Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q1 2023 Earnings Presentation
54 slides from Commerce Bancshares's earnings presentation, May 16, 2023
Slide 1: Commerce Bancshares Investor Update 1st Quarter 2023
COMMERCE BANCSHARES, INC. INVESTOR UPDATE 1ST Quarter 2023 PEOPLE, GROWTH AND POSSIBILITIES
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: 158 Years in Business
COMMERCE BANCSHARES 158 YEARS IN BUSINESS FULL-SERVICE BANKING FOOTPRINT 148 full-service branches and 293 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 35%1 of total revenue, bolstered by growing wealth and national payments businesses Deposit Franchise $23.6 billion in low-cost, diverse deposits2 with peer-leading historical deposit betas C
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 12/31/2022 Peer Banks include: ABCB, ASB, BOKF, CADE, CFR, FIBK, FNB, FULT, HWC, ONB, OZK, PB, PNFP, SFNC, SBB, UBSI, UCBI, UMBF, WTFC Large Banks include: JPM, BAC, C, W
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 $300 $200 $100 $250 $150 $350 $400 $450 $550 $600 20152013 2014 2016 2017 2018 2019 2020 2021 2022 7 Dividends per share All data has been restated for 5% stock dividend distributed in December 2022 Net Income represents Net Income Available to Co
Slide 8: Steady Shareholder Returns
Source: Bloomberg; data as of 03/31/2023 Total Shareholder Returns Indexed, 03/31/2008 = $100 Consistent, positive returns to shareholders Significant outperformance relative to banks over long period -40% -30% -20% -10% 0% 10% 20% 30% 3 Year 10 Year5 Year1 Year 15 Year CBSH S&P 500KBW Regional KBW
Slide 9: A Strong Culture Is the Foundation of Our Success
At Commerce, our core values shape the way we live and work: How we put our culture into practice: We have a long-term view We act with integrity We are customer- focused We strive for excellence We collaborate as one team A STRONG CULTURE IS THE FOUNDATION OF OUR SUCCESS 9 What defines us, ultimate
Slide 10: Commerce's Focus Extends Beyond Banking
10 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 Currency 2The Korn Ferry Hay Group – 2022 survey results 2022 Engagement and Enablement2 vs. 70% U.S. High
Slide 11: Our Commitment to Diversity, Equity and Inclusion
11 Enhance internal talent mobility and external recruiting practices to increase the diversity of our teams and leaders Internal Connecting young professionals 800+ members OUR COMMITMENT TO DIVERSITY, EQUITY AND INCLUSION Our longstanding approach of “doing what’s right” continues to guide our foc
Slide 12: Recent Recognition
12 RECENT RECOGNITION Modernized Core Banking Platform to Drive Efficiency3 2022 Forbes World’s Best Banks1 4 consecutive years 2022 Forbes America’s Best Banks4 13 consecutive years BEST Customer Service, Newsweek’s Best Banks 2022 List2 2 consecutive years 2022 Forbes America’s Best Midsize Employ
Slide 13: Liquidity and Capital
LIQUIDITY AND CAPITAL & commerce Bancshares, Inc.
