Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q3 2022 Earnings Presentation
52 slides from Commerce Bancshares's earnings presentation, 2022
Slide 1: Commerce Bancshares Investor Update 3rd Quarter 2022
MOMENTUM: Innovation. Improvement. Growth. COMMERCE BANCSHARES, INC. INVESTOR UPDATE 3rd Quarter 2022
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 $32.6 $27.5 157 YEARS IN BUSINESS TOTAL BILLION DEPOSITS BILLION 42ND LARGEST U.S. BANK TOTAL $15.9 BASED ON ASSET SIZE1 LOANS2 BILLION MARKET CAP $7.9 $9.4 COMMERCIAL BILLION CARD VOLUME BILLION AS OF 12/31/2021 21ST LARGEST U.S. BANK BASED ON MARKET CAP1 RETURN ON
Slide 4: Super-Community Bank Platform
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 $26.9 billion in low-cost deposits1 revenue at 36%2 of total revenue, with peer-leading historical Core banking system bolstered by growing wealth and dep
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: 0.96% 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 $ in millions $400 $3.00 $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*
Slide 8: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of September 30, 2022 Annualized Comparison Total Shareholder Returns Indexed, 9/30/2007 = $100 Total Shareholder Returns $500 30% CBSH KBW Bank 20% KBW Regional S&P 500 COMMERCE $400 10% 0% S&P 500 $300 -10% -20% $200 KBW -30% REGIONAL 1 Year 3 Year 5 Year 10 Year 15 Y
Slide 9: Our Strong Culture Is the Key Driver to Long-Term Success
OUR STRONG CULTURE IS THE KEY DRIVER TO OUR LONG-TERM SUCCESS A culture formed 157 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 ” 2022 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 annual ESG report assesses our impact in several key areas: • Environmental sustainability • Customer, team
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 A Blue Chip initiative centered on A culture that celebrates inclusion and diversity Commerce offers a variety of internal r
Slide 13: Recent Recognition
RECENT RECOGNITION Forbes Forbes Forbes America’s Best Banks Best Banks Best Midsize in America in Each Employers 13th consecutive State: year 5th consecutive Missouri year Global Finance Forbes Human Rights Best U.S. Campaign World’s Regional Bank Best Banks in the Midwest Corporate 4th consecutive
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: TRANSFORMATION: • 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 a
Slide 16: Well-Positioned for Current Environment
WELL-POSITIONED FOR CURRENT ENVIRONMENT 16
Slide 17: Well-Positioned for Multiple Rate Environments
WELL-POSITIONED FOR MULTIPLE RATE ENVIRONMENTS Opportunities to enhance and protect NII in Cost of Total Deposits & Deposit Beta: Prior & Current Fed Cycle a rising rate environment. Cost of Total Deposits • Investment securities portfolio duration Before Fed Rate End of Fed Rate Deposit of 3.9 year
Slide 18: 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 19: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 11.0% Large, stable deposit base PB 15.3% CBSH 13.9% OZK 13.7% Core Deposits 56% Average Loan to Deposit Ratio 3 CFR 13.2% 12.7% $26.5 Commerce 77% Average UBSI Loan to SFNC 12.1% Billion2 Deposi
Slide 20: Financial Results 3Q2022
FINANCIAL RESULTS 3Q2022 20
Slide 21: Financial Performance vs. Prior Years
FINANCIAL PERFORMANCE VS. PRIOR YEARS Net Income Attributable to Earnings per Common Return on Total Average CBI ($ in Millions) Share As of Sept. 30 Assets As of Sept. 30 As of Sept. 30 $531 $4.31 1.55% 1.65% $416 $3.37 1.39% $354 $357 $2.77 $2.95 1.20% YE 2020 YE 2021 YTD 2021 YTD 2022 YE 2020 YE
Slide 22: 3Q2022 Earnings Highlights
3Q2022 EARNINGS HIGHLIGHTS Highlights Well-positioned for current environment PPNR1 • PPNR1 increased 8.7% over Q2. $172.0 million • Net interest income increased 6.0% over Q2. Net Income • Net interest margin increased 22 bps over Q2 to 3.01%. $122.8 million • Non-interest income decreased .7% from
Slide 23: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Balances Change vs. $ in millions 3Q22 2Q22 3Q21 Highlights • Linked quarter (LQ) reflects growth in business real estate and construction, partly offset by a decline in business Commercial1 $9,864.5 $90.6 $275.6 loans Consumer 5,781.4 69.8 111.3 Total Loan
Slide 24: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions -1% $28.1 $28.7 $27.8 +3% $11.5 $11.2 $10.8 $15.3 $15.5 $15.6 $5.7 $5.7 $5.8 4.37% 3.74% 3.72% $17.5 $17.0 $16.6 $9.6 $9.8 $9.8 .06% .07% .21% 3Q21 2Q22 3Q22 3Q21 2Q22 3Q22 Consumer Loans Loan Yield Non-Inte
Slide 25: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 9/30/2022 6/30/2022 9/30/2021 QoQ YoY $ in 000s 9/30/2022 6/30/2022 9/30/2021 QoQ YoY Business $5,528,895 $5,441,592 $5,277,850 1.6% 4.8% Business $5,317,696 $5,385,181 $5,437,498 -1.3% -2.2% Business excl. Business excl. 5,507,081 5,
Slide 26: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Change vs. $ in millions 3Q22 2Q22 3Q21 Highlights • Linked quarter (LQ) increase due to higher interest earned Net Interest Income $246.4 $14.0 $32.3 on loans, partly offset by lower interest earned on investment securities and higher interest expense Non-Interest Income
