Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q2 2023 Earnings Presentation
25 slides from Commerce Bancshares's earnings presentation, Jul 19, 2023
Slide 1: Commerce Bancshares, Inc. Earnings Highlights 2nd Quarter 2023
COMMERCE BANCSHARES, INC. EARNINGS HIGHLIGHTS 2nd Quarter 2023 PEOPLE, GROWTH AND POSSIBILITIES
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: 158 Years in Business
COMMERCE BANCSHARES 158 YEARS IN BUSINESS FULL-SERVICE BANKING FOOTPRINT 147 full-service branches and 288 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: Track Record of Long-Term Outperformance
4 TRACK RECORD OF LONG-TERM OUTPERFORMANCE Revenue Diversification Balanced earnings profile, fee revenue at 36%1 of total revenue, bolstered by growing wealth and national payments businesses Deposit Franchise $24.2 billion in low-cost, diverse deposits2 with peer-leading historical deposit betas C
Slide 5: 2Q2023 Highlights
$1.02 EPS 5 • Built additional cushion of liquidity in Q2 – (Average cash at Fed of $2.3B) • Grew period end total deposits over Q1 by $1.2B ($904MM short-term brokered). • Net interest margin decreased 14 bps from Q1. • Net interest margin was flat, excluding short-term liquidity build. • Net inter
Slide 6: Balance Sheet Highlights
Quarterly Average Balances 2Q23 vs. 1Q23 2Q23 vs. 2Q22 $ in millions 2Q23 $ Change % Change $ Change % Change Commercial $10,748.4 $203.1 2% $974.5 10% Consumer 5,920.6 62.1 1% 209.0 4% Total Loans $16,669.0 $265.2 2% $1,183.5 8% Investment Securities $11,289.5 $(808.4) (7)% $(3,248.8) (22)% Interes
Slide 7: Balance Sheet
$17.5 $16.1 $11.2 $9.1 $8.2 1Q232Q22 $17.0 2Q23 $28.7 $25.2 $25.2 -12% $9.8 $10.5 $10.8 $5.7 $5.9 $5.9 2Q22 1Q23 2Q23 $15.5 $16.4 $16.7 BALANCE SHEET 7 Loans Consumer Loans Commercial Loans Loan Yield Deposits QTD Average Balances $ billions Non-Interest Bearing Interest Bearing Deposit Interest Bea
Slide 8: Loan Portfolio
LOAN PORTFOLIO 8 $ in 000s 6/30/2023 3/31/2023 6/30/2022 QoQ YoY Business $5,906,493 $5,704,467 $5,441,592 3.5% 8.5% Construction 1,451,783 1,437,419 1,266,260 1.0% 14.7% Business Real Estate 3,621,222 3,486,543 3,215,578 3.9% 12.6% Personal Real Estate 2,980,599 2,952,042 2,836,835 1.0% 5.1% Consum
Slide 9: Commercial Real Estate Breakdown
Real Estate - Business Loans: Office Outstanding Balances by Geography1 Real Estate - Business Loans % of Total Loans Owner – Occupied 6.8% Office 3.0% Industrial 3.3% Retail 2.1% Multi-family 1.8% Hotels 1.5% Farm 1.2% Senior living 1.0% Other .7% Total 21.4% COMMERCIAL REAL ESTATE BREAKDOWN 9 31.7
Slide 10: Income Statement Highlights
10 INCOME STATEMENT HIGHLIGHTS $140 $158 $232 $214 2Q22 $372 $137 $165 $252 $224 1Q23 $389 $148 $170 $250 $228 2Q23 $398 Non-Interest Income (+) Net Interest Income (+) Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) 2Q23 Comparison vs. 2Q22 7.1% vs. 1Q23 2.7% Pre-Tax, Pre-Provision
Slide 11: Income Statement
2Q23 vs. 1Q23 2Q23 vs. 2Q22 $ in millions 2Q23 $ Change % Change $ Change % Change Net Interest Income $249.5 $(2.1) -1% $17.2 7% Non-Interest Income 147.6 10.0 7% 8.2 6% Non-Interest Expense 227.6 3.5 2% 14.1 7% Pre-Tax, Pre-Provision Net Revenue1 $169.5 $4.4 3% $11.2 7% Investment Securities Gains
Slide 12: Non-Interest Income Highlights
NON-INTEREST INCOME HIGHLIGHTS 12 2Q23 vs. 1Q23 2Q23 vs. 2Q22 $ in millions 2Q23 $ Change % Change $ Change % Change Bank Card Transaction Fees $49.7 $3.1 7% 5.9 13% Trust Fees 47.3 1.9 4% .5 1% Deposit Account Charges and Other Fees 22.6 .9 4% (2.9) (11)% Capital Market Fees 2.5 (.8) (24)% (.8) (24
Slide 13: Non-Interest Expense Highlights
NON-INTEREST EXPENSE HIGHLIGHTS 13 2Q23 vs. 1Q23 2Q23 vs. 2Q22 $ in millions 2Q23 $ Change % Change $ Change % Change Salaries and Employee Benefits $145.4 $1.1 1% 3.2 2% Net Occupancy 13.0 .2 2% .5 4% Equipment 4.9 .0 0% .1 3% Supplies and Communication 4.6 .0 1% .2 6% Data Processing and Software
Slide 14: Liquidity and Capital
LIQUIDITY AND CAPITAL & commerce Bancshares, Inc.