Slide 14: Liquidity and Capital Highlights
LIQUIDITY AND CAPITAL HIGHLIGHTS 14 • $1.3B of cash at Federal Reserve Bank (FRB) at Q1. • $1.5B in Federal Home Loan Bank (FHLB) advances at Q1. • No borrowings from Federal Reserve lending facilities during Q1. • Increased borrowing capacity in Q1 from $8.0B at Q4 to $9.2B. • AFS debt securities p
Slide 15: Deposit Trends – YTD 2023
$20,000 $22,000 $24,000 $26,000 $28,000 $30,000 1/7 2/1 3/1 4/1 -3% 7-Day Moving Average $ in millions DEPOSIT TRENDS – YTD 2023 January 1, 2023 – April 10, 2023 Z0% 3/8 Seasonal runoff early in the first quarter was in line with expectations. 15 Deposit balances declined slightly after March 8, but
Slide 16: Deposit Balance Trends
2020 1Q2320212019 2022 $1.8 $2.3 $3.0 $2.8 $2.5 $2.4 1Q231Q23 $9.5 DEPOSIT BALANCE TRENDS Segment view $ in billions 16 1Q2320222019 2020 $12.0 2021 $7.8 $9.9 $11.9 $10.3 1Q23 $10.2 2020 $11.3 2019 20222021 $12.8 $13.4 $12.5 Commercial Consumer Wealth Average Balance Period End $12.7 1Q23 Period End
Slide 17: Deposit Portfolio Characteristics
DEPOSIT PORTFOLIO CHARACTERISTICS 17 1Finance and Insurance Sector includes affiliate deposits 2Excludes affiliate and collateralized deposits Top 10 Commercial Sectors (NAICS Sector / Industry) % of Commercial Segment Deposits % of Total Deposits Finance and Insurance 13.3% 5.1%1 Construction 10.0%
Slide 18: 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 19: High Quality, Highly Liquid and Diverse Investment Portfolio
9% 14% 49% 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 QTD – March 31, 2023 Avg Rate Duration (yrs) Treasury & agency1 1.32% 2.2
Slide 20: Sound Capital and Liquidity Position
Average Loan to Deposit Ratio3 SOUND CAPITAL AND LIQUIDITY POSITION 20 Tier 1 Risk-Based Capital Ratio1 1S&P Global Market Intelligence, Information as of December 31, 2022 2Period-end balances, as of March 31, 2023 3Includes loans held for sale, for the quarter ended March 31, 2023 15.9% 14.1% 13.4
Slide 21: Summary of Fixed & Floating Loans
Over 55% of total loans are variable; 64% of commercial loans have floating rates SUMMARY OF FIXED & FLOATING LOANS 40% 60% Business Total Loans: $5.7B Fixed Variable C om m er ci al 67% 33% Personal RE Total Loans: $2.9B C on su m er 95% 5% Construction Total Loans: $1.4B 99% 1% HELOC Total Loans:
Slide 22: Commercial Real Estate Breakdown
Real Estate - Business Loans: Office Outstanding Balances by Geography1 Real Estate - Business Loans % of Total Loans Owner – Occupied 7.0% Office 3.0% Industrial 2.9% Retail 2.1% Multi-family 1.8% Hotels 1.5% Farm 1.2% Senior living .9% Other .7% Total 21.1% COMMERCIAL REAL ESTATE BREAKDOWN 22 33.2
Slide 23: Maintaining Strong Credit Quality
$4.6 $5.6 $6.8 $3.1 $4.5 $6.1 1Q22 4Q22 1Q23 MAINTAINING STRONG CREDIT QUALITY 23 Net Loan Charge-Offs (NCOs) $ in millions NCOs- CBSH NCOs - Peer Average NCO/Average Loans1 - CBSH $134.7 $150.1 $159.3 $254.7 $269.8 $280.5 1Q22 1Q234Q22 Allowance for Credit Losses on Loans (ACL) $ in millions ACL -
Slide 24: Allocation of Allowance
ALLOCATION OF ALLOWANCE 24 CECL allowances reflect the economic and market outlook December 31, 2022 March 31, 2023 $ in millions Allowance for Credit Losses (ACL) % of Outstanding Loans Allowance for Credit Losses (ACL) % of Outstanding Loans Business $ 46.3 .82% $ 49.5 .87% Bus R/E 28.2 .83% 27.7
Slide 25: Strong Capital Position – Flexibility in Capital Planning
0% 50% 100% 150% 200% $0 $50 $100 $150 $200 $250 $300 20152013 2016 20182014 20202017 2019 2021 2022 • 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 accel
Slide 26: Financial Results 1Q2023
FINANCIAL RESULTS 1Q2023 & commerce Bancshares, Inc.
