Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q4 2021 Earnings Presentation
58 slides from Commerce Bancshares's earnings presentation, January 2022
Slide 1: Well-Positioned and Playing Offense
Well-Positioned and Playing Offense COMMERCE BANCSHARES, INC. INVESTOR UPDATE 4th 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 $29.8 TOTAL DEPOSITS 156 YEARS IN BUSINESS TOTAL ASSETS BILLION $36.7 LARGEST U.S. BANK BILLION 41ST BASED ON ASSET SIZE $15.2 1 TOTAL LOANS2 BILLION MARKET CAP $8.3 BILLION 23RD BASED CAP LARGEST U.S. BANK ON MARKET 1 $9.4 COMMERCIAL CARD VOLUME BILLION 12TH LARGEST COMMERCIAL C
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: Track Record of Long-Term Outperformance
TRACK RECORD OF LONG-TERM OUTPERFORMANCE Revenue Diversification Deposit Franchise Continued Long-Term Investments Balanced earnings profile, fee $28.8 billion in low-cost deposits1 revenue at 40% of total revenue in with peer-leading historical Core banking system 2021, bolstered by growing wealth
Slide 6: 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% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Commerce Peer Median Large Bank Median Return on Average Common Equity 20.0% 15
Slide 7: Long-Term View: Net Income and Earnings per Share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE $600 $4.50 Earnings Per Share Earnings per Share (EPS) $550 $4.00 $500 Net Income $450 $3.50 Net Income $400 $3.00 $ 000s $350 $2.50 $300 $250 $2.00 $200 $1.50 $150 $100 $1.00 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Dividends $0.56* $0.58 $
Slide 8: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of December 31, 2021 Annualized Comparison Total Shareholder Returns Indexed, 12/31/2006 = $100 Total Shareholder Returns $500 CBSH KBW Bank 50% S&P 500 NASDAQ Bank S&P 500 40% COMMERCE $400 30% 20% $300 10% NASDAQ $200 BANK 0% 1 Year 3 Year 5 Year 10 Year 15 Year KBW B
Slide 9: 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 156 At Commerce, our core values shape the way we live and work. years ago to be a force for We have a • We make decisions today that will good in our V sustain us well into the future. region and our long-term View indus
Slide 10: 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 490 nonprofit 2021 Engagement & Enablement2 Consistently scoring above the U.S. organizations supported High
Slide 11: 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 assessed our impact in several key areas: • Environmental sustainability • Customer, te
Slide 12: 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 13: Recent Recognition
RECENT RECOGNITION 1 1The Korn Ferry Hay Group – based on 2018 survey results 13
Slide 14: Focusing on Our Customers
FOCUSING ON OUR CUSTOMERS America’s Best Banks 2022 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. A
Slide 15: Core Banking System Transformation
CORE BANKING SYSTEM TRANSFORMATION REASONS FOR OUR PARTNER: TRANSORMATION: • Core Banking Systems were at end of life • Vendor no longer selling solution • Solution inhibits delivery of new products A global leader in providing banking solutions, leads • Technology was 25+ years old and resources ar
Slide 16: Well-Positioned for a Rising Rate Environment
WELL-POSITIONED FOR A RISING RATE ENVIRONMENT 16
Slide 17: Well-Positioned for Higher Rates
WELL-POSITIONED FOR HIGHER RATES Previous Cycle Deposit Beta 3.0% Cost of Total Deposits Deposit Beta 2.5% As of As of Prior Fed Cycle 3Q2015 2Q2019 (+225 bps) 2.0% Commerce .12% .38% 12% 1.5% Peer Median .23% .85% 27% Effective Fed Funds Rate 1.0% 0.5% 0.0% 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016
Slide 18: Balance Sheet: Low-Cost Deposits