Slide 15: Liquidity and Capital Highlights
LIQUIDITY AND CAPITAL HIGHLIGHTS 15 • $2.6B of cash at Federal Reserve Bank (FRB) at Q2. • FHLB advances declined from $1.5B to $1.0B. • AFS debt securities portfolio duration of 3.9 years. • Cash flows from maturities and paydowns of investments and resale agreements of approximately $2.7B expected
Slide 16: Deposit Balance Trends
2Q2320202019 1Q232021 $1.8 2022 $2.3 $3.0 $2.8 $2.5 $2.4 $2.4 1Q23 2Q23 $2.3 DEPOSIT BALANCE TRENDS Segment view $ in billions 16 2022 2Q231Q23 $9.9 $12.0 $7.8 2019 20212020 $11.9 $10.3 $10.1 $10.2 1Q2320202019 2021 2022 $11.3 2Q23 $12.8 $13.4 $12.5 $12.3 Commercial Consumer Wealth Average Balance P
Slide 17: Deposit Portfolio Characteristics
DEPOSIT PORTFOLIO CHARACTERISTICS 17 Percent of accounts under $250,000 Percent of deposits ($) uninsured1 Average balance of accounts <$250,000 Average balance of accounts 99% 32% $15,547 $27,262 Uninsured Deposit Analysis $ in billions 6/30/2023 Uninsured Deposits $ 10.4 Less: Affiliate Deposits $
Slide 18: FHLB Advances & Brokered CDs by Maturity
FHLB ADVANCES & BROKERED CDS BY MATURITY $500MM $500MM $503MM $401MM $1,003MM 3Q23 4Q23 $901MMBrokered CDs FHLB Advance Weighted average rate 5.21% 5.21% • Short-term, wholesale funding added providing ample liquidity cushion • FHLB advances and brokered CDs mature by December 31, 2023 18
Slide 19: Well-Positioned for Multiple Rate Environments
Hedging actions: Entered into three floor contracts (indexed to 1 Month SOFR) to hedge the risk of declining interest rates on floating rate commercial loans. The contracts have a term of 6 years. • 3Q2022: One 2.5% floor contract with a notional value of $500 million. The contract begins 1/2024. •
Slide 20: High Quality, Highly Liquid and Diverse Investment Portfolio
9% 13% 51% 23% 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 QTD – June 30, 2023 Avg Rate Duration (yrs) Treasury & agency1 1.22% 2.0
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 March 31, 2023 2Period-end balances, as of June 30, 2023 3Includes loans held for sale, for the quarter ended June 30, 2023 15.6% 14.5% 13.7% 12.
Slide 22: Maintaining Strong Credit Quality
$4.0 $6.8 $6.5 $2.2 $6.1 2Q232Q22 1Q23 MAINTAINING STRONG CREDIT QUALITY 22 Net Loan Charge-Offs (NCOs) $ in millions NCOs - Peer Average NCOs- CBSH NCO/Average Loans1 - CBSH $138.0 $159.3 $158.7 $256.0 $280.5 2Q232Q22 1Q23 Allowance for Credit Losses on Loans (ACL) $ in millions ACL - CBSH ACL - Pe
Slide 23: Allocation of Allowance
ALLOCATION OF ALLOWANCE 23 CECL allowances reflect the economic and market outlook March 31, 2023 June 30, 2023 $ in millions Allowance for Credit Losses (ACL) % of Outstanding Loans Allowance for Credit Losses (ACL) % of Outstanding Loans Business $ 49.5 .87% $ 47.1 .80% Bus R/E 27.7 .80% 29.9 .83%
Slide 24: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 24 For The Three Months Ended (DOLLARS IN THOUSANDS) Jun. 30, 2023 Mar. 31, 2023 Jun. 30, 2022 A Net Interest Income $ 249,538 $ 251,623 $ 232,385 B Non-Interest Income $ 147,605 $ 137,612 $ 139,427 C Non-Interest Expense $ 227,611 $ 224,107 $ 213,505 Pre-Provision Net Reven
Slide 25: Commerce Bancshares, Inc.
\ {37 Commerce Bancshares, Inc.