Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q3 2024 Earnings Presentation
48 slides from Commerce Bancshares's earnings presentation, 2024
Slide 1: Commerce Bancshares, Inc. Investor Update 3rd Quarter 2024
COMMERCE BANCSHARES, INC. INVESTOR UPDATE 3rd Quarter 2024
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 $31.5 159 YEARS IN BUSINESS BILLION TOTAL DEPOSITS $25.2 BILLION 43RD LARGEST U.S. BANK BASED ON ASSET SIZE2 MARKET CAP TOTAL $17.1 LOANS3 BILLION $7.6 BILLION $9.9 COMMERCIAL CARD VOLUME 20TH BILLION AS OF DECEMBER 31, 2023 LARGEST U.S. BANK BASED ON MARKET CAP2 TOT
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 Balanced earnings profile, fee revenue $23.7 billion in low-cost, diverse at 37%1 of total revenue, bolstered by deposits2 with peer-leading growing wealth and national payments historical deposit betas businesses Cre
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 $600 $560 $547 $506 2% 5% $500 $428 $460 6% $400 4% 4% $300 10% $200 4% 4% $100 6% $0 Commerce 2020
Slide 7: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $ in millions Compared to Peers1 3% 28% $16,783 $17,096 23% 3% $15,916 $15,686 $15,570 11% $14,243 37% Commerce 21% Peers Bank 2019 2020 2021 2022 2023 2024 YTD Banks 2024 Loan Growth by Category (QTD Average loans Sep
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 We seek opportunities to help make our communities and our company a better place to live and work 2024 Engagement MORE THAN and Enablement2 500 Sense of Consistently scoring above the U.S. Financial Services norms for Belonging2 engagement, enablement and 83%
Slide 10: Recent Recognition
RECENT RECOGNITION 2024 2024 2024 Forbes U.S. News & World Report Bank Director Best Employer by Best Companies to Work Top 25 U.S. Banks3 State: Missouri1 For in the Banking Industry2 2024 2024 2024 Forbes Newsweek Newsweek America’s Best Greatest Workplaces for America’s Best Midsize Employers6 Pa
Slide 11: 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: 1.31% 0.5% Peers: 1.03% 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 12: 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 13: Steady Long-Term Shareholder Returns
STEADY LONG-TERM SHAREHOLDER RETURNS as of September 30, 2024 Annualized Comparison Total Shareholder Returns Indexed, 9/30/2004 = $100 Total Shareholder Returns $800 60% CBSH KBW Regional KBW Bank S&P 500 S&P 500 50% $700 40% $600 30% 20% $500 COMMERCE 10% $400 0% -10% $300 1 Year 3 Year 5 Year 10
Slide 14: Strategic Position
STRATEGIC POSITION 14
Slide 15: Strategic Posture: Maintaining the Balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE STRONG PERFORMANCE with Disciplined focus on ongoing refinement of the PRIORITY BLUE CHIP “Core Bank” investments • Super-Community Bank • Enhancing our platform People Leadership • Relationship-based banking • Workplace Optimization • High-touch customer s
Slide 16: Digital Technology: Application Modernization
DIGITAL TECHNOLOGY: APPLICATION MODERNIZATION 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. P
Slide 17: Enterprise Digital Strategy
MEETING OUR CUSTOMERS WHERE THEY ARE: ENTERPRISE DIGITAL STRATEGY Our Vision Why it’s Important Transform the digital experience by staying • Our current and potential customers’ current on digital trends and creating behaviors have changed, and they expect seamless digital ecosystems that place mor
Slide 18: We're Built for You: Commercial Banking
WE’RE BUILT FOR YOU: COMMERCIAL BANKING Revenue Revenue growth growthopportunities 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 • R
Slide 19: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables that enhance cash flow, streamline processing and increase efficiencies Treasury Commercial Payments Merchant Management Card Revenue Volume Revenue Volume $212 $65 $9.9 $8.3 MILLION MI