BALANCE SHEET: LOW-COST DEPOSITS – 41% of Q4 average deposits were non-interest bearing. – Cost of interest-bearing deposits declined slightly. $30 0.15% $25 0.12% Average Balance $20 0.09% 0.10% $ in billions $15 0.07% 0.06% 0.05% $10 0.05% $5 $0 0.00% 4Q20 1Q21 2Q21 3Q21 4Q21 Non Interest-Bearing
Slide 19: Earning Asset Optimization Excluding Loans
EARNING ASSET OPTIMIZATION EXCLUDING LOANS Prudently deploying excess deposits into higher-yielding assets $20.0 $19.1 9.0% $18.0 $2.9 8.0% $16.5 $2.6 $15.0 $1.7 7.0% $15.0 $2.7 $14.0 $1.5 $1.6 $13.1 $1.1 $0.8 $0.9 6.0% Average Balance $12.2 $1.0 $0.8 $0.8 $ in billions $9.7 $9.6 $9.8 $10.0 $1.8 5.0
Slide 20: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Over 50% of total loans are variable; 62% of commercial loans have floating rates Fixed Variable Business Construction Business RE Commercial Total Loans: $5.3B Total Loans: $1.1B Total Loans: $3.1B 4% 42% 44% 58% 56% 96% Personal RE Consumer HELOC Consumer Card Tot
Slide 21: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 12.0% Large, stable deposit base OZK 14.6% SFNC 14.3% CBSH 14.0% Core Deposits 52% Average Loan to Deposit Ratio 3 CFR 14.0% 13.5% $28.4 Commerce 78% Average UBSI Loan to WBS 12.4% Billion2 Depos
Slide 22: Financial Results 4Q & YTD 2021
FINANCIAL RESULTS 4Q & YTD 2021 22
Slide 23: Financial Performance in 2021
FINANCIAL PERFORMANCE IN 2021 ROA ROE Growth in deposits 11% Growth in period end 1.55% 15.4% non-interest 11% income Growth in Total Company loans period end, .5% excl. PPP Net charge- Growth in offs to Growth in Expansion Markets average .12% earnings per 56% loans share (EPS) period end 6% l
Slide 24: Financial Performance vs. Prior Years
FINANCIAL PERFORMANCE VS. PRIOR YEARS Net Income Attributable to Earnings per Common Return on Total Average CBI ($ in Millions) Share Assets $531 $4.31 1.67% 1.55% $421 $3.25 1.20% $354 $2.77 YE 2019 YE 2020 YE 2021 YE 2019 YE 2020 YE 2021 YE 2019 YE 2020 YE 2021 Return on Average Common Period End
Slide 25: 4Q2021 Earnings Highlights
4Q2021 EARNINGS HIGHLIGHTS Highlights Well-positioned for growth PPNR1 • Net interest income decreased 3.0% from Q3. $151.8 million • Net interest margin decreased 15 bps from Q3 to 2.43%. Net Income • Non-interest income increased 7.4% over Q3. $114.9 million – Non-interest income to total revenue
Slide 26: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Balances Change vs. $ in millions 4Q21 3Q21 4Q20 Highlights • Linked quarter (LQ) reflects lower PPP loans (-356MM) offset by higher core business, construction and business real Commercial1 $9,423.5 $(165.4) $(1,219.5) estate • LQ reflects slightly higher
Slide 27: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +13% $28.1 $28.8 $25.6 -8% $11.5 $11.9 $16.4 $10.3 $15.3 $15.1 $5.7 $5.7 $5.7 3.69% 3.74% 3.62% $15.3 $16.6 $16.9 $10.6 $9.6 $9.4 .12% .06% .05% 4Q20 3Q21 4Q21 4Q20 3Q21 4Q21 Consumer Loans Loan Yield Non-In
Slide 28: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 12/31/2021 9/30/2021 12/31/2020 QoQ YoY $ 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 $5,191,844 $5,437,498 $6,580,300 -4.5% -21.1% Business excl. Business excl. 5,174,
Slide 29: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Change vs. $ in millions 4Q21 3Q21 4Q20 Highlights • Linked quarter (LQ) decrease due to lower interest earned Net Interest Income $207.7 $(6.4) $(2.1) on loans and securities purchased under agreements to resell, partially offset by higher income earned on investment sec
Slide 30: Non-Interest Income Highlights
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 fr
Slide 31: Non-Interest Expense Highlights
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.
