Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q4 2020 Earnings Presentation
49 slides from Commerce Bancshares's earnings presentation, 2021
Slide 1: Embracing a Growth Mindset: Investor Update 4th Quarter 2020
Embracing a Growth Mindset COMMERCE BANCSHARES, INC. INVESTOR UPDATE 4th Quarter 2020
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: 155 Years in Business
COMMERCE BANCSHARES $32.9 $26.9 155 YEARS IN BUSINESS BILLION IN TOTAL ASSETS BILLION IN TOTAL DEPOSITS 42ND LARGEST U.S. BANK BASED ON ASSET SIZE1 $16.4 BILLION IN TOTAL LOANS2 $7.7 BILLION IN MARKET CAPITALIZATION $8.5 BILLION IN COMMERCIAL 16TH CARD VOLUME as of 12/31/20 LARGEST U.S. BANK 10.6% B
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 Long-Term Success
OUR STRONG CULTURE IS THE KEY DRIVER TO OUR LONG-TERM SUCCESS A culture At Commerce, our core values shape the way we live and work. formed 155 years ago to • We make decisions today that will be a force for We have a long V sustain us well into the future. good in our term View region and • We see
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 nonprofit 500 2020 Engagement & Enablement1 Consistently scoring above the U.S. High organizations supported
Slide 7: 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 8: Recent Recognition
RECENT RECOGNITION Commerce was named to Commerce Bank was selected as Newsweek’s America’s Best Banks list one of 20 best-in-class banks in for Best Customer Service. The Bank Director’s 2019 award recognizes banks with the RankingBanking study. We placed fewest problems reported to the third overa
Slide 9: Financial Results 4Q & YTD
FINANCIAL RESULTS 4Q & YTD (aN & Commerce Bancshares, Inc.
Slide 10: Financial Performance in 2020
FINANCIAL PERFORMANCE IN 2020 ROA ROE Growth in Dividend growth 9% 1.20% 10.6% deposits period end 31% Net loan Net Growth in charge- interest 2.99% loans 11% offs to .22% margin period end loans Long-term performance remains strong 20-year TOTAL ANNUALIZED SHAREHOLDER RETURN @ 9.6% Vs KBW Bank I
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) Share Assets $434 $421 $3.43 $3.41 1.76% 1.67% $354 $2.91 1.20% YE 2018 YE 2019 YE 2020 YE 2018 YE 2019 YE 2020 YE 2018 YE 2019 YE 2020 Return on Average Common Period End
Slide 12: 4Q2020 Earnings Highlights
4Q2020 EARNINGS HIGHLIGHTS Highlights Well-positioned in a challenging environment PPNR1 • Allowance for credit losses on loans to total loans decreased to 1.35% $148.6 million – Decreased to 1.48% excluding Paycheck Protection Program (“PPP”) loans. Allowance for Credit • Net charge-offs to total l
Slide 13: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Average Balances Change vs. $ in millions 4Q20 3Q20 4Q19 Highlights • Linked quarter (LQ) reflects lower business loans offset by higher construction and business real estate loans Commercial1 $10,643.0 $(30.2) $1,559.4 • YoY reflects PPP • LQ reflects higher personal real e
Slide 14: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +27% $24.7 $25.6 +13% $20.2 $16.3 $16.3 $9.8 $10.3 $14.5 $6.6 4.47% $5.7 $5.7 $5.4 3.69% 3.69% $13.6 $14.9 $15.3 $9.1 $10.6 $10.6 0.52% 0.18% 0.12% 4Q19 3Q20 4Q20 4Q19 3Q20 4Q20 Consumer Loans Loan Yield Non
Slide 15: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Change vs. $ in millions 4Q20 3Q20 4Q19 Highlights • LQ decline due to lower earning asset yields, Net Interest Income $209.8 $(6.2) $7.1 partially offset by lower deposit costs and larger balance sheet. • LQ increase in bank card fees, trust fees and mortgage loan sales.
