Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q4 2023 Earnings Presentation
50 slides from Commerce Bancshares's earnings presentation, February 2024
Slide 1: Commerce Bancshares, Inc. Investor Update 4th Quarter 2023
PEOPLE, GROWTH AND POSSIBILITIES COMMERCE BANCSHARES, INC. INVESTOR UPDATE 4th Quarter 2023
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 TOTAL ASSETS $31.7 158 YEARS IN BUSINESS BILLION TOTAL DEPOSITS $25.4 BILLION 41st LARGEST U.S. BANK BASED ON ASSET SIZE2 MARKET CAP TOTAL $17.2 LOANS3 BILLION $7.0 BILLION $9.9 COMMERCIAL CARD VOLUME 19TH BILLION AS OF DECEMBER 31, 2023 LARGEST U.S. BANK BASED ON MARKET CAP2 TOT
Slide 4: Super-community bank platform: 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 $23.4 billion in low-cost, diverse revenue at 36%1 of total revenue, deposits2 with peer-leading Core banking system bolstered by growing wealth and histo
Slide 6: 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 $573 $560 $547 2% 5% $525 $506 7% 3% 5% 3% 11% 3% 6% Commerce 2019 2020 2021 2022 2023 Bank Peers Banks 1
Slide 7: Well-diversified loan portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $s in millions Compared to Peers1 5% $16,783 30% $15,916 $15,686 $15,570 21% 3% 11% $13,946 $14,243 36% 21% Commerce Peers 2018 2019 2020 2021 2022 2023 Bank Banks 2023 Loan Growth by Category (Average loans Dec. 2023
Slide 8: A strong culture is the foundation of our success
A STRONG CULTURE IS THE FOUNDATION OF OUR SUCCESS At Commerce, our core values shape the way we live and work: We have a We collaborate We act with We are We strive for long-term as one team integrity customer- excellence view focused How we put our culture into practice: What defines us, ultimately
Slide 9: Commerce's focus extends beyond banking
COMMERCE’S FOCUS EXTENDS BEYOND BANKING Supporting our communities, our customers and our team members “ MORE THAN 500 As a socially responsible corporate citizen, we continuously seek opportunities to “ 2023 Engagement and Enablement2 Consistently scoring above the U.S. High Performance and U.S. ma
Slide 10: 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 A Blue Chip initiative centered on Commerce offers a variety of internal resource groups, mentoring programs and networking
Slide 11: Recent recognition
RECENT RECOGNITION 2024 BEST 2023 2023 2023 90 Newsweek U.S. News & World Forbes World’s Forbes America’s Newsweek’s Human Rights America’s Best Report’s Best Best Banks3 Best Midsize America’s Campaign Regional Banks1 Companies to Employers4 Greatest Corporate Equality Work For in the Workplaces fo
Slide 12: 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: 1.32% 0.5% Peers: 1.00% 0.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Commerce Peer Median Large Bank Median Return on Average Common Equity 20.0% 15
Slide 13: Long-term view: net income and earnings per share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE $600 $4.00 Earnings Per Share Earnings per Share (EPS) $500 Net Income $3.50 $3.00 Net Income $400 $ 000s $2.50 $300 $2.00 $200 $1.50 $100 $1.00 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Dividends $0.55 $0.58 $0.61 $0.64 $0.70 $0.82 $0.89 $0.