Slide 32: Pre-Tax, Pre-Provision Net Revenue (PPNR)
PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) Dollars in millions Net Interest Income (+) Non-Interest Expense (-) Non-Interest Income (+) Pre-Tax, Pre-Provision Net Revenue (=) $352 $355 $345 4Q2021 Comparison vs. 4Q2020 2.2% $208 $204 vs. 3Q2021 8.5% $210 $196 $214 $212 $149 $140 $152 $135 $138 $148 4
Slide 33: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) .22% $ in millions .19% $11.2 $306.1 $261.1 $265.7 $8.0 .10% .11% $220.8 .07% 1.49% $162.8 $150.0 .05% $4.3 1.35% 1.33% $3.7 1.27% $2.5 $2.6 1.07% .99% 4Q20 3Q21 4Q21 4Q20 3Q21 4Q21
Slide 34: Net Interest Income: YTD December 31, 2021
NET INTEREST INCOME: YTD – December 31, 2021 Quarterly Net Interest Income (Tax Equivalent) • Net interest income (tax equivalent) $220 3.50% decreased $6.4 million from the prior quarter, partly due to lower interest income Net interest income – $210 3.25% from PPP loans of $5.3 million. 3.00% $ in
Slide 35: 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 6% $560 2% $525 $501 $506 $461 12% 5% 10% 5% 4% Commerce 2017 2018 2019 2020 2021 7% 4% Bank Peers 60% Ba
Slide 36: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $s in millions Compared to Peers1 $15,916 $15,686 5% 31% $14,243 $13,946 $13,629 20% 4% 12% 36% Commerce Peers 22% 2017 2018 2019 2020 2021 Bank Banks 2021 Loan Growth by Category (Average loans Dec. 2021 vs. Sep. 2021
Slide 37: Paycheck Protection Program Impact and Update
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE Total Loan Originations1: Total SBA Fees: $1.9 Billion $60.4 Million Forgiven 93% 7% Remaining Recognized 95% 5% Remaining Yield and Interest Income2 Q4 2021, $ in millions 10.80% $41.4 $35.4 3.16% $6.0 2.83% Yield Interest Income Business Loans PPP Yiel
Slide 38: 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 $5,437 $5,192 $1,264 $575 $219 $5,494 $5,517 $5,203 $5,104 $5,159 $4,947 $4,863 $4,973 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21
Slide 39: 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, 2021 Total average investments3 $14.5 billion 4% 7% Treasury & agency Unrealized gain3 $86.0 million 24% 15% Municipal 12 month maturities / pay-downs $3.0 billion MBS Duration
Slide 40: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans September 30, 2021 December 31, 2021 $ in millions Allowance Allowance $250 1.60% for Credit % of for Credit % of Losses Outstanding Losses Outstanding $ in millions (ACL) Loans
Slide 41: Strong Capital Position – Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 54 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) % Payout (right) $300 Common share repurchase (left) 200% Payout
Slide 42: Strategic Position
STRATEGIC POSITION 42
Slide 43: 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 44: 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 rapidly seamless digital ecosyst
Slide 45: 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 46: 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 introduce this innovation, enabling high-touch service through a digital channel • Secure platform
Slide 47: 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 48: Playing Offense: Consumer Banking
PLAYING OFFENSE: CONSUMER BANKING 152 Full-service 333 $13.4 $1.9 811 branches ATMs BILLION BILLION THOUSAND 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 64.6% $53,330 25.7% 4
Slide 49: 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. 19TH $69 $43 $762 Largest Among Bank-Managed BILLION BILLION MILLION Trust Total Client Assets Under Managed Companies1 Assets2 Manag
Slide 50: Key Growth Initiatives Strengthening our wealth brands
Key Growth Initiatives Strengthening our wealth brands • Implement new Private 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 experience •
Slide 51: 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 52: Commercial Banking – Expansion Markets Offer Growth Opportunities
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Fee Income Expansion Market Loan Growth Growth Team Overview for 132% $ in millions Expansion Market Loan $2,615 Growth Expansion Markets $2,466 since 2016 # of team members per market $2,200 $2,317 62% (includes open positions) $1,
Slide 53: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow Key Verticals $190 Payments MILLION Revenue Tailored return on investment-based solutions Treasury $58 Management enables healthcare providers to enhance the pat
Slide 54: 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 55: 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 #12 Commercial #7 Purchasing 1 #9Bank #12 Consumer #19 Debit #13 Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment product offerings • Hea
Slide 56: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue 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
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