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 (=) $346 $346 $345 4Q2020 Comparison $203 $195 $191 $196 $216 $210 vs. 4Q2019 -1.6% vs. 3Q2020 -3.9% $151 $155 $149 $143 $130 $135 4Q2019 3Q2020 4Q202
Slide 17: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Total Risk-Based Capital Ratio1 Loan to Deposit Ratio SFNC Peer Median: 14.1% 15.8% Large, stable deposit base and low OZK 15.3% loan to deposit ratio UBSI 15.1% UMPQ 15.0% Core Deposits 64% Average Loan to Deposit Ratio3 CFR CBSH 14.7% 14.6% Total $25.1 Commerce
Slide 18: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $15.2 $ in millions $301.8 $10.4 $236.4 $220.8 $8.3 $7.6 $8.0 $160.7 $143.0 1.44% 1.42% 1.35% .42% 1.09% .73% .18% .18% .18% .19% 4Q19 3Q20 4Q20 4Q19 3Q20 4Q20 NCOs- CBSH NCO/Averag
Slide 19: Net Interest Income: YTD December 31, 2020
NET INTEREST INCOME: YTD – December 31, 2020 Quarterly Net Interest Income • Net interest income (tax equivalent) decreased $6.1 $220 (Tax Equivalent) 4.0% million from the prior quarter, which included a Net interest income – $210 3.8% decline of $2.1 million in TIPs inflation income and $3.5 3.6%
Slide 20: NIM Protection
NIM PROTECTION Hedging structures and low deposit costs provide support to net interest margin in low-rate environment Asset Repo Securities • 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 Net Interest Income Non-Interest Income 5% $ in millions $501 $525 $506 10% Wealth Management $447 $461 4% Deposit Service Charges 7% Commerce Fees and Commissions Bank1 Card Income 12% 62%
Slide 22: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Business Loans YTD Average Loans2 $s in millions 4% Construction $15,916 16% Business RE $14,243 $13,946 37% Residential RE $12,953 $13,629 Commerce Consumer/HELOCs 20% Bank1 Credit Card 2016 2017 2018 2019 2020 6% 2020 Loan Growth by Category 17% 8% (Average loans De
Slide 23: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE Round 1 – Key Metrics Median Loan SBA Fees Recognized Loan Balance Customers Total SBA Fees Size in 2020 over $41.0MM $1.5B $33M $21.4MM 7,500 (2.7%) Yield and Interest Income Q4 2020, $ in millions 3.17% $49.8 3.01% $38.1 2.97% $11.7 Yield Interest Inco
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 December 31, 2020 Total average investments3 $12.3 billion 5% 7% Treasury & agency Unrealized gain3 $329.5 million 15% 16% Municipal 12 month maturities / pay-downs $2.0 billion MBS Duration
Slide 26: Impact of CECL: Allocation of Allowance
IMPACT OF CECL: ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook due to COVID-19 pandemic December 31, 2019 September 30, 2020 December 31, 2020 Incurred Model CECL Model CECL Model Methodology and Allowance Allowance Allowance % of for Credit % of for Credit % of Vari
Slide 27: Net Loan Charge-Offs: YTD December 31, 2020
NET LOAN CHARGE-OFFS: YTD – December 31, 2020 2020 YTD YTD Actual Loss • Rise in 90+ delinquent $ in 000s 2019 2020 $ Chge Rate loans exiting Skip Pay program Business $ 4,102 $ 3,665 $ (437) 0.06% Overdraft 1,523 1,277 (246) 38.11% • Skip Pay was enacted for Construction (117) (3) 114 0.00% May and
Slide 28: Commerce and COVID-19
COMMERCE AND COVID-19 P ro] Commerce Bancshares, Inc. 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 September 30, 2020 as of December 31, 2020 Number Total Number Total % of Portfolio % of Portfolio Loan Type of Amount of of Amount of (by $ amou
Slide 30: 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 eight industries that will be most impacted. % of Loan Portfolio $ in $ in Loan Outstandings Highest Impacted m
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 & Commerce Bancshares, Inc. 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 • Maximize Value o
Slide 34: CBI Blue Chip: Enterprise Digital Strategy
CBI BLUE CHIP: ENTERPRISE DIGITAL STRATEGY The Enterprise Digital Strategy leverages the success of the consumer digital strategy, expands it across the bank, and has been elevated to an executive role. VISION WHY Transform the digital • Our current and potential customers’ behaviors experience by s
Slide 35: 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 CommercePremier • Enhanced product offerings • Improved operating model Commerce Bank Mortgage An end-to-end, fully coordina
Slide 36: Commerce Bank CONNECT Mobile App
GROWTH MINDSET: 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 platform
Slide 37: Growth Mindset: Internal Innovation at Commerce
GROWTH MINDSET: 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 incr
Slide 38: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT $12.2 $2.0 1.1 157 Full-service branches 354 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% 4.6 Period e
Slide 39: Commerce Trust Company Wealth Management
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. Key Growth Initiatives 17TH $61 $38 $611 • Implement new Private Banking Lending Program Largest Among Bank-Managed BILLION BILLION M
Slide 40: 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 41: 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 42: 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 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 10-yr average 1.0% CBSH: 1.31% 0.5% Peers: 0.97% 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 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 $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 46: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of December 31, 2020 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 12/31/2005 = $100 Percent CBSH NASDAQ Bank 450 COMMERCE 20% S&P 500 KBW Bank 400 NASDAQ 10% 350 BANK 300 KBW BANK 0% 250 S&P 500 -10% 200 -20% 150 1 Year 3 Year 5 Yea
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Dec. 31, 2020 Sept. 30, 2020 Dec. 31, 2019 A Net Interest Income $ 209,763 $ 215,962 $ 202,659 B Non-Interest Income $ 135,117 $ 129,572 $ 143,461 C Non-Interest Expense $ 196,310 $ 190,858
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/
Slide 49: Embracing a Growth Mindset
a {ss Commerce Bancshares, Inc.