Slide 20: We don't just serve the healthcare industry. It's 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 21: Expansion Markets Offer Growth Opportunities
EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Expansion Markets Fee Income Team Overview 2023 Expansion Market Loan Growth Growth # of team members per market 66% (includes open positions) $ in billions Expansion $3.3 $3.5 Market Loan Growth since 2018 42 Oklahoma 61% $2.2 $2.3 $2.5 $2.6 since 2018
Slide 22: 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 Largest Among $69 $41 Bank-Managed BILLION BILLION Trust Total Client Assets Under Companies1 Assets2 Management Total Client As
Slide 23: Wealth Key Growth Initiatives
Wealth Key Growth Initiatives Strengthening our Wealth Brands • Utilize new private banking loan and deposit system to offer specialized products, services and automation • Continued expansion into new concentrated wealth markets through de novo and acquisition efforts • Expand our integrated referr
Slide 24: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT 141 Branches 272 ATMs $12.4 $3.9 810 BILLION BILLION THOUSAND Consumer Consumer Consumer Deposits1 Loans1 Households2 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 25: Liquidity and Capital
LIQUIDITY AND CAPITAL 25
Slide 26: Liquidity and Capital Highlights
LIQUIDITY AND CAPITAL HIGHLIGHTS Liquidity Capital • $2.6B in cash at Federal Reserve Bank (FRB) at Q3. • TCE/TA of 10.47%, an increase of 65 bps over Q2. Tier 1 leverage at 12.31%. • QTD average loan to deposit ratio of 70%. • Purchased $44MM of common stock vs. • AFS debt securities portfolio dura
Slide 27: Deposit Balance Trends
DEPOSIT BALANCE TRENDS Segment view $ in billions Commercial Consumer Wealth $13.4 $12.8 $12.1 $12.4 $12.3 $12.4 $12.5 $12.3 $12.0 $11.9 $11.3 $10.6 $10.4 $10.5 $9.9 $9.5 $9.8 $9.4 $3.0 $2.8 $2.3 $2.3 $2.4 $2.3 $2.5 $2.3 $2.4 2020 2021 2022 4Q23 2Q24 3Q24 4Q23 2Q24 3Q24 2020 2021 2022 4Q23 2Q24 3Q24
Slide 28: Opportunities to Enhance and Protect Net Interest Income
OPPORTUNTIES TO ENHANCE AND PROTECT NET INTEREST INCOME Quarterly Net Yield on Interest Earning Assets • Net yield on interest earning assets decreased 5 bps from Q2 to 3.50%. 2Q 2024 3Q 2024 3.55% • Loan yield increased 5 bps over Q2 to 6.35%. 3.50% • Total cost of deposits was flat compared to Q2
Slide 29: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio As of September 30, 2024 Total available for sale securities Average balance: $8.7 billion, at fair value Duration QTD – Sept. 30, 2024 Avg Rate (yrs) Treasury & agency Treasury & agency1 3.40% 3.2 2% 16% 20% M
Slide 30: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio CBSH Peer Median: 12.2% Large, stable deposit base 16.7% 70% Average PB 15.8% Core Deposits Loan to HOMB 14.7% Deposit Ratio 3 CFR 14.0% $22.6 Commerce 84% UBSI 13.8% Average Loan to HWC 13.8% Billion2 Deposi
Slide 31: Summary of Fixed & 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 32: Commercial Real Estate Breakdown
COMMERCIAL REAL ESTATE BREAKDOWN Real Estate - Business Loans: Office Outstanding Balances by Geography1 Other Real Estate - Business Loans Midwest States Real Estate - % of Total OH Business Loans Loans $3.6 billion CO 6.8% IL 4.7% Owner- 2.3% Owner – Occupied 7.0% 33.4% occupied 4.9% OK 5.8% Offic
Slide 33: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $ in millions $14.2 $13.2 $303.1 $330.7 $333.1 $9.8 $9.8 $10.2 $9.6 $162.2 1.29% $158.6 1.34% $160.8 1.34% .23% .23% .22% .22% .16% .21% .95% .92% .94% 3Q23 2Q24 3Q24 3Q23 2Q24 3Q24
Slide 34: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans June 30, 2024 September 30, 2024 $ in millions $225 1.40% Allowance for % of Allowance for % of Credit Losses Outstanding Credit Losses Outstanding $ in millions (ACL) Loans (AC