Slide 14: Steady long-term shareholder returns
STEADY LONG-TERM SHAREHOLDER RETURNS as of December 31, 2023 Annualized Comparison Total Shareholder Returns Indexed, 12/31/2008 = $100 Total Shareholder Returns $800 40% CBSH KBW Bank S&P 500 30% KBW Regional S&P 500 $700 20% $600 10% $500 0% $400 COMMERCE -10% $300 KBW BANK -20% KBW 1 Year 3 Year
Slide 15: Strategic Position
STRATEGIC POSITION 15
Slide 16: Strategic posture: maintaining the balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE Disciplined focus on PRIORITY STRONG PERFORMANCE with BLUE CHIP investments ongoing refinement of the “Core Bank” • Diversity, Equity and Inclusion • Super-Community Bank platform • Enhancing our People • Relationship-based banking Leadership • High-touch c
Slide 17: Digital technology: application modernization
DIGITAL TECHNOLOGY: APPLICATION MODERNIZATION Payments BUSINESS DRIVERS • Instant Payments (RTP, FedNow) • New Capabilities • Wires System Refresh • Improved User Experience • Flexibility • ACH System Refresh • Reduced Operational Expense Lending • Risk Management • Private Banking Loan Origination
Slide 18: CBI Blue Chip: Enterprise Digital Strategy
CBI BLUE CHIP: ENTERPRISE DIGITAL STRATEGY Our Vision • Creates a unified Digital Strategy expanding across all segments of the bank Transform the digital experience by staying • Committed to delivering customer digital current on digital trends and creating solutions, when and where they need them
Slide 19: Commercial banking: revenue growth opportunities
COMMERCIAL BANKING Revenue growth opportunities Financing solutions and deposit capabilities customized for your business • Working Capital Line of Credit • Commercial Real Estate • Full suite of cash management solutions • Term Loans • ESOP Loans • Robust Card and Merchant acceptance • Equipment Fi
Slide 20: Industry-leading commercial payments capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow $212 $65 $9.9 $8.3 MILLION MILLION BILLION BILLION Payments Treasury Commercial Merchant Revenue Management Card Volume Revenue Volume Information as of December
Slide 21: Healthcare is our specialty
We don’t just serve the healthcare industry. It’s our specialty. 500+ hospitals in all 48 contiguous states 100+ entities and over 75 million patient transactions annually Patient Engagement Receivables Accounts Payable Traditional Banking Solutions Management Solutions Solutions Services • Treasury
Slide 22: Expansion markets offer growth opportunities
EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Team Overview for Expansion Markets 2023 Fee Income Expansion Market Loan Growth Growth # of team members per market (includes open positions) 66% $ in millions Expansion $3,547 42 Market Loan Growth Oklahoma $3,280 since 2018 61% $2,200 $2,317 $2,466 $
Slide 23: 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. 20TH $69 $41 $665 Largest Among Bank-Managed BILLION BILLION MILLION Trust Total Client Assets Under Managed Companies1 Assets2 Manag
Slide 24: Wealth key growth initiatives
Wealth Key Growth Initiatives Strengthening our Wealth Brands • 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 s
Slide 25: Consumer banking snapshot
CONSUMER BANKING SNAPSHOT 141 Branches 272 ATMs $12.4 $3.9 810 BILLION BILLION THOUSAND Consumer Consumer Consumer Deposits1 Loans2 Households3 Focus on Digital 4.7 4.6 68.2% $77,251 27.7% Commerce Bank Digital HH Digital Loan Mobile App Rating Penetration Sales (000s) Deposit Use Period end balance
Slide 26: Liquidity and Capital
LIQUIDITY AND CAPITAL 26
Slide 27: Liquidity and capital highlights
LIQUIDITY AND CAPITAL HIGHLIGHTS Liquidity / Borrowing Deposits • $2.2B of cash at Federal Reserve Bank (FRB) • QTD Average loan to deposit ratio of 68%. at Q4. • Uninsured deposits1 of 35% of total deposits • Final FHLB advances matured as planned. at Q4. • AFS debt securities portfolio duration of
Slide 28: Deposit balance trends