Slide 27: Financial Performance vs. Prior Years
$4.11 $3.85 $0.92 $0.95 YTD 2023YE 2022YE 2021 YTD 2022 Return on Total Average Assets 1.55% 1.45% 1.33% 1.54% YTD 2022YE 2022YE 2021 YTD 2023 Earnings per Common Share Return on Average Common Equity Net Income Attributable to CBI ($ in Millions) FINANCIAL PERFORMANCE VS. PRIOR YEARS $488 $118 YE 2
Slide 28: 1Q2023 Highlights
$0.95 EPS 28 • PPNR1 was up 22.4% year over year but down 5.5% from Q4. • Net interest income decreased 1.2% from Q4. • Net interest margin increased 81 bps year over year and 8 bps over Q4 to 3.26%. • Non-interest income increased 0.6% over Q4 (35.4% of total revenue). • Wealth management client as
Slide 29: Balance Sheet Highlights
Quarterly Average Balances Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights Commercial $10,545.3 $497.5 $991.2 • Linked quarter (LQ) and prior year (PY) reflects growth in business, business real estate, and construction loans Consumer 5,858.6 21.4 189.5 Total Loans $16,403.9 $518.9 $1,180.7 Inves
Slide 30: Balance Sheet
$17.8 $16.2 $16.1 $11.5 $10.4 $9.1 1Q22 4Q22 1Q23 $29.3 $26.6 $25.2 -14% $9.5 $10.1 $10.5 $5.7 $5.8 $5.9 $16.4 4Q221Q22 1Q23 $15.2 $15.9 BALANCE SHEET 30 Loans Consumer Loans Commercial Loans Loan Yield Deposits QTD Average Balances $ billions Non-Interest Bearing Interest Bearing Deposit Interest B
Slide 31: Loan Portfolio
LOAN PORTFOLIO 31 $ in 000s 3/31/2023 12/31/2022 3/31/2022 QoQ YoY Business $5,704,467 $5,661,725 $5,508,508 0.8% 3.6% Construction 1,437,419 1,361,095 1,144,411 5.6% 25.6% Business Real Estate 3,486,543 3,406,981 3,109,668 2.3% 12.1% Personal Real Estate 2,952,042 2,918,078 2,820,076 1.2% 4.7% Cons
Slide 32: Income Statement Highlights
Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights Net Interest Income $251.6 $(3.0) $42.8 • Linked quarter (LQ) decrease due to higher interest expense and lower investment securities balances, partly offset by higher interest earned on loans Non-Interest Income $137.6 $.8 $5.8 • See page 33 Non-In
Slide 33: Non-Interest Income Highlights
Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights Bank Card Transaction Fees $46.7 $2.1 $4.6 • Prior year (PY) increase mainly due to higher corporate card fees Trust Fees $45.3 $.6 $(2.5) • 1Q23 reflects lower market values on assets under management compared to prior year (PY) Deposit Account Cha
Slide 34: Non-Interest Expense Highlights
Change vs. $ in millions 1Q23 4Q22 1Q22 Highlights Salaries and Employee Benefits $144.4 $5.9 $8.4 • Increase over prior year (PY) mostly due to higher full-time salaries expense of $7.6 million and higher benefits expense of $1.4 million Net Occupancy $12.8 $1.0 $.5 Equipment $4.8 $(.2) $.3 Supplie
Slide 35: Pre-Tax, Pre-Provision Net Revenue (PPNR)
35 PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) $132 $135 $209 $206 1Q2022 $341 $137 $175 $255 $217 4Q2022 $391 $137 $165 $252 $224 $389 1Q2023 Non-Interest Income (+) Net Interest Income (+) Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) 1Q2023 Comparison vs. 1Q2022 22.4% vs. 4Q2022 (
Slide 36: Net Interest Income: QTD – March 31, 2023
230 240 250 260 270 280 290 300 -$4,000 -$2,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 3Q 20 1Q 20 In te re st in co m e 4Q 20 C PI-U 2Q 21 1Q 21 3Q 21 2Q 20 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22 1Q 23 • Net interest income (fully taxable-equivalent) decreased $3.3 million from the prior quarter. •
Slide 37: A Full-Service, Diversified Operating Model
79% 2% 3% 4% 7% 5% 37 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 December 31, 2022 Peer Banks
Slide 38: Well-Diversified Loan Portfolio
32% 31% 21% 11% 5% 38 36% 8% 20% 21% 11% 4% Business Loans Construction Business RE Residential RE Consumer / HELOCs Credit Card Peers Banks Loan Portfolio Diversification Compared to Peers1 Commerce Bank WELL-DIVERSIFIED LOAN PORTFOLIO 1Source: S&P Global Market Intelligence as of December 31, 2022
Slide 39: Strategic Position
STRATEGIC POSITION & commerce Bancshares, Inc. .