Slide 35: 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 (%) $300 200% Common
Slide 36: Financial Results 3Q2024
FINANCIAL RESULTS 3Q2024 36
Slide 37: Financial Performance vs. Prior Years
FINANCIAL PERFORMANCE VS. PRIOR YEARS Net Income Earnings Return on Total Attributable to CBI ($ in Millions) per Common Share Average Assets $488 $477 As of Sept 30 $3.67 $3.64 As of Sept 30 As of Sept 30 $390 $2.80 $3.00 1.71% $368 1.45% 1.49% 1.53% YE 2022 YE 2023 YTD 2023 YTD 2024 YE 2022 YE 202
Slide 38: 3Q2024 Highlights
3Q2024 HIGHLIGHTS Highlights Well-positioned for current environment Net Income • Net interest income was flat compared to Q2 at $262MM. $138.0 million • Net interest margin declined 5 bps from Q2 to 3.50%; excluding TIPs inflation income, Q3 net interest margin of 3.49%, up 4 bps over Q2. PPNR1 $18
Slide 39: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Average Loans: Balances 3Q24 vs. 2Q24 3Q24 vs. 3Q23 Increased slightly compared to the prior year. $ in millions 3Q24 $ Change % Change $ Change % Change Investment securities: Purchased $976 million of Commercial $10,948.1 $-169.8 -2% $-52.0 0% available f
Slide 40: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +0% 6.35% 6.30% -5% 6.02% $25.6 $24.3 $24.4 $7.9 $7.3 $7.3 $17.0 $17.2 $17.0 1.99% 2.00% $6.0 $6.1 $6.1 1.76% $17.7 $17.0 $17.1 $11.0 $11.1 $10.9 3Q23 2Q24 3Q24 3Q23 2Q24 3Q24 Consumer Loans Loan Yield1 Non-
Slide 41: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 9/30/2024 6/30/2024 9/30/2023 QoQ YoY $ in 000s 9/30/2024 6/30/2024 9/30/2023 QoQ YoY Business $6,048,328 $6,090,724 $5,908,330 -.7% 2.4% Business $5,966,797 $5,980,364 $5,849,227 -.2% 2.0% Construction 1,381,607 1,396,515 1,539,566 -
Slide 42: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Pre-Tax, Pre-Provision Net Revenue (PPNR) $ in millions Net Interest Income (+) 3Q24 Comparison Non-Interest Income (+) vs. 3Q23 12.4% Non-Interest Expense (-) vs. 2Q24 .8% Pre-Tax, Pre-Provision Net Revenue (=) $421 Revenue increased 1.7% $414 $391 over Q2 and increased
Slide 43: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS 3Q24 vs. 2Q24 3Q24 vs. 3Q23 $ in millions 3Q24 $ Change % Change $ Change % Change Net Interest Income $262.4 $.1 0% $13.8 6% Non-Interest Income $159.0 $6.8 4% $16.1 11% Non-Interest Expense $237.6 $5.4 2% $9.6 4% Pre-Tax, Pre-Provision Net Revenue1 $183.8 $1.5 1% $20.3
Slide 44: Non-Interest Income Highlights
NON-INTEREST INCOME HIGHLIGHTS 3Q24 vs. 2Q24 3Q24 vs. 3Q23 Trust Fees: $ in millions 3Q24 $ Change % Change $ Change % Change Increase over prior year mainly due to higher private client fees. Trust Fees $54.7 $2.4 5% $5.5 11% Deposit Account Charges and Bank Card Transaction Fees 47.6 .1 0% .7 1% O
Slide 45: Non-Interest Expense Highlights
NON-INTEREST EXPENSE HIGHLIGHTS 3Q24 vs. 2Q24 3Q24 vs. 3Q23 $ in millions 3Q24 $ Change % Change $ Change % Change Salaries and Employee Benefits $153.1 $4.0 3% $6.3 4% Salaries and employee benefits: Data Processing and Software 32.2 .7 2% 1.5 5% Increase compared the prior year mainly due to highe
Slide 46: Net Interest Income: QTD September 30, 2024
NET INTEREST INCOME: QTD – September 30, 2024 Quarterly Net Interest Income (Fully taxable-equivalent) • Net interest income (fully taxable-equivalent) $280 3.6% increased $60 thousand over the prior quarter. Net interest income – $260 3.4% • The net yield on interest earning assets 3.2% decreased 5
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Sept. 30, 2024 June 30, 2024 Sept. 30, 2023 A Net Interest Income $ 262,351 $ 262,249 $ 248,547 B Non-Interest Income $ 159,025 $ 152,244 $ 142,949 C Non-Interest Expense $ 237,600 $ 232,214
Slide 48: 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/