DEPOSIT BALANCE TRENDS Segment view $ in billions Commercial Consumer Wealth $13.4 $12.8 $12.0 $11.9 $12.1 $12.1 $12.3 $12.4 $11.3 $10.5 $10.6 $9.9 $10.0 $10.4 $10.2 $7.8 $3.0 $2.8 $2.3 $2.3 $2.3 $2.3 $2.5 $1.8 2019 2020 2021 2022 3Q23 4Q23 3Q23 4Q23 2019 2020 2021 2022 3Q23 4Q23 3Q23 4Q23 2019 2020
Slide 29: Deposit portfolio characteristics
DEPOSIT PORTFOLIO CHARACTERISTICS Percent of accounts under $250,000 99% Uninsured Deposit Analysis $ in billions 12/31/2023 Uninsured Deposits $ 10.8 Percent of deposits ($) uninsured1 35% Less: Affiliate Deposits $ 0.3 Less: Collateralized Deposits $ 1.7 Average balance of accounts $25,902 Uninsur
Slide 30: Well-positioned for multiple rate environments
WELL-POSITIONED FOR MULTIPLE RATE ENVIRONMENTS Cost of Total Deposits & Deposit Beta: Prior & Current Fed Cycle Opportunities to enhance and protect NII. Cost of Total Deposits • Net yield on interest earning assets increased 6 bps Before Fed Rate End of Fed Rate Deposit over Q3 to 3.17%. Increases
Slide 31: High quality, highly liquid and diverse investment portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio As of December 31, 2023 Total available for sale securities Average balance: $9.6 billion, at fair value Duration QTD – Dec. 31, 2023 Avg Rate (yrs) Treasury & agency Treasury & agency1 1.12% 2.0 5% 8% Municipa
Slide 32: Sound capital and liquidity position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 11.1% Large, stable deposit base CBSH 15.1% 68% Average Loan to PB 15.0% Core Deposits CFR 13.8% Deposit Ratio3 UBSI 13.0% $22.5 Commerce 84% UCBI 12.6% Average Loan to BOKF 12.1% Billion2 Deposi
Slide 33: Summary of fixed and floating loans
SUMMARY OF FIXED & FLOATING LOANS Over 57% of total loans are variable; 65% of commercial loans have floating rates Fixed Variable Business Construction Business RE Commercial Total Loans: $6.0B Total Loans: $1.4B Total Loans: $3.7B 3% 40% 41% 60% 59% 97% Personal RE Consumer HELOC Consumer Card Tot
Slide 34: Commercial real estate breakdown
COMMERCIAL REAL ESTATE BREAKDOWN Real Estate - Business Loans: Office Outstanding Balances by Geography1 Other Real Estate - Business Loans Midwest Other States States Real Estate - % of Total Business Loans Loans $3.7 billion CO OH 7.6% 0.8% IL 5.1% 2.5% Owner – Occupied 6.8% Owner- OK 31.6% occupi
Slide 35: Maintaining strong credit quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $ in millions $14.5 $9.8 $269.8 $304.6 $8.0 $5.6 $4.5 .23% .22% $150.1 1.15% $162.2 1.22% $162.4 .19% .14% .92% .95% .94% .08% 4Q22 3Q23 4Q23 4Q22 3Q23 4Q23 NCOs- CBSH NCO/Average L
Slide 36: Allocation of allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans Sept. 30, 2023 Dec. 31, 2023 $ in millions $250 1.47% 1.60% Allowance for % of Allowance for % of 1.44% Credit Losses Outstanding Credit Losses Outstanding $ in millions (ACL) L
Slide 37: Strong capital position: flexibility in capital planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 56 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) Total Payout - % (right) Total Payout Ratio (%) $300 200% Common
Slide 38: Financial Results 4Q2023
FINANCIAL RESULTS 4Q2023 38
Slide 39: Financial performance vs. prior years
FINANCIAL PERFORMANCE VS. PRIOR YEARS Net Income Attributable to Earnings per Common Return on Total Average CBI ($ in Millions) Share Assets $531 $3.91 $488 $477 $3.67 $3.64 1.55% 1.45% 1.49% YE 2021 YE 2022 YE 2023 YE 2021 YE 2022 YE 2023 YE 2021 YE 2022 YE 2023 Return on Average Common Period End
Slide 40: 4Q2023 Highlights
4Q2023 HIGHLIGHTS Highlights Well-positioned for current environment PPNR1 • Net interest income flat to Q3 at $248MM. $142 million • Net interest margin increased 6 bps from Q3 to 3.17%. Net Income • Total cost of deposits increased 13 bps to 1.34%, compared to an $109.2 million increase of 34 bps
Slide 41: Balance sheet highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Loans: 7% growth over prior Balances 4Q23 vs. 3Q23 4Q23 vs. 4Q22 year. $ in millions 4Q23 $ Change % Change $ Change % Change Investment securities: Continued portfolio run-off, Commercial $11,029.5 $29.4 0% $981.7 10% funding cash balances and loan growth.