Slide 40: Strategic Posture: Maintaining the Balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE Disciplined focus on PRIORITY BLUE CHIP investments • Diversity, Equity and Inclusion • Enhancing our People Leadership • Workplace Optimization • Enterprise Digital Strategy • Maximize Value of Key Retail Clients • Grow the Private Bank Through a New Trans
Slide 41: Blue Chip: Enterprise Digital Strategy
anywhere, any time. 41 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 current and potential customers’ behaviors have changed, and they expect more digit
Slide 42: Digital Technology: Application Modernization
DIGITAL TECHNOLOGY: APPLICATION MODERNIZATION 42 Application Modernization is the focused effort to re-platform, replace, or significantly improve application platforms for the express purpose of modernizing features and capabilities, improving total cost of ownership, and/or reducing operating risk
Slide 43: Consumer Banking Snapshot
Period end balances. All information as of December 31, 2022 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 $13.0 Consumer Deposits1 Consumer Households1 81
Slide 44: Distinctive Digital Offerings
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 interact directl
Slide 45: Commerce Trust Company Wealth Management
45 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 12/31/2022, based on assets under management 2Assets under administration Largest Am
Slide 46: Wealth Key Growth Initiatives
46 Wealth Key Growth Initiatives • Utilize new private banking loan and deposit system to offer special products, services and automation • Continued expansion into new concentrated wealth markets through de novo and acquisition efforts • Expand our integrated referral strategy with affluent househo
Slide 47: Commercial Banking
Commercial Revenue $ in millions COMMERCIAL BANKING $10.9 $9.7 $10.7 2020 2021 2022 Commercial Loans $ in billions $11.3 $13.0 $10.6 20212020 2022 Commercial Deposits $ in billions $609 $665 $678 20212020 2022 47Commercial segment as of December 31, 2022 Financing solutions and deposit capabilities
Slide 48: Expansion Markets Offer Growth Opportunities
Team Overview for Expansion Markets 2022 # of team members per market (includes open positions) EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Period end balances as of December 31, 2022 2022 $2,466 2017 $2,200 2018 $1,912 2019 20212020 $2,317 $2,615 $3,280 Oklahoma Texas Cincinnati & Indianapolis Den
Slide 49: Industry-Leading Commercial Payments Capabilities
Information as of December 31, 2022 49 Payments Revenue Commercial Card Volume Merchant Volume Treasury Management Revenue Innovative payments solutions to manage payables and receivables to streamline cash flow $63 MILLION $7.7 BILLION INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES $10.4 BILLION
Slide 50: Healthcare Payments and Services
Patient Engagement Solutions • Patient Financing • Online Bill Pay • Patient Refunds Receivables Management Solutions • Receivables Optimization • Reconciliation Automation • Healthcare Lockbox Accounts Payable Solutions • Virtual Card Revenue Share Program • Supplemental Card Program Traditional Ba
Slide 51: A Full Suite of Innovative Card and Payment Product Offerings
A FULL SUITE OF INNOVATIVE CARD AND PAYMENT PRODUCT OFFERINGS • Health Services Financing • Claims Payments • Multi Account Chip • Co-Brand • Prepaid Expense • Credit Card Installment opportunity during purchase • Contactless Visa® Debit Card Early adopter 51
Slide 52: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 52 For The Three Months Ended (DOLLARS IN THOUSANDS) Mar. 31, 2023 Dec. 31, 2022 Mar. 31, 2022 A Net Interest Income $ 251,623 $ 254,641 $ 208,786 B Non-Interest Income $ 137,612 $ 136,825 $ 131,769 C Non-Interest Expense $ 224,107 $ 216,740 $ 205,648 Pre-Provision Net Reven
Slide 53: 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/ 53
Slide 54: People, Growth and Possibilities
PEOPLE, GROWTH AND POSSIBILITIES