Slide 27: Non-Interest Income Highlights
NON-INTEREST INCOME HIGHLIGHTS Change vs. $ in millions 3Q22 2Q22 3Q21 Highlights Bank Card Transaction Fees $45.6 $1.8 $2.8 • Increase of 6.6% over prior year (PY) driven by growth in net corporate card fees Trust Fees $45.4 $(1.4) $(3.5) • 3Q2022 reflects lower market values on assets under manage
Slide 28: Non-Interest Expense Highlights
NON-INTEREST EXPENSE HIGHLIGHTS Change vs. $ in millions 3Q22 2Q22 3Q21 Highlights • Increase of 3.4% over prior year (PY) due to higher full-time salaries expense partly offset by lower incentive compensation expense Salaries and Employee Benefits $137.4 $(4.8) $4.6 • Decrease from linked quarter (
Slide 29: 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 (=) $385 $372 $352 3Q2022 Comparison vs. 3Q2021 22.9% $213 vs. 2Q2022 8.7% $232 $214 $246 $214 $212 $172 $158 $140 $138 $140 $139 3Q2021 2Q2022 3Q2022
Slide 30: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $ in millions $4.8 $270.0 $275.8 $3.7 $4.0 $4.0 $3.6 $162.8 $143.4 1.29% $138.0 1.12% .10% .07% .10% .06% .12% 1.07% .88% .90% 3Q21 2Q22 3Q22 3Q21 2Q22 3Q22 NCOs- CBSH NCO/Average L
Slide 31: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans June 30, 2022 September 30, 2022 $ in millions $250 1.47% 1.60% Allowance Allowance 1.44% for Credit % of for Credit % of Losses Outstanding Losses Outstanding 1.35% $ in millio
Slide 32: Net Interest Income: YTD September 30, 2022
NET INTEREST INCOME: YTD – September 30, 2022 Quarterly Net Interest Income (Fully taxable-equivalent) • Net interest income (fully taxable-equivalent) $250 3.6% increased $13.7 million over the prior quarter. Net interest income – $240 3.4% $230 3.2% • The net yield on interest earning assets incre
Slide 33: 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 5% $525 $506 $560 2% $501 $413 $410 9% 5% 5% 11% 3% 4% 7% 2018 2019 2020 2021 YTD YTD Commerce Bank Peers
Slide 34: 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% $15,461 30% $14,243 $13,946 $13,629 19% 4% 12% 36% Commerce Peers 21% Bank 2017 2018 2019 2020 2021 YTD Banks 20223 2022 Loan Growth by Category (Average loans Sep.
Slide 35: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of September 30, 2022 Total average investments3 $13.5 billion 4% 8% Treasury & agency Unrealized loss3 $1.1 billion 14% Municipal 12 month maturities / pay-downs $2.4 billion 27% MBS Duration
Slide 36: 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) Total Payout - % (right) Total Payout Ratio (%) $300 Common shar
Slide 37: Strategic Position
STRATEGIC POSITION 37
Slide 38: 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 39: 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 40: Upgrading the Customer Experience
UPGRADING THE CUSTOMER EXPERIENCE 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 41: Distinctive Digital Offerings
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
Slide 42: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT 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% 4.7 Perio
Slide 43: 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. 18TH $69 $43 $762 Largest Among Bank-Managed BILLION BILLION MILLION Trust Total Client Assets Under Managed Companies1 Assets2 Manag
Slide 44: Key Growth Initiatives Strengthening our Wealth Brands
Key Growth Initiatives Strengthening our Wealth Brands • Onboard a new, industry-leading private banking loan and deposit system • Evaluate new wealth markets and acquisition targets • Execute our integrated strategy to expand reach with affluent households • Invest in our team with additional TM de
Slide 45: 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 46: Commercial Banking – Expansion Markets
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Fee Income Team Overview for Expansion Market Loan Growth Growth Expansion Markets 132% $ in millions Expansion Market Loan # of team members per market $2,615 Growth (includes open positions) $2,466 since 2016 $2,200 $2,317 62% 202
Slide 47: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow $190 $58 $9.4 $7.2 MILLION MILLION BILLION BILLION Payments Treasury Commercial Merchant Revenue Management Card Volume Revenue Volume Information as of December
Slide 48: Healthcare industry specialty
We don’t just serve the healthcare industry. It’s our specialty. Partner to 3,000+ healthcare providers and 500+ hospitals in 47 states 100+ entities and over 42 million in patient transactions annually Patient Engagement Receivables Accounts Payable Traditional Banking Solutions Management Solution
Slide 49: 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 49
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Sep. 30, 2022 Jun. 30, 2022 Sep. 30, 2021 A Net Interest Income $ 246,373 $ 232,385 $ 214,037 B Non-Interest Income $ 138,514 $ 139,427 $ 137,506 C Non-Interest Expense $ 212,884 $ 213,505 $
Slide 51: 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/ 51
Slide 52: Momentum: Innovation. Improvement. Growth.
MOMENTUM: Innovation. Improvement. Growth.