peer Banks fi Large Banks Return on Average Common Equity 20.0% 2019 15.0% -*—» 10.0% aTTTIiTiliit 0.0% 2010 2011 2012 2013 «2
Slide 42: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of June 30, 2020 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 03/31/2005 = $100 Percent 400 . a0 li cesH NASDAQ Bank — COMMERCE % > we ssp500 [lll KBW Bank 350 | NASDAQ 10% 300 4 BANK 0% i i i — | | al oso | — KEW BANK | | — ssp 500
Slide 43: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS June 30,2020 March 31, 2020 June 30, 2019 A Net Interest Income $ 203,057 $ 201,065 $ 211,634 BNon-Interest Income $ 117,515 $ 123,663 $ 127,259 C_ Non-Interest Expense $ 187,512 $ 193,698 $
Slide 44: Investor Relations
Investor Relations 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/ & Commerce Bancshares,
Slide 45: Embracing a Growth Mindset
§) Embracing a Growth Mindset sas, 83 Commerce Bancshares, Inc.