Slide 42: Balance sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +7% -5% $26.6 $25.6 $25.2 6.15% 6.02% $7.9 $10.4 $7.7 $17.0 $17.1 $15.9 $5.8 $6.0 $6.1 1.93% 1.76% $16.2 $17.7 $17.5 5.03% $10.1 $11.0 $11.0 .40% 4Q22 3Q23 4Q23 4Q22 3Q23 4Q23 Consumer Loans Loan Yield Non-I
Slide 43: Loan portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 12/31/2023 9/30/2023 12/31/2022 QoQ YoY $ in 000s 12/31/2023 9/30/2023 12/31/2022 QoQ YoY Business $6,019,036 $5,908,330 $5,661,725 1.9% 6.3% Business $5,861,229 $5,849,227 $5,478,241 .2% 7.0% Construction 1,446,764 1,539,566 1,361,09
Slide 44: Income statement highlights
INCOME STATEMENT HIGHLIGHTS Pre-Tax, Pre-Provision Net Revenue (PPNR) $ in millions Net Interest Income (+) 4Q23 Comparison Non-Interest Income (+) vs. 4Q22 (18.7)% Non-Interest Expense (-) vs. 3Q23 (13.1)% Pre-Tax, Pre-Provision Net Revenue (=) Revenue was up .5% $391 $391 $393 $251 over both 3Q an
Slide 45: Income statement
INCOME STATEMENT 4Q23 vs. 3Q23 4Q23 vs. 4Q22 $ in millions 4Q23 $ Change % Change $ Change % Change Net Interest Income $248.4 $(0.1) (0)% $(6.2 ) (2)% Non-Interest Income 144.9 1.9 1% 8.1 6% Non-Interest Expense 251.3 23.2 10% 34.5 16% Pre-Tax, Pre-Provision Net Revenue1 $142.0 $(21.4) (13)% $(32.7
Slide 46: Non-interest income highlights
NON-INTEREST INCOME HIGHLIGHTS 4Q23 vs. 3Q23 4Q23 vs. 4Q22 $ in millions 4Q23 $ Change % Change $ Change % Change Bank Card: Bank Card Transaction Fees $47.9 $1.0 2% $3.3 7% Corporate card fees increased over Q3 due to Trust Fees 49.2 (.1) 0% 4.4 10% lower rewards and network expense. Deposit Accoun
Slide 47: Non-interest expense highlights
NON-INTEREST EXPENSE HIGHLIGHTS 4Q23 vs. 3Q23 4Q23 vs. 4Q22 Salaries and employee $ in millions 4Q23 $ Change % Change $ Change % Change benefits: Flat compared to the prior Salaries and Employee quarter; increase over the prior Benefits $147.5 $.7 0% $9.0 6% year was due to higher full-time salarie
Slide 48: Net interest income: QTD December 31, 2023
NET INTEREST INCOME: QTD – December 31, 2023 Quarterly Net Interest Income (Fully taxable-equivalent) • Net interest income (fully taxable-equivalent) $260 3.6% decreased $415 thousand from the prior quarter. Net interest income – 3.4% $240 • The net yield on interest earning assets 3.2% $ in millio
Slide 49: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Dec. 31, 2023 Sep. 30, 2023 Dec. 31, 2022 A Net Interest Income $ 248,421 $ 248,547 $ 254,641 B Non-Interest Income $ 144,879 $ 142,949 $ 136,825 C Non-Interest Expense $ 251,254 $ 228,010 $
Slide 50: Investor Relations
PEOPLE, GROWTH AND POSSIBILITIES Investor